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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 27, 1997
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)
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Delaware 51-0312772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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300 Nyala Farms Road
Westport, Connecticut 06880
(Address of principal executive offices)
Telephone number: (203) 341-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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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 17, 1998 was $414,997,537 (based on the closing sale
price of $14 5/8 on March 17, 1998 as reported by the New York Stock
Exchange--Composite Transactions). For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by named executive 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 17, 1998, 60,274,051 shares of Playtex Products, Inc. common stock,
par value $.01 per share, were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE:
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DOCUMENT PART OF FORM 10-K
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Portions of the registrant's Annual Report to Stockholders for the twelve months ended December
27, 1997 (the "Annual Report")(pages 3 through 48)............................................. II
Portions of the registrant's definitive Proxy Statement (the "Proxy Statement") for the 1998
Annual Meeting of Stockholders to be held on June 4, 1998, which will be filed with the
Securities and Exchange Commission within 120 days after the end of the registrant's fiscal
year ended December 27, 1997 pursuant to Regulation 14A........................................ III
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business..................................................................................... 5
Item 2. Properties................................................................................... 14
Item 3. Legal Proceedings............................................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................ 17
Item 6. Selected Financial Data...................................................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 17
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.................................... 17
Item 8. Financial Statements and Supplementary Data.................................................. 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......... 18
PART III
Item 10. Directors and Executive Officers of the Registrant........................................... 18
Item 11. Executive Compensation....................................................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and Management............................... 18
Item 13. Certain Relationships and Related Transactions............................................... 18
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K............................... 18
22
Signatures
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PART I
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES
LITIGATION REFORM ACT OF 1995
Certain statements in this document may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this document, the words "anticipates," "intends,"
"plans," "believes," "estimates," "expects," and similar expressions are
intended to identify forward-looking statements. 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: price and product changes and promotional activity by competitors,
timing of technological advances and new product initiatives by the Company and
its competitors, acceptance by consumers of new replacement products, continued
activity in the private label sector, the loss of a significant customer,
product liability litigation, integration of acquisitions and changes in
governmental regulation.
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, IPI 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 channels of distribution.
In 1986, IPI was the subject of a management leveraged buyout and, in 1988,
the Company, which was formed by certain management investors and The Thomas H.
Lee Company, acquired the Family Products business from Playtex Holdings, Inc.
("PHI"), the successor to IPI. Concurrently, Playtex Apparel, Inc. ("Apparel"),
which manufactured woman's intimate apparel, was divested to a partnership owned
by operating management of that business. In November 1991, Apparel was sold to
Sara Lee Corporation ("Sara Lee"). There is no longer any corporate relationship
between the Company and Sara Lee or Apparel, except that the Company and Apparel
each own 50% of the stock of Playtex Marketing Corporation ("Playtex
Marketing"), which owns the Playtex-Registered Trademark- and
Living-Registered Trademark- trademarks and licenses them on a royalty-free
basis in perpetuity to the Company.
In December 1992, the Company acquired, for $5 million, a 22% common equity
interest 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 affiliates and
employees of the 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- trademark. Concurrently 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.
In February 1995, the Company acquired the assets of the
Woolite-Registered Trademark- Rug and Upholstery Cleaning Products ("WOOLITE")
from Reckitt & Coleman PLC under an exclusive, royalty-free trademark license in
perpetuity in the United States and Canada.
On June 6, 1995, the Company sold, for an aggregate purchase price of $180.0
million, 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"),
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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 constituted approximately 40% of the Company's outstanding
Common Stock at the time of the Investment and designees of the Investors were
elected by the Company's stockholders as a simple majority of the Board of
Directors. Concurrent with the Investment, the Company entered into a new bank
credit agreement and, together with the Investment, the net proceeds were used
by the Company to refinance all outstanding borrowings under the Company's prior
credit agreement.
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 of BBH not previously owned by the Company (the "BBH
Acquisition"). 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. On March 22, 1996, BBH was merged with and into Sun, with Sun being
the surviving corporation.
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The net proceeds from the 1997 Refinancing were used to
retire the indebtedness outstanding under the prior credit agreement. The 1997
Refinancing included: (i) the issuance of $150.0 million principal amount of 8
7/8% unsecured senior notes due July 15, 2004 (the "Senior Notes"), (ii) a
$150.0 million senior secured term loan due September 15, 2003 (the "1997 Term
Loan") and (iii) senior secured credit facilities (the "1997 Senior Secured
Credit Facilities") in an aggregate amount of $170.0 million comprised of a
$115.0 million revolving credit facility (the "1997 Revolving Credit Facility")
and a $55.0 million term loan facility (the "1997 Term A Loan"). The 1997 Term
Loan provides for quarterly principal repayments of $375,000 from September 15,
1997 through June 15, 2003 and a payment of $141.0 million on September 15,
2003. The 1997 Revolving Credit Facility will mature on June 15, 2003 and
commitments thereunder are automatically and permanently reduced by $5.0 million
on December 15, 2000 and June 15, 2001, $7.0 million on December 15, 2001 and
June 15, 2002, and $8.0 million on December 15, 2002 and June 15, 2003. The 1997
Term A Loan will require reduction in commitment amounts of $1.4 million in
fiscal 1999, $7.6 million in fiscal 2000, $15.1 million in fiscal 2001, $19.9
million in fiscal 2002, and $11.0 million in fiscal 2003.
RECENT ACQUISITIONS
On January 6, 1998, the Company acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash. Carewell manufactures and
markets the Dentax-Registered Trademark- line of toothbrushes, toothpaste, and
dental floss for distribution through food stores, drug chains, and mass
merchandisers. The acquisition, which was financed with borrowings under the
Company's 1997 Revolving Credit Facility, will be accounted for as a purchase.
On January 26, 1998, the Company acquired certain tangible and intangible
assets related to the Binky-Registered Trademark- pacifier business ("BINKY")
from Binky-Griptight, Inc. for approximately $1.2 million in cash and the
issuance of a $0.5 million note due July 27,1998. The acquisition, which was
financed with borrowings under the Company's 1997 Revolving Credit Facility,
will be accounted for as a purchase.
On January 28, 1998, the Company acquired Personal Care Holdings, Inc.
("PCH") for approximately $91 million in cash and 9,257,345 shares of Common
Stock. PCH manufactures and markets a number of leading consumer product brands,
including Wet Ones-Registered Trademark- pre-moistened towelettes,
Chubs-Registered Trademark- baby wipes, Ogilvie-Registered Trademark- home
permanent products, Binaca-Registered Trademark- breath spray and drops, Mr.
Bubble-Registered Trademark- childrens bubble bath products,
Diaparene-Registered Trademark- infant care products,
Tussy-Registered Trademark- deodorants, Dorothy Gray-Registered Trademark- skin
care products and Better Off-Registered Trademark- depilatories. In connection
with the PCH acquisition, the Company increased its borrowing
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capacity under the 1997 Term Loan by $100 million and used this to finance the
cash portion of the consideration paid for PCH. The acquisition will be
accounted for as a purchase.
B. EXECUTIVE OFFICERS OF REGISTRANT
Listed below are the executive officers of the Company as of March 17, 1998.
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. The following
information is furnished with respect to each of the executive officers of the
Company, each of which is elected by and serves at the pleasure of the Board of
Directors. Ages are shown as of March 17, 1998.
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NAME AGE POSITION
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Michael R. Gallagher 52 Chief Executive Officer and Director
Michael F. Goss 38 Executive Vice President, Chief Financial Officer and Director
Richard G. Powers 52 President, Personal Products Division
Max R. Recone 42 President, Consumer Products Division
James S. Cook 46 Senior Vice President, Operations
Irwin S. Butensky, Ph.D. 62 Senior Vice President, Research and Development
John D. Leahy 44 Senior Vice President, Corporate Sales / International
Paul E. Yestrumskas 46 Vice President, General Counsel and Secretary
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MICHAEL R. GALLAGHER has been the Chief Executive Officer and a Director of
the Company since 1995. Prior to joining the Company, Mr. Gallagher was Chief
Executive Officer of North America for Reckitt & Colman PLC ("R&C") from 1994 to
1995. Mr. Gallagher was President and Chief Executive Officer of Eastman Kodak's
L&F Products subsidiary from 1988 until the subsidiary was sold to R&C in 1994.
From 1984 to 1988, Mr. Gallagher held various executive positions with the Lehn
& Fink Group of Sterling Drug. From 1982 to 1984, he was Corporate Vice
President and General Manager of the Household Products Division of The Clorox
Company ("Clorox"). Prior to that, Mr. Gallagher had various marketing and
general management assignments with Clorox and with Procter & Gamble. He is
presently a director of Fleet Bank N.A. and the Grocery Manufacturers
Association.
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 1995. From 1992 to 1994, Mr. Goss was Treasurer and Vice
President--Corporate Development of Oak Industries, Inc. ("Oak") an electronic
components company. From 1990 to 1992, he was Director of Financial Planning for
Oak.
RICHARD G. POWERS has been the President of the Personal Products Division
of the Company since 1996. Prior to joining the Company, Mr. Powers was
President of R&C's North American Personal Products Division. From 1992 to 1995,
he was Vice President of Sales for R&C, and from 1990 to 1992 he was Vice
President of Marketing for R&C's Durkee-French Foods Division. From 1973 to
1990, Mr. Powers held various positions in marketing and general management at
General Foods Corp.
MAX R. RECONE has been the President of the Consumer Products Division of
the Company since March 1996. From 1995 to 1996, he was Vice President and
Business Manager for Sun Care, Hair Care and Household Products. From 1993 to
1995, he served as Vice President--Banana Boat. From 1992 to 1993, he was Vice
President--Sales of the Company. From 1990 to 1992, Mr. Recone served as Vice
President/ General Manager of Playtex Limited, the Company's Canadian
subsidiary.
JAMES S. COOK has been Senior Vice President, Operations of the Company
since 1991. From 1990 to 1991, he was Vice President, Dover Operations of the
Company. From 1988 to 1990, he was Vice President of Distribution, Logistics &
MIS of the Company. From 1982 to 1988, Mr. Cook held various senior level
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positions in manufacturing and distribution with the Company. From 1974 to 1982,
he held various manufacturing and engineering positions at Procter & Gamble.
IRWIN S. BUTENSKY, PH.D. has been Senior Vice President, Research and
Development since 1990. From 1979 to 1990 he was Vice President of Research &
Development for the Company. From 1967 to 1979, Dr. Butensky held several senior
technical positions at Richardson-Vicks, Inc., his last being Director of
Dermatology Research.
JOHN D. LEAHY has been Senior Vice President, Corporate Sales /
International since January 1998. From 1996 until January 1998 he was Vice
President of Corporate Sales / International. From 1993 to 1996 he was Vice
President of Sales for the Company. From 1982 to 1993, Mr. Leahy held various
sales positions with the Company.
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 Director of Government Relations at Timex Corporation from
1981 to 1988.
C. GENERAL
The Company is a leading manufacturer and marketer of a diversified line of
well recognized branded consumer products, including PLAYTEX tampons, Playtex
infant care products, BANANA BOAT sun care products, PLAYTEX household latex
gloves and WOOLITE rug and upholstery cleaning products. In 1997, approximately
94% of the Company's net sales were derived from the sale of products in which
it holds the number one or two market share position. Since 1994, the Company
has leveraged its brand name recognition, stable market position and strong
distribution network to grow its Infant Care and Sun Care businesses, both of
which have experienced rapid growth in market share and net sales.
Net sales by classes of similar products to unaffiliated customers for the
five most recent fiscal years are as follows (in millions):
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TWELVE MONTHS ENDED DECEMBER
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1997 1996 1995 1994 1993
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Feminine Care................................ $ 201.5 $ 225.5 $ 243.6 $ 257.1 $ 244.5
Infant Care.................................. 124.0 109.5 87.6 77.9 74.7
Sun Care..................................... 95.7 73.3 50.3 48.9 1.9
Household Products........................... 55.3 60.5 57.3 32.5 28.8
Personal Grooming............................ 24.1 29.9 44.8 56.9 60.0
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Total.................................... $ 500.6 $ 498.7 $ 483.6 $ 473.3 $ 409.9
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D. PRODUCTS
The following discussion about the Company's products focus on those brands
which were a part of the Company's product portfolio as of December 27, 1997. As
such, the brands acquired in the Carewell, Binky, and PCH acquisitions (see
Recent Acquisitions) have not been included with the Company's discussion of
1997 results for its core brands. However, a new section titled, Newly Acquired
Brands has been included to help facilitate the understanding of the addition of
these brands to the Playtex portfolio. All references to market share and market
share data are for the twelve month periods indicated and were obtained from the
ACNielsen Corporation.
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FEMININE CARE. The Company's largest-selling brand is PLAYTEX tampons,
which in 1997 accounted for approximately 40% of the Company's net sales. For
over 20 years, PLAYTEX tampons have been the second largest-selling tampon brand
in the United States.
Tampons represented approximately 40% of the U.S. feminine sanitary
protection market in 1997 and accounted for approximately $785 million in retail
sales. Since 1992, the tampon market has grown at a compound annual rate of 2%
in dollar terms and 3% in unit terms. Company research indicates that brand
loyalty rates in the tampon category are high relative to other consumer product
categories. The research further suggests that women generally develop brand
preferences during their adolescent years and early twenties and are likely to
maintain a high degree of brand loyalty over time.
Playtex has two major product lines in the Feminine Care business: plastic
applicator tampons and cardboard applicator tampons. The plastic applicator
business represented 89% of the Playtex branded domestic tampon business in 1997
and is comprised of three product offerings: Gentle Glide-Registered Trademark-,
Playtex's original plastic tampon; Soft Comfort-Registered Trademark-, with an
applicator made of a soft material designed to improve comfort; and
Slimfits-Registered Trademark-, a new line of tampons introduced in late 1996,
developed for the first-time tampon user. The Silk Glide-Registered Trademark-
brand is Playtex's line of cardboard applicator tampons. This product line
features a rounded-tip cardboard applicator and a unique surface coating that
provides the consumer with a quality product in the cardboard applicator segment
of the tampon market.
The Company's dollar market share of the domestic tampon market declined
from 29% in 1994 to 26% in 1997 as a result of heavy promotional activity by
Tambrands in 1995 and early 1996 as Tambrands management sought to accelerate
category growth and increase its market share. As competitors (including the
Company) responded with their own promotional activities, average retail selling
prices in the category declined, and retail and consumer inventories grew. In
the second half of 1996, the retail price environment stabilized, and since the
fourth quarter of 1996, average retail selling prices for both the category and
the Company have increased.
During the eighteen month period from July 1996 through December 1997, the
Company's market share was relatively stable, ranging between 25% and 26% in
dollar terms. However, the Company's shipments to retailers in the first half of
1997 were negatively impacted by the high retail inventories created by earlier
price-oriented promotional activity and by management's strategic decision to
reduce these excess inventories by curtailing the off-price programs. During the
first half of 1997, dollar shipments of Feminine Care products fell 22% versus
the prior year. During the same period in 1997, retail sales of the Company's
products exceeded the Company's shipments by 90 million tampons, indicating that
retailers reduced their inventories of Playtex tampons by approximately six
weeks worth of sales.
The Company believes that trade inventories returned to more normal levels
by mid-year 1997 given that: 1) dollar shipments in the second half of 1997 were
even with the same period in 1996 and 30% higher than dollar shipments in the
first half of 1997, and 2) shipments and retail sales in the second half of 1997
were in greater balance with one another. Furthermore, retail sales of PLAYTEX
tampons in the second half of 1997 increased 12% over the same period in 1996,
the result of both higher market shares and overall category growth.
Management's strategy with respect to the Feminine Care business is to
maintain its market share at current levels and increase net sales in line with
growth in the category. The Company intends to continue shifting its marketing
resources into more consumer-driven, brand-building activities such as
advertising and product improvement to preserve the brand's premium price
position and maximize cash flow from the business.
The introductions of SLIMFITS in late 1996 and Odor Absorbing GENTLE GLIDE
in late 1997 are examples of Playtex's innovative product development and new
advertising and promotional strategies. SLIMFITS were developed to appeal to a
key segment of the tampon market: young teens. SLIMFITS have a softer and more
narrow plastic applicator providing for greater comfort. The Company believes
that SLIMFITS will build its
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business by encouraging young women to use tampons rather than pads at an
earlier age, and by developing brand loyalty for PLAYTEX tampons at a time when
lifelong preferences are being formed. Odor Absorbing GENTLE GLIDE tampons are
plastic applicator tampons with an all natural material in the tampons that
absorb odors without the use of a fragrance or deodorant. This product is
designed to appeal to a large group of women who are concerned with odor
protection yet reluctant to use a fragranced tampon.
INFANT CARE. The Company's second largest business is Infant Care, which is
comprised of the PLAYTEX disposable nurser system, cups and mealtime products,
reusable hard bottles and pacifiers. In 1997, Infant Care accounted for 25% of
the Company's total net sales. The Company's dollar market share in infant
feeding was 39% in 1997, which increased from 30% in 1995 and 36% in 1996. The
Company is particularly strong in both the disposable feeding and the infant cup
segments with 1997 dollar market shares of 75% and 72%, respectively.
The PLAYTEX disposable feeding system, introduced in 1960, was the first
disposable system on the market. Since that time, Playtex has provided
innovative product improvements as a healthy alternative to breast feeding. In
1996, Playtex continued to lead innovation in this category with its
Drop-Ins-Registered Trademark- ready-formed disposable bottle. Since its
introduction in 1996, DROP-INS have steadily increased its market share in the
disposable feeding category.
In 1994, Playtex introduced the Spill-Proof-TM- cup. The domestic infant cup
segment of the infant feeding category has almost doubled since this
introduction. Sales of the popular 6-ounce version and a larger 9-ounce size
have increased the Company's dollar market share in the infant cup segment from
29% in 1994 to 72% in 1997. In 1996, the Company introduced another innovative
cup to the market, the QuickStraw-Registered Trademark- bottle. This product,
which is focused on the older child, has a sliding cap that hides a retractable
straw and extends the age range of the children who use Playtex cups and
bottles.
In the fourth quarter of 1997, the Company introduced new products in each
of its major infant care segments. In the disposable feeding segment, the
Company launched a 4 ounce version of its DROP-INS ready-formed disposable
bottle along with a proprietary DROP-INS holder and two new disposable nipples.
In the cup segment, the Company introduced the CoolStraw-TM- cup, an insulated
version of the QUICKSTRAW cup introduced in 1996. In the pacifier segment, the
Company introduced a one-piece silicone pacifier under the trademark Safe'N
Sure-TM-. Also in late 1997, the Company introduced a new hard bottle feeding
system called Avance-TM-. Unlike conventional hard bottles which are vented near
the nipple, this system incorporates a patented air vent on the bottom of the
bottle that eliminates air bubbles that form near the nipples of conventional
bottles as babies feed. In addition, the bottom of the bottle can be unscrewed
from the body of the bottle for easier and more effective cleaning.
The Company's carefully designed message of quality, health and convenience
is delivered in a variety of ways including a professional sampling and
advertising program targeting pediatricians and pediatric nurses. Programs
directed to new mothers include distribution of millions of samples and coupons
prenatally via childbirth instructors and postnatally in hospitals and at home.
SUN CARE. The Company's Sun Care business, which accounted for 19% of 1997
net sales, consists of an extensive line of sun care products designed for
specific uses, such as sun protection in sun protection factors ("SPFs") from 4
to 50, waterproof and sweat proof formulas and infant and children's products.
The Company also sells a variety of BANANA BOAT skin care products, including
sunless tanning lotion, after-sun products, moisturizers and skin treatment
formulas containing additives such as Vitamin E and aloe vera gel. For 1997, the
Company's Sun Care products had a 20% unit market share, compared to an
approximate 12% unit market share in 1992 prior to the Company's involvement
with the product line.
Since 1992, the Sun Care category has grown at a compound annual rate in
excess of 6%. The Company believes the growth prospects for the sun care market
are favorable as a result of increasing consumer awareness of the need for
sunscreen protection and consumers' desire for sun care products targeted
towards their specific age and needs.
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Consistent with this trend, the Company has embarked on an aggressive
strategy to introduce new products. For the 1997 sun care season, the Company
launched 21 new product offerings targeted at clearly defined segments of the
sun care market. Among the new BANANA BOAT products were Tan
Express-Registered Trademark-, Action Sport-TM- spray gel, oil free lotion and
Bite Block-Registered Trademark-. The Company believes that one of its most
promising recent introductions is the BioSun-Registered Trademark- sun care
line, positioned for today's active, health-conscious consumer. BIOSUN, a
premium product line tested by dermatologists and recommended by The Skin Cancer
Foundation, was formulated to provide long-lasting protection. The brand has
gained visibility due, in part, to an educational program specifically targeted
to the medical community, especially dermatologists.
In late 1997, the Company launched several additional products for each of
the BANANA BOAT and BIOSUN product lines. In BANANA BOAT, the Company introduced
a line of trigger spray products under the QuikBlok-TM- trademark, a pump spray
in its Active Kids line, and several additional TAN EXPRESS products with small
amounts of SPF. In its BioSun line, the Company launched a pump spray along with
a clear gel sunscreen.
The Company focuses on a number of different distribution outlets to deliver
its sun care products to the consumer. BANANA BOAT is particularly strong with
mass merchandisers among whom the brand held a 25% unit market share for 1997.
Another valuable part of the focused sales effort for Sun Care products is the
use of more than 35 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. The van operators manage
product inventory at the store level, invoice customers and transmit key
marketing data to the Company through a network of hand-held computers. This
technology and the information it supplies provide the Company with a
competitive advantage relative to its smaller competitors.
Industry convention and the seasonal nature of the sun care business
requires that manufacturers of Sun Care products provide retailers with the
opportunity to return unsold products at the end of the season. To better
reflect the impact of potential returns, the Company provides for estimated
returns in its reported operating results as sales are made throughout the year.
HOUSEHOLD PRODUCTS. Playtex competes in two segments of the Household
Products category: household latex gloves and rug and upholstery cleaning
products. These products accounted for 11% of the Company's net sales in 1997.
Since the Company introduced the first household latex glove in the U.S. in
1954, PLAYTEX gloves have held the number one market share. The Company's
leadership position continued in 1997 with a 39% unit market share of this
category, up for the third consecutive year from 32% in 1994. Playtex's
nationally recognized brand name, based upon its reputation for superior
quality, durability and protection, provides a strong competitive advantage as
the Company's primary competition is from private label and regional brands. The
non-disposable household latex glove market had retail sales of approximately
$82 million in 1997.
In February 1995, Playtex acquired the assets of the WOOLITE rug and
upholstery cleaning products business for $20 million. WOOLITE is the number two
rug and upholstery cleaning product with a 17% unit market share in 1997.
Playtex acquired this product line because of its: (i) strong brand name; (ii)
number two position in a growing category; (iii) distribution alongside gloves
in food stores, drug chains and mass merchandisers; and (iv) opportunity for
line extensions and more effective marketing programs. Since acquiring the brand
in 1995, the Company has introduced new, distinctive packaging to enhance
communication of the product attributes to the consumer, an improved Pet Stain
spray in 1996, a new foam Pet Carpet Cleaner in early 1997, and a new liquid
carpet cleaning product called Stain Solutions-TM- in early 1998.
PERSONAL GROOMING. The Company's Personal Grooming business consists of
Jhirmack-Registered Trademark- hair care products and Tek-Registered Trademark-
toothbrushes. In 1997, these products contributed approximately 5% of the
Company's net sales.
11
<PAGE>
NEWLY ACQUIRED BRANDS. In January 1998, the Company acquired a number of
well-known brands that assimilate well into existing sales and distribution
systems. The new products should result in a more strategically-balanced product
mix, decreasing the relative size of the Feminine Care business as a percent of
total revenue. In Infant Care, the Company added CHUBS baby wipes, WET ONES
hands and face towelettes, MR. BUBBLE bubble bath products, BINKY pacificers and
DIAPARENE skin care products for babies. In Personal Grooming, the Company
expanded it's line of oral care products with the addition of BINACA breath
sprays and drops and the DENTAX line of toothbrushes, toothpaste and dental
floss. Additionally, the Company added OGILVIE home permanent products, TUSSY
deodorants, DOROTHY GRAY skin care products and BETTER OFF depilatories to the
Personal Grooming category.
E. MARKETING
The Company allocates a significant portion of its revenues to the
advertising and promotion of its products. Expenditures for these purposes were
$114.3 million, $119.4 million and $117.6 million, in 1997, 1996 and 1995,
respectively. As part of the Company's strategic shift to a more consumer driven
marketing strategy, the Company has shifted a greater percentage of its spending
to brand-building activities, such as advertising and sampling programs, and has
decreased price-oriented trade spending.
The Company believes it is responsible for, and will benefit from, the
building and development of the markets in which it competes. As a result, the
Company is also aggressively developing category management programs--the
process of working with retailers to increase product category sales and
profitability through analysis of consumer buying habits and improved
merchandising techniques.
F. COMPETITION
The markets for the Company's principal 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.
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's major competitor in the tampon
market is Procter & Gamble, which acquired Tambrands, the manufacturer and
distributor of TAMPAX in July 1997. TAMPAX had a 49% market share in 1997. Other
key competitors in the tampon market include Kimberly-Clark Corporation, Johnson
& Johnson and various private label suppliers. The Company believes that the
market for consumer products will continue to be highly competitive.
G. 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. (See
Legal Proceedings).
H. DISTRIBUTION
The Company sells its products through direct sales personnel of
approximately 141 people, independent food brokers and by exclusive
distributors. Independent food brokers supplement the direct sales force in the
food class of trade, primarily by providing more effective coverage at the store
level. In 1997, mass merchandisers and other outlets, supermarkets, and drug
stores accounted for 45%, 36% and 19%, respectively, of the Company's net sales.
In recent years, sales through mass merchandisers and price clubs,
12
<PAGE>
as a percentage of total sales, have increased 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.
During 1996, Playtex restructured its domestic sales force into two separate
organizations: the Consumer Products Division for Sun Care, Household Products
and Personal Grooming, and the Personal Products Division for Feminine Care and
Infant Care Products. This new structure allows the Company's sales forces to
focus more effectively on individual product lines and the Company's category
management initiatives, which the Company anticipates will allow for a more
effective and efficient integration of newly acquired brands through its
existing distribution network.
I. RESEARCH AND DEVELOPMENT
The Company maintains ongoing research and development programs in Paramus,
New Jersey. Approximately 69 employees are engaged in these programs, for which
expenditures were $8.0 million, $7.3 million, and $6.5 million in 1997, 1996 and
1995, respectively.
J. TRADEMARKS AND PATENTS
The Company has proprietary rights to a number of trademarks important to
its businesses, such as PLAYTEX, GENTLE GLIDE, SILK GLIDE, SLIMFITS, LIVING,
HANDSAVER, EASY-FEED, DROP-INS, SPILL-PROOF, MOST LIKE MOTHER, NATURAL ACTION,
QUICKSTRAW, COOLSTRAW, AVANCE, JHIRMACK, BANANA BOAT, GET ON THE BOAT, TAN
EXPRESS, BIOSUN, QUIKBLOK and TEK. The PLAYTEX and LIVING trademarks in the
United States and Canada are owned by Playtex Marketing. Playtex Marketing is
responsible for protecting, exercising quality control over and enforcing the
trademarks. The Company and Apparel each have licenses from Playtex Marketing
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. The Company also owns a royalty-free
license in perpetuity to the WOOLITE trademark for rug and upholstery cleaning
products in the United States and Canada.
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 cups and
formulations for certain sun care and hair care products. The patents expire at
varying times, ranging from 1998 to 2014. 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.
K. 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
13
<PAGE>
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.
L. CUSTOMERS AND BACKLOG
No single customer or affiliated group of customers represents 10% or more
of the Company's sales over the past three years, except for Wal-Mart Stores,
Inc. ("Wal-Mart") which represented approximately 20% in 1997, 18% in 1996, and
17% in 1995. For each of such periods, net sales to the Company's next three
largest customers represented in the aggregate approximately 14% in 1997, 12% in
1996, and 12% in 1995 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 Sun Care products due to industry convention and the seasonal nature of
this business.
The Company's policy is not to accept returned goods, except for 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, the dollar amount of current
backlog is not considered to be a reliable indication of future sales volume.
M. EMPLOYEES AND LABOR RELATIONS
The Company's worldwide workforce consisted of approximately 1,640 employees
as of December 27, 1997, of whom 167 were located outside the United States,
primarily in Canada. Of the United States facilities, only the 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 180 workers at December 27, 1997 and expires on June 24, 2000.
The Company believes that its labor relations are satisfactory and no material
labor cost increases are anticipated.
N. 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 environmental
expenditures anticipated for the current year or for 1999. (See Legal
Proceedings).
ITEM 2. PROPERTIES
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 manufacturing and distribution
facilities in Dover, Delaware; Watervliet, New York; and Arnprior and Malton,
Canada. The Company maintains a research and development facility in Paramus,
New Jersey, which is leased on a month-to-month basis. The Company operates two
facilities in Canada. 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 expires in 2004. In May 1997, the
Company signed an agreement to lease certain office space located in Allendale,
New Jersey. This facility contains 43,500 square feet and will house the
Company's Research and Development group. This new lease has a term of 15 years
with two five-year renewal options. The Paramus facility noted in the table
below, will be
14
<PAGE>
vacated when construction of the Allandale facility is completed. For 1997, the
Company's average utilization rate of manufacturing capacity was an estimated
82%.
The following table sets forth the principal properties of the Company as of
December 27, 1997, which are located in six states, Puerto Rico and Canada:
<TABLE>
<CAPTION>
NUMBER OF ESTIMATED
FACILITIES OWNED FACILITIES SQUARE FOOTAGE
- ------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
MANUFACTURING/OFFICE/DISTRIBUTION/ WAREHOUSE
Dover, DE.................................................... 3 710,000
Watervliet, NY............................................... 1 159,600
Arnprior, Canada............................................. 1 91,800
FACILITIES LEASED
- -------------------------------------------------------------------
OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE.................................................... 5 324,000
Malton, Canada............................................... 1 72,800
Westport, CT................................................. 1 41,700
Paramus, NJ.................................................. 1 33,000
Guaynabo, PR................................................. 1 15,700
Orlando, FL.................................................. 1 10,400
Spokane, WA.................................................. 1 8,400
</TABLE>
As a result of the acquisition of PCH in January 1998, the Company now owns
and operates a 54,400 square foot manufacturing facility located in Sidney,
Ohio. In addition, as a result of the acquisition, the Company acquired leases
for three additional manufacturing and warehousing locations in Sidney, Ohio
totaling 227,200 square feet and office space in a single building totaling
19,500 square feet in Montvale, New Jersey.
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.
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 1998, there were approximately 12 pending claims, although additional
claims may be asserted in the future. For TSS claims filed from October 1, 1985
until November 30, 1995, the Company is self-insured 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.
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.
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
15
<PAGE>
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, 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
combined. The Company and Apparel have each paid $300,000 (or a total of
$600,000) 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 $100,000, 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 is a defendant in various other legal proceedings, claims and
investigations which arise in the normal course of business. In the opinion of
Management, the ultimate disposition of these matters, including those described
above, will not have a material 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
16
<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, par value
$.01 per share, 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, 60,274,051
shares were issued and outstanding as of March 17, 1998. There were 406 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 17,
1998, 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 1997 Term Loan,
the Senior Secured Credit Facilities and the indentures governing the Senior
Subordinated Notes, and the Senior Notes.
The following table sets forth the high and low sale price per share of the
Common Stock during the fiscal years ended December 27, 1997 and December 28,
1996 as reported by the New York Stock Exchange--Composite Transactions:
<TABLE>
<CAPTION>
FIRST SECOND QUARTER THIRD QUARTER FOURTH QUARTER
Fiscal 1997 QUARTER
- ------------------------- ---------
------- ----------------
-------
<S> <C> <C> <C> <C> <C> <C> <C>
High..................... $11 3/4 $11 1/2 $10 1/4 $11
Low...................... 7 7/8 9 8 13/16 9
<CAPTION>
Fiscal 1996
- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
High..................... 8 5/8 10 3/8 9 1/2 9 1/2
Low...................... 6 5/8 7 1/8 7 1/2 7 1/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The response to this Item is incorporated by reference to the information in
the section entitled "Selected Financial Data" of the Company's 1997 Annual
Report to Stockholders (included as Exhibit 13 to this Annual Report on Form
10-K).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The response to this Item is incorporated by reference to the information in
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Company's 1997 Annual Report to
Stockholders (included as Exhibit 13 to this Annual Report on Form 10-K).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has interest rate risk associated with variable rate
indebtedness. From time to time, the Company utilizes off-balance sheet
financial instruments to manage market risks associated with fluctuations in
interest rates. It is the Company's policy to use derivative financial
instruments to protect against market risks arising in the normal course of
business. Company policies prohibit the use of derivative instruments for the
sole purpose of trading for profit on price fluctuations or to enter into
contracts which intentionally increase the Company's underlying exposure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is incorporated by reference to the information
under the captions "Consolidated Statements of Operations", "Consolidated
Balance Sheets", "Consolidated Statements of Changes in Stockholders' Equity",
"Consolidated Statements of Cash Flows", "Notes to Consolidated
17
<PAGE>
Financial Statements", "Independent Auditors' Report", and "Report of
Management" of the Company's 1997 Annual Report to Stockholders (included as
Exhibit 13 to this Annual Report on Form 10-K).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this Item is incorporated by reference to the information in
the section entitled "Election of Directors" in the Company's Proxy Statement
for the 1998 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this Item is incorporated by reference to the information in
the section entitled "Executive Compensation" in the Company's Proxy Statement
for the 1998 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this Item is incorporated by reference to the information in
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item is incorporated by reference to the information in
the section entitled "Certain Transactions" and "Executive Compensation -
Arrangements with Former Chief Executive Officer" in the Company's Proxy
Statement for the 1998 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
(A)(1) The following Consolidated Financial Statements and related Notes of
the Company are incorporated herein by reference to the Company's 1997 Annual
Report to Stockholders and the Independent Auditors' Report (included as Exhibit
13 to this Annual Report on Form 10-K):
Independent Auditors' Report
Consolidated Balance Sheets as of December 27, 1997 and December 28, 1996
Consolidated Statements of Operations for the twelve months ended December 27,
1997,
December 28, 1996 and December 30, 1995
Consolidated Statements of Changes in Stockholders' Equity for the twelve months
ended
December 27, 1997, December 28, 1996 and December 30, 1995
Consolidated Statements of Cash Flows for the twelve months ended December 27,
1997,
December 28, 1996 and December 30, 1995
Notes to Consolidated Financial Statements
18
<PAGE>
(A) (2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of the Company as set forth below
is filed with this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report on Schedule................................................................... 20
Schedule VIII--Valuation and Qualifying Accounts........................................................... 21
</TABLE>
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-7 for exhibits filed with this Annual
Report on Form 10-K.
(B) REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Company with the Securities and
Exchange Commission on December 24, 1997. The Company announced that it had
reached a definitive agreement to acquire Personal Care Group, Inc. There were
no financial statements filed with the Form 8-K.
19
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
Playtex Products, Inc.:
Under date of February 5, 1998, we reported on the consolidated balance
sheets of Playtex Products, Inc. and subsidiaries as of December 27, 1997 and
December 28, 1996, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the twelve months ended
December 27, 1997, December 28, 1996 and December 30, 1995, as contained in the
1997 Annual Report to Stockholders. These consolidated financial statements and
our report thereon are incorporated by reference in the Annual Report on Form
10-K for the fiscal year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule for the twelve months ended December
27, 1997, December 28, 1996, and December 30, 1995, as listed in Item 14(a)(2)
of the Annual Report on Form 10-K for the fiscal year 1997. 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 5, 1998
20
<PAGE>
PLAYTEX PRODUCTS, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
TWELVE MONTHS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT END
OF PERIOD INCOME DEDUCTIONS (1) OF PERIOD
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Receivables:
Allowance for doubtful accounts
December 30, 1995............................................ $ (2,346) $ (449) $ 753 $ (2,042)
December 28, 1996............................................ $ (2,042) $ (325) $ 609 $ (1,758)
December 27, 1997............................................ $ (1,758) $ (64) $ 153 $ (1,669)
</TABLE>
- ------------------------
(1) - Represents accounts written-off.
21
<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.
<TABLE>
<S> <C> <C>
PLAYTEX PRODUCTS, INC.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Michael R. Gallagher
CHIEF EXECUTIVE OFFICER
</TABLE>
March 27, 1998
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 27th day of March 1998.
SIGNATURES TITLE
- ------------------------------ --------------------------
/s/ ROBERT B. HAAS
- ------------------------------ Chairman of the Board and
Robert B. Haas Director
/s/ MICHAEL R. GALLAGHER
- ------------------------------ Chief Executive Officer
Michael R. Gallagher and Director
Executive Vice President,
/s/ MICHAEL F. GOSS Chief Financial Officer
- ------------------------------ and Director (Principal
Michael F. Goss Financial and Accounting
Officer)
- ------------------------------ Director
Thomas H. Lee
/s/ DOUGLAS D. WHEAT
- ------------------------------ Director
Douglas D. Wheat
- ------------------------------ Director
Michael R. Eisenson
- ------------------------------ Director
Kenneth F. Yontz
- ------------------------------ Director
Timothy O. Fisher
/s/ C. ANN MERRIFIELD
- ------------------------------ Director
C. Ann Merrifield
- ------------------------------ Director
John W. Childs
/s/ WYCHE H. WALTON
- ------------------------------ Director
Wyche H. Walton
22
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
<S> <C>
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.)
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
</TABLE>
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<CAPTION>
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31, 1995. (Incorporated herein by reference to Exhibit 4(b)(4) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 30, 1995, File No. 33-25485-01.)
<S> <C>
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.
(Incorporated herein by reference to Exhibit 4(b)(5) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
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.
(Incorporated herein by reference to Exhibit 4(b)(6) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
4(b)(7) Seventh Supplemental Indenture among Playtex Products, Inc., as Issuer, TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company, as Trustee, dated as of October
31, 1995. (Incorporated herein by reference to Exhibit 4(b)(7) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 30, 1995, File No. 33-25485-01.)
* 4(b)(8) Eighth Supplemental Indenture among Playtex Products, Inc., as Issuer,TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company, as Trustee, dated as of July
21, 1997.
* 4(b)(9) Ninth Supplemental Indenture among Playtex Products, Inc., as Issuer,TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company, as Trustee, dated as of August
27, 1997.
* 4(b)(10) Tenth Supplemental Indenture among Playtex Products, Inc., as Issuer,TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company, as Trustee, dated as of January
28, 1998.
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.
(Incorporated herein by reference to Exhibit 4(c)(2) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
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.)
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.)
</TABLE>
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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.)
4(e) Indenture dated as of July 21, 1997 relating to the 8 7/8 Senior Notes due 2004 (the "Senior Notes")
among Playtex Products, Inc., as Issuer, Playtex Beauty Care, Inc., Playtex Investment Corp.,
Playtex International Corp., Playtex Sales & Services, Inc., Playtex Manufacturing, Inc.,
Smile-Tote, Inc., Sun Pharmaceuticals Corp., TH Marketing Corp. (Collectively, the "Guarantors") and
Marine Midland Bank, as Trustee. (Incorporated herein by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K dated July 21, 1997).
4(e)(1) Form of Exchange Notes (incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated July 21, 1997.)
4(e)(2) Registration Rights Agreement, among the Company, the Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser") (incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K dated July 21, 1997).
4(e)(3) Purchase Agreement, dated as of July 14, 1997 relating to the 8 7/8 Senior Notes due 2004 (the
"Senior Notes") among Playtex Products, Inc., as Issuer, Playtex Beauty Care, Inc., Playtex
Investment Corp., Playtex International Corp., Playtex Sales & Services, Inc., Playtex
Manufacturing, Inc., Smile-Tote, Inc., Sun Pharmaceuticals Corp., TH Marketing Corp. (Collectively,
the "Guarantors") and Donaldson, Lufkin & Jenrette Securities Corporation. (Incorporated herein by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 21, 1997).
* 4(e)(4) First Supplemental Indenture, dated as of January 28, 1998 among the Company, Personal Care
Holdings, Inc. ("PCH"), Personal Care Group, Inc. ("PCG") and Carewell Industries, Inc.
("Carewell"), (each of PCH, PCG and Carewell being referred to as a Guarantor), and Marine Midland
Bank as trustee.
10(a) Credit Agreement, dated as of July 21, 1997, among Playtex Products, Inc., DLJ Funding, as the
syndication agent, Wells Fargo Bank, N.A. ("Wells Fargo"), as the administrative agent, and the
lenders named therein. (Incorporated herein by reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K dated July 21, 1997).
* 10(a)(1) First Amendment, dated as of January 28, 1998, to the Credit Agreement, dated as of July 21, 1997,
among the Company, DLJ Capital Funding, Inc., as the syndication agent, Wells Fargo, as the
administrative agent, and the lenders named therein.
10(b) Term Loan Agreement, dated as of July 21 1997, among Playtex Products, Inc., DLJ Funding, as the
syndication agent, Wells Fargo, as the facility manager, and the lenders therein. (Incorporated
herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated July 21,
1997).
* 10(b)(1) First Amendment, dated as of January 28, 1998, to the Term Loan Agreement, dated as of July 21,
1997, among the Company, DLJ Capital Funding, Inc., as the syndication agent, Wells Fargo, as the
facility manager, and the Lenders therein.
</TABLE>
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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.)
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)(1) Playtex Management Incentive Plan for 1996. (Incorporated herein by reference to Exhibit 10(l)(1) of
Playtex's Annual Report on Form 10-K for the fiscal year ended December 30, 1995, File No.
33-25485-01).
10(l)(2) Playtex Management Incentive Plan for 1997.
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.)
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.)
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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.)
10(r) 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(s) 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(t)(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(t)(2) Amendment No. 2 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(t)(3) Amendment No. 3 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(t)(4) Amendment No. 4 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(u) 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(u)(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(v) 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(v)(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.)
</TABLE>
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10(v)(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(v)(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(w) 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(x) 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(y) 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(z) 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(aa) Memorandum of Understanding, dated June 21, 1995 with Michael R. Gallagher, Chief Executive Officer.
(Incorporated herein by reference to Exhibit 10(ab) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
10(ab) Form of Retention Agreement dated as of July 22, 1997 between Michael R. Gallagher and the Company.
(Incorporated herein by reference to Exhibit 10.1 of Playtex's Registration Statement on Form S-4
dated August 29, 1997, File No. 333-33915.)
10(ac) Form of Retention Agreement dated as of July 22, 1997 between Michael F. Goss and the Company.
(Incorporated herein by reference to Exhibit 10.2 of Playtex's Registration Statement on Form S-4
dated August 29, 1997, File No. 333-33915.)
10(ad) Form of Retention Agreement dated as of July 22, 1997 between each of Richard G. Powers, Max R.
Recone and James S. Cook and the Company. (Incorporated herein by reference to Exhibit 10.3 of
Playtex's Registration Statement on Form S-4 dated August 29, 1997, File No. 333-33915.)
* 10(ae) Interest Protection Agreement effective November 28, 1997 between Playtex Products, Inc., and
Merrill Lynch Capital Services, Inc.
* 10(af) Stock Purchase Agreement, dated as of December 19, 1997, among Playtex Products, Inc., and the
Shareholders of Carewell Industries, Inc.
* 10(ag) Asset Purchase Agreement, dated as of January 26, 1998, among Playtex Products, Inc.,
Binky-Griptight, Inc., Lewis Woolf Griptight Limited and L.W.G. Holdings Limited.
10(ah) Merger Agreement, dated as of December 22, 1997, among Playtex Products, Inc., PCG Acquisition
Corp., J.W. Childs Equity Partners L.P. and Personal Care Holdings, Inc. (Incorporated herein by
reference to Exhibit 2.1 of Playtex's Form 8-K dated February 12, 1998.)
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10(ah)(1) Registration Rights Agreement, dated as of January 28, 1998 among Playtex Products, Inc. and J.W.
Childs Equity Partners, L.P. (Incorporated herein by reference to Exhibit 2.2 of Playtex's Form 8-K
dated February 12, 1998.)
10(ah)(2) Stockholders Agreement, dated as of January 28, 1998, between Playtex Products, Inc. and J.W. Childs
Equity Partners, L.P. and certain other Stockholders named therein. (Incorporated herein by
reference to Exhibit 2.3 of Playtex's Form 8-K dated February 12, 1998.)
*10 (ai) Lease Agreement between Playtex Manufacturing, Inc. and Tetra Pak Plastic Packaging R&D GmbH, Hitek
FSP, S.A., Tetra Laval Holdings & Finance S.A., and Tetra Laval Credit Inc., dated as of April 26,
1996.
*10 (aj) Lease Agreement between Playtex Manufacturing, Inc. and BTM Capital Corporation, dated as of June
20, 1996.
* 12(a) Statement re-computation of ratios.
* 13 Playtex's 1997 Annual Report to Stockholders.
* 22(a) Subsidiaries of Playtex.
* 23 Consent of KMPG Peat Marwick LLP.
* 27 Financial Data Schedule.
</TABLE>
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* Filed herewith
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Exhibit 4(b)(8)
--------------------
EIGHTH
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
TH MARKETING CORP., and
SMILE-TOTE, INC., as Guarantors
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
--------------------
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of July 21, 1997
<PAGE>
THIS EIGHTH SUPPLEMENTAL INDENTURE, dated as of July 21, 1997, among
Playtex Products, Inc., a Delaware corporation (the "Company"), TH Marketing
Corp., a Delaware corporation, and Smile-Tote, Inc., a California corporation
(each, a "Guarantor" and, together, the Guarantors), 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;
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 Banana Boat Holding Corporation, a Delaware corporation ("BBH"), 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
(the "BBH Merger") and, by reason of the BBH Merger, entered into a Sixth
Supplemental Indenture dated as of October 31, 1995;
<PAGE>
2
WHEREAS, on October 31, 1995, Sun Acquisition, Inc., a Delaware
corporation, merged with and into Sun Pharmaceuticals Corp., a Delaware
corporation ("Sun"), 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 (the "Sun Merger") and, by reason of the Sun
Merger, entered into a Seventh Supplemental Indenture dated as of October 31,
1995;
WHEREAS, each of the Guarantors has guaranteed the obligations of
the Company pursuant to an Indenture dated as of July 21, 1997 by and among the
Company, the subsidiaries of the Company (including the Guarantors) named
therein, as guarantors, and Marine Midland Bank, as Trustee (the "1997
Indenture");
WHEREAS, pursuant to Section 1013(b) of the Indenture, by reason of
such guarantees each Guarantor is required to execute this Eighth Supplemental
Indenture (this "Supplemental Indenture");
WHEREAS, the Company, each of the Guarantors 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 for other good and valuable consideration,
the receipt and sufficiency of which are herein acknowledged, the Company, the
Trustee and each of the Guarantors 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.
ARTICLE TWO
GUARANTEE
2.1 Guarantee. For value received, each Guarantor, in accordance
with this Article Two, hereby absolutely, unconditionally and irrevocably
guarantees to the Trustee and the Holders, as if such 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
<PAGE>
3
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. Each 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, each 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) Each 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) Each 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 embodied herein; and it
is specifically acknowledged and agreed that this Guarantee has been delivered
by each Guarantor free of any conditions whatsoever and that no representations,
warranties or promises have been made to such 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 any Guarantor.
(e) This Guarantee is a guarantee of payment, performance and
compliance and not of collectibility and is in no way conditioned or contingent
<PAGE>
4
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 each Guarantor set forth herein
constitute the full recourse obligations of such Guarantor enforceable against
it to the full extent of all its assets and properties.
2.3 Guarantee Absolute and Unconditional. The obligations of each
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 such 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 each Guarantor hereunder is irrevocable,
absolute and unconditional and (to the extent permitted by law) the liability
and obligations of each 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, a 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, a 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, a
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, a Guarantor or any other Person and
including any other guarantees received by the Trustee;
(f) any other dealings by the Company or a Guarantor with any
other Person, or with any security;
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5
(g) the Trustee's or the Holders' acceptance of compositions
from the Company or a 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, a Guarantor
or any other Person on account of any indebtedness and liabilities owing by the
Company or a 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 a 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 a Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(k) the sale of the Company's or a Guarantor's business or any
part thereof;
(l) any merger or consolidation, arrangement or reorganization
of the Company, a Guarantor, any Person resulting from the merger or
consolidation of the Company or a 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 a Guarantor or
any change in the corporate relationship between the Company and a 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 a Guarantor (whether voluntary or involuntary) or the loss of
corporate existence;
(n) any arrangement or plan of reorganization affecting the
Company or a Guarantor;
(o) any failure, omission or delay on the part of the Company
to conform or comply with any term of the Indenture;
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6
(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 a 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 a 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 each 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 a 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. Each 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) Each 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 a Guarantor with respect to the Indenture
Obligations, whether by statute, rule of law or otherwise. Each 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. Each 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
<PAGE>
7
disposition of any right, title to or interest in the Securities by the Holders
or in the Indenture, (ii) any release of a 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, each 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, a 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.
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 each 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
each 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 each Guarantor
shall be responsible for the payment thereof to the Trustee or the Holders upon
demand.
<PAGE>
8
2.7 Waiver of Rights. Each 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, such 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 a 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, each
Guarantor hereby consents and agrees, to the fullest extent permitted by
applicable law, that the rights of the Trustee hereunder, and the liability of
such 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 thereof, or the exercise of any other rights,
powers, privileges or remedies. The rights
<PAGE>
9
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, a 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, a 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 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
<PAGE>
10
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 each 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, each 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 each 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 each 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 each 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, each
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 such 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.
<PAGE>
11
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.
2.16 Guarantee Subordinate to Senior Guarantor Indebtedness. Each
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 a Guarantor or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of a
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 a 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 such
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
<PAGE>
12
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 such 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 (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 such 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 a 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 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.
<PAGE>
13
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 a Guarantor or any Person acting on behalf of a Guarantor in
respect of the Securities.
(b) No payment (excluding Payments in the form of Permitted
Guarantor Junior Securities) shall be made by a 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, a
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 a 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 such
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 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
<PAGE>
14
Two to the holders of Senior Guarantor Indebtedness by Holders of the Securities
or the Trustee, shall, as among a 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 such 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 a Guarantor, its
creditors other than holders of Senior Guarantor Indebtedness and the Holders of
the Securities, the obligation of such 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 a Guarantor of the Holders of the Securities and
creditors of such 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 a 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, including, in the event of any
dissolution, winding up, liquidation or reorganization of a Guarantor whether in
bankruptcy, insolvency, receivership proceedings, or otherwise, the timely
filing of a claim for the unpaid balance of the indebtedness of such 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.
<PAGE>
15
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 a Guarantor or by any act or failure to act by any such holder, or by
any non-compliance by a 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 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 a 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.
2.24 Notice to Trustee by Guarantor.
(a) Each Guarantor shall give prompt written notice to the
Trustee of any fact known to such 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 a 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
<PAGE>
16
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 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 a 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 a 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
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 a 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 such 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>
17
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 Sections 2.16 through 2.30 of this Supplemental Indenture 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 a Guarantor or any Affiliate of
such 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, a 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>
18
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.
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 eleventh 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 either Guarantor of this Supplemental Indenture. The Trustee makes
no representations as to the validity or sufficiency of this Supplemental
Indenture.
<PAGE>
19
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: Exec. Vice President
TH MARKETING CORP.
By: /s/ Michael F. Goss
------------------------------------
Name: Michael F. Goss
Title: Exec. Vice President
SMILE-TOTE, INC.
By: /s/ Michael F. Goss
------------------------------------
Name: Michael F. Goss
Title: Exec. Vice President
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Barbara McCluskey
------------------------------------
Name: Barbara McCluskey
Title: Vice President
<PAGE>
Exhibit 4(b)(9)
--------------------
NINTH
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
PLAYTEX SALES & SERVICES, INC.,
PLAYTEX MANUFACTURING, INC.
SUN PHARMACEUTICALS CORP.
TH MARKETING CORP., and
SMILE-TOTE, INC., as Guarantors
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
--------------------
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of August 27, 1997
<PAGE>
Exhibit 4(b)(9)
THIS NINTH SUPPLEMENTAL INDENTURE, dated as of August 27, 1997,
among Playtex Products, Inc., a Delaware corporation (the "Company"), Playtex
Sales & Services, Inc., a Delaware corporation, Playtex Manufacturing, Inc., a
Delaware corporation, Sun Pharmaceuticals Corp., a Delaware corporation, TH
Marketing Corp., a Delaware corporation, and Smile-Tote, Inc., a California
corporation (each, a "Guarantor" and, together, the Guarantors), 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. 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. 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;
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 Banana Boat Holding Corporation ("BBH") 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 (the "BBH Merger") and, by reason
of the BBH Merger, entered into a Sixth Supplemental Indenture dated as of
October 31, 1995;
<PAGE>
2
WHEREAS, on October 31, 1995, Sun Acquisition, Inc., a Delaware
corporation, merged with and into Sun Pharmaceuticals Corp. ("Sun") 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 (the
"Sun Merger") and, by reason of the Sun Merger, entered into a Seventh
Supplemental Indenture dated as of October 31, 1995;
WHEREAS, in March 1996, BBH merged with and into Sun with Sun
succeeding to the business of BBH and assuming all the obligations of BBH under
the Securities and the Indenture;
WHEREAS, each of TH Marketing Corp. and Smile-Tote, Inc. has
guaranteed the obligations of the Company pursuant to an Indenture dated as of
July 21, 1997 by and among the Company, the subsidiaries of the Company named
therein, as guarantors, and Marine Midland Bank, as Trustee and, by reason of
such guarantee, entered into an Eighth Supplemental Indenture dated as of July
21, 1997;
WHEREAS, the Company, the Guarantors and the Trustee desire to make
certain technical amendments to Section 1426 of the Indenture and Section 2.26
of each of the Second through Fifth Supplemental Indentures;
WHEREAS, the Company, the Guarantors 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 for other good and valuable consideration,
the receipt and sufficiency of which are herein acknowledged, the Company, the
Trustee and each of the Guarantors hereby agree for the equal and the ratable
benefit of all holders of the Securities as follows:
Section 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.
Section 2. Amendment.
(a) The second sentence of Section 1426 of the Indenture
is hereby amended to read as follows: "Nothing in Sections 1416 through 1429
shall apply to claims of, or payments to, the Trustee under or pursuant to the
<PAGE>
3
provisions in this Indenture regarding compensation and indemnification of the
Trustee."
(b) The second sentence of Section 2.26 of each of the
Second through Fifth Supplemental Indentures is hereby amended to read as
follows: "Nothing in Sections 2.16 through 2.30 of this Supplemental Indenture
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."
Section 3. 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 4. 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 5. 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 6. Recitals. The Trustee shall not be responsible for any
recital herein (other than the eleventh 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 any Guarantor 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, 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
PLAYTEX SALES & SERVICES, INC.
<PAGE>
4
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
PLAYTEX MANUFACTURING, INC.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
SUN PHARMACEUTICALS CORP.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
TH MARKETING CORP.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
SMILE-TOTE, INC.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Terence Rawlins
----------------------
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE>
Exhibit 4(b)(10)
EXECUTION COPY
--------------------
TENTH
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
PERSONAL CARE HOLDINGS, INC.,
PERSONAL CARE GROUP, INC., and
CAREWELL INDUSTRIES, INC., as Guarantors
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
--------------------
$360,000,000
9% Senior Subordinated Notes due 2003
Dated as of January 28, 1998
<PAGE>
THIS TENTH SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of January 28, 1998, among Playtex Products, Inc., a Delaware
corporation (the "Company"), Personal Care Holdings, Inc., a Delaware
corporation ("PCH"), Personal Care Group, Inc., a Delaware corporation ("PCG"),
and Carewell Industries, Inc., a Delaware corporation ("Carewell"), (each of
PCH, PCG and Carewell being referred to herein as a "Guarantor" and, together,
as the "Guarantors"), 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 (as defined
in the Indenture) and, by reason of such guarantee, entered into a Third
Supplemental Indenture dated as of June 6, 1995;
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 Banana Boat Holding Corporation, a Delaware corporation ("BBH"), 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
(the "BBH
<PAGE>
2
Merger") and, by reason of the BBH Merger, entered into a Sixth Supplemental
Indenture dated as of October 31, 1995;
WHEREAS, on October 31, 1995, Sun Acquisition, Inc., a Delaware
corporation, merged with and into Sun Pharmaceuticals Corp., a Delaware
corporation ("Sun"), 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 (the "Sun Merger") and, by reason of the Sun
Merger, entered into a Seventh Supplemental Indenture dated as of October 31,
1995;
WHEREAS, each of TH Marketing Corp. and Smile-Tote, Inc. has
guaranteed the obligations of the Company pursuant to an Indenture dated as of
July 21, 1997 by and among the Company, the subsidiaries of the Company named
therein, as guarantors, and Marine Midland Bank, as Trustee and, by reason of
such guarantee, entered into an Eighth Supplemental Indenture, dated as of July
21, 1997;
WHEREAS, the Company, Playtex Sales & Services, Inc., Playtex
Manufacturing, Inc., Sun Pharmaceuticals Corp., TH Marketing Corp., Smile-Tote,
Inc. and the Trustee made certain technical amendments to Section 1426 of the
Indenture and Section 2.26 of each of the Second through Fifth Supplemental
Indentures and by reason of such amendments, entered into a Ninth Supplemental
Indenture, dated as of August 21, 1997;
WHEREAS, the Guarantors have each guaranteed the obligations of the
Company under the Credit Agreement pursuant to a Subsidiaries Guarantee, dated
as of January 28, 1998;
WHEREAS, pursuant to Section 1013(b) of the Indenture, by reason of
such guarantees each Guarantor is required to execute this Tenth Supplemental
Indenture; and
WHEREAS, the Company, each of the Guarantors 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 for other good and valuable consideration,
the receipt and sufficiency of which are herein acknowledged, the Company, the
Trustee and each of the Guarantors hereby agree for the equal and the ratable
benefit of all holders of the Securities as follows:
<PAGE>
3
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.
ARTICLE TWO
GUARANTEE
2.1 Guarantee. For value received, each Guarantor, in accordance
with this Article Two, hereby absolutely, unconditionally and irrevocably
guarantees to the Trustee and the Holders, as if such 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. Each 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, each 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) Each 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.
<PAGE>
4
(c) Each 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 embodied herein; and it
is specifically acknowledged and agreed that this Guarantee has been delivered
by each Guarantor free of any conditions whatsoever and that no representations,
warranties or promises have been made to such 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 any 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 each Guarantor set forth herein
constitute the full recourse obligations of such Guarantor enforceable against
it to the full extent of all its assets and properties.
2.3 Guarantee Absolute and Unconditional. The obligations of each
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 such 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 each Guarantor hereunder is irrevocable,
absolute and unconditional and (to the extent permitted by law) the liability
and obligations of each 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, a 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
<PAGE>
5
departure from, the Indenture or the Securities, including any increase or
decrease in the Indenture Obligations;
(c) the taking of security from the Company, a 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, a
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, a Guarantor or any other Person and
including any other guarantees received by the Trustee;
(f) any other dealings by the Company or a Guarantor with any
other Person, or with any security;
(g) the Trustee's or the Holders' acceptance of compositions
from the Company or a 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, a Guarantor
or any other Person on account of any indebtedness and liabilities owing by the
Company or a 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 a 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 a Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(k) the sale of the Company's or a Guarantor's business or any
part thereof;
(l) any merger or consolidation, arrangement or reorganization
of the Company, a Guarantor, any Person resulting from the merger or
<PAGE>
6
consolidation of the Company or a 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 a Guarantor or
any change in the corporate relationship between the Company and a 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 a Guarantor (whether voluntary or involuntary) or the loss of
corporate existence;
(n) any arrangement or plan of reorganization affecting the
Company or a 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 a 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, a Guarantor.
2.4 Right to Demand Full Performance. In the event of any demand for
payment or performance by the Trustee from a 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 each 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 a Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Indenture Obligations
<PAGE>
7
due to the Trustee or the Holders by the Company or any part thereof. Each
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) Each 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 a Guarantor with respect to the Indenture
Obligations, whether by statute, rule of law or otherwise. Each 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. Each 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 a 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, each 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, a 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;
<PAGE>
8
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 each 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
each 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 each Guarantor
shall be responsible for the payment thereof to the Trustee or the Holders upon
demand.
2.7 Waiver of Rights. Each 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, such 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 a 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, each
Guarantor hereby consents and agrees, to the fullest extent permitted by
applicable law, that the rights of the Trustee hereunder, and the liability of
such 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
<PAGE>
9
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 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, a 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, a 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
<PAGE>
10
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
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 each 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, each 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 each 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 each 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 each Guarantor shall enter into an
amendment to this Guarantee, reasonably satisfactory to the Trustee, evidencing
such revival and reinstatement.
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11
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, each
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 such 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.
2.16 Guarantee Subordinate to Senior Guarantor Indebtedness. Each
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 a Guarantor or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of a
Guarantor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or
<PAGE>
12
(c) any assignment for the benefit of creditors or any other marshaling of
assets or liabilities of a 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 such
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 such 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 (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 such Guarantor for
application to the payment of all Senior Guarantor Indebtedness remaining
unpaid, to the extent necessary
<PAGE>
13
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 a 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 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 a Guarantor or any Person acting on behalf of a Guarantor in
respect of the Securities.
(b) No payment (excluding Payments in the form of Permitted
Guarantor Junior Securities) shall be made by a 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, a
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.
<PAGE>
14
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 a 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 such
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 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 a 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 such 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 a Guarantor, its
creditors other than holders of Senior Guarantor Indebtedness and the Holders of
the Securities, the obligation of such 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 a Guarantor of the Holders of the Securities and
creditors of such 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 a Guarantor referred to in Section
2.17 of this
<PAGE>
15
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, including, in the event of any
dissolution, winding up, liquidation or reorganization of a Guarantor whether in
bankruptcy, insolvency, receivership proceedings, or otherwise, the timely
filing of a claim for the unpaid balance of the indebtedness of such 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 a Guarantor or by any act or failure to act by any such holder, or by
any non-compliance by a 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 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 a Guarantor and any other Person; provided,
however, that in no event shall
<PAGE>
16
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) Each Guarantor shall give prompt written notice to the
Trustee of any fact known to such 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 a 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 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 a 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 a 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
<PAGE>
17
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 a 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 such 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.
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 Sections 2.16 through 2.30 of this Supplemental Indenture 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 a Guarantor or any Affiliate of
such 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
<PAGE>
18
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, a 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.
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.
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 thirteenth 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 any
<PAGE>
19
Guarantor 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, 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 CFO
PERSONAL CARE HOLDINGS, INC.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
PERSONAL CARE GROUP, INC.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
CAREWELL INDUSTRIES, INC.
By: /s/ Michael F. Goss
---------------------
Name: Michael F. Goss
Title: Executive Vice President
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Terence Rawlins
----------------------
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE>
Exhibit 4(e)(4)
EXECUTION COPY
--------------------
FIRST
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
PERSONAL CARE HOLDINGS, INC.
PERSONAL CARE GROUP, INC., and
CAREWELL INDUSTRIES, INC., as Guarantors
and MARINE MIDLAND BANK, as Trustee
--------------------
$150,000,000
8 7/8% Senior Notes due 2004
Dated as of January 28, 1998
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of January 28, 1998, among Playtex Products, Inc., a Delaware
corporation (the "Company"), Personal Care Holdings, Inc., a Delaware
corporation ("PCH"), Personal Care Group, Inc. ("PCG") and Carewell Industries,
Inc., a Delaware corporation ("Carewell"), (each of PCH, PCG and Carewell being
referred to herein as a "Guarantor" and, collectively, as the "Guarantors"), and
Marine Midland Bank (the "Trustee").
WHEREAS the Company and the Trustee are among the parties to an
Indenture dated as of July 21, 1997 (the "Indenture") providing for the issuance
of the Company's 8 7/8% Senior Notes due 2004;
WHEREAS the Guarantors, pursuant to Section 917 of the Indenture,
are required to execute and deliver to the Trustee Guarantees in the form of
Exhibit C to the Indenture;
WHEREAS, pursuant to Section 801(e) of the Indenture, by reason of
such guarantees, each Guarantor is required to execute this Supplemental
Indenture; and
WHEREAS, the Company, each of the Guarantors 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 for other good and valuable consideration,
the receipt and sufficiency of which are herein acknowledged, the Company, the
Trustee and each of the Guarantors hereby agree as follows:
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.
2. Additional Guarantors. Each of PCH, PCG and Carewell hereby
agrees to become a party to the Indenture as a Guarantor and to execute a
Guarantee in the form of Exhibit C to the Indenture.
3. 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
<PAGE>
2
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).
3.4 Recitals. The Trustee shall not be responsible for any
recital herein (other than the fourth 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 any Guarantor of this Supplemental Indenture. The Trustee makes
no representations as to the validity or sufficiency of this Supplemental
Indenture.
<PAGE>
3
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 CFO
PERSONAL CARE HOLDINGS, INC.
By: /s/ Michael F. Goss
-------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
PERSONAL CARE GROUP, INC.
By: /s/ Michael F. Goss
-------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
CAREWELL INDUSTRIES, INC.
By: /s/ Michael F. Goss
-------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
MARINE MIDLAND BANK, as Trustee
By: /s/ Frank J. Godino
-------------------------------------
Name: Frank J. Godino
Title: Vice President
<PAGE>
Exhibit 10(a)(1)
EXECUTION COPY
--------------------
FIRST
SUPPLEMENTAL INDENTURE
AMONG
PLAYTEX PRODUCTS, INC., as Issuer,
PERSONAL CARE HOLDINGS, INC.
PERSONAL CARE GROUP, INC., and
CAREWELL INDUSTRIES, INC., as Guarantors
and MARINE MIDLAND BANK, as Trustee
--------------------
$150,000,000
8 7/8% Senior Notes due 2004
Dated as of January 28, 1998
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of January 28, 1998, among Playtex Products, Inc., a Delaware
corporation (the "Company"), Personal Care Holdings, Inc., a Delaware
corporation ("PCH"), Personal Care Group, Inc. ("PCG") and Carewell Industries,
Inc., a Delaware corporation ("Carewell"), (each of PCH, PCG and Carewell being
referred to herein as a "Guarantor" and, collectively, as the "Guarantors"), and
Marine Midland Bank (the "Trustee").
WHEREAS the Company and the Trustee are among the parties to an
Indenture dated as of July 21, 1997 (the "Indenture") providing for the issuance
of the Company's 8 7/8% Senior Notes due 2004;
WHEREAS the Guarantors, pursuant to Section 917 of the Indenture,
are required to execute and deliver to the Trustee Guarantees in the form of
Exhibit C to the Indenture;
WHEREAS, pursuant to Section 801(e) of the Indenture, by reason of
such guarantees, each Guarantor is required to execute this Supplemental
Indenture; and
WHEREAS, the Company, each of the Guarantors 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 for other good and valuable consideration,
the receipt and sufficiency of which are herein acknowledged, the Company, the
Trustee and each of the Guarantors hereby agree as follows:
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.
2. Additional Guarantors. Each of PCH, PCG and Carewell hereby
agrees to become a party to the Indenture as a Guarantor and to execute a
Guarantee in the form of Exhibit C to the Indenture.
3. 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
<PAGE>
2
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).
3.4 Recitals. The Trustee shall not be responsible for any
recital herein (other than the fourth 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 any Guarantor of this Supplemental Indenture. The Trustee makes
no representations as to the validity or sufficiency of this Supplemental
Indenture.
<PAGE>
3
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 CFO
PERSONAL CARE HOLDINGS, INC.
By:/s/ Michael F. Goss
-------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
and CFO
PERSONAL CARE GROUP, INC.
By:/s/ Michael F. Goss
-------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
and CFO
CAREWELL INDUSTRIES, INC.
By:/s/ Michael F. Goss
-------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
and CFO
MARINE MIDLAND BANK, as Trustee
By:/s/ Frank J. Godino
-------------------------------------
Name: Frank J. Godino
Title Vice President
<PAGE>
Exhibit 10(b)(1)
PLAYTEX PRODUCTS, INC.
FIRST AMENDMENT TO TERM LOAN AGREEMENT
This FIRST AMENDMENT TO TERM LOAN AGREEMENT (this "Amendment") is
dated as of January 28, 1998 and entered into by and among Playtex Products,
Inc., a Delaware corporation ("Borrower"), the financial institutions listed on
the signature pages hereof ("Lenders"), DLJ Capital Funding, Inc., as the
Syndication Agent for Lenders ("Syndication Agent") and Wells Fargo Bank, N.A.,
as facility manager for the Lenders ("Facility Manager"), and, for purposes of
Section 4 hereof, the Credit Support Parties (as defined in Section 4 hereof)
listed on the signature pages hereof, and is made with reference to that certain
Term Loan Agreement dated as of July 21, 1997 (the "Term Loan Agreement"), by
and among Borrower, Lenders, Syndication Agent and Facility Manager. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Term Loan Agreement.
RECITALS
WHEREAS, Borrower has advised Lenders that Borrower desires to
acquire (the "Acquisition") 100% of the stock of Personal Care Holdings, Inc.
("PCH") by way of merger of PCH with and into PCG Acquistition Corp., a Delaware
corporation and wholly owned subsidiary of Borrower to be subsequently renamed
PCH, for an aggregate purchase price of approximately $191.4 million, including
the refinancing of approximately $60 million in existing debt and the payment of
approximately $8 million in related fees and expenses;
WHEREAS, Borrower proposes to pay for the Acquisition through (i)
the issuance of approximately 9,257,375 shares of its common stock and (ii) the
borrowing of up to $100 million of senior secured debt;
WHEREAS, Borrower has requested Lenders to amend the Term Loan
Agreement to (i) permit Borrower to borrow such an additional $100 million in
senior secured debt under the Term Loan Agreement (the "Additional Debt") and
(ii) make certain other related amendments as set forth below;
WHEREAS, subject to the terms and conditions of this Amendment,
Lenders are willing to agree to such amendments.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
<PAGE>
Section 1. AMENDMENTS TO THE TERM LOAN AGREEMENT
1.1 Amendments to Cover Page
The cover page of the Term Loan Agreement is hereby amended by
deleting the reference to "$150,000,000" contained thereon and substituting
"$250,000,000" therefor.
1.2 Amendments to Section 1: Definitions
A. Subsection 1.1 of the Term Loan Agreement is hereby amended by
adding thereto the following definitions, which shall be inserted in proper
alphabetical order:
"'First Amendment': the First Amendment to Term Loan Agreement dated
as of January 28, 1998, by and among Borrower, Lenders, Syndication Agent
and Facility Manager.
`First Amendment Effective Date': the date on which the conditions
precedent to the effectiveness of the First Amendment as set forth in
Section 2 thereof shall have been satisfied.
`New Lenders': those financial institutions making Loans to the
Borrower on the First Amendment Effective Date and identified as New
Lenders on Schedule 1.1. Upon the effectiveness of the First Amendment,
each New Lender will become a Lender for all purposes under the Term Loan
Agreement to the same extent as if originally a party thereto.
`PCH': Personal Care Holdings, Inc., a Delaware corporation, to be
acquired by the Borrower on the First Amendment Effective Date."
B. Subsection 1.1 of the Term Loan Agreement is hereby further
amended by deleting the definition of "Commitment" therefrom and by substituting
therefor the following:
"'Commitment': as to any Lender, the obligation of such Lender to
make a Loan to the Borrower on the Closing Date or on the First Amendment
Effective Date, as the case may be, in a principal amount not to exceed
the amount set forth opposite such Lender's name on Schedule 1.1 under the
heading `Term Loan.'"
C. Subsection 1.1 of the Term Loan Agreement is hereby further
amended by deleting the "." from the end of the definition of "Lender" and
substituting therefor the following:
[First Amendment
LA1-773680 to Term Loan Agreement]
2
<PAGE>
"and includes without limitation the New Lenders."
1.3 Amendments to Section 2: Loans
A. Subsection 2.1(a) of the Term Loan Agreement is hereby amended by
adding the following sentence at the end thereof:
"Subject to the terms and conditions hereof, each New Lender
severally agrees to make a Loan to the Borrower upon the First
Amendment Effective Date in an amount not to exceed the amount of
the Commitment of such New Lender."
B. Subsection 2.1(c) of the Term Loan Agreement is hereby amended by
adding the following sentence at the end thereof:
"The proceeds of the Loans made by the New Lenders upon the
First Amendment Effective Date shall be used, together with
approximately 9,257,375 of common stock shares issued by the
Borrower, to acquire 100% of the stock of PCH by way of merger of
PCH with and into PCG Acquisition Corp., a wholly owned subsidiary
of Borrower to be subsequently renamed PCH, to refinance
approximately $60 million of existing debt of PCH and to pay
transaction costs and fees in an approximate amount of $8,000,000."
C. Subsection 2.2 of the Term Loan Agreement is hereby amended (i)
by adding the phrase "or the First Amendment Effective Date, as the case may be"
to such subsection after each place the phrase "Closing Date" appears therein
and (ii) in the second and third sentences thereof by deleting the words
"Lender" or "Lenders" each place they appear and by substituting therefor the
phrase "Lender or New Lender, as the case may be," or "Lender's or New Lender's,
as the case may be," respectively.
1.4 Amendments to Section 3: General Provisions
A. Subsection 3.1 of the Term Loan Agreement is hereby amended by
adding a new clause (c) at the end thereof as follows:
"(c) The Borrower shall pay to the Arranger and the
Syndication Agent the amounts set forth in the letter agreement
dated December 20, 1997 among the Arranger, the Syndication Agent
and the Borrower in the amounts and on the dates set forth therein.
The Arranger shall pay on the First Amendment Effective Date to each
New Lender such amounts as have been agreed upon by the Arranger and
such New Lender."
[First Amendment
LA1-773680 to Term Loan Agreement]
3
<PAGE>
B. Subsection 3.2(a) of the Term Loan Agreement is hereby amended by
(i) deleting therefrom the number "25" and substituting therefor the number "23"
and (ii) deleting therefrom the date "September 15, 1997" and substituting
therefor the date "March 15, 1998."
1.5 Substitution of Schedules
A. Schedule 1.1: Address for Notice, Commitments. Schedule 1.1 to
the Term Loan Agreement is hereby amended by deleting said Schedule 1.1 in its
entirety and substituting in place thereof a new Schedule 1.1 in the form of
Annex A to this Amendment.
B. Schedule 3.2: Amortization of Term Loans. Schedule 3.2 to the
Term Loan Agreement is hereby amended by deleting said Schedule 3.2 in its
entirety and substituting in place thereof a new Schedule 3.2 in the form of
Annex B to this Amendment.
C. Schedule 4.15: Subsidiaries of Playtex Products, Inc. Schedule
4.15 to the Term Loan Agreement is hereby amended by deleting said Schedule 4.15
in its entirety and substituting in place thereof a new Schedule 4.15 in the
form of Annex C to this Amendment.
D. Schedule 4.20: Uniform Commercial Code Filing Locations. Schedule
4.20 to the Term Loan Agreement is hereby amended by deleting said Schedule 4.20
in its entirety and substituting in place thereof a new Schedule 4.20 in the
form of Annex D to this Amendment.
Section 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (such date of
satisfaction being referred to herein as the "First Amendment Effective Date"):
A. On or before the First Amendment Effective Date, Borrower shall
deliver to Lenders (or to Agent for Lenders with sufficient originally executed
copies, where appropriate, for each Lender and its counsel) the following with
respect to the Borrower, each, unless otherwise noted, dated the First Amendment
Effective Date:
1. Certified copies of its Articles or Certificate of
Incorporation, or a certificate by its corporate secretary or an assistant
secretary certifying that there has been no change in the Articles or
Certificate of Incorporation subsequent to the Closing Date, except as
disclosed in such certificate and attaching thereto copies of any such
amendments certified by the Secretary of State of the jurisdiction of its
incorporation, together with a good standing certificate from the
Secretary of State of the jurisdiction
[First Amendment
LA1-773680 to Term Loan Agreement]
4
<PAGE>
of its incorporation and the jurisdiction in which its principal place of
business is located, each dated a recent date prior to the First Amendment
Effective Date;
2. Copies of its Bylaws, certified as of the First Amendment
Effective Date by its corporate secretary or an assistant secretary or a
certificate by such secretary or assistant secretary certifying that there
has been no change in the Bylaws subsequent to the Closing Date;
3. Resolutions of the Executive Committee of its Board of
Directors approving and authorizing the execution, delivery and
performance of this Amendment and the incurrence of the Additional Debt
under the Term Loan Agreement and approving and authorizing the execution,
delivery and payment of the Notes issued to New Lenders (the "New Notes"),
certified as of the First Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment;
4. Signature and incumbency certificates of its officers
executing this Amendment and the New Notes;
5. This Amendment executed by the Borrower and the Credit
Support Parties and the New Notes executed by the Borrower and drawn to
the order of the New Lenders;
6. An officer's certificate of a Responsible Officer of the
Borrower to the effect that (i) there has been no material adverse change
in the business, assets, debt service capacity, tax position, liabilities
(including environmental liabilities), financial condition, operations or
prospects of Borrower and its subsidiaries, since December 31, 1996, (ii)
there has been no material adverse change in the business, results of
operations, properties, assets or condition (financial or otherwise) of
PCH and its subsidiaries, in each case taken as a whole, since December
31, 1996, (iii) there exists no pending or threatened materially adverse
litigation as to the Borrower or PCH and (iv) immediately upon the funding
of the Additional Debt, the Borrower will consummate the acquisition of
PCH and will deliver to Collateral Agent or to Facility Manager, as the
case may be, a Subsidiaries Guarantee and Security Documents executed by
each of PCH and its Subsidiaries, together with such other documents and
certificates as may be required under the Loan Documents, including
without limitation UCC-1 Financing Statements;
7. The Lenders shall have received (i) such financial
statements and related documents for PCH as received by Borrower and as
agreed upon as necessary and sufficient by Borrower and Lenders and (ii) a
pro forma opening balance sheet of the Borrower as of the First Amendment
Effective Date giving effect to the contemplated transactions;
[First Amendment
LA1-773680 to Term Loan Agreement]
5
<PAGE>
8. The First Amendment to the Credit Agreement in
substantially the form attached hereto as Annex F shall have been executed
by the required parties under the Credit Agreement;
9. PCH shall have paid in full its existing indebtedness,
including the release of any liens and collateral or other security
interests associated therewith and shall have delivered to Collateral
Agent appropriate UCC-3 Termination Statements with respect thereto; and
10. Borrower shall have delivered to Collateral Agent or to
Facility Manager, as the case may be, a Subsidiaries Guarantee and
Security Documents executed by each of Carewell Industries Inc. and its
Subsidiaries, together with such other documents and certificates as may
be required under the Loan Documents, including without limitation UCC-1
Financing Statements.
B. On or before the First Amendment Effective Date, Lenders and
their respective counsel shall have received originally executed copies of one
or more favorable written opinions of Paul, Weiss, Rifkind, Wharton & Garrison,
counsel to the Borrower and of Paul E. Yestrumakas, general counsel and
secretary of the Borrower, in form and substance reasonably satisfactory to the
Arranger and the Facility Manager and their counsel, dated as of the First
Amendment Effective Date, substantially in the forms set forth in Annex E hereto
and as to such other matters as the Arranger or the Facility Manager may
reasonably request; provided it is understood and agreed that any such opinions
or portions of such opinions which relate to PCH and its Subsidiaries and any
Subsidiaries Guarantee and Security Documents to be executed by PCH and its
Subsidiaries will not be delivered until immediately after the Borrower has
consummated the acquisition of PCH and its Subsidiaries.
C. On or before the First Amendment Effective Date, Required Lenders
shall have delivered to Arranger and Facility Manager originally executed copies
of this Amendment and each New Lender shall have delivered to Arranger and
Facility Manager originally executed copies of this Amendment.
D. The Arranger and each New Lender shall have received the fees
payable by Borrower on the First Amendment Effective Date in such amounts as
have been separately agreed upon.
E. On or before the First Amendment Effective Date, all corporate
and other proceedings taken or to be taken in connection with this Amendment and
all documents incidental thereto not previously found acceptable by the Arranger
and the Facility Manager, and its counsel shall be reasonably satisfactory in
form and substance to the Arranger and the Facility Manager and such counsel,
and the Arranger and the Facility Manager and such counsel shall have received
all such counterpart originals or certified copies of such documents as the
Arranger and the Facility Manager may reasonably request.
[First Amendment
LA1-773680 to Term Loan Agreement]
6
<PAGE>
Section 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Term Loan Agreement in the manner provided herein, Borrower represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. Corporate Power and Authority. Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Term Loan
Agreement as amended by this Amendment (the "Amended Agreement") and to issue
the New Notes.
B. Authorization of Agreements. The execution and delivery of this
Amendment and the New Notes and the performance of the Amended Agreement and the
payment of the New Notes have been duly authorized by all necessary corporate
action on the part of Borrower.
C. No Conflict. The execution and delivery by Borrower of this
Amendment and the New Notes and the performance by Borrower of the Amended
Agreement and the payment of the New Notes do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Borrower or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Borrower or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Borrower or any of its Subsidiaries; (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrower or any of its Subsidiaries; (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Borrower or any of its Subsidiaries (other than Liens created under
any of the Loan Documents in favor of the Collateral Agent on behalf of
Lenders); or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Borrower or any of its
Subsidiaries.
D. Governmental Consents. The execution and delivery by Borrower of
this Amendment and the New Notes and the performance by Borrower of the Amended
Agreement and the payment of the New Notes do not and will not require any
registration with, consent or approval of, notice to, or other action to, with
or by, any federal, state or other governmental authority or regulatory body.
E. Binding Obligation. This Amendment and the New Notes have been
duly executed and delivered by Borrower and this Amendment, the New Notes and
the Amended Agreement are the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
[First Amendment
LA1-773680 to Term Loan Agreement]
7
<PAGE>
F. Incorporation of Representations and Warranties From Term Loan
Agreement. The representations and warranties contained in Section 4 of the Term
Loan Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
G. Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Default.
Section 4. ACKNOWLEDGEMENT AND CONSENT
Each Subsidiary Guarantor is a party to the Subsidiaries Guarantee
and the other Security Documents to which such Credit Support Parties are
parties pursuant to which such Subsidiary Guarantor has (i) guarantied
Borrower's obligations under the Loan Documents and (ii) created Liens in favor
of Collateral Agent on certain Collateral to secure the obligations of such
Subsidiary Guarantor under the Subsidiaries Guarantee. The Subsidiary Guarantors
are collectively referred to herein as the "Credit Support Parties", and the
Subsidiaries Guarantee and the other Security Documents are collectively
referred to herein as the "Credit Support Documents".
Each Credit Support Party hereby acknowledges that it has reviewed
the terms and provisions of the Term Loan Agreement and this Amendment and
consents to the amendment of the Term Loan Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral encumbered
thereby will continue to guaranty or secure, as the case may be, to the fullest
extent possible the payment and performance of all "Obligations" (as such term
is defined in the applicable Credit Support Document), including without
limitation the payment and performance of all such "Obligations" in respect of
the Borrower now or hereafter existing under or in respect of the Amended
Agreement and the Notes defined therein. Without limiting the generality of the
foregoing, each Credit Support Party hereby acknowledges and confirms the
understanding and intent of such party that, upon the effectiveness of this
Amendment, and as a result thereof, the definition of "Obligations" contained in
the Amended Agreement includes the obligations of Borrower under the New Notes.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support
[First Amendment
LA1-773680 to Term Loan Agreement]
8
<PAGE>
Party represents and warrants that all representations and warranties contained
in the Amended Agreement and the Credit Support Documents to which it is a party
or otherwise bound are true, correct and complete in all material respects on
and as of the First Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Term Loan
Agreement or any other Loan Document to consent to the amendments to the Term
Loan Agreement effected pursuant to this Amendment and (ii) nothing in the Term
Loan Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to the
Term Loan Agreement.
Section 5. MISCELLANEOUS
A. Reference to and Effect on the Term Loan Agreement and the Other
Loan Documents.
(i) On and after the First Amendment Effective Date, each reference
in the Term Loan Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import referring to the Term Loan Agreement, and
each reference in the other Loan Documents to the "Term Loan Agreement,"
"thereunder," "thereof" or words of like import referring to the Term Loan
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Term Loan
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of the
Syndication Agent or the Facility Manager or any Lender under, the Term
Loan Agreement or any of the other Loan Documents.
B. Fees and Expenses. Borrower acknowledges that all costs, fees and
expenses as described in subsection 10.5 of the Term Loan Agreement, incurred by
any of the Arranger, the Collateral Agent or the Agents and their counsel with
respect to this Amendment and the documents and transactions contemplated hereby
shall be for the account of Borrower.
[First Amendment
LA1-773680 to Term Loan Agreement]
9
<PAGE>
C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
[First Amendment
LA1-773680 to Term Loan Agreement]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BORROWER: PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
--------------------------------
Title: Executive Vice President
and CFO
CREDIT SUPPORT PARTIES: Playtex Investment Corp.
Playtex International Corp.
Playtex Beauty Care, Inc.
Playtex Manufacturing, Inc.
Playtex Sales & Services, Inc.
Sun Pharmaceuticals Corp.
Smile-Tote, Inc.
TH Marketing Corp.,
(for purposes of Section 4 only)
as Credit Support Parties
By: /s/ Michael F. Goss
--------------------------------
Title: Executive Vice President
[First Amendment
LA1-773680 to Term Loan Agreement]
S-1
<PAGE>
Exhibit 10(ae)
Dear Sirs:
The purpose of this communication is to confirm the terms and conditions
of the Transaction entered into between Merrill Lynch Capital Services, Inc.
("MLCS") and Playtex Products, Inc. ("Counterparty") on the Trade Date specified
below (the "Transact. This communication constitutes a "Confirmation" as
referred to in the Agreement specified below.
This facsimile transmission will be the only written communication
regarding this Transaction exchanged between us, unless you request that we sign
hard copy versions of this Confirmation. Please contact the individual indicated
in the last paragraph is letter to receive such copies.
Please sign and return this Confirmation at your earliest convenience.
Because of the importance of confirming Transactions promptly and accurately, we
regret that any Confirmations which are not signed and returned within ten days
may result in a del payments.
The definitions and provisions contained in the 1991 ISDA Definitions, as
published by the International Swaps and Derivatives Association, Inc. (the
"Definitions") are incorporated into this Confirmation. For these purposes, all
references in those D tions to a "Swap Transaction" shall be deemed to apply to
the Transaction referred to herein. In the event of any inconsistency between
the Definitions and this Confirmation, the terms of this Confirmation shall
govern.
1. This Confirmation evidences a complete binding agreement between you
and us as to the terms of the Transaction to which this Confirmation relates. In
addition, you and we agree to use all reasonable efforts promptly to negotiate,
execute and delive aster Agreement in the form published by ISDA, with such
modifications as you and we shall in good faith agree (the "Agreement"). Upon
the execution by you and us of such Agreement, this Confirmation will
supplement, form a part of, and be subject to t reement. All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
Each party will make each payment specified in this Confirmation to be
made by it. Such payments will be made on the due date for value on that date in
the place of the account specified below, in freely transferable funds and in
the manner customary ayments in the required currency. If on any date amounts
would otherwise be payable in the same currency by each party to the other,
then, on such date, each party's obligation to make payment
<PAGE>
of any such amount will be automatically satisfied and disc
d and, if the aggregate amount that would otherwise have been payable by one
party exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount woul e been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Type of Transaction: Rate Cap Transaction
Notional Amount: USD 100,000,000
Trade Date: August 26, 1997
Effective Date: November 28, 1997
Termination Date: November 28, 1998
Fixed Amounts:
Fixed Amount Payer: Counterparty
Fixed Amount Payer
Payment Date: August 28, 1997, subject to adjustment in
accordance with the Modified Following
Business Day Convention
Fixed Amount: USD 95,000
Floating Amounts:
Floating Rate Payer: MLCS
Cap Rate: 6.50% per annum
Floating Rate Payer
Payment Dates: February 28, May 28, August 28 and November
28, commencing on February 28, 1998, and
ending on the Termination Date, inclusive,
subject to adjustment in accordance with the
Modified Following Business Day Convention
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 months
<PAGE>
Floating Rate Day
Count Fraction: Actual/360
Reset Dates: The first day of each Floating Rate Payer
Calculation Period
Rate Cut-off Dates: Inapplicable
Method of Averaging: Inapplicable
Compounding: Inapplicable
Business Days: New York and London
Calculation Agent: MLCS
3. Account Details:
Payments to MLCS: Bankers Trust Company
New York, NY
ABA: 021001033
A/C #00-811-874
Ref: Merrill Lynch Capital Services, Inc.
U.S. Dollar Swap Account
Payments to Counterparty: Please advise
4. Credit Support Documents:
MLCS: The guarantee of Merrill Lynch & Co., Inc.
Please confirm that the foregoing correctly sets forth the terms of
our agreement by executing this Confirmation and returning it to us
by facsimile transmission on (212) 449 - 6219, attention: Keith
Doree, telephone: (212) 449-7412.
Your sincerely,
MERRILL LYNCH CAPITAL SERVICES, INC.
By: /s/ Christopher Wildes
-------------------------------------
Name: Christopher Wildes
Title: Vice President
Accepted and confirmed as
<PAGE>
of the Trade Date written above:
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
------------------------------------------
Name: Michael F. Goss
Title: Executive Vice President
and Chief Finanial Officer
<PAGE>
Exhibit 10(af)
EXECUTION COPY
================================================================================
STOCK PURCHASE AGREEMENT
among
PLAYTEX PRODUCTS, INC.
and
THE SHAREHOLDERS OF CAREWELL INDUSTRIES, INC.
-----------------------------------
Dated as of December 19, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TRANSACTION.......................................................1
ARTICLE I SALE OF STOCK AND TERMS OF PAYMENT................................1
1.01 The Sale.........................................................1
1.02 Consideration....................................................1
1.03 Payment of Purchase Price.......................................1
1.04 Estimated Adjustment.............................................2
1.05 Adjustment of Purchase Price.....................................2
(a) Closing Inventory and Balance Sheet........................2
(b) Review by Buyer............................................3
(c) Base-Line Net Worth........................................3
(d) Amount of Adjustment.......................................3
ARTICLE II RELATED AGREEMENT................................................4
2.01 Related Agreement................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS.......................4
3.01 Organization; Qualification......................................4
3.02 Capitalization...................................................4
3.03 Title to Stock...................................................5
3.04 Investments......................................................5
3.05 Authority Relative to this Agreement.............................5
3.06 Consents and Approvals; No Violation.............................5
3.07 Financial Statements.............................................6
3.08 Undisclosed Liabilities..........................................6
3.09 Absence of Certain Changes and Events............................6
3.10 Title and Condition of Assets....................................7
3.11 Proprietary Rights...............................................8
3.12 Real Property Leases.............................................8
3.13 Insurance........................................................8
3.14 Labor Matters....................................................9
3.15 Employee Benefit Plans; ERISA....................................9
3.16 Certain Contracts and Arrangements..............................11
3.17 Legal Proceedings, Etc..........................................12
3.18 Taxes...........................................................12
3.19 Environmental Matters...........................................13
i
<PAGE>
3.20 Compliance with Law.............................................14
3.21 Certain Interests...............................................14
3.22 Powers of Attorney, Absence of Limitation on Competition........15
3.23 Competing Interests.............................................15
3.24 Full Disclosure.................................................15
3.25 Stockholder Loans...............................................16
3.26 Representations and Warranties True at the Closing Date.........16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER ........................16
4.01 Organization....................................................16
4.02 Authority Relative to this Agreement............................16
4.03 Consents and Approvals; No Violation............................16
4.04 Acquisition of Stock for Investment.............................17
ARTICLE V COVENANTS PENDING CLOSING........................................17
5.01 Conduct of Business of the Company Prior to the Closing.........17
5.02 Access to Information...........................................18
5.03 Consents........................................................19
5.04 Public Announcements............................................19
5.05 Confidentiality.................................................19
5.06 Related Party Loans and Guarantees..............................20
5.07 Escrow Agreement................................................20
5.08 Updating of Schedule Information................................20
5.09 Pre-Closing Actions.............................................20
ARTICLE VI CLOSING CONDITIONS .............................................21
6.01 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby................................21
6.02 Conditions to the Obligation of Sellers to Effect the
Transactions Contemplated Hereby................................22
6.03 Conditions to the Obligations of Buyer to Effect the
Transactions Contemplated Hereby................................23
ARTICLE VII THE CLOSING AND CERTAIN CLOSING DELIVERIES ....................26
7.01 Time and Place of Closing.......................................26
7.02 Deliveries by Sellers...........................................26
7.03 Deliveries by Buyer.............................................26
ii
<PAGE>
ARTICLE VIII POST-CLOSING COVENANTS........................................27
8.01 Expenses........................................................27
8.02 Further Assurances..............................................27
8.03 Commissions and Fees............................................28
8.04 Sales and Transfer Taxes........................................28
8.05 Other Tax Matters...............................................28
8.06 Shareholder Claims..............................................29
8.07 Nondisclosure; Noncompetition...................................30
8.08 Indemnification.................................................31
8.09 Defense of Claims...............................................32
ARTICLE IX MISCELLANEOUS PROVISIONS........................................33
9.01 Amendment and Modification......................................33
9.02 Waiver of Compliance............................................33
9.03 Survival........................................................33
9.04 Notices.........................................................33
9.05 Assignment......................................................34
9.06 Governing Law...................................................34
9.07 Arbitration.....................................................34
9.08 Counterparts....................................................35
9.09 Interpretation..................................................35
9.10 Entire Agreement................................................35
9.11 Specific Performance............................................36
9.12 Severability of Covenants.......................................36
9.13 Notice to Sellers; Actions by Sellers...........................36
ARTICLE X TERMINATION AND ABANDONMENT......................................36
10.01 Termination.....................................................36
10.02 Procedure and Effect of Termination.............................37
iii
<PAGE>
EXHIBITS AND SCHEDULES
Page and Section
Exhibits Description Reference
- -------- ----------- ----------------
A Stock Ownership 1 [ss.1.01]
B Form of Escrow Agreement 4 [ss.2.01]
Page and Section
Schedules Description Reference
- -------- ----------- ----------------
3.01 Qualifications to do Business 4 [ss.3.01]
3.02 Stockholders Agreement 4 [ss.3.02]
3.04 Investments 5 [ss.3.04]
3.07 Financial Statements 6 [ss.3.07]
3.09 Certain Changes and Events 6 [ss.3.09]
3.10 Property Liens 7 [ss.3.10]
3.11 Proprietary Rights 8 [ss.3.11]
3.12 Real Property Leases 8 [ss.3.12]
3.13 Insurance 8 [ss.3.13]
3.14 Labor Matters 9 [ss.3.14]
3.15 Employee Benefit Plans 9 [ss.3.15]
3.16 Certain Contracts 11 [ss.3.16]
3.17 Legal Proceedings, Etc. 12 [ss.3.17]
3.18 Taxes 12 [ss.3.18]
3.19 Environmental Matters 13 [ss.3.19]
3.21 Certain Interests 14 [ss.3.21]
3.22 Powers of Attorney; 15 [ss.3.22]
Limitations on Competition
3.23 Competing Interests 15 [ss.3.23]
5.01 Conduct of Business 17 [ss.5.01]
Prior to Closing
5.09(A) Payoff Creditors 20 [ss.5.09]
5.09(B) Stockholder Loans 21 [ss.5.09]
8.03 Finders Fees 28 [ss.8.03]
iv
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 19, 1997, among Tony
B. Gelbart, TWS Enterprises International Corp., MRM Investments, Inc., William
A. Mathis and Ralph S. D'Angelo (collectively "Sellers" and each individually a
"Seller"), and Playtex Products, Inc., a Delaware corporation ("Buyer").
SUMMARY OF TRANSACTION
Sellers own all the issued and outstanding shares of capital stock
of Carewell Industries, Inc., a New York corporation (the "Company"). Buyer
desires to purchase, and Sellers desire to sell, all of the outstanding shares
of Common Stock, without par value ("Common Stock"), of the Company, upon the
terms and subject to the satisfaction of the conditions set forth in this
Agreement.
To effect such transactions and in consideration of the mutual
covenants, representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF STOCK AND TERMS OF PAYMENT
1.01 The Sale. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, at the Closing (as hereinafter defined)
each Seller will sell, assign, transfer and deliver to Buyer, and Buyer will
purchase and acquire from each Seller, the number of shares of Common Stock set
forth opposite each Seller's name on Exhibit A hereto.
1.02 Consideration. Upon the terms and subject to the satisfaction
of the conditions contained in this Agreement, in consideration of the aforesaid
sale, assignment, transfer and delivery of the Common Stock, Buyer will pay or
cause to be paid to Sellers the purchase price of $10,000,000, plus or minus the
Estimated Adjustment determined pursuant to the terms of Section 1.04 hereof,
plus or minus the Adjustment determined pursuant to the terms of Section 1.05
hereof (the "Purchase Price").
1.03 Payment of Purchase Price.
(a) The Purchase Price payment of $10,000,000 plus or minus the
Estimated Adjustment shall be delivered as follows: (A) $1,000,000 will be
delivered at Closing by wire transfer in immediately available funds to United
States Trust Company of New York (the "Escrow Agent"), as escrow agent under the
Escrow Agreement contemplated by Section 2.01(a) hereof; and
1
<PAGE>
(B) the remainder shall be delivered to Sellers in cash at Closing and shall, at
the Closing, (i) be wire transferred in immediately available funds to the
account or accounts of Sellers at such bank or banks and in such accounts as
Sellers specify in writing at least two business days prior to the Closing Date
(as hereinafter defined), or (ii) be paid by such other means as are agreed upon
by Sellers and Buyer. In addition, at Closing Buyer will pay to the holders of
Stockholder Loans (as defined in Section 5.09 hereof) the Loan Purchase Price
(as defined in Section 5.09 hereof) by wire transfer in immediately available
funds to such bank accounts as such holders shall specify in writing at least
two business days prior to the Closing Date.
(b) If the Adjustment is a positive amount, then Buyer will pay to
Sellers the amount of the Adjustment, such payment to be made within 10 business
days after the final determination of the Purchase Price pursuant to Section
1.05(d) hereof. If the Adjustment is a negative amount, then Sellers will refund
to Buyer the amount of the Adjustment, such payment to be made by Sellers (from
the funds received pursuant to Section 1.03(a)(B) above) within 10 business days
after the final determination of the Purchase Price pursuant to Section 1.05(d)
hereof.
(c) Each Seller shall receive or be entitled to receive a percentage
of the Purchase Price equal to the percentage of the total outstanding Common
Stock sold by such Seller, as set forth on Exhibit A hereto, and shall be
obligated to satisfy a portion equal to such percentage of any refund of the
Purchase Price which is required by Section 1.03(b) hereof.
1.04 Estimated Adjustment. Four business days before the date of the
scheduled Closing hereunder, Sellers will cause the Company to deliver to Buyer
an estimated balance sheet (the "Estimated Balance Sheet") reflecting the
Company's best estimate of the Closing Net Worth (as defined in Section 1.05
below) prepared in accordance with generally accepted accounting principles
("GAAP") which shall be applied consistently with those used to prepare the
Company's November 1, 1997 balance sheet (the "Estimated Net Worth"). Buyer and
its advisors shall be permitted access to the Company's books, records and work
papers to review such estimated balance sheet prior to the Closing and if Buyer
disputes any items in such estimated balance sheet it will be changed in such
manner as the parties shall mutually agree at or before Closing. If (after any
such agreed changes) the Estimated Net Worth is equal to $1,032,000, then the
Estimated Adjustment will equal zero. If the Estimated Net Worth is greater than
$1,032,000, then the Estimated Adjustment will be a positive amount equal to the
amount by which the Estimated Net Worth exceeds $1,032,000. If the Estimated Net
Worth is less than $1,032,000, then the Estimated Adjustment will be a negative
amount equal to the amount by which the Estimated Net Worth is less than
$1,032,000.
1.05 Adjustment of Purchase Price.
(a) Closing Inventory and Balance Sheet. As of the Closing Date, the
parties will cause the Company to conduct a physical inventory of the Company in
accordance with the standard physical inventory procedures of the Company. Buyer
and Sellers, if they so elect, shall have the right to have their
representatives or their independent certified public accountants observe the
2
<PAGE>
physical inventory to be conducted by the Company. Promptly after the Closing,
Sellers will prepare or cause to be prepared (with the full cooperation of the
Company's employees and full access to the Company's books and records) an
unaudited balance sheet (the "Closing Balance Sheet") stating the net worth of
the Company as of the close of business on the Closing Date and specifically
including as liabilities (without limitation) all Stockholder Loans all Closing
Payables (less any payable amounts forgiven by the creditors in connection with
the payment of the Closing Payables) and all long term debt and accrued interest
thereon, notwithstanding the repayment or purchase thereof as contemplated by
Section 5.09 hereof (the "Closing Net Worth"). As soon as reasonably possible
after the Closing (and in any event no later than 30 days after the Closing
Date), Sellers will deliver to Buyer the Closing Balance Sheet. The Closing
Balance Sheet shall be prepared and the Closing Net Worth shall be calculated in
conformity with GAAP, which shall be applied consistently with those used to
prepare the Company's November 1, 1997 balance sheet.
(b) Review by Buyer. Following receipt of the Closing Balance Sheet,
Buyer will be afforded a period of 60 days to review the Closing Balance Sheet,
during which period Buyer and its advisors shall have the right to inspect the
work papers generated by Sellers in preparation of the Closing Balance Sheet. At
or before the end of such 60-day period, Buyer will either (i) accept the
Closing Balance Sheet in its entirety, in which case the Closing Net Worth will
be as stated in the Closing Balance Sheet, or (ii) deliver to Sellers written
notice and a written explanation of those items in the Closing Balance Sheet
which Buyer disputes, in which case the items identified by Buyer shall be
deemed to be in dispute. Upon delivery by Buyer of such notice of dispute, the
appropriate party shall make payment of the amount of the Adjustment which is
not in dispute. Within a further period of 30 days from the end of the
aforementioned review period, the parties and their accountants will attempt to
resolve in good faith any disputed items. Failing such resolution, the
unresolved disputed items will be referred for final binding resolution to a
nationally-recognized firm of certified public accountants mutually acceptable
to Buyer and Sellers. In such event the Closing Net Worth will be deemed to be
as determined by such firm in accordance with the aforementioned accounting
principles within 30 days of such reference. The decision of such firm will be
nonappealable and incontestable by Buyer or Sellers and will not be subject to
collateral attack for any reason.
(c) Base-Line Net Worth. For purposes of this Agreement, the
Base-Line Net Worth of the Company will be an amount equal to $1,032,000 plus or
minus the Estimated Adjustment (as defined in section 1.04 above).
(d) Amount of Adjustment. If the Closing Net Worth is equal to the
Base-Line Net Worth, then the Adjustment will equal zero. If the Closing Net
Worth is greater than the Base-Line Net Worth, then the Adjustment will be a
positive amount equal to the amount by which the Closing Net Worth is greater
than the Base-Line Net Worth. If the Closing Net Worth is less than the
Base-Line Net Worth, then the Adjustment will be a negative amount equal to the
amount by which the Closing Net Worth is less than the Base-Line Net Worth. The
Purchase Price will finally be determined on the date the amount of the
Adjustment is finally determined.
3
<PAGE>
ARTICLE II
RELATED AGREEMENT
2.01 Related Agreement. Simultaneously with the Closing hereunder an
Escrow Agreement (the "Escrow Agreement") among Sellers, Buyer and the Escrow
Agent in the form of Exhibit B hereto shall be executed and delivered by the
parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS
As an inducement to Buyer to enter into this Agreement, each Seller
jointly and severally represents and warrants to Buyer that as of the date
hereof and as of the Closing Date:
3.01 Organization; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Company has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted.
The Company is in good standing in the State of Florida and in each of the other
jurisdictions set forth in Schedule 3.01 hereto in which it is qualified or
registered to do business as a foreign corporation. The Company is not required
to be qualified or licensed to do business as a foreign corporation in any other
jurisdiction in which the Company owns, leases or operates property or otherwise
conducts business and the Company has not received notice from any governmental
agency or authority that it is required to register or qualify to do business as
a foreign corporation in any jurisdiction other than such jurisdictions in which
it has already registered. The Company does not have any subsidiaries. Sellers
have heretofore delivered to Buyer complete and correct copies of the
Certificate of Incorporation and By-Laws (or similar governing documents) of the
Company as currently in effect.
3.02 Capitalization. The total authorized capital stock of the
Company consists of 200 shares of Common Stock, of which 130.2 shares are issued
and outstanding. Each Seller represents as to himself (or herself) that such
Seller owns beneficially and of record such number of shares of Common Stock as
are set forth opposite such Seller's name in Exhibit A hereto. Other than this
Agreement and as set forth in Schedule 3.02 hereto, (a) there is no
subscription, option, warrant, call, right, agreement or commitment relating to
the issuance, sale, delivery or transfer (including any right of conversion or
exchange under any outstanding security or other instruments) by the Company, or
by any Seller, of the Common Stock or other capital stock of the Company, and
(b) there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
of the Company.
4
<PAGE>
3.03 Title to Stock. Each Seller represents as to himself (or
herself) that such Seller owns and at the Closing will own the shares of Common
Stock listed opposite such Seller's name in Exhibit A hereto free and clear of
all pledges, security interests, liens, charges, encumbrances, equities, claims,
options or limitations affecting such Seller's ability to vote such shares or to
transfer such shares to Buyer other than the stockholders agreement described in
Schedule 3.02, which Sellers agree to terminate prior to Closing. At the Closing
each Seller will transfer, assign and deliver good title to such shares of
Common Stock to Buyer, free and clear of all pledges, security interests, liens,
charges, encumbrances, equities, claims, options or limits of whatever nature.
3.04 Investments. Schedule 3.04 hereto sets forth each of the equity
or similar investments of the Company, directly or indirectly, in or with any
subsidiary, corporation, partnership, limited liability company, association,
joint venture or other entity. Except as described in Schedule 3.04, no such
investment is subject to any restriction (contractual, statutory or otherwise)
which would impair the Company's ability to dispose of any such investment at
any time, and all of such investments are owned free and clear of any lien,
claim, charge, pledge, security interest, option or other legal or equitable
encumbrance.
3.05 Authority Relative to this Agreement. Each Seller represents
and warrants, as to himself (or herself), (a) that such Seller has full legal
power and authority to execute and deliver this Agreement and the Escrow
Agreement and to consummate the transactions contemplated hereby and thereby,
(b) that this Agreement has been duly and validly executed and delivered by such
Seller and constitutes a valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms, and (c) that the
Escrow Agreement will, when executed and delivered by such Seller at Closing,
constitute a valid and binding obligation of such Seller, enforceable against
such Seller in accordance with its terms.
3.06 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and the Escrow Agreement by Sellers, the sale by
Sellers of the Common Stock pursuant to this Agreement nor the consummation of
the other transactions contemplated by this Agreement and the Escrow Agreement
will (a) conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws (or other similar governing documents)
of the Company, (b) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority
other than those that have been made or obtained; (c) result in a default (or
give rise to any right of termination, cancellation or acceleration) under the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which the Company or any of its assets may be bound, except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained; (d) result in the creation of any
encumbrance, security interest, equity or right of others upon any of the
properties or assets of the Company or under the terms, conditions or provisions
of any agreement, instrument or obligation to which the Company or any of its
assets may be bound or affected; or (e) violate any order, writ,
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injunction, decree, law, statute, rule or regulation applicable to Sellers or
the Company or any of its assets.
3.07 Financial Statements. Sellers have previously furnished to
Buyer a true and correct copy of (a) the balance sheets of the Company as at
December 31, 1996, prepared by the Company's certified public accountants; (b)
the related income statements and cash flow statements of the Company for the
fiscal year ended December 31, 1996; and (c) the pro-forma balance sheet and
income statement of the Company for the 10 months ended November 1, 1997
(collectively referred to hereinafter as the "Financial Statements"). The
balance sheets included in the Financial Statements (including the related notes
thereto) present fairly the financial position of the Company as of their
respective dates, and the related income statements included in the Financial
Statements (including the related notes thereto) present fairly the results of
operations of the Company for the periods then ended, all in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein or as disclosed on Schedule 3.07 hereto. The
Financial Statements dated at and as of November 1, 1997 are hereinafter
referred to as the "Recent Financial Statements".
3.08 Undisclosed Liabilities. The Company has no liabilities or
obligations, secured or unsecured (whether absolute, accrued, contingent or
otherwise, and whether due or to become due), which (i) are in existence on the
date hereof and are not fully reflected or reserved against in the Recent
Financial Statements, except those which have been incurred in the ordinary
course of business since the date thereof, or (ii) will be in existence on the
Closing Date and will not, as of the Closing Date, be fully reflected or
reserved against in the Closing Balance Sheet; and none of Sellers or the
Company know of any basis for any claim against the Company of any liability or
obligation of such nature not fully reflected or reserved against in the Recent
Financial Statements or that will not be fully reflected or reserved against in
the Closing Balance Sheet.
3.09 Absence of Certain Changes and Events. Except as otherwise
contemplated by this Agreement, between the date of the Recent Financial
Statements and the Closing Date:
(a) the business of the Company has been and will be conducted only
in the ordinary course and substantially in the manner that such business
was heretofore conducted (including, without limitation, with respect to
inventory levels, sales levels, promotional programs, distribution,
spending and pricing), and there has not been, except in the ordinary
course and consistent with past practice:
(i) any purchase or other acquisition of property, any sale,
lease or other disposition of property, or any expenditure in excess
of $100,000 in the aggregate not disclosed on Schedule 3.09;
(ii) any material incurrence of liability not disclosed on
Schedule 3.09; or
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(iii) any encumbrance or consent to encumbrance of any
property or assets in excess of $100,000 in the aggregate not
disclosed on Schedule 3.09;
(b) the Company has not entered into any agreement or transaction
which, based upon the good faith application of its best business
knowledge and experience, has resulted or will result in a transfer of
assets for other than full and fair consideration;
(c) there has been no change in the condition (financial or
otherwise), assets, liabilities, business, results of operations,
licenses, permits, franchises or affairs of the Company which has had or
is likely to have a material adverse effect on the business, financial
condition or results of operations of the Company nor are Sellers aware of
any public controversy critical of the Company of any of its products or
its manufacture of products other than isolated customer and consumer
complaints in the ordinary course of business;
(d) there has not been any damage, destruction or casualty loss
materially adversely affecting the business, results of operations or
financial condition of the Company;
(e) there has not been any change by the Company in accounting
methods, principles or practices;
(f) there has not been any issuance, sale, encumbrance, or gift of
any capital stock of the Company or of any option, security convertible
into or right to purchase any such capital stock; and
(g) to the best of Sellers' knowledge, there has been no threatened
occurrence or development relating to the business, operations, financial
condition or affairs of the Company which would materially adversely
affect the business, operations, financial condition, prospects or affairs
of the Company.
3.10 Title and Condition of Assets. The Company has good and
marketable title to all of the properties and assets which it purports to own,
including without limitation the properties reflected in the Recent Financial
Statements (other than those which have been disposed of since the date of the
Recent Financial Statements in the ordinary course of business consistent with
the practices of the Company in the last fiscal year), free and clear of all
liabilities, obligations, mortgages, security interests, pledges, liens, claims,
charges, title defects or other encumbrances ("Liens") other than the Liens
described in Schedule 3.10 hereto, all of which Liens (if any) will have been
discharged and eliminated at or prior to the Closing. The Company's assets
(including, without limitation, all product molds) are in good working
condition, reasonable wear and tear excepted. Except as set forth in Schedule
3.11 hereto, the Company is the owner of all assets (including, without
limitation, all properties, rights, claims, inventories, receivables, product
molds,
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customer lists, intellectual property, intangibles and goodwill, wherever
located) used in the business of selling toothbrushes, toothpaste, floss and
other dental products under the "Dentax" brand.
All of the Company's inventories are in good and marketable
condition and are first-quality and usable in the present normal business
operations of the Company's business. No products now being made by or for the
Company are adulterated, or misbranded, contaminated, damaged or defective in
any respect, and all such products are in full compliance with all federal,
state and local regulations as to manufacturing, contents, efficacy, labeling
and distribution, and all claims and descriptions for such products, in the
manner now used on such products or in advertising therefor, are lawful and not
materially misleading.
All accounts and notes receivable which will be included in the
Closing Balance Sheet will be valid and existing obligations payable to the
Company in accordance with their terms and fully collectible in the aggregate
recorded amounts thereof, less the allowance for bad debts, if any, set forth in
the Closing Balance Sheet.
3.11 Proprietary Rights. Schedule 3.11 hereto sets forth a complete
list of all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade secrets, trade names,
copyrights, licenses, inventions, drawings, designs, formulae, processes,
proprietary know-how or commercial or technical information, or other rights
with respect thereto (collectively referred to as "Proprietary Rights") which
are held or owned or licensed by the Company; and no other Proprietary Rights
are used or necessary in connection with the Company's business. Except as set
forth in Schedule 3.11, no one has asserted to the Company or to any Seller, and
none of the Sellers has any knowledge, that the operations of the Company
conflict with or infringe upon any Proprietary Rights owned by any other person.
3.12 Real Property Leases. The Company does not own any real
property. Schedule 3.12 hereto sets forth the only real property lease under
which the Company is a lessee. Such lease is valid and binding, and is in full
force and effect; there are no existing defaults by the Company thereunder; no
event has occurred which (whether with or without notice, lapse of time, or
both) would constitute a default thereunder by the Company. Sellers have
delivered or made available to Buyer true and complete copies of such lease.
Sellers have agreed to cause the Company to terminate or assign to a third party
such lease effective as of the date which is 60 days following the Closing.
3.13 Insurance. All policies of fire, products liability, general
liability, worker's compensation and other forms of insurance (including
"key-man" insurance policies covering any of Sellers or other key employees of
the Company in which the Company is a beneficiary or named insured) owned or
held by and insuring the Company are set forth on Schedule 3.13 hereto and such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy which was not replaced on substantially similar terms prior
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to the date of such cancellation or termination. Except as set forth in Schedule
3.13, such policies will not in any way be affected by or terminate or lapse by
reason of the transactions contemplated by this Agreement (provided, however,
that the parties recognize that certain life insurance policies covering the
life of Tony B. Gelbart will be assigned to and assumed by him on or prior to
the Closing Date). The insurance policies to which the Company is a party are
sufficient for compliance with all requirements of applicable laws and of all
agreements to which the Company is a party or by which the Company is bound.
Except as set forth on Schedule 3.13, in the three years preceding the date of
this Agreement, the Company has not been refused any insurance with respect to
its assets or operations or had its coverage limited by any insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance.
3.14 Labor Matters. Except as set forth in Schedule 3.14, (a) the
Company is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice complaint against the Company pending or threatened before the National
Labor Relations Board or any other tribunal; (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the best of Sellers'
knowledge, threatened against or affecting the Company; (d) the Company has
received no notice that any representation or petition respecting the employees
of the Company has been filed with the National Labor Relations Board; (e) no
grievance nor any arbitration proceeding arising out of or under any collective
bargaining agreements is pending against the Company; and (f) the Company has
not experienced any strike or work stoppage or other industrial dispute
involving its employees in the past five years. Sellers have agreed to cause the
Company to terminate the employment of all of the Company's employees as of the
date which is 30 days following the Closing Date.
3.15 Employee Benefit Plans; ERISA.
(a) Except as set forth in Schedule 3.15 hereto, the Company does
not maintain, administer or otherwise contribute to any "employee benefit plan,"
as defined in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not such plan is subject to any of the
provisions of ERISA, or any qualified or non-qualified current or deferred
compensation (other than base salary and base wages), bonus, incentive
compensation, stock right, stock option, stock appreciation right, severance
pay, retirement, pension, profit- sharing, stock bonus, salary continuation,
tuition assistance dependent care assistance, legal assistance, vacation, fringe
benefit (cash and non-cash), group or individual health, medical, dental,
vision, disability, life insurance or survivor benefit or similar plan, policy
or arrangement, which covers any employee, self-employed individual or
beneficiary of any employee or self-employed individual, whether active or
retired, of the Company (any such plan being herein referred to as an "Employee
Plan"). The Company has no commitment to create any additional Employee Plans.
Except as set forth in Schedule 3.15, (i) none of such Employee Plans is a money
purchase plan or a defined benefit plan, and (ii) none of such Employee Plans is
a "multi-employer plan" as defined in Section 3(37) of ERISA and the Company has
not been obligated to make a contribution to any "multi-employer plan" within
the past five years. The Company would have no withdrawal liability if it
withdrew from any "multi-
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employer plan" in which it participates. Each of the Employee Plans that is
intended to be qualified under Section 401(a) of the Internal Revenue Code (the
"Code") has been determined by the Internal Revenue Service ("IRS") to be so
qualified, such determination by the IRS covers the most recent restatement of
each such Employee Plan, such determination may be relied upon by the Company as
of the Closing Date, any amendment upon which any such determination is
conditioned has been duly adopted by the Company and the Company is not aware of
any fact which would adversely affect the qualified status of any such Employee
Plan.
(b) True and complete copies of each Employee Plan, including all
amendments thereto and related trust or other funding agreements and the latest
financial statements thereof, have been heretofore delivered to Buyer, together
with (i) a true and complete copy of the three most recent annual reports (if
required by law) for each such plan including any and all schedules, opinions
and attachments thereto prepared in connection with any such reports, (ii) a
copy of the most recent summary plan description and summary of material
modifications of each such plan, and (iii) for each Employee Plan intended to be
covered under Section 401(a) of the Code, a copy of the most recent IRS
determination letter and the application therefore. None of the Company,
Sellers, any Employee Plan, any "party in interest" as defined in section 3(14)
of ERISA or any "disqualified person" as defined under Section 4975 of the Code
has engaged in a "prohibited transaction", as defined in Section 406 of ERISA or
Section 4975 of the Code, with respect to any Employee Plan which could subject
any of them or Buyer to liability or penalty under Section 409 or 502(i) of
ERISA or Section 4975 of the Code.
(c) The Company, and each fiduciary for each of the Employee Plans,
is in compliance with the terms of the Employee Plans and with the requirements
of any and all laws, statutes, orders, decrees, rules and regulations, including
but not limited to ERISA, applicable to each such plan. The Company has not
failed to make any contribution to, or to pay any amount due and owing, as
required by applicable law or by the terms of any Employee Plan, or to avoid a
funding deficiency, to or with respect to any Employee Plan as of the last day
of the most recent plan year of each of such plans ended prior to the Closing
Date. Schedule 3.15 contains a reasonable estimate of all liabilities of the
Company accrued under the Employee Plans through and as of the date therein
specified and Sellers undertake to amend such Schedule at the Closing to reflect
any material changes occurring subsequent to such date.
(d) There is no pending or, to the best of the knowledge of the
Company or Sellers, threatened legal action, arbitration or other proceedings or
investigations against the Company or any Employee Plan with respect to any
Employee Plan, other than routine claims for benefits, which could result in
liability to any such Employee Plan, the Company or Buyer, and there is no basis
for any such legal action or proceeding.
(e) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in payment
(either of severance pay or otherwise)
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becoming due from any of the Employee Plans, the Company, Sellers or Buyer to
any current or former employee or self-employed individual, and will not result
in the payment, vesting, acceleration or increase of any benefit payable under
any Employee Plan to any current or former employee or self-employed individual.
(f) There does not exist any liability , obligation or claim (other
than a routine claim for benefits) resulting from, relating to or arising out of
any Employee Plan, or any liability, obligation or claim (other than a routine
claim for benefits) resulting from, relating to or arising out of any employee
benefit plan, as defined in section 3(3) of ERISA, maintained by an employer
which, with the Company, is considered to be, or to be part of, a single
employer under Section 414(b), (c), (m) or (o) of the Code, including, but not
limited to, any liability, obligation or claim (other than a routine claim for
benefits) in connection with a "multi-employer plan" as defined in Section 3(37)
of ERISA, or in connection with the Consolidated Omnibus Budget Reconciliation
Act of 1985 (COBRA).
(g) Sellers agree to cause the Company to terminate all Employee
Plans as of the date which is 30 days following the Closing Date.
3.16 Certain Contracts and Arrangements. Except as listed in
Schedule 3.16 hereto, the Company is not a party to or bound by any written or
oral: (a) employment, consulting, compensation or similar agreement or
understanding which is not terminable at will by the Company (without penalty or
liability on the part of the Company) on 30 or fewer days' notice; (b)
indenture, mortgage, note, installment obligation, agreement or other instrument
relating to the borrowing of money in excess of $10,000 in any one case or
$25,000 in the aggregate by the Company or the guaranty of any obligation for
the borrowing of money in excess of $10,000 in any one case or $25,000 in the
aggregate by the Company; (c) contract manufacturing, product or inventory
purchase or other similar agreements; (d) license agreements relating to
Proprietary Rights, software or other intangible assets; or (e) agreement which
(i) is not terminable by the Company on 30 or fewer days' notice at any time
without penalty, (ii) has a remaining term, as of the date of this Agreement, of
over one year in length of obligation on the part of the Company; or (iii)
involves the receipt or payment by the Company on or after the date hereof of
more than $25,000. There is not, under any of the aforesaid obligations, any
default or event which, with notice or lapse of time, or both, would constitute
a default on the part of the Company, except such events of default and other
events as to which requisite waivers or consents have been obtained or which
would not, in the aggregate, have a material adverse effect on the business,
results of operations or financial condition of the Company. The broker
commission agreements described in Schedule 3.16 are all in substantially the
form of the sample broker commission agreement delivered by the Company to Buyer
and are all terminable by the Company without penalty on not more than 30 days
notice of termination by the Company.
Schedule 3.16 also lists all indentures, mortgages, notes,
installment obligations, agreements or other instruments relating to the
borrowing of money, regardless of amount, by any
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Seller, any officer, director, employee or stockholder of the Company or any
relative or other affiliate of any of the foregoing, from the Company or the
guarantee by the Company of, or the contractual obligation of the Company to be
responsible for, any obligation for the borrowing of money or otherwise by such
persons ("Related Party Loans and Guarantees"), including the amount thereof,
the parties thereto and a brief description thereof.
3.17 Legal Proceedings, Etc. Except as listed in Schedule 3.17
hereto, there is no claim, action, proceeding or investigation which is pending
or, to the best of Sellers' knowledge, any basis for or any threatened claim,
action, proceeding or investigation, against or relating to the Company before
any court, arbitrator or governmental or regulatory authority or body acting in
an investigative or adjudicative capacity and the Company is not subject to any
outstanding order, writ, injunction or decree which adversely affects the
business, operations or financial condition of the Company. Schedule 3.17 also
contains a complete list of all such claims, actions, proceedings and
investigations against or relating to the Company during the five years prior to
the date of this Agreement and a description of the disposition thereof.
3.18 Taxes.
(a) Except as set forth on Schedule 3.18 hereto, (i) all Tax Returns
(as hereinafter defined) required to be filed on or before the Closing Date have
been filed by or on behalf of the Company and all Taxes (as hereinafter defined)
shown to be due on such Tax Returns have been paid or will be provided for in
full in the Estimated Balance Sheet and the Closing Balance Sheet; (ii) all
accruals or reserves for Taxes reflected in the Recent Financial Statements are
adequate to cover Taxes accruing with respect to or payable by the Company
through the date thereof and the Company has not incurred or accrued any
liability for Taxes subsequent to such date other than those incurred or accrued
in the ordinary course of business, all of such Tax liabilities will be fully
and adequately accrued or reserved for in the Estimated Balance Sheet and the
Closing Balance Sheet; (iii) all Tax Returns filed or required to be filed on or
before the Closing by the Company are or will be true, correct and complete in
all material respects; (iv) no Tax Return of the Company has been audited by the
relevant authorities, and the Company has not received any notice that any Tax
Return is under examination; (v) no extension of the statute of limitations with
respect to any claim for Taxes has been granted by the Company; and (vi) there
are no liens for Taxes upon the assets of the Company except liens for Taxes not
yet due.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, gains,
use, value added, withholding, license, occupation, privileges, payroll and
franchise taxes, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof; and such term shall include any
interest, penalties or additions to tax attributable to such assessments. For
purposes of this Agreement, the term "Tax Return" shall mean any report,
statement, return or other information required to be supplied by the Company to
a taxing authority in connection with Taxes.
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3.19 Environmental Matters.
(a) Except as set forth in Schedule 3.19 hereto, (i) the Company is
in compliance with all environmental laws, regulations, permits and orders
applicable to it, and with all laws, regulations, permits and orders governing
or relating to asbestos removal and abatement; (ii) the Company has not
transported, stored, treated or disposed, or allowed or arranged for any third
parties to transport, store, treat or dispose, of any Hazardous Substances or
other waste to or at any location other than a site lawfully permitted to
receive such Hazard Substances or other waste for such purposes, or had
performed, arranged for or allowed by any method or procedure such
transportation, storage, treatment or disposal in contravention of any laws or
regulations, nor has the Company disposed, or allowed or arranged for any third
parties to dispose of, Hazardous Substances or other waste upon property owned
or leased by it; (iii) there has not occurred, nor is there presently occurring,
a Release of any Hazardous Substance on, into or beneath the surface of any
parcel of real property in which the Company has an ownership interest or any
leasehold interest; (iv) the Company has not transported or disposed, or allowed
or arranged for any third parties to transport or dispose, any Hazardous
Substance or other waste to or at a site which, pursuant to the U.S.
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or any similar law, (A) has been placed on the National
Priorities List or its state equivalent, or (B) the Environmental Protection
Agency or the relevant state agency has proposed or is proposing to place on the
National Priorities List or its state equivalent; (v) the Company has not
received notice and has no knowledge of any facts which could give rise to any
notice, that the Company is a potentially responsible party for a federal or
state environmental cleanup site or for corrective action under CERCLA or any
other applicable law or regulation or notice of any other Environmental Claim;
(vi) the Company has not received any written or oral request for information in
connection with any federal or state environmental cleanup site and has not
undertaken (or been requested to undertake) any response or remedial actions or
cleanup actions of any kind at the request of any federal, state or local
governmental entity, or at the request of any other person or entity; (vii)
there are no laws, regulations, ordinances, licenses, permits or orders relating
to environmental or worker safety matters requiring any work, repairs,
construction or capital expenditures with respect to the assets or properties of
the Company; and (viii) Schedule 3.19 identifies (A) all environmental audits,
assessments or occupational health studies undertaken by the Company or its
agents or by any governmental agencies with respect to the operations or
properties of the Company; (B) the results of any groundwater, soil, air or
asbestos monitoring undertaken with respect to any real property owned or leased
by the Company; (C) all written communications of the Company with environmental
agencies; and (D) all citations issued with respect to the Company under the
Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.).
(b) For the purposes of this Agreement, "Environmental Claim" shall
mean any demand, claim, governmental notice or threat of litigation or the
actual institution of any action, suit or proceeding at any time by a person
other than the parties which asserts that an Environmental Condition constitutes
a violation of or otherwise may give rise to any liability or obligation under,
any statute, ordinance, regulation, or other governmental requirement or the
common law, including,
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without limitation, any such statute, ordinance, regulation, or other
governmental requirement relating to the emission, discharge, or release of any
Hazardous Substance into the environment or the generation, treatment, storage,
transportation, or disposal of any Hazardous Substance. "Environmental
Condition" shall mean the presence on the Closing Date, whether discovered or
undiscovered on the Closing Date, in surface water, ground water, drinking water
supply, land surface, subsurface strata or ambient air of any pollutant,
contaminant, industrial solid waste or Hazardous Substance arising out of or
otherwise related to the operations or other activities of the Company, or of
any predecessor in interest or line of business to the Company, conducted or
undertaken prior to the Closing Date. "Hazardous Substance" shall mean any
substance defined in the manner set forth in Section 101(14) of the U.S.
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and shall include any additional substances designated under Section
102(a) thereof. "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment.
3.20 Compliance with Law. The Company has conducted its business in
compliance with, and is in compliance with, all applicable foreign, federal,
state and local laws and regulations and all orders, judgments, decrees or rules
of any foreign, federal or state court or governmental authority, or regulatory
agency or authority. The Company holds all licenses, registrations, rights,
permits and other governmental authorities, and has made all necessary
governmental submissions, which are required in connection with the conduct of
the Company's business.
3.21 Certain Interests.
(a) Except as disclosed in Schedule 3.21 hereto (and except for
Related Party Loans and Guarantees disclosed in Schedule 3.16), each Seller
represents, as to himself (or herself), and represents to the best of such
Seller's knowledge as to any other person, that no Seller or any officer,
director, employee or stockholder of the Company or any relative or other
affiliate of any of the foregoing, has any material interest in any property,
real or personal, tangible or intangible, used in or pertaining to the business
of the Company and no such person is indebted to the Company. Except as
disclosed in Schedule 3.21, the Company is not indebted to or required to
indemnify or hold harmless any such person except for amounts due under normal
salary and for reimbursement of ordinary business expenses and the consummation
of the transactions contemplated by this Agreement will not (either alone or
upon the occurrence of any act or event, or with the lapse of time, or both)
result in any payment (severance or other) becoming due from the Company to any
such person.
(b) Schedule 3.21 hereto contains a complete and correct list and
brief description of (i) all contracts and other transactions entered into
within the past three years involving the Company with respect to which any
officer, director, employee or stockholder of the Company, or any relative or
other affiliate of any of the foregoing, is or was a party or is or was
otherwise
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interested (other than an interest existing solely by virtue of, arising solely
from and limited solely to, his position as an officer, director or stockholder
of the Company, and (ii) the amount of all compensation paid for services
rendered during each of the three calendar years prior to the date of Closing as
well as the aggregate amount of all such payments made in the current calendar
year through the date hereof to any Seller by or on behalf of the Company
regardless of the materiality thereof. Except as set forth in Schedule 3.21,
each Seller represents, as to himself (or herself) and to the best of such
Seller's knowledge as to the other Sellers, that no Seller has had any direct or
indirect interest in any competitor, customer, supplier or other person, firm or
corporation that has had any material business relationship or material
transaction with the business of the Company during the last three years, nor is
any of the foregoing a party to, nor the owner of property that is the subject
of, any business arrangement with the Company.
3.22 Powers of Attorney, Absence of Limitation on Competition.
Except as set forth in Schedule 3.22, (a) no material power of attorney or
similar authorization given by the Company presently is in effect or
outstanding, and (b) no contract or agreement to which the Company is a party or
is bound or to which any of its properties or assets is subject limits the
freedom of the Company to compete in any line of business or with any person or
to treat confidentially any information of any third party. Except as
specifically disclosed in Schedule 3.22, the Company is not contractually
restricted from marketing any of its products in any territory in the world.
3.23 Competing Interests. Except as set forth in Schedule 3.23
hereto, each Seller represents as to himself (or herself), and to the best of
such Seller's knowledge as to any other person, that neither Sellers nor any
director or officer of the Company has any direct or indirect interest in any
person which competes with, is a customer or sales agent of or is engaged in any
business of the kind being conducted by the Company (other than shares of
publicly traded companies which represent less than 5% of the outstanding
capital stock of such companies), and neither Sellers nor any director or
officer of the Company has any interest, directly or indirectly, in any contract
with, commitment or obligation of or to, or claim against the Company.
3.24 Full Disclosure. All information furnished in the Schedules
hereto is, and as of the Closing Date shall be, correct and complete (without
reference to any document or information separately provided to Buyer) in all
respects. No representation or warranty of any Seller and no information,
Schedule or certificate furnished or to be furnished by or on behalf of any
Seller to Buyer, its affiliates or its agents pursuant to or in connection with
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statement contained herein or therein not misleading.
3.25 Stockholder Loans. The Stockholder Loans represent valid
indebtedness owing by the Company to the Sellers (or affiliates of Sellers) who
are the holders thereof (the "Holders"); and such Holders are the beneficial
owners of such Stockholder Loans, free and clear of all Liens, and have made no
prior endorsement or assignment of any such Stockholder Loans.
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Upon delivery to Buyer at Closing of the Notes representing the Stockholder
Loans duly endorsed by the Holders for transfer to Buyer, Buyer will obtain good
title to such Notes, free and clear of all Liens.
3.26 Representations and Warranties True at the Closing Date. The
representations and warranties of Sellers herein and in any Schedule attached
hereto shall be true and complete at the Closing Date with the same effect as
though made at and as of such time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.01 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
4.02 Authority Relative to this Agreement. Buyer has full corporate
power and authority to execute and deliver this Agreement and the Escrow
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by requisite corporate action taken on the part of Buyer
and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement and the Escrow Agreement or to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly and
validly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
4.03 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and the Escrow Agreement by Buyer, nor the purchase
by Buyer of the Common Stock pursuant to this Agreement, nor the consummation of
the other transactions contemplated by this Agreement and the Escrow Agreement,
will (a) conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws of Buyer; or (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not have a material adverse effect on the business, results
of operations or financial condition of Buyer and its subsidiaries, taken as a
whole, or adversely affect the ability of Buyer to consummate the transactions
contemplated hereby, other than those which have been made or obtained; or (c)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, agreement, lease or other instrument or obligation to
which Buyer is a party
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or by which its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained and which defaults, in the aggregate, would have a
material adverse effect on the business, results of operations or financial
condition of Buyer and its subsidiaries, taken as a whole, or would adversely
affect the ability of Buyer to consummate the transactions contemplated hereby;
or (d) violate any order, writ, injunction, decree, law statute, rule or
regulation applicable to Buyer or any of its assets, which violation would have
a material adverse effect on the business, results of operations or financial
condition of Buyer and its subsidiaries, taken as a whole, or would adversely
affect the ability of the Buyer to consummate the transactions contemplated
hereby.
4.04 Acquisition of Stock for Investment. Buyer is acquiring the
shares of Common Stock for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling such shares of Common Stock. Buyer agrees that such
shares of Common Stock may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act of 1933, as amended, except pursuant to an exemption from registration
available under such Act. Buyer acknowledges that it has such knowledge and
experience as is necessary to evaluate an investment in the Company's Common
Stock.
ARTICLE V
COVENANTS PENDING CLOSING
5.01 Conduct of Business of the Company Prior to the Closing. Except
as contemplated by this Agreement, during the period from the date of this
Agreement to the Closing Date, Sellers will cause the Company to conduct its
business and operations in, and only in, the ordinary course of business and
substantially in the manner heretofore conducted. Without limiting the
generality of the foregoing, and, except as contemplated in this Agreement or as
described in Schedule 5.01 hereto, prior to the Closing Date, without the prior
written consent of Buyer, Sellers will not permit the Company to:
(a) create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except in the ordinary
course of business and consistent with the practices of the business of the
Company in the last fiscal year; or incur any material liabilities or
obligations other than in the ordinary course of business consistent with past
practices; or assume, guarantee, endorse or otherwise become liable or
responsible (whether directly or contingently or otherwise) for the obligations
of any person; provided, that the Company may endorse negotiable instruments for
collection in the ordinary course of business;
(b) increase the rate or terms of compensation payable or to become
payable by the Company to Sellers or their affiliates or to its other directors,
officers, employees or commission
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sales personnel; or increase the rate or terms of any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with the
directors, officers, employees or sales personnel of the Company; or enter into
any new employment agreement or modify the terms of any existing employment
agreement;
(c) enter into any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or capital financing),
involving payments or obligations in excess of $25,000 other than in the
ordinary course of business;
(d) amend the Certificate of Incorporation or By-Laws of the
Company;
(e) accept any equity infusion or issue, sell, encumber or gift any
shares of the capital stock of the Company, or issue or sell any securities
convertible into, or options with respect to, or warrants to purchase or rights
to subscribe to, any shares of the capital stock of the Company;
(f) sell, transfer, mortgage, encumber or otherwise dispose of any
of the assets of the Company, except in the ordinary course of business
consistent with past practice;
(g) make any material investment, by purchase of stock or
securities, contributions to capital, property transfer or purchases of any
property or assets, in any individual, corporation or other entity; or
(h) agree or make any commitment to take any actions prohibited by
this Section 5.01.
5.02 Access to Information. Between the date of this Agreement and
the Closing Date, Sellers will cause the Company, during ordinary business
hours, to (a) give Buyer and its authorized representatives and advisors access
to all books, records, contracts, documents, offices and other facilities and
properties of the Company, (b) permit Buyer to make such inspections thereof as
Buyer may reasonably request, and (c) cause its officers and advisors to furnish
Buyer with such financial and operating data and other information with respect
to the business and properties of the Company as Buyer may from time to time
reasonably request; in addition, Sellers will cause the Company's accountants to
make their personnel, their work papers and such other requested documentation
relating to their work papers and to their audits of the books and records of
the Company available to Buyer and its advisors and representatives.
5.03 Consents. The parties hereto will use their best efforts to
obtain consents, if any, of all persons and governmental authorities necessary
to the consummation of the sale of the Common Stock and the other transactions
contemplated by this Agreement and the Escrow Agreement.
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5.04 Public Announcements. Sellers agree that prior to the Closing
neither Sellers nor the Company will make any press releases or other statements
with respect to this Agreement or the transactions contemplated hereby, and
Sellers will consult with Buyer before issuing any press release or otherwise
making any public statement with respect to this Agreement and the transactions
contemplated hereby after the Closing, and shall not issue any such press
release or make any such public statement unless the content thereof is approved
by Buyer. Buyer will also consult with Sellers prior to making any press release
or otherwise making any public statement with respect to this Agreement and the
transactions contemplated hereby.
5.05 Confidentiality.
(a) All information furnished by Buyer (or its agents and
representatives) to any of Sellers or the Company (or their agents and
representatives) or furnished by any or all such latter parties to Buyer (or its
agents and representatives) pursuant hereto shall be treated as the sole
property of the party furnishing the information until the Closing Date and, if
the Closing shall not occur, the party receiving the information shall return to
the party which furnished such information all copies of any documents or other
materials containing, reflecting or referring to such information, shall use its
best efforts to keep confidential all of such information regarded as
confidential by the party supplying such information, and shall not directly or
indirectly use such information for any competitive or other commercial purpose.
The obligation to keep such information confidential shall not apply to (i) any
information which (w) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof by the party furnishing the information, (x) was then generally known to
the public, (y) became known to the public through no fault of the party
receiving the information; or (z) was disclosed to the party receiving the
information by a third party not bound by an obligation of confidentiality to
the party furnishing the information; or (ii) disclosures in accordance with an
order of a court of competent jurisdiction.
(b) Sellers on the one hand, and Buyer on the other hand, agree,
whether or not the Closing shall occur, to maintain, and to cause their agents
and representatives to maintain, the confidentiality of the terms and conditions
of this Agreement and the Escrow Agreement and all documents executed and
delivered in connection with the transactions contemplated by this Agreement and
the Related Agreement. The provisions of this Section 5.05(b) shall not apply to
particular conditions or terms of the above referenced documents (i) if the
party seeking to make such disclosure shall have obtained the prior written
consent of the other party to the disclosure of such conditions or terms, (ii)
that are required to be disclosed during the course of any litigation or
arbitration which may be brought by either party related to the provisions of
any of the above referenced documents, (iii) that are or become generally
available to the public other than as a result of actions taken by the party
seeking to make such disclosure or its agents and representatives, or (iv) that
are required to be disclosed pursuant to and in accordance with any law, rule or
regulation applicable to the party seeking to make such disclosure.
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Notwithstanding the foregoing, if a party is requested or required
(by oral questions, interrogatories, requests for information or document
subpoena, civil investigative demand or similar process) to disclose any of the
above-referenced documents, such party will promptly notify the other party of
such request so that such other party may seek an appropriate protective order
or waive compliance with the provisions hereof. If, in the absence of a
protective order or the receipt of a waiver hereunder, a party is nonetheless,
in the opinion of its counsel, compelled to disclose any terms or conditions of
the above-referenced documents to any tribunal or else stand liable for contempt
or suffer other censure or penalty, such party may disclose such information to
such tribunal without liability hereunder.
5.06 Related Party Loans and Guarantees. On or prior to Closing,
Sellers and the Company shall take all action necessary such that, at the
Closing, there are outstanding no Related Party Loans and Guarantees, and that
such Related Party Loans and Guarantees which are in the nature of loans or
borrowings from the Company by any Seller or any affiliate of a Seller shall be
repaid to the Company together with all accrued interest to the date of
repayment. Buyer shall purchase the Stockholder Loans at Closing as contemplated
by Section 5.09 hereof.
5.07 Escrow Agreement. The parties hereto agree that at Closing they
will execute and deliver the Escrow Agreement.
5.08 Updating of Schedule Information. From the date hereof until
the Closing Date, Sellers shall notify Buyer in writing and supply full details
of any matter arising after the date hereof which, if existing or occurring at
the date of this Agreement would have been required to be set forth or described
in the Schedules hereto. For the purpose of determining the satisfaction of the
conditions set forth in Section 6.03(a) hereof, such updated information shall
not be deemed added to the Schedules to this Agreement.
5.09 Pre-Closing Actions. Sellers agree to cause the Company and
Sellers' affiliates to (i) terminate (or transfer to an entity not owned by the
Company) all employees of the Company effective on the date which is 30 days
following the Closing Date; (ii) terminate all Employee Plans effective on the
date which is 30 days following the Closing Date; (iii) obtain an agreement to
terminate (or assign to another entity not owned by the Company which assumes
all obligations thereunder) the lease described in Schedule 3.12 hereto
effective as of the date which is 60 days after the Closing Date; (iv)
concurrently with the Closing repay any of the Company's long term debt which is
not held by Sellers or their affiliates, and pay those payables of the Company
to the creditors listed in Schedule 5.09(A) hereof (the "Closing Payables") as
Sellers shall designate to Buyer in writing two business days prior to the
Closing Date (such designation to list the amount to be paid to each such
creditor), it being agreed by Buyer that it will provide the Company with funds
for the purpose of such loan repayments and payment of the Closing Payables; (v)
obtain satisfactions or releases (or assignments to Buyer in connection with
Buyer's purchase of the Stockholder Loans) of all Liens on any of the Company's
assets; (vi) terminate on or prior to the Closing Date the Company's employment
agreement with Tony B. Gelbart ("Gelbart"); (vii) assign
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on or prior to the Closing Date to Gelbart (with Gelbart's assumption of all
obligations thereunder) the life insurance policies on his life described in
Schedule 3.15 hereto; (viii) assign on or prior to the Closing Date to Gelbart
(with Gelbart's assumption of all obligations thereunder) the Infinity auto
lease described in Schedule 3.15 hereto; (ix) terminate on or prior to the
Closing Date the Exclusive Supply and Distribution Agreement with LG Chemical
America, Inc. ("LG") described in Schedule 3.11 hereto and obtain from LG
written confirmation that no liabilities of the Company to LG exist other than
those which are properly reflected in the Estimated Balance Sheet and the
Closing Balance Sheet; and (x) pay all liabilities and obligations of the
Company (including, without limitation, severance, benefit plan termination,
lease termination, contract termination and tax obligations) arising from the
foregoing actions or cause full accruals reflecting such liabilities and
obligations to be included in the Estimated Balance Sheet and the Closing
Balance Sheet. Together with the written designation of the Closing Payables,
Sellers will deliver to Buyer evidence reasonably satisfactory to Buyer that the
creditors receiving payments for Closing Payables have released all other
indebtedness or amounts payable by the Company to such creditors (other than any
payables to such creditors that are fully reflected in the Estimated Balance
Sheet and the Closing Balance Sheet) upon receipt of the payment of the amount
of the Closing Payables designated by Sellers. Concurrently with the Closing,
Sellers agree to sell, and Buyer agrees to purchase, all loans payable by the
Company to any of Sellers or affiliates of Sellers (the "Stockholder Loans"),
including specifically the loans described in Schedule 5.09(B) hereto, for a
cash purchase price equal to the principal amount thereof plus accrued interest
thereon through the Closing Date (the "Loan Purchase Price"), and to assign to
Buyer all security agreements and other collateral for such Stockholder Loans.
Sellers agree to (and will cause the Company to) cooperate with
Buyer and assist Buyer in connection with any efforts by Buyer to hire any of
the Company's employees; and Sellers agree to cause entities which are
affiliated with Sellers not to solicit for employment or hire any of such
employees which Buyer specifies in writing at or prior to Closing that it
desires to employ.
ARTICLE VI
CLOSING CONDITIONS
6.01 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) None of Sellers, the Company or Buyer shall be subject to any
order, decree or injunction of a court of competent jurisdiction or governmental
agency and no statute, rule or regulation shall be enacted or issued which (i)
prevents or delays any of the transactions
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contemplated by this Agreement or (ii) would impose any limitation on the
ability of Buyer effectively to exercise full rights of ownership of the Common
Stock.
6.02 Conditions to the Obligation of Sellers to Effect the
Transactions Contemplated Hereby. The obligations of Sellers to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by Sellers:
(a) Buyer shall have performed and complied in all material respects
with the covenants and agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing Date and the
representations and warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects as of the Closing Date as though made
at and as of the Closing Date, and Sellers shall have received a certificate to
that effect signed on behalf of Buyer by an authorized officer of Buyer;
(b) At the Closing, Sellers shall have received an opinion or
opinions from Carter, Ledyard & Milburn, counsel to Buyer, dated the Closing
Date and satisfactory in form and substance to Sellers and their counsel, to the
effect that:
(i) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(ii) Buyer has the corporate power and authority to execute and
deliver this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby, and the execution and
delivery of this Agreement and the Escrow Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly and
validly authorized by requisite corporate action taken on the part of
Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or the Escrow Agreement or to
consummate the transactions contemplated hereby and thereby;
(iii) this Agreement and the Escrow Agreement have been duly and
validly executed and delivered by Buyer and, assuming this Agreement and
the Escrow Agreement are valid and binding obligations of the other
parties thereto, are valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
As to any matters contained in such opinion which involve the laws
of any jurisdiction other than the federal laws of the United States of America,
the laws of the State of New
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York, or the General Corporation Law of the State of Delaware, Buyer's counsel
may rely upon opinions of counsel admitted to practice in such other
jurisdictions. Any opinions relied upon by Buyer's counsel as aforesaid shall be
in form and substance satisfactory to Sellers and their counsel, and the counsel
rendering such opinions shall be satisfactory to Sellers and their counsel. Any
such opinions shall be delivered to Sellers together with the opinion of Buyer's
counsel. The opinion of Buyer's counsel may expressly rely as to matters of fact
upon certificates furnished by appropriate officers and directors of Buyer and
its affiliates and public officials;
(c) At or prior to the Closing, Buyer shall have executed and
delivered the Escrow Agreement and shall have purchased the Stockholder Loans as
contemplated by Section 5.09 hereof.
6.03 Conditions to the Obligations of Buyer to Effect the
Transactions Contemplated Hereby. The obligations of Buyer to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by Buyer:
(a) Sellers shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement required
to be performed and complied with by them at or prior to the Closing Date
(including, without limitation, timely delivery of the Estimated Balance Sheet),
and the representations and warranties of Sellers set forth in this Agree ment
(without regard to any updated information provided pursuant to Section 5.08
hereof) shall be true and correct in all material respects as of the Closing
Date as though made at and as of the Closing Date and Buyer shall have received
a certificate to that effect signed by each of Sellers;
(b) There shall not have been, since the date of the Recent
Financial Statements, any material adverse change in the business, results of
operations, financial condition or prospects of the Company;
(c) At the Closing, Buyer shall have received an opinion or opinions
from Ruden, McClosky, Smith, Schuster & Russell, P.A., counsel for Sellers,
dated the Closing Date and satisfactory in form and substance to Buyer and its
counsel, to the effect that:
(i) The Company has been incorporated under the New York Business
Corporation Law and is a subsisting corporation under the laws of the
State of New York and has all requisite corporate power and authority to
carry on its business as now being conducted and is authorized to transact
business and its status is active in the State of Florida;
(ii) This Agreement and the Escrow Agreement have been duly and
validly executed and delivered by each of Sellers and, assuming the
Agreement and the Escrow Agreement are valid and binding obligation of
Buyer, constitute a valid and binding obligations of each of Sellers,
enforceable against each of Sellers in accordance with their
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terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law);
(iii) Except for those approvals and consents which have already
been obtained, neither execution and delivery by Sellers of this Agreement
and the Escrow Agreement, the sale by Sellers of the Common Stock pursuant
to this Agreement nor the consummation of the other transactions
contemplated by this Agreement and the Escrow Agreement will (A) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws (or other similar governing documents) of the
Company, (B) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority
other than those which have been made or obtained; (C) to the best of such
counsel's knowledge after limited investigation, constitute a default (or
give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation known to
such counsel to which any of Sellers or the Company is a party or by which
any of Sellers, the Company or any of their assets may be bound, except
for such defaults (or rights of termination, cancellation or acceleration)
as to which requisite waivers or consents have been obtained; (D) to the
best of such counsel's knowledge after limited investigation, result in
the creation of any encumbrance, security interest, equity or right of
others upon any of the properties or assets of the Company under any of
the terms, conditions or provisions of any agreement, instrument or
obligation to which the Company or its assets may be bound or affected; or
(E) violate any order, writ, injunction, judgment or decree known to such
counsel, to which any of Sellers or the Company is a party, or by which
any of their respective assets are bound or any law, statute, rule or
regulation applicable to any of Sellers, the Company or any of their
respective assets;
(iv) By reason of delivery of certificates for the Common Stock and
duly executed stock powers as contemplated by this Agreement, Sellers have
transferred, assigned and delivered to Buyer good and marketable title to
such shares of Common Stock, free and clear, to the best of such counsel's
knowledge after limited investigation, of any liens, encumbrances,
equities and claims of whatever nature, except as provided by applicable
securities laws and except as created by Buyer;
(v) The total authorized capital stock of the Company is as set
forth in Section 3.02 of this Agreement; all of the issued and outstanding
shares of Common Stock of the Company are duly authorized, validly issued,
fully paid and nonassessable and, other than this Agreement, to the best
of such counsel's knowledge after limited investigation, there is no
outstanding subscription, obligation, option, warrant, call, right,
agreement or commitment relating to the issuance, sale, delivery or
transfer by the Company, or by any of Sellers (including any right of
conversion or exchange under any outstanding security or
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other instrument) of the Common Stock or other capital stock of the
Company or, to the best of such counsel's knowledge after reasonable
investigation, any outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any issued and outstanding shares
of capital stock of the Company or other rights of any kind to acquire
shares of capital stock of any class of the Company; and all of the issued
and outstanding shares of Common Stock are owned of record by Sellers; and
(vi) Except as disclosed in Schedule 3.17 to this Agreement, such
counsel has no knowledge after limited investigation of any claim, action,
proceeding or investigation pending or threatened against or relating to
the Company before any court or governmental or regulatory authority or
body acting in an investigative or adjudicative capacity or of any
outstanding order, writ, injunction or decree to which the Company is a
party or is subject which adversely affects the business, operations or
financial condition of the Company.
As to any matters contained in such opinion which involve the laws
of any jurisdiction other than the federal laws of the United States of America,
or the laws of the States of New York and Florida, Sellers' counsel may rely
upon opinions of counsel admitted in such other jurisdictions. Any opinions
relied upon by Sellers' counsel as aforesaid shall be in form and substance
satisfactory to Buyer and its counsel, and the counsel rendering such opinions
shall be satisfactory to Buyer and its counsel. Any such opinions shall be
delivered to Buyer together with the opinion of Sellers' counsel. The opinion of
Sellers' counsel may expressly rely as to matters of fact upon certificates
furnished by Sellers, appropriate officers and directors of the Company and
public officials;
(d) At or prior to the Closing, all Related Party Loans and
Guarantees shall have been repaid or extinguished as contemplated by Section
5.06;
(e) At or prior to the Closing, all parties other than Buyer shall
have executed and delivered the Escrow Agreement;
(f) At or prior to the Closing, Sellers shall have caused the
Company to deliver to Buyer written acknowledgments executed by the contractor
or contractors who are in possession of the Company's product molds confirming
that such molds are owned by the Company free and clear of any Lien of such
contractor (except as otherwise disclosed in Schedule 3.07 hereto); and
(g) At or prior to the Closing, Sellers shall have caused the
Company to deliver evidence to Buyer demonstrating the taking of the actions
contemplated by Section 5.09 hereof.
ARTICLE VII
THE CLOSING AND CERTAIN CLOSING DELIVERIES
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7.01 Time and Place of Closing. Upon the terms and subject to
satisfaction or waiver of the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") will
take place as of the close of business on January 5, 1998 (or, if the conditions
to the closing contained in Article VI hereof have not been satisfied or waived
by such date, then on the day which is three business days after the
satisfaction or waiver of the last such condition which is outside of the
control of the parties) at the offices of Sellers' counsel Ruden, McClosky,
Smith, Schuster & Russell, P.A. in Fort Lauderdale, Florida, or at such other
place or time as the parties may agree in writing. The effective time of the
Closing is hereinafter referred to as the "Closing Date".
7.02 Deliveries by Sellers. At the Closing, Sellers will deliver to
Buyer the following:
(a) One or more stock certificates representing all of the issued
and outstanding shares of Common Stock, accompanied by stock powers duly
executed in blank or duly executed instruments of transfer and any other
documents that are necessary to transfer to Buyer good and marketable title to
all issued and outstanding shares of Common Stock;
(b) The stock books, stock ledgers, minute books and corporate seals
of the Company;
(c) Resignations dated the Closing Date of all of the officers and
directors of the Company;
(d) The opinion and the certificate contemplated by Section 6.03;
(e) The promissory notes representing the Stockholder Loans endorsed
payable to the order of Buyer; and
(f) All other documents, instruments and writings required to be
delivered by Sellers at or prior to the Closing Date pursuant to this Agreement
or otherwise required in connection herewith.
7.03 Deliveries by Buyer. At the Closing, Buyer will deliver the
following to or for the account of Sellers:
(a) The amounts to be paid to the Escrow Agent and to Sellers at
Closing in accordance with the instructions provided by Sellers as contemplated
by Section 1.03(a) and the amounts to be paid to purchase the Stockholder Loans
as contemplated by Section 5.09 hereof;
(b) The opinion and the certificate contemplated by Section 6.02;
and
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(c) All other documents, instruments and writings required to be
delivered by Buyer at or prior to the Closing Date pursuant to this Agreement or
otherwise required in connection herewith.
ARTICLE VIII
POST-CLOSING COVENANTS
8.01 Expenses. Except as otherwise provided herein, Sellers and
Buyer shall each bear their own costs and expenses incurred in connection with
this Agreement, the Escrow Agreement and the transactions contemplated hereby
and thereby. Specifically, acquisition-related expenses will be paid by the
party for whose benefit the expenses were incurred and not by the Company. Buyer
shall be responsible for fees, commissions, expenses and reimbursements incurred
by or required to be paid to its professional advisors and each Seller shall be
responsible for the fees, commissions, expenses and reimbursements incurred by
or required to be paid to such Seller's professional advisors. Buyer and Sellers
will each pay one-half of any fees charged by the certified public accountants
referred to in Section 8.05 and Section 1.04(b) hereof.
8.02 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Common Stock and the other
transactions contemplated by this Agreement and the Escrow Agreement. From time
to time after the date hereof (including after the Closing Date if requested),
Sellers will, at their own expense and without further consideration, execute
and deliver such documents to Buyer as Buyer may reasonably request in order
more effectively to vest in Buyer good title to the Common Stock and to more
effectively consummate the transactions contemplated by this Agreement and the
Escrow Agreement.
Sellers will at Buyer's request during the two years following the
Closing Date review and execute all documents, furnish in a reasonably timely
manner such records and information, be reasonably available to testify and
attend proceedings (with reasonable compensation for time spent on such
testimony or attendance, and reimbursement of reasonable actual expenses
incurred, including without limitation reasonable attorneys fees) and take such
other actions as Buyer may reasonably request (at times reasonably convenient to
Sellers) in connection with the seeking or maintaining of protection for any
product or asset of the Company or the business of the Company, or the defense
or prosecution of any litigation involving any product or asset of the Company
or the Company's business, and otherwise cooperate with Buyer and the Company to
enable them to perfect, maintain and enforce the Company's rights in any product
or asset of the Company.
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<PAGE>
8.03 Commissions and Fees. Except as set forth in Schedule 8.03
hereto, Sellers and Buyer each represent and warrant to the other that no
broker, finder, financial adviser or other person is entitled to any brokerage
fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the party making such
representation. The "exit commission" payable by the Company to Cove Associates
Ltd. described in Schedule 8.03 will be reflected as a reduction of the
Company's Estimated Net Worth and Closing Net Worth in the Estimated Balance
Sheet and the Closing Balance Sheet and paid as provided in Section 5.09 hereof.
Sellers, on the one hand, and Buyer, on the other hand, will pay to the other or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees incurred by reason of any action taken by such party.
8.04 Sales and Transfer Taxes. All sales and transfer taxes
(including all stock transfer taxes, if any) incurred in connection with this
Agreement and the Escrow Agreement and the transactions contemplated hereby and
thereby will be borne by Sellers, and Sellers will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all such sales
and transfer taxes, and, if required by applicable law, Buyer will join in the
execution of any such Tax Returns or other documentation.
8.05 Other Tax Matters.
(a) To the extent the accruals or reserves for Taxes reflected in
the Closing Balance Sheet prove inadequate to cover Taxes accruing with respect
to or payable by the Company with respect to all periods (whether or not
constituting taxable years or otherwise recognized taxable periods) through the
Closing Date and after giving full consideration to the actual permitted
application or use of any net operating loss carryforwards of the Company, Buyer
and Sellers agree that Sellers shall be jointly and severally liable for all
such Taxes with respect to the Company for all periods ending on or prior to the
Closing Date, and that Buyer shall be liable for all Taxes with respect to the
Company for periods beginning with the Closing Date.
(b) Sellers shall have exclusive control and responsibility to file
all Tax Returns reflecting the operations of the Company and required to be
filed by or on behalf of the Company for all taxable periods ending on or prior
to the Closing Date. Buyer shall have exclusive control and responsibility to
file all Tax Returns reflecting the operations of the Company and required to be
filed by or on behalf of the Company for all taxable periods ending after the
Closing Date. The parties shall cooperate fully in connection with the filing of
such returns, including the provision of copies of any return or report for a
period which includes the Closing Date to the other party before filing. No
party shall destroy or allow the destruction of any books, records or files
pertaining to the operations of the Company prior to the Closing without first
having offered in writing to deliver such books, records or files to the other
party at such other party's expense. In any instance in which Buyer is required
to file or cause to be filed tax returns covering a period commencing prior to
but ending after the Closing, Sellers will furnish all information and records
reasonably available to
28
<PAGE>
them and reasonably requested by Buyer or the Company and necessary or
appropriate for use in preparing such returns. Any taxes for a period commencing
prior to but ending after the Closing will be apportioned, in the case of real
and personal property Taxes, on a per diem basis and, in the case of other
Taxes, on the basis of the actual activities, taxable income or taxable loss of
the Company during the periods before and after the Closing.
(c) Sellers and Buyer will provide (or, in the case of Buyer, will
cause the Company to provide) the other with such assistance as may reasonably
be requested by either of them in connection with the preparation of any Tax
Return, any audit or any examination by any taxing authority, any judicial or
administrative proceedings relating to liability for Taxes, or any claim arising
under this Agreement with respect to Taxes, and each will retain and provide the
other with any records or information which may be relevant to such Taxes.
Sellers shall be permitted to participate (at their own expense) in any audit or
examination by any taxing authority with respect to any Tax Return for which
Sellers may be required to provide indemnification.
(d) Buyer will not consent, and it will cause the Company not to
consent, to the extension of any statute of limitations with respect to any Tax
Return for which Sellers may be required to provide indemnification without the
consent of Sellers who prior to Closing held a majority of the outstanding
Common Stock, so long as Sellers provide assurances reasonably satisfactory to
Buyer that they will be able to satisfy any potential deficiency.
(e) If Sellers and Buyer disagree as to the amount of Taxes for
which each is liable under this Agreement, Sellers and Buyer hereby agree to
appoint a firm of certified public accountants acceptable to the parties to act
as arbitrator to resolve said dispute. All determinations by such arbitrator
shall be final and binding on the parties and all fees and expenses with respect
to such arbitrator shall be shared equally by Sellers and Buyer.
8.06 Shareholder Claims. Sellers hereby waive, effective on the
Closing Date, all claims that they have or may have against the Company, whether
such claims accrue prior to or after the Closing; provided, however, that
Sellers do not waive claims which may arise with respect to (i) a Seller's
salary, commissions, benefits, bonuses and reimbursement of expenses pursuant to
such Seller's terms of employment by the Company with respect to the period
through the Closing Date to the extent that the same are reflected as
liabilities in the Estimated Balance Sheet and the Closing Balance Sheet, or
(ii) contracts or agreements between the Company and any or all of Sellers (or
their affiliates) contemplated by this Agreement and adequately reflected as
liabilities in the Closing Balance Sheet or which are entered into after the
Closing. Sellers shall jointly and severally save, defend and indemnify Buyer
against and hold it harmless from any and all claims, liabilities, losses, costs
and expenses of every kind arising out of or relating to any action, suit,
proceeding or claim brought by or in the right of any person who is or was a
stockholder of the Company prior to Closing, or had, prior to Closing, any right
or option to acquire any capital stock of the Company, other than in respect of
matters covered by the proviso to the first sentence of this Section 8.06.
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<PAGE>
8.07 Nondisclosure; Noncompetition.
(a) Sellers agree not to use or disclose at any time after
consummation of the transactions contemplated hereby, except with the prior
written consent of an officer authorized to act in the matter by the Board of
Directors of Buyer, any trade secrets, proprietary information, or other
information that the Company or Buyer consider confidential with respect to the
oral care products business, including without limitation information relating
to formulas, designs, processes, suppliers, machines, compositions,
improvements, inventions, operations, manufacturing, processing, marketing,
distributing, selling, cost and pricing data, master files or customer lists
utilized by the Company or by Buyer or any of their respective subsidiaries or
affiliates (collectively, including the Company, the "Buyer Group"), or the
skills, abilities and compensation of the Buyer Group's employees, and all other
similar information material to the conduct of the Buyer Group's business, which
is not presently generally known to the public and which is or was obtained or
acquired by such Seller while in the employ of, or while a stockholder of, the
Company; provided, however, that this provision shall not preclude such Seller
from (i) the use or disclosure of such information which presently is known
generally to the public or which subsequently comes into the public domain,
other than by way of disclosure in violation of this Agreement or in any other
unauthorized fashion, or (ii) disclosure of such information required by law or
court order, provided that prior to such disclosure required by law or court
order the undersigned will give the Company three business days' written notice
(or, if disclosure is required to be made in less than three business days, then
such notice shall be given as promptly as practicable after determination that
disclosure may be required) of the nature of the law or order requiring
disclosure and the disclosure to be made in accordance therewith.
(b) For a period of four years from the Closing Date, Sellers shall
not, within the United States, Mexico or Canada, without the written consent of
an officer authorized to act in the matter by the Board of Directors of Buyer,
directly or indirectly: (i) own, manage, operate, join, control, participate in,
invest in, or otherwise be connected with, in any manner, whether as an officer,
director, employee, partner, investor, consultant, lender or otherwise, any
business entity which is engaged in, or is in any way related to or competitive
with, the oral care products business conducted by the Company; or (ii) on such
Seller's behalf or on behalf of anyone else engaged in any such line of business
(1) persuade or attempt to persuade any employee of any member of the Buyer
Group or any individual who was an employee of any member of the Buyer Group
during the one year prior to the date of this Agreement (other than employees of
the Company whose employment with the Company is terminated as contemplated by
Section 5.09 hereof), to leave the employ of any member of the Buyer Group or to
become employed by any person other than the members of the Buyer Group; (2)
persuade or attempt to persuade any current client or former customer of any
member of the Buyer Group to cease doing business with, or to reduce the amount
of business it does or intends or anticipates doing with, any member of the
Buyer Group; or (3) solicit the business of any of such customer or former
customer with respect to the business conducted by the Company or by any member
of the Buyer Group. Notwithstanding the foregoing, the parties agree that the
30
<PAGE>
continuation of MRM Investments, Inc.'s or its affiliates' involvement in
Oraline, LTD's business of distributing battery powered toothbrushes will not be
deemed a violation of this Section 8.07(b).
(c) Any and all inventions, discoveries or other developments
developed by any of Sellers who are or were employees of the Company, the
Company or any other member of the Buyer Group ("developments") during the term
of such Seller's employment with the Company shall be conclusively presumed to
have been created for and on behalf of the Company as part of such Seller's
obligation to the Company. Such developments shall be the property of and belong
to the Company without the payment of consideration therefor in addition to the
consideration paid by Buyer for the Common Stock of the Company, and such Seller
hereby transfers, assigns and conveys all of his right, title and interest in
any such developments to the Company, and agrees to execute and deliver any
documents that the Company deems necessary to effect such transfer on the demand
of the Company.
8.08 Indemnification.
(a) Sellers jointly and severally agree to save, defend and
indemnify Buyer against and hold it harmless from any and all claims,
liabilities, losses, costs and expenses, of every kind, nature and description,
fixed or contingent (including, without limitation, counsel's fees and expenses
in connection with any action, claim or proceeding relating thereto or seeking
enforcement of Sellers' obligations hereunder) ("Losses"), arising out of any
breach of (i) any representation, warranty, covenant or agreement made by
Sellers under this Agreement, or (ii) out of any Environmental Claim or any
other liability or obligation of the Company that is not fully reflected in the
Closing Balance Sheet. Notwithstanding the foregoing, Sellers shall have no
obligation to indemnify Buyer hereunder until the aggregate of all indemnifiable
Losses exceeds $20,000, in which event Sellers shall provide indemnification for
the full amount of such Losses.
(b) Buyer agrees to save, defend and indemnify Sellers against and
hold them harmless from any and all claims, liabilities, losses, costs and
expenses, of every kind, nature and description, fixed or contingent (including,
without limitation, counsel's fees and expenses in connection with any action,
claim or proceeding relating thereto), arising out of any breach of any
representation, warranty, covenant or agreement made by Buyer under this
Agreement.
(c) All amounts for which either party is indemnified pursuant to
this Section 8.08 shall bear interest thereon from the date expended by the
indemnified party until paid by the indemnifying party at a rate equal to the
Chase Manhattan Bank prime rate as quoted in The Wall Street Journal, Eastern
Edition, and if that rate is not quoted, the NationsBank prime rate.
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<PAGE>
8.09 Defense of Claims.
(a) Should any claim, action or proceeding by or involving a third
party arise after the Closing Date for which Sellers are liable under the terms
of this Agreement, Buyer shall notify Sellers within a reasonable time after
such claim (but in all events at least 10 business days prior to the date when
any responses or other documents are required to be filed in connection with
such claim, action or proceeding), action or proceeding arises and is known to
Buyer, and if Sellers shall admit in writing their indemnification obligation in
respect thereof, Buyer shall give Sellers a reasonable opportunity:
(i) to take part in any examination of the books and records of
Buyer and the Company;
(ii) to conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend Buyer or the Company or
prosecute any claim, action, counterclaim or other proceeding with respect
thereto;
(iii) to take all other required steps or proceedings to settle or
defend any such claim, action or proceeding; and
(iv) to employ counsel to contest any such claim, action or
proceeding in the name of Buyer, the Company, or otherwise.
The expenses of all proceedings, contests or lawsuits with respect to such
claims or actions shall be borne by Sellers. If Sellers wish to assume the
defense of such claim or action, they shall give written notice to Buyer
admitting their indemnification obligation in respect thereof and stating that
they intend to assume such defense within 15 days after notice from Buyer of
such claim or action (unless the claim or action reasonably requires a response
in less than 15 days after the notice is given to Sellers, in which event they
shall notify Buyer at least five days prior to such reasonably required response
date), and Seller shall thereafter assume the defense of any such claim or
liability, through counsel reasonably satisfactory to Buyer; provided that Buyer
or the Company may participate in such defense at its own expense but, in any
event, Sellers shall have the right, as long as they are actively defending any
claim or action, to control such defense. Buyer shall afford Sellers' counsel
designated by them and other authorized representatives reasonable access during
normal business hours to all books, records, offices and other facilities and
properties of the Company, and to the personnel of the Company, and shall
otherwise use all reasonable efforts to cooperate with Sellers, such counsel and
such other authorized representatives in connection with the exercise of the
rights of Sellers pursuant to this Section 8.09.
(b) If Sellers shall not assume the defense of, or if after so
assuming they shall fail to actively defend, any such claim or action, Buyer or
the Company may defend against any such claim or action in such manner as they
may deem appropriate, and Buyer or the Company may settle
32
<PAGE>
such claim or litigation on such terms as they may deem appropriate, and Sellers
promptly shall reimburse Buyer or the Company for the amount of such settlement
and for all expenses, legal and otherwise, reasonably and necessarily incurred
by Buyer or the Company in connection with the defense against and settlement of
such claim or action. If no settlement of such claim or litigation is made,
Sellers shall satisfy any judgment rendered with respect to such claim or in
such action, before Buyer or the Company is required to do so, and pay all
expenses, legal or otherwise, reasonably and necessarily incurred by Buyer or
the Company in the defense against such claim or litigation.
(c) If a judgment is rendered against Buyer or the Company in any
action covered by the indemnification hereunder, or any lien attaches to any of
the assets of Buyer or the Company, Sellers immediately upon such entry or
attachment shall pay such judgment in full or discharge such lien unless, at
Sellers' expense and direction, an appeal is taken under which the execution of
the judgment or satisfaction of the lien is stayed. If and when a final judgment
is rendered in any such action, Sellers shall forthwith pay such judgment or
discharge such lien before Buyer or the Company is compelled to do so.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written instrument executed by all of Sellers
and Buyer.
9.02 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but any such waiver, or the failure to insist upon strict
compliance with any obligation, covenant, agreement or condition herein, shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure or breach.
9.03 Survival. Each and every representation, warranty, covenant and
agreement contained in this Agreement or in any document delivered pursuant to
or in connection with this Agreement shall survive the Closing and shall not be
affected by any investigation made by any party.
9.04 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by reputable overnight delivery service or by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address as any party shall
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<PAGE>
specify by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
(a) if to any of Sellers, at such
person's address as set forth on the
signature pages hereof;
with a copy to:
Ruden, McClosky, Smith, Schuster & Russell, P.A.
200 East Broward Boulevard
P.O. Box 1900
Fort Lauderdale, Florida 33302
Attention: Thomas O. Katz, Esq.
Telecopier No.: 954-764-4996
(b) if to Buyer to:
Playtex Products, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
Attention: General Counsel
Telecopier No.: 203-341-4080
9.05 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, personal representatives, successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties (other than any assignment by Buyer to an
affiliate of Buyer or to any party which purchases all of the capital stock or
substantially all of the assets of the Company or any successor to the business
of the Company, which may be made without any such consents). Any purported
assignment in violation of the provisions hereof shall be void.
9.06 Governing Law. This Agreement shall be governed by the laws of
the State of Florida (regardless of the laws that might otherwise govern under
applicable Florida conflict of laws principles) as to all matters, including but
not limited to matters of validity, construction, effect, performance and
remedies.
9.07 Arbitration. Any dispute, controversy or claim arising out of
or relating to this Agreement or the Escrow Agreement or the transactions
contemplated hereby or thereby shall be settled and finally determined by
arbitration in Palm Beach County, Florida, or at such other location as the
parties may agree, by one arbitrator in accordance with the Commercial
Arbitration
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<PAGE>
Rules of the American Arbitration Association in force at the time of such
arbitration. In any such arbitration proceeding, each party shall submit to the
arbitrator its position concerning the appropriate payment amount or other issue
in dispute and the arbitrator shall have the power only to rule entirely in
favor of the stated position of one party or entirely in favor of the stated
position of the other party. Judgment upon any award rendered by such an
arbitration may be rendered in any court having jurisdiction. All fees and
charges of the American Arbitration Association and of the arbitrators and all
arbitration-related costs of the parties shall be borne as the arbitrators shall
determine in their award.
9.08 Counterparts. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which as so
executed and delivered shall be deemed an original, but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party hereto to produce or account for
more than one such counterpart executed and delivered by such party.
9.09 Interpretation. The table of contents and the article and
section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way
affect the meaning or interpretation of this Agreement. As used in this
Agreement, the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental entity or any department or agency thereof. As
used in this Agreement, the term "subsidiary", when used in reference to any
other person, shall mean any corporation of which outstanding securities having
ordinary voting power to elect a majority of the Board of Directors of such
corporation are owned directly or indirectly by such other person. As used in
this Agreement, the term "generally accepted accounting principles" means
generally accepted accounting principles as in effect and as applied in the
United States. As used in this Agreement, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934. When used herein, the masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include
the others whenever the context so indicates or permits. Where a statement
contained in this Agreement is said to be to "Sellers' knowledge" or "the
Company's knowledge" (or words of similar import) such expression means that,
after having conducted a thorough due diligence review including inquiries of
relevant employees of the Company, each of the Sellers believe the statement to
be true, accurate and complete.
9.10 Entire Agreement. This Agreement and the Escrow Agreement,
including the schedules, exhibits, documents, certificates and instruments
referred to herein and therein, embody the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated by this Agreement
and supersede all prior agreements and understandings between the parties with
respect thereto. Except for any permitted assignees, successors or assigns of
the parties, no provision of this Agreement is intended to or shall be deemed to
be for the benefit of, or create any rights in favor of, any third party.
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9.11 Specific Performance.
(a) Sellers and Buyer acknowledge that, in view of the uniqueness of
the business of the Company and the transactions contemplated hereby, Buyer may
not have an adequate remedy at law for money damages in the event that this
Agreement with respect to the sale and delivery of the Common Stock has not been
performed in accordance with its terms by Sellers, and therefore each Seller
agrees that Buyer shall be entitled to specific enforcement of the terms hereof
with respect to the sale and delivery of the Common Stock and the other
transactions contemplated hereby in the event of breach by any Seller in
addition to any other remedy to which Buyer may be entitled, at law or in
equity, for such breach.
(b) In the event of a breach or threatened breach by any of Sellers
of their covenants under Section 8.07, Sellers acknowledge that Buyer may not
have an adequate remedy at law for money damages. Accordingly, in the event of
such breach or threatened breach, Buyer will be entitled to such equitable and
injunctive relief as may be available to restrain any Seller from the violation
of the provisions of said Section in addition to any other remedy to which Buyer
may be entitled, at law or in equity, for such breach or threatened breach.
9.12 Severability of Covenants. Sellers acknowledge that the
covenants contained in Section 8.07 of this Agreement are reasonable and
necessary for the protection of Buyer and its investment in the Company and that
each covenant, and the period or periods of time and the types and scope of
restrictions on the activities specified therein are, and are intended to be,
divisible and shall be deemed a series of separate covenants, one for each state
or jurisdiction to which they are applicable. In the event that any provision of
this Agreement, including any sentence, clause or part hereof, shall be deemed
contrary to law or invalid or unenforceable in any respect by a court of
competent jurisdiction, the remaining provisions shall remain in full force and
effect to the extent that such provisions can still reasonably be given effect
in accordance with the intentions of the parties, and any invalid and
unenforceable provisions shall be deemed, without further action on the part of
the parties, modified, amended and limited solely to the extent necessary to
render the same valid and enforceable.
9.13 Notice to Sellers; Actions by Sellers. Notices to Sellers will
be sufficient if made in accordance with Section 9.04 hereof. Sellers shall act
by a majority in interest of the Sellers (unless otherwise specifically
provided) with respect to any provision of this Agreement which provides for
action to be taken by, or waiver or consent to be given by, Sellers.
ARTICLE X
TERMINATION AND ABANDONMENT
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10.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the written agreement of all of the parties hereto;
(b) by Buyer if there has been a material violation or breach by any
Seller of any covenant, agreement, representation or warranty contained in this
Agreement;
(c) by Sellers if there has been a material violation or breach by
Buyer of any covenant, agreement, representation or warranty contained in this
Agreement; or
(d) by either Buyer or Sellers if the Closing of the transactions
contemplated by this Agreement shall not have been consummated on or before
January 31, 1998, provided, however, that termination pursuant to this
subsection shall not relieve any party of the liabilities contemplated by the
proviso to the second sentence of Section 10.02, if applicable.
10.02 Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by any of the parties pursuant to Sections 10.01(b), (c) or (d) of this
Agreement, written notice thereof shall forthwith be given by the terminating
party to the other parties and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated, none of the parties
hereto nor any of their respective directors, officers or affiliates, as the
case may be, shall have any liability or further obligation to any of the other
parties or any of their respective directors, officers or affiliates, as the
case may be, pursuant to this Agreement; provided, however, that if such
termination shall result from the willful breach of a warranty or the willful
failure of a party to fulfill a condition to the performance of the obligations
of the other parties or to perform a covenant or agreement contained in this
Agreement or from any other willful breach by any party to this Agreement
(including, without limitation, the failure to close as contemplated by Section
7.01 hereof), such party shall be solely liable for any and all damages, costs
and expenses (including, but not limited to, counsel's fees) sustained or
incurred by the other party or parties as a result of such failure or breach, or
for specific performance pursuant to Section 9.11 hereof if permitted
thereunder. The provisions of Sections 9.06, 9.07, 9.11, 9.12, 9.13 and 10.02
shall survive any termination hereof.
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IN WITNESS WHEREOF, Sellers have executed this Agreement and Buyer
has caused this Agreement to be executed by its duly authorized officer, each as
of the date first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
------------------------------
Michael F. Goss
Executive Vice President
SELLERS:
By:/s/ Tony B. Gelbart
------------------------------
Name: Tony B. Gelbart
Address: 7766 Tennyson Court
Boca Raton, FL 33433
By: /s/ Ralph S. D'Angelo
------------------------------
Name: Ralph S. D'Angelo
Address: 5171 N.W. 64th Drive
Coral Springs, FL 33067
By: /s/ William A. Mathis
------------------------------
Name: William A. Mathis
Address: 103 Rosewood Lane
Green Acres, FL 33463
TWS ENTERPRISES INTERNATIONAL CORP.
By:/s/ Teddy Struhl
------------------------------
Name: Teddy Struhl
Title: President
Address: 17891 Lake Estates Drive
Boca Raton, FL 33496
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MRM INVESTMENTS, INC.
By:/s/ Michael Nyman
------------------------------
Name: Michael Nyman
Title: Vice President
Address: 200 E. Las Olas Boulevard
Suite 1480
Ft. Lauderdale, FL 33301
EXHIBIT A
Stock Ownership
Name of Seller No. of Shares
- -------------- -------------
Tony B. Gelbart 50.0
TWS Enterprises International Corp. 50.0
MRM Investments, Inc. 25.0
William A. Mathis 2.6
Ralph S. D'Angelo 2.6
------
Total 130.20
======
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Exhibit 10 (ag)
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
PLAYTEX PRODUCTS, INC.,
BINKY-GRIPTIGHT, INC.,
LEWIS WOOLF GRIPTIGHT LIMITED
and
L.W.G. HOLDINGS LIMITED
January 26, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TRANSACTION.......................................................1
ARTICLE I SALE OF ASSETS AND TERMS OF PAYMENT...............................1
1.01 Assets Being Sold (the "Purchased Assets").................1
(a) Furniture, Machinery and Equipment...................1
(b) Inventories..........................................1
(c) Contracts and Commitments............................1
(d) Accounts Receivable..................................2
(e) Books and Records....................................2
(f) Proprietary Rights...................................2
1.02 Retained Assets............................................2
1.03 Assumed Liabilities........................................2
1.04 Retained Liabilities.......................................3
1.05 Purchase Price.............................................3
1.06 Closing Balance Sheet......................................3
1.07 Purchase Price Allocation..................................4
1.08 Absolute Sale..............................................4
1.09 Other Contracts............................................4
1.10 Bulk Sale Tax Notice.......................................4
ARTICLE II RELATED AGREEMENTS...............................................4
2.01 Noncompetition Agreement...................................4
2.02 Assignment of Trademark Rights.............................5
2.03 Technology License Agreement...............................5
2.04 Bill of Sale...............................................5
2.05 Manufacturing Agreement....................................5
2.06 Promissory Note............................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER,
PARENT AND LWG..................................................5
3.01 Organization and Good Standing; No Investments.............5
3.02 Authorization; Compliance with Other Instruments and Law...5
3.03 Financial Statements.......................................6
3.04 Operation of the Business in the Ordinary Course...........7
3.05 Tax Matters................................................7
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3.06 Material Contracts and Commitments.........................7
3.07 Licenses, Permits and Authorizations.......................8
3.08 Title to Purchased Assets..................................8
3.09 Proprietary Rights.........................................8
3.10 Litigation and Other Claims................................8
3.11 No Material Adverse Change.................................9
3.12 Compliance with Laws.......................................9
3.13 Insurance..................................................9
3.14 Condition of Purchased Assets..............................9
3.15 Full Disclosure............................................9
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS
OF BUYER........................................................10
4.01 Organization and Good Standing............................10
4.02 Due Authorization.........................................10
4.03 Satisfaction of Assumed Liabilities.......................11
4.04 Performance of Assumed Contracts..........................11
ARTICLE V CLOSING CONDITIONS ..............................................11
5.01 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby..........................11
(a) No Order, Decree or Injunction......................11
5.02 Conditions to the Obligations of Seller, LWG and Parent
to Effect the Transactions Contemplated Hereby............11
(a) Covenants Performed; Representations and
Warranties True.....................................11
(b) Opinion Letter......................................12
5.03 Conditions to the Obligations of Buyer to Effect the
Transactions Contemplated Hereby..........................13
(a) Covenants Performed; Representations and
Warranties True.....................................13
(b) Opinion Letter......................................13
(c) Consents Obtained...................................15
(d) CPSC Settlement Concluded...........................15
(e) No Material Adverse Change..........................15
ARTICLE VI THE CLOSING.....................................................15
6.01 Time and Place of Closing.................................15
6.02 Instruments of Transfer, Etc..............................15
(a) Seller..............................................16
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(b) Buyer...............................................16
(c) Parent..............................................16
(d) LWG.................................................16
ARTICLE VII POST-CLOSING COVENANTS.........................................16
7.01 Expenses..................................................16
7.02 Further Assurances........................................17
7.03 Commissions and Fees......................................17
7.04 Sales, Transfer and Use Taxes.............................17
7.05 Nondisclosure.............................................17
7.06 Indemnification...........................................18
(a) By Seller and Parent................................18
(b) By Buyer............................................18
(c) Environmental Claim Definition......................18
7.07 Defense of Claims.........................................19
7.08 Access to Records.........................................20
7.09 Payment of Intercompany Payable...........................21
7.10 Surrender of Binky Name...................................21
7.11 Musical Pacifiers.........................................21
7.12 Molds and Designs.........................................21
7.13 Removal of Purchased Assets and Transition Services.......21
ARTICLE VIII MISCELLANEOUS.................................................22
8.01 Binding Effect............................................22
8.02 Assignment................................................22
8.03 Counterparts..............................................22
8.04 Governing Law.............................................22
8.05 Arbitration...............................................22
8.06 Survival..................................................23
8.07 Notices...................................................23
(a) To Buyer............................................23
(b) To Seller or Parent.................................23
8.08 Amendment and Modification................................24
8.09 Waiver of Compliance......................................24
8.10 Interpretation............................................24
8.11 Entire Agreement..........................................24
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Page/Section
Schedule Description Reference
- -------- ----------- ------------
1.01(a) Fixed Assets 1 [ss.1.01(a)]
1.01(b) Transferred Styles 1 [ss.1.01(b)]
1.01(c) Contracts 1 [ss.1.01(c)]
1.01(f) Proprietary Rights 2 [ss.1.01(f)]
1.06 Closing Balance Sheet 3 [ss.1.06]
1.07 Purchase Price Allocation 4 [ss.1.07]
3.03 GAAP Exceptions 6 [ss.3.03]
3.04 Certain Changes and Events 7 [ss.3.04]
3.07 Licenses, Permits and 8 [ss.3.07]
Authorizations
3.08 Title Exceptions 8 [ss.3.08]
3.09 Proprietary Rights 8 [ss.3.09]
3.10 Litigation 8 [ss.3.10]
3.11 Material Adverse Changes 9 [ss.3.11]
3.13 Insurance 9 [ss.3.13]
5.03(d) CPSC Settlement 15 [ss.5.03(d)]
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Page/Section
Exhibit Description Reference
- ------- ----------- ------------
A Form of Noncompetition 4 [ss. 2.01]
Agreement
B Form of Trademark Assignment 5 [ss.2.02]
C Form of Technology License 5 [ss.2.03]
D Form of Bill of Sale 5 [ss.2.04]
E Form of Manufacturing Agreement 5 [ss.2.05]
F Form of Promissory Note 5 [ss.2.06]
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of January 29, 1998 between PLAYTEX
PRODUCTS, INC., a Delaware corporation ("Buyer"), BINKY-GRIPTIGHT, INC., a New
Jersey corporation ("Seller"), LEWIS WOOLF GRIPTIGHT LIMITED, an English company
("LWG"), and L.W.G. HOLDINGS LIMITED, an English company ("Parent").
SUMMARY OF TRANSACTION
Parent owns all of the outstanding capital stock of Seller and of
LWG. Seller wishes to sell, and Buyer wishes to purchase, substantially all of
the assets of Seller related to or used in connection with Seller's business of
selling pacifiers under the "Binky" brand name (herein the "Business"). To
effect such transaction and in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND TERMS OF PAYMENT
1.01 Assets Being Sold (the "Purchased Assets"). At the Closing (as
defined in Section 6.01 hereof), Seller agrees to sell and transfer to Buyer,
and Buyer agrees to purchase, all of Seller's assets related to or used in
connection with the Business as they shall exist on the Closing Date (as defined
in Section 6.01 hereof), except for the Retained Assets (as defined in Section
1.02 hereof), including without limitation the following assets:
(a) Furniture, Machinery and Equipment. All of the furniture,
machinery, equipment, and other fixed assets of Seller (the "Furniture and
Equipment"), substantially all of which are listed in Schedule 1.01(a)
hereto;
(b) Inventories. All inventories of Seller related to the Business,
consisting of pacifiers of the styles listed in Schedule 1.01(b) hereto
(the "Transferred Styles"), except as otherwise provided in Section 1.02
hereof;
(c) Contracts and Commitments. Subject to the provisions of Section
1.09 hereof, all of the right, title and interest of Seller in, to and
under all pending and executory contracts, agreements, commitments and
understandings relating to the Business which are specifically listed in
Schedule 1.01(c) hereto including, without limitation, those with respect
to: (w) the licensing of Proprietary Rights (as hereinafter defined), (x)
the sale of products of Seller, including all unfilled orders received
from Seller's customers, a complete list of which is included in Schedule
1.01(c) hereto, (y) the purchase of materials, supplies or services by
Seller, and (z) the Material Contracts as defined in Section 3.06;
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(d) Accounts Receivable. All of Seller's accounts receivable
(including, without limitation, trade and sundry receivables) and notes
receivable relating to the Business, subject to any trade credits or
offsets owed to customers of Seller which are properly reflected in the
Closing Balance Sheet;
(e) Books and Records. All of Seller's books and records relating to
the Business, including all sales and credit records, advertising and
sales material, literature, customer lists, financial and accounting
records and other business books and records, except as otherwise provided
in Section 1.02 hereof; and
(f) Proprietary Rights. Seller's U.S. and foreign (if any)
trademarks (including, without limitation, worldwide rights to the "Binky"
trademark), service marks and goodwill appurtenant thereto, and
applications therefor, copyrights, trade names, brand names, technology
licenses and goodwill of Seller relating to the Business ("Proprietary
Rights"), a complete list of which is included in Schedule 1.01(f) hereto.
1.02 Retained Assets. Notwithstanding the foregoing, the Purchased
Assets shall not include: (i) Seller's interest in any leasehold premises and
any real property lease agreements of Seller; (ii) all rights, title and
interest in and to the name "Griptight"; (iii) the capital stock of Monital
Signal Corp. held by Seller; (iv) tax credits, tax refunds and tax receivables
of every kind to which Seller is or may become entitled; (v) Seller's corporate
minute books, stock books, stock transfer ledgers, tax returns, financial
statements, work papers related to preparation thereof, general ledgers, cash
receipts ledgers, disbursement/payable ledgers, sales ledgers, payroll journals,
payroll tax returns and all vendor invoices; (vi) all of Seller's inventories of
Christmas musical pacifiers, items number 2800, 2800CL, 2800DP and 2851 and all
components thereof (if any); (vii) any Furniture and Equipment which Buyer has
not removed from Seller's premises within 30 days after the Closing Date; (viii)
the cash and cash equivalent items of Seller as of the Closing Date, including,
without limitation, time deposits, certificates of deposit, marketable
securities and the proceeds of accounts receivable paid on or prior to the
Closing Date; (ix) all of Seller's right, title and interest in and to the
Agreement (the "Joy Baby Agreement") dated February 15, 1989 between Seller and
Joy Baby, Inc.; and (x) all assets of Seller which do not relate to and are not
used in connection with the Business.
1.03 Assumed Liabilities. Buyer agrees to assume, perform and
discharge only those accounts payable of Seller's business incurred as a result
of Buyer's operations conducted prior to the Closing Date which are specifically
reflected in the Closing Balance Sheet (as defined in Section 1.06 below), to
the extent and only to the extent that adequate provisions or reserves therefor
are included in the Closing Balance Sheet. Such Closing Balance Sheet shall
include only the following Assumed Liabilities: (i) Seller's accounts payable on
the Closing Date; (ii) Seller's payable to its Malaysian supplier as of the
Closing Date (which payable has been assigned to LWG); and (iii) Seller's
intercompany payable to LWG as of the Closing Date reduced by the amount payable
by
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Parent to Seller on the Closing Date (collectively, to the extent reflected in
the Closing Balance Sheet, the "Assumed Liabilities").
1.04 Retained Liabilities. The Assumed Liabilities shall not include
any of Seller's accounts payable or other indebtedness or liabilities incurred,
related to, or arising as a result of operations conducted, actions taken or
events occurring on or prior to the Closing Date which are not reflected in full
on the Closing Balance Sheet, including specifically, but without limitation,
(i) all environmental liabilities and claims, (ii) all litigations, arbitrations
and other third party claims and proceedings (including, without limitation, any
liabilities, fines or other obligations to the Consumer Products Safety
Commission (the "CPSC") with respect to acts occurring or products sold prior to
the Closing Date), (iii) all employee liabilities, workers compensation
liabilities and employee benefit liabilities and obligations (including
specifically, but without limitation, post-retirement medical benefits,
severance pay, bonuses, incentive pay and deferred compensation), (iv) all tax
liabilities, including without limitation, all foreign, federal, state or local
income, franchise, gross receipts, property, sales, use or value added taxes or
any interest, additions to tax or penalties thereon, (v) all product liability
claims relating to products manufactured or sold on or prior to the Closing Date
(regardless of when the relevant injury or damage occurs or when the claim is
asserted); (vi) all liabilities and obligations under or related to the Joy Baby
Agreement; and (vii) all other liabilities and obligations (known, unknown,
contingent or other) which are not specifically reflected on the Closing Balance
Sheet (the "Retained Liabilities"). Buyer shall not assume any liabilities or
obligations of Seller except those specifically assumed by Buyer pursuant to the
provisions of Section 1.03, and Seller and Parent agree to indemnify and hold
harmless Buyer with respect to the Retained Liabilities in the manner provided
in Section 7.06 hereof.
1.05 Purchase Price. Buyer, in consideration for the Purchased
Assets being sold pursuant to this Agreement, agrees to pay to Seller $405,000
(the "Purchase Price"), and agrees to assume the Assumed Liabilities. The
Purchase Price will be delivered to Seller in cash at Closing by wire transfer
of immediately available funds to the account of Seller at such bank as Seller
specifies in writing at least two business days prior to the Closing Date.
1.06 Closing Balance Sheet. Seller has prepared and delivered to
Buyer (and Buyer has reviewed) the unaudited balance sheet of Seller as of the
close of business on the Closing Date reflecting only the Purchased Assets and
the Assumed Liabilities (the "Closing Balance Sheet") attached hereto as
Schedule 1.06, which includes appropriate provisions, accruals or reserves for
bad debts, returns and credits and for obsolete inventory, prepared by Seller's
accountants in accordance with United States generally accepted accounting
principles (hereinafter "GAAP") applied on a basis consistent with the prior
practices of Seller in preparing the Financial Statements (as hereinafter
defined) except for such exceptions to GAAP which are specified in Schedule 1.06
hereto. In connection with preparing the Closing Balance Sheet, Seller conducted
a complete physical inventory of the Purchased Assets as of the Closing Date,
and Buyer and its accountants attended and participated in the taking of such
physical inventory.
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1.07 Purchase Price Allocation. Seller and Buyer agree to allocate
the purchase price for the Purchased Assets in the manner reflected in Schedule
1.07 hereto, which allocation the parties shall adhere to for the purposes of
all federal, state and local tax returns filed by them subsequent to the
Closing, including the determination by Seller of taxable gain or loss on the
sale of the Purchased Assets hereunder and the determination by Buyer of its tax
basis with respect to the Purchased Assets.
1.08 Absolute Sale. Seller agrees that the sale, conveyance,
transfer and delivery of the Purchased Assets to Buyer shall be free and clear
of all title defects, liabilities, obligations, liens, encumbrances, charges and
claims of any kind, except any liabilities and obligations expressly assumed by
Buyer pursuant to Section 1.03 hereof and any matters described in Schedule 3.08
hereto.
1.09 Other Contracts. This Agreement shall not constitute an
agreement to assign, sublease or sublicense, as the case may be, any contracts,
leases, licenses, agreements or arrangements (for purposes of this Section 1.09
collectively called "Contracts") if such attempted assignment, sublease or
sublicense, without the consent of the other party or parties thereto, is not
permitted as a matter of law or in accordance with the terms of the Contracts or
would constitute a breach of the Contracts or would in any way impair the rights
of Seller or Buyer thereunder. Seller will use its best efforts to obtain, or
will assist Buyer to obtain, such consents as may be necessary or appropriate to
vest in Buyer all of Seller's right, title and interest in all such Contracts.
If any such consent is not obtained or if any assignment, attempted assignment,
sublease or sublicense is not so permitted or would be ineffective or would
impair Buyer's rights thereunder, Seller will cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the benefits under any such
Contracts.
1.10 Bulk Sale Tax Notice. Seller and Buyer agree to comply with any
instructions received from the New Jersey Division of Taxation (the "NJDT")
which result from Buyer's notice filing under N.J.S.A. 54:32B-22(c). Seller and
Buyer agree that any tax escrow required by the NJDT shall, to the extent
permissible, be satisfied by the existence of the Promissory Note (as
hereinafter defined) with appropriate set-off rights.
ARTICLE II
RELATED AGREEMENTS
Simultaneously with the Closing hereunder the following agreements
(the "Related Agreements") will be executed and delivered by the parties:
2.01 Noncompetition Agreement. An agreement (the "Noncompetition
Agreement") among Buyer, Seller, LWG and Parent, in the form of Exhibit A
hereto, pursuant to which Seller, LWG and Parent will agree to certain
non-competition covenants.
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2.02 Assignment of Trademark Rights. An assignment agreement (the
"Trademark Assignment") in the form of Exhibit B hereto, pursuant to which
Seller will assign to Buyer all of Seller's right, title and interest in, to and
under all trademarks and applications therefor included in the Purchased Assets.
2.03 Technology License Agreement. An agreement between Buyer,
Playtex Manufacturing, Inc. ("PMI") and LWG (the "Technology License") in the
form of Exhibit C hereto, providing for the license to Buyer of certain patents,
designs and intellectual property rights of LWG.
2.04 Bill of Sale. A bill of sale (the "Bill of Sale") in the form
of Exhibit D hereto transferring title to the Purchased Assets to Buyer.
2.05 Manufacturing Agreement. An agreement between PMI and LWG, in
the form of Exhibit E hereto, pursuant to which LWG will manufacture and supply
certain products to Buyer (the "Manufacturing Agreement").
2.06 Promissory Note. An unsecured promissory note (the "Promissory
Note") of Buyer, in the form of Exhibit F hereto, payable to LWG representing a
portion of the Intercompany Payable (as hereinafter defined) in the principal
amount of $500,000 payable on July 26, 1998 and bearing interest at the rate of
7.25% per annum.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER, PARENT AND LWG
Seller, Parent and LWG jointly and severally represent and warrant
to, and covenant with, Buyer that as of the Closing Date:
3.01 Organization and Good Standing; No Investments. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey, and has the corporate power and authority to own,
lease and operate its properties and assets (including the Purchased Assets) and
to conduct its business as it is now being conducted. Seller is duly qualified
to do business in all jurisdictions in which Seller owns, leases or operates
property related to the Business or otherwise conducts the Business. Seller has
no equity or similar investments, direct or indirect, in any corporation,
partnership, limited liability company, association, joint venture or other
entity which are necessary for Buyer to conduct the Business.
3.02 Authorization; Compliance with Other Instruments and Law.
Seller, LWG and Parent each has full corporate power and authority to enter into
this Agreement, the Related Agreements and any other agreements and documents to
be executed and delivered by them at Closing as contemplated hereby
(collectively, the "Closing Documents"), to consummate the
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transactions contemplated hereby and thereby and to perform their obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement, the Related Agreements and the Closing Documents and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of each of Seller, LWG and Parent.
This Agreement has been duly executed and delivered by Seller, LWG and Parent,
and is a valid and binding obligation of each of Seller, LWG and Parent,
enforceable in accordance with its terms and the Related Agreements and the
Closing Documents will, when executed and delivered by Seller, LWG and Parent at
Closing, constitute valid and binding obligations of each of Seller, LWG and
Parent, enforceable in accordance with their terms. The execution, delivery and
performance of this Agreement, the Related Agreements and the Closing Documents
will not (i) conflict with or result in a breach or violation of any provision
of the Certificate of Incorporation or By-Laws of Seller or the Memorandum and
Articles of Association of LWG and Parent or of any order, writ, injunction,
judgment, decree, law, statute, rule or regulation to which Seller, LWG or
Parent is a party or by which Seller, LWG or Parent or the Purchased Assets may
be bound or affected; or (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) or result in the creation of any
lien, encumbrance, security agreement, charge, pledge, equity or other claim or
right of any person in or to the Purchased Assets under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Seller, LWG or Parent is a party or by which
Seller, LWG or Parent or the Purchased Assets may be bound. All necessary
authorizations of the transactions contemplated by this Agreement required to be
obtained by Seller, LWG or Parent from any Federal, state, local or foreign
government or agency shall have been obtained prior to the Closing, and any
filings, notifications or disclosures required by law or regulation of any such
government or agency shall have been made in such form as is acceptable as
filed. Buyer shall cooperate with Seller, LWG and Parent, with respect to the
aforesaid filings, notifications or disclosures to the extent necessary to
obtain said authorizations. Seller, LWG and Parent will each deliver to Buyer at
the Closing true and complete copies of all resolutions of its board of
directors by which the execution, delivery and performance of this Agreement,
the Related Agreements and the Closing Documents and the consummation of the
transactions contemplated hereby and thereby were authorized, certified by the
Secretary or Assistant Secretary of each of Seller, LWG and Parent as of the
Closing Date.
3.03 Financial Statements. Seller has previously furnished to Buyer
true and correct copies of (i) the audited balance sheet of Seller as at March
31, 1997 and the unaudited balance sheets of Seller as of September 30, 1997 and
December 31, 1997; and (ii) the related audited statement of income of Seller
for the fiscal year ended March 31, 1997, and the unaudited income statements
for the seven month period ended September 30, 1997 and for the nine month
period ended December 31, 1997 (collectively, the "Financial Statements"). The
balance sheets included in the Financial Statements (including the related notes
thereto) present fairly the financial position of Seller as of their respective
dates, and the related statements of income included in the Financial Statements
present fairly the results of operations of Seller for the periods then ended,
all in conformity with GAAP applied on a consistent basis except for such
exceptions from GAAP as
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are specified in Schedule 3.03 hereof. The Financial Statements dated as at and
for the nine month period ended December 31, 1997 are hereinafter referred to as
the "Recent Financial Statements".
The Closing Balance Sheet presents fairly the financial condition of
Seller reflected therein as at the Closing Date in accordance with GAAP, except
as specified on Schedule 1.06.
3.04 Operation of the Business in the Ordinary Course. Except as
otherwise contemplated by this Agreement, since the close of business on March
31, 1997, the Business has been operated in the ordinary course and
substantially in the manner such Business was heretofore conducted (including,
without limitation, with respect to inventory levels, sales levels, promotional
programs, distribution, spending and pricing), and there has not been, except as
disclosed on Schedule 3.04 hereto:
(a) any purchase or other acquisition of property (except for
purchases of inventory in the ordinary course), any sale, lease or other
disposition of property, or any single expenditure in excess of $50,000;
(b) any material incurrence of liability not reflected in the
Financial Statements;
(c) any public controversy Seller is aware of which is critical of
Seller of any of its products or its manufacture of products other than
isolated customer and consumer complaints in the ordinary course of
business; or
(d) any change by Seller in accounting methods, principles or
practices.
3.05 Tax Matters. There is no tax obligation of Seller which
constitutes, or may in the future constitute, a lien on the Purchased Assets,
and, if any such lien exists or arises, it will be promptly discharged by
Seller.
3.06 Material Contracts and Commitments. Schedule 1.01(c) hereto
constitutes a full and complete list, as of the date hereof, of all: (a)
agreements or commitments relating to contract manufacturing, product or
inventory purchase arrangements for the Business; (b) license agreements
relating to Proprietary Rights, software or other intangible assets used by the
Business; and (c) contracts and commitments of Seller relating to the Business
which involve aggregate obligations of Seller in excess of $10,000 per contract
or which have a remaining term, as of the date hereof, of over six months in
length of obligation on the part of Seller ("Material Contracts"). Except as
indicated on Schedule 1.01(c), Seller is not in breach or violation of, or in
default under, any of the Material Contracts; the execution of this Agreement
and the consummation of the trans actions contemplated hereby will not
constitute a default or breach under the Material Contracts; and, except as
specifically indicated in Schedule 1.01(c), the execution of this Agreement and
the consummation of the transactions contemplated hereby will not give rise to
any consent requirement under any of the Material Contracts for which consent
has not already been obtained ("Required
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Consents"). All of the contracts listed on Schedule 1.01(c) are in full force
and effect and have not been modified or amended in any material respect, except
as set forth on Schedule 1.01(c).
3.07 Licenses, Permits and Authorizations. Seller has all approvals,
authorizations, consents, licenses, franchises, orders, certificates and other
permits of, and has made all filings with, any governmental authority, whether
foreign, Federal, state or local, which are required for the ownership of the
Purchased Assets or the conduct of Seller's business as presently conducted. A
complete list of all such approvals, authorizations, consents, licenses,
franchises, orders, certificates, permits and filings is included in Schedule
3.07 hereto.
3.08 Title to Purchased Assets. Seller has good and marketable legal
title to the Purchased Assets and shall at the Closing deliver to Buyer good and
marketable legal title to the Purchased Assets free and clear of all title
defects, liabilities, obligations, liens, mortgages, security interests,
encumbrances, claims or similar adverse interests of any kind or character
except the title exceptions listed in Schedule 3.08 hereto. All leases pursuant
to which Seller leases any of the Purchased Assets are valid and binding in
accordance with their respective terms.
3.09 Proprietary Rights. Schedule 3.09 hereto sets forth a complete
list of all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade secrets, trade names,
copyrights, licenses, inventions, drawings, designs, formulae, processes,
proprietary know-how or commercial or technical information, or other rights
with respect thereto (collectively "Proprietary Rights") which are held, owned,
licensed or used by Seller in connection with the Business; and no other
Proprietary Rights (other than those which will be licensed to Buyer pursuant to
the Technology License) are used or necessary in connection with the Company's
business. Seller is not, by virtue of the conduct of its business, infringing
upon or making an unauthorized use of any patent, trademark, service mark, trade
name, copyright, trade secret, proprietary right or other intellectual property
right of any third party.
3.10 Litigation and Other Claims. Except as described in Schedule
3.10, there are no actions, suits, arbitration proceedings, claims,
investigations or proceedings (civil, criminal or administrative) related to the
Business or relating to any of the Purchased Assets pending or, to the knowledge
of Seller, threatened before any foreign, Federal, state, municipal or other
court, department, commission, arbitration panel, board, bureau, agency, body or
instrumentality against Seller or affecting any of the Purchased Assets, at law
or in equity. Schedule 3.10 also contains a complete list of all such claims,
actions, proceedings and investigations against Seller relating to the Business
during the five years prior to the date hereof and a description of the
disposition thereof. The settlement with the CPSC referred to in Schedule 3.10
constitutes a full and final resolution of all pending CPSC investigations and
claims concerning Seller's products. Seller is not a party to or subject to the
provisions of any order, writ, injunction, decree or judgment of any court or
foreign, Federal, state, municipal or other governmental or administrative body,
department, commission, board, bureau, any securities exchange or other agency
or instrumentality in connection with the ongoing operations of Seller except as
set forth in Schedule 3.10.
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3.11 No Material Adverse Change. Except as described in Schedule
3.11 hereto, since the close of business on December 31, 1997, there has been no
material adverse change in the financial condition, results of operations,
business or prospects of Seller.
3.12 Compliance with Laws. Neither the Purchased Assets nor the
operations of the Business, as conducted on or prior to the date hereof, violate
any foreign, Federal, state or local law, ordinance, rule or regulation or any
orders, judgments, decrees or rules of any foreign, Federal, state or local
court or governmental authority or regulatory agency or authority.
3.13 Insurance. All policies of insurance of any kind maintained,
owned or held by Seller are set forth in Schedule 3.13 hereto and such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy
which has not been replaced on substantially similar terms prior to the date of
such cancellation or termination. The insurance policies to which Seller is a
party are sufficient for compliance with all requirements of applicable laws and
all agreements to which Seller is a party or by which Seller is bound. Except as
disclosed in Schedule 3.13, in the three years preceding the date of this
Agreement, Seller has not been refused any insurance with respect to any of its
assets or operations or had its coverage limited by any insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance.
3.14 Condition of Purchased Assets. Except as reflected in any
reserves for obsolete inventory included in the Closing Balance Sheet, all of
Seller's inventories included in the Closing Balance Sheet are in good and
marketable condition and are first-quality and usable in the present normal
business operations of Seller's business. No products now being made by or for
Seller are adulterated, or misbranded, contaminated, damaged or defective in any
respect, and all such products are in full compliance with all federal, state
and local regulations as to manufacturing, contents, efficacy, labeling and
distribution, and all claims and descriptions for such products, in the manner
now used on such products or in advertising therefor, are lawful and not
materially misleading.
All accounts and notes receivable which are included in the Closing
Balance Sheet are valid and existing obligations payable to Seller in accordance
with their terms and fully collectible in the aggregate recorded amounts
thereof, less the allowance for bad debts, if any, set forth in the Closing
Balance Sheet. Buyer agrees that, if it shall collect from Seller any
indemnification claim hereunder with respect to unpaid accounts or notes
receivable, Buyer shall at the time it satisfies such indemnification claim
(whether by set-off against the Promissory Note or otherwise) assign to Seller
ownership of the accounts or note receivable (or portion thereof) giving rise to
such indemnification claim.
3.15 Full Disclosure. All information furnished to Buyer in
accordance herewith is, and as of the Closing Date shall be, correct and
complete in all respects. No representation or
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warranty of Seller and no information, schedule, certificate or document
furnished or to be furnished by or on behalf of Seller to Buyer, its affiliates
or its agents pursuant to or in connection with this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statement contained herein or
therein not misleading.
ARTICLE IV
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BUYER
Buyer hereby represents and warrants to, and covenants with, Seller,
Parent and LWG that:
4.01 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as proposed to be conducted.
4.02 Due Authorization. Buyer has full corporate power and authority
to enter into this Agreement, the Related Agreements and any other agreements
and documents to be executed and delivered by it at Closing as contemplated
hereby (collectively, the "Closing Documents"), to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Closing Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer, and
is a valid and binding obligation of Buyer enforceable in accordance with its
terms and the Related Agreements will, when executed and delivered by Buyer at
Closing, constitute valid and binding obligations of Buyer enforceable in
accordance with their terms. The execution, delivery and performance of this
Agreement and the Closing Documents will not (i) conflict with or result in a
breach or violation of any provision of the Certificate of Incorporation or
By-Laws of Buyer or of any order, writ, injunction, judgment, decree, law,
statute, rule or regulation to which Buyer is a party or by which Buyer may be
bound or affected; or (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) or result in the creation of any
lien, encumbrance, security agreement, charge, pledge, equity or other claim or
right of any person under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which Buyer is a party or by which Buyer may be bound. All necessary
authorizations of the transactions contemplated by this Agreement required to be
obtained by Buyer from any Federal, state, local or foreign government or agency
shall have been obtained prior to the Closing, and any filings, notifications or
disclosures required by law or regulation of any such government or agency shall
have been made in such form as is acceptable as filed. Seller shall cooperate
with Buyer with respect
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to the aforesaid filings, notifications or disclosures to the extent necessary
to obtain said authorizations. Buyer will deliver to Seller at the Closing true
and complete copies of all resolutions of its board of directors by which the
execution, delivery and performance of this Agreement and the Closing Documents
and the consummation of the transactions contemplated hereby and thereby were
authorized, certified by the Secretary or Assistant Secretary of Buyer as of the
Closing Date.
4.03 Satisfaction of Assumed Liabilities. Buyer shall pay and
satisfy in full and in a timely manner all of the Assumed Liabilities in full
compliance with, and without permitting any breach of, all contracts pertaining
to the Assumed Liabilities, so as to protect Seller from any assertions of
breach of contract or claims based upon the Assumed Liabilities.
4.04 Performance of Assumed Contracts. Buyer shall fully and
properly perform, and shall not permit any breach to occur on the part of the
Buyer with respect, to any of the contracts included in the Purchased Assets, so
as to protect Seller from any assertions from breach of contract brought by any
third party.
ARTICLE V
CLOSING CONDITIONS
5.01 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the fulfillment
at or prior to the Closing Date of the following condition:
(a) No Order, Decree or Injunction. Neither Seller nor Buyer shall
be subject to any order, decree or injunction of a court of competent
jurisdiction or governmental agency and no statute, rule or regulation
shall be enacted or issued which (i) prevents or delays any of the
transactions contemplated by this Agreement, or (ii) would impose any
limitation on the ability of Buyer effectively to exercise full rights of
ownership of the Purchased Assets.
5.02 Conditions to the Obligations of Seller, LWG and Parent to
Effect the Transactions Contemplated Hereby. The obligations of Seller, LWG and
Parent to effect the transactions contemplated hereby shall be further subject
to the fulfillment at or prior to the Closing Date of the following conditions,
any one or more of which may be waived by Seller, LWG and Parent:
(a) Covenants Performed; Representations and Warranties True. Buyer
shall have performed and complied in all material respects with the covenants
and agreements contained in this Agreement required to be performed and complied
with by it at or prior to the Closing Date, the representations and warranties
of Buyer set forth in this Agreement shall be true and correct as
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of the Closing Date, and Seller, LWG and Parent shall have received a
certificate to that effect signed by an authorized officer of Buyer;
(b) Opinion Letter. At the Closing, Seller, LWG and the Parent shall
have received an opinion from Paul Yestrumskas, General Counsel of Buyer,
dated the Closing Date and satisfactory in form and substance to Seller
and its counsel, to the effect that:
(i) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as proposed to
be conducted;
(ii) Buyer has full corporate power and authority to enter
into this Agreement, the Related Agreements and any other agreements
and documents to be executed and delivered by it at Closing as
contemplated hereby (collectively, the "Closing Documents"), to
consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement, the Related Agreements
and the Closing Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Buyer. All necessary
authorizations of the transactions contemplated by this Agreement
required to be obtained by Buyer from any Federal, state, local or
foreign government or agency shall have been obtained prior to the
Closing, and any filings, notifications or disclosures required by
law or regulation of any such government or agency shall have been
made in such form as is acceptable as filed.
(iii) This Agreement and the Related Agreements have been duly
and validly executed and delivered by Buyer and, assuming this
Agreement and the Related Agreements are the valid and binding
obligations of Seller, Parent, L.W.G. and/or the other parties
thereto, constitute the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally, and by general principles of equity
(regardless of whether such enforcement is considered in a
proceeding in equity or at law).
As to any matters contained in such opinion which involve the laws
of any jurisdiction other than the Federal laws of the United States of
America, the laws of the State of New York and the General Corporation Law
of the State of Delaware, Buyer's counsel may rely upon opinions of
counsel admitted to practice in such other jurisdictions or may, for
purposes of opinions involving New Jersey law, assume that the laws of the
State of New Jersey are the same as the laws of the State of New York. Any
opinions relied upon by
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Buyer's counsel as aforesaid shall be in form and substance satisfactory
to Seller and its counsel, and the counsel rendering such opinions shall
be satisfactory to Seller and its counsel. Any such opinions shall be
delivered to Seller together with the opinion of Buyer's counsel. The
opinion of Buyer's counsel may expressly rely as to matters of fact upon
certificates furnished by appropriate officers and directors of Buyer and
public officials.
5.03 Conditions to the Obligations of Buyer to Effect the
Transactions Contemplated Hereby. The obligations of Buyer to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by Buyer:
(a) Covenants Performed; Representations and Warranties True.
Seller, LWG and Parent shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement required
to be performed and complied with by them at or prior to the Closing Date, and
the representations and warranties of Seller, LWG and Parent set forth in this
Agreement shall be true and correct as of the Closing Date, and Buyer shall have
received a certificate to that effect signed by an authorized officer of Seller;
(b) Opinion Letter. At the Closing, Buyer shall have received an
opinion from Schiffman, Berger, Abraham, Kaufman & Ritter, P.C., counsel
for Seller, and an opinion from Martin Amey & Co., counsel to LWG and
Parent (each, respectively, as to their specific clients), dated the
Closing Date and reasonably satisfactory in form and substance to Buyer
and its counsel, to the effect that:
(i) Each of Seller, LWG and Parent is a corporation duly
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation, and has the corporate power and
authority to own, lease and operate its properties and assets
(including, in the case of Seller, the Purchased Assets) and to
conduct its business as it is now being conducted;
(ii) Each of Seller, LWG and Parent has full corporate power
and authority to enter into this Agreement, the Related Agreements
and any other agreements and documents to be executed and delivered
by them at Closing as contemplated hereby (collectively, the
"Closing Documents"), to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this
Agreement, the Related Agreements and the Closing Documents and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the
part of each of Seller, LWG and Parent. All necessary authorizations
of the transactions contemplated by this Agreement or the Related
Agreements required to be obtained by Seller, Parent or LWG from any
Federal, state, local or foreign government or agency shall have
been
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obtained prior to the Closing, and any filings, notifications or
disclosures required by law or regulation of any such government or
agency shall have been made in such form as is acceptable as filed;
(iii) This Agreement and the Related Agreements have been duly
and validly executed and delivered by each of Seller, LWG and Parent
(to the extent that such entities are parties to such agreements),
and, assuming this Agreement and the Related Agreements are the
valid and binding obligations of Buyer, constitute the valid and
binding obligations of each of Seller, LWG and Parent, enforceable
against Seller, LWG and Parent in accordance with their terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally, and by general principles of equity
(regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(iv) Except for those approvals and consents which have
already been obtained, neither execution and delivery by Seller, LWG
and Parent of this Agreement and the Related Agreements, the sale by
Seller of the Purchased Assets pursuant to this Agreement, nor the
consummation of the other transactions contemplated by this
Agreement and the Related Agreements, will (A) conflict with or
result in any breach of any provision of the Certificate of
Incorporation or ByLaws or the Memorandum and Articles of
Association of Seller, LWG and Parent, (B) require any consent,
approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority other than those which
have been made or obtained; (C) to the best of such counsel's
knowledge after reasonable inquiry of management, result in the
creation of any encumbrance, mortgage, security interest, lien,
equity or right of others upon any of the Purchased Assets under any
of the terms, conditions or provisions of any agreement, instrument
or obligation known to such counsel to which Seller or any of its
assets may be bound or affected; or (D) violate any order, writ,
injunction, judgment or decree known to such counsel, to which
Seller, LWG or Parent is a party, or by which any of their assets
are bound or any law, statute, rule or regulation applicable to
Seller, LWG or Parent or any of their assets.
As to any matters contained in such opinion which involve the laws
of any jurisdiction other than the federal laws of the United States of
America and the laws of the State of New Jersey as to counsel for Seller
or the laws of England as to counsel for LWG and Parent, the respective
counsel may rely upon opinions of counsel admitted in such other
jurisdictions. Any opinions relied upon by Seller's counsel as aforesaid
shall be in form and substance satisfactory to Buyer and its counsel, and
the counsel rendering such opinions shall be satisfactory to Buyer and its
counsel. Any such opinions shall be delivered to Buyer together with the
opinion of Seller's counsel and counsel to LWG and Parent. The opinion
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of both such counsel may expressly rely as to matters of fact upon
certificates furnished by appropriate officers and directors of Seller and
public officials.
(c) Consents Obtained. Seller shall have received and delivered to
Buyer all Required Consents.
(d) CPSC Settlement Concluded. Seller shall have reached a final
settlement with the CPSC staff, which is awaiting approval by the Commission (a
true and complete copy of which is attached as Schedule 5.03(d) hereto) with
regard to the pending CPSC investigation and claims concerning Seller's
products, Seller shall have paid in full any liability or fine resulting from
such settlement which is, by the terms of such settlement, due to be paid on or
prior to the Closing Date (and shall have provided Buyer with evidence
reasonably satisfactory to Buyer of such settlement and payments).
(e) No Material Adverse Change. There shall not have been, since the
date of the Recent Financial Statements, any material adverse change in the
business, results of operations, financial condition or prospects of Seller
except as set forth in Schedule 3.11 hereto.
ARTICLE VI
THE CLOSING
6.01 Time and Place of Closing. Upon the terms and conditions of
this Agreement, the Closing of the transactions contemplated hereby (the
"Closing") shall take place, effective as of the close of business on the date
hereof, at the offices of Carter, Ledyard & Milburn, 114 West 47th Street, New
York, New York 10036, or at such other time and place as the parties hereto may
agree in writing. The effective time of the Closing is herein referred to as the
"Closing Date".
6.02 Instruments of Transfer, Etc. At the Closing, Seller will
deliver to Buyer such deeds, bills of sale, instruments of assignment and other
good and sufficient instruments of transfer, executed by Seller and in a form
reasonably satisfactory to Buyer, as Buyer may reasonably require to vest in
Buyer all right, title and interest of Seller in and to the Purchased Assets,
and Buyer shall pay to Seller in immediately available Federal Funds $405,000
representing the Purchase Price, plus $502,583 (representing the amount by which
the Intercompany Payable (as hereinafter defined) exceeds $500,000), and shall
also deliver to Seller the other documents and instruments required of it at the
Closing.
Without limiting the foregoing, the documents to be delivered by the
parties at the Closing shall include the following:
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(a) Seller. Seller shall execute and deliver (i) this Agreement,
(ii) the Noncompetition Agreement, (iii) the Trademark Assignment, (iv)
the Bill of Sale, (v) all necessary third party consents to the assignment
of Contracts as contemplated by Section 1.09 hereof, (vi) the Secretary's
Certificate contemplated by Section 3.02 hereof and the Officer's
Certificate contemplated by Section 5.03(a) hereof; (vii) the opinion
letters contemplated by Section 5.03(b) hereof; and (viii) such other
instruments and documents as may reasonably be required of it at the
Closing pursuant to the terms of this Agreement.
.
(b) Buyer. Buyer shall execute and deliver (i) this Agreement, (ii)
the Non competition Agreement, (iii) the Trademark Assignment, (iv) the
Technology License, (v) the Manufacturing Agreement, (vi) the Promissory
Note, (vii) the Secretary's Certificate con templated by Section 4.02
hereof and the Officer's Certificate contemplated by Section 5.02(a)
hereof; (viii) the opinion letter contemplated by Section 5.02(b) hereof;
and (ix) such other instruments and documents as may reasonably be
required of it at the Closing pursuant to the terms of this Agreement.
(c) Parent. Parent shall execute and deliver (i) this Agreement,
(ii) the Noncompetition Agreement, (iii) the Secretary's Certificate
contemplated by Section 3.02 hereof, and (iv) such other instruments and
documents as may reasonably be required of it at the Closing pursuant to
the terms of this Agreement.
(d) LWG. LWG shall execute and deliver (i) this Agreement, (ii) the
Noncompetition Agreement, (iii) the Technology License; (iv) the
Manufacturing Agreement, (v) Secretary's Certificate contemplated by
Section 3.02 hereto, and (vi) such other instruments and documents as may
reasonably be required of it at the Closing pursuant to the terms of this
Agreement.
Seller shall deliver to Buyer within thirty (30) days after the
Closing possession of the Purchased Assets being sold pursuant to this Agreement
(and access thereto prior to removal thereof as contemplated by Section 7.13
hereof) and the entire right, title and interest of Seller in and to such
Purchased Assets shall pass to Buyer at the Closing. All physical assets
comprising the Purchased Assets shall be removed from their current locations by
Buyer pursuant to the provisions of Section 7.13 hereof.
ARTICLE VII
POST-CLOSING COVENANTS
7.01 Expenses. Except as otherwise provided herein, Seller and Buyer
shall each bear their own costs and expenses incurred in connection with this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby. Buyer shall be responsible for fees, commissions, expenses and
reimbursements incurred by or required to be paid to its
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professional advisors and Seller shall be responsible for the fees, commissions,
expenses and reimbursements incurred by or required to be paid to its
professional advisors. Buyer and Seller will each pay one-half of any fees
charged by the Accountants referred to in Section 1.06 hereof.
7.02 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use their best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Purchased Assets and the other
transactions contemplated by this Agreement and the Related Agreements. From
time to time after the date hereof (including after the Closing Date if
requested), Seller and its affiliates will, at their own expense and without
further consideration, execute and deliver such documents to Buyer as Buyer may
reasonably request in order more effectively to vest in Buyer good title to the
Purchased Assets and to more effectively consummate the transactions
contemplated by this Agreement and the Related Agreements.
7.03 Commissions and Fees. Seller represents and warrants to Buyer
that no broker, finder, financial adviser or other person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by Seller. Buyer is obligated
to (and agrees that it shall) pay a finders fee in connection with the
transactions contemplated hereby. Seller and Buyer will pay to the other or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees incurred by reason of any action taken by such party.
7.04 Sales, Transfer and Use Taxes. All sales, transfer and use
taxes incurred in connection with this Agreement and the Related Agreements and
the transactions contemplated hereby and thereby (if any) will be borne by
Seller, and Seller will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such sales, transfer and use taxes, and,
if required by applicable law, Buyer will join in the execution of any such Tax
Returns or other documentation.
7.05 Nondisclosure. Seller, LWG and Parent agree not to use or
disclose at any time after consummation of the transactions contemplated hereby,
except with the prior written consent of an officer authorized to act in the
matter by the Board of Directors of Buyer, any trade secrets, proprietary
information, or other information that Buyer considers confidential (or which
Seller has previously treated as or claimed to be confidential) relating to
operations, marketing, bidding information, cost and pricing data, master files
or customer lists utilized by Seller in connection with the Business prior to
the Closing or by Buyer or any of its affiliates (the "Buyer Group"), or the
skills, abilities and compensation of the Buyer Group's employees, and all other
similar information material to the conduct of the Buyer Group's business, which
is not presently generally known to the public; provided, however, that this
provision shall not preclude Seller, LWG or Parent from (i) the use or
disclosure of such information which presently is known generally to the public
or which subsequently comes into the public domain, other than by way of
disclosure in
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violation of this Agreement or in any other unauthorized fashion, or (ii)
disclosure of such information required by law or court order, provided that
prior to such disclosure required by law or court order the undersigned will
give Buyer three business days' written notice (or, if disclosure is required to
be made in less than three business days, then such notice shall be given as
promptly as practicable after determination that disclosure may be required) of
the nature of the law or order requiring disclosure and the disclosure to be
made in accordance therewith.
7.06 Indemnification.
(a) By Seller and Parent. Seller and Parent jointly and severally
agree to save, defend and indemnify Buyer and its affiliates against and hold
them harmless from any and all claims, liabilities, losses, damages,
deficiencies, costs and expenses, of every kind, nature and description, fixed
or contingent (including, without limitation, interest, penalties and counsel's
fees and expenses) ("Losses"), asserted against, resulting to, imposed upon or
incurred by Buyer or any of Buyer's affiliates, officers, directors or agents,
directly or indirectly, arising out of (i) any breach of any representation,
warranty, covenant or agreement made by Seller or Parent under this Agreement or
the Related Agreements, or (ii) any Retained Liability, or (iii) any
Environmental Claim (as hereinafter defined).
(b) By Buyer. Buyer agrees to save, defend and indemnify Seller, LWG
and Parent against and hold them harmless from any and all Losses arising out of
(i) any breach of any representation, warranty, covenant or agreement made by
Buyer under this Agreement or the Related Agreements, or (ii) any Assumed
Liability.
(c) Environmental Claim Definition. For the purposes of this
Agreement, "Environmental Claim" shall mean any demand, claim, governmental
notice or threat of litigation or the actual institution of any action, suit or
proceeding at any time by a person or entity which asserts that an Environmental
Condition constitutes a violation of or otherwise may give rise to any liability
or obligation under, any statute, ordinance, regulation, or other governmental
requirement or the common law, including, any such statute, ordinance,
regulation, or other governmental requirement relating to the emission,
discharge, or release of any Hazardous Substance into the environment or the
generation, treatment, storage, transportation, or disposal of any Hazardous Sub
stance. "Environmental Condition" shall mean the presence on the Closing Date,
or the occurrence on or at any time prior to the Closing Date of any storage,
treatment, disposal or Release, or the presence on the Closing Date of any
condition or circumstances which thereafter causes or gives rise to any storage,
treatment, disposal or Release, whether discovered or undiscovered on the
Closing Date, in surface water, ground water, drinking water supply, land
surface, subsurface strata or ambient air or any other location, of any
pollutant, contaminant, industrial solid waste or Hazardous Substance, arising
out of or otherwise related to (i) the operations or other activities of Seller,
or of any predecessor in interest or line of business Seller, conducted or
undertaken prior to the Closing Date or (ii) any property, facility owned,
leased, managed or operated by Seller. "Hazardous Substance" shall mean any
substance defined in the manner set forth in Section 101(14) of the U.S.
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Comprehensive Environment Response, Compensation and Liability Act of 1980, as
amended, and shall include any additional substances designated under Section
102(a) thereof or any other substance which is or contains asbestos in any form,
urea formaldehyde foam insulation, methane, petroleum, gasoline, diesel fuel or
another petroleum hydrocarbon product, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenys in excess
of 50 parts per million, or any other chemical material or substance which is
regulated as toxic or hazardous or exposure to which is prohibited, limited, or
regulated by foreign, federal, state, county, regional, local or other
governmental authority or which, even if not so regulated, may or could pose a
hazard to the health or safety of the occupants of any property or facility or
the owners or occupants of any property or facility adjacent thereto.
7.07 Defense of Claims.
(a) Should any claim, action or proceeding by or involving a third
party arise after the Closing Date for which a party hereto (the "Indemnifying
Party") has an indemnification obligation under the terms of this Agreement, the
other party (the "Indemnified Party") shall notify the Indemnifying Party within
a reasonable time after such claim, action or proceeding arises and is known to
the Indemnified Party (provided that the failure to give timely notice shall not
affect the right to indemnification hereunder except to the extent that the
Indemnifying Party is actually damaged or prejudiced by such delay), and if the
Indemnifying Party shall admit in writing its indemnification obligation to the
Indemnified Party in respect thereof, the Indemnified Party shall give the
Indemnifying Party a reasonable opportunity:
(i) to take part in any examination of the books and records of
Indemnified Party;
(ii) to conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend the Indemnified Party or
prosecute any claim, action, counterclaim or other proceeding with respect
thereto;
(iii) to take all other required steps or proceedings to settle or
defend any such claim, action or proceeding; and
(iv) to employ counsel to contest any such claim, action or
proceeding in the name of the Indemnified Party or otherwise.
The expenses of all proceedings, contests or lawsuits with respect to such
claims or actions shall be borne by the Indemnifying Party. If the Indemnifying
Party wishes to assume the defense of such claim or action, it shall give
written notice to the Indemnified Party admitting its indemnification obligation
to the Indemnified Party in respect thereof and stating that it intends to
assume such defense within 30 days after notice from the Indemnified Party of
such claim or action (unless the claim or action reasonably requires a response
in less than 30 days after the notice is given to the Indemnifying Party, in
which event it shall notify the Indemnified Party at least five days prior to
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such reasonably required response date), and the Indemnifying Party shall
thereafter assume the defense of any such claim or liability, through counsel
reasonably satisfactory to the Indemnified Party, provided that the Indemnified
Party may participate in such defense at its own expense. The Indemnified Party
shall afford the Indemnifying Party's counsel designated by it and other
authorized representatives reasonable access during normal business hours to all
books, records, offices and other facilities and properties of the Indemnified
Party, and to the personnel of the Indemnified Party, and shall otherwise use
all reasonable efforts to cooperate with the Indemnifying Party, such counsel
and such other authorized representatives in connection with the exercise of the
rights of the Indemnifying Party pursuant to this Section 7.07.
(b) If the Indemnifying Party shall not assume the defense of, or if
after so assuming it shall fail to actively defend, any such claim or action:
(i) the Indemnified Party, after giving written notice to the Indemnifying
Party, may defend against any such claim or action in such manner as it may deem
appropriate, and (ii) the Indemnified Party may settle such claim or litigation
on such terms as it may deem appropriate (but not sooner than 30 days after
notifying the Indemnifying Party of such proposed settlement and the terms
thereof), and the Indemnifying Party promptly shall reimburse the Indemnified
Party for the amount of such settlement and for all expenses, legal and
otherwise, reasonably and necessarily incurred by the Indemnified Party in
connection with the defense against and settlement of such claim or action. If
no settlement of such claim or litigation is made, the Indemnifying Party shall
satisfy any judgment rendered with respect to such claim or in such action,
before the Indemnified Party is required to do so, and pay all expenses, legal
or otherwise, reasonably and necessarily incurred by the Indemnified Party in
the defense against such claim or litigation.
(c) If a judgment is rendered against an Indemnified Party in any
action covered by the indemnification hereunder, or any lien attaches to any of
the assets of an Indemnified Party, the Indemnifying Party, immediately upon
such entry or attachment, shall pay such judgment in full or discharge such lien
unless, at the Indemnifying Party's expense and direction, an appeal is taken
under which the execution of the judgment or satisfaction of the lien is stayed.
If and when a final judgment is rendered in any such action, the Indemnifying
Party shall forthwith pay such judgment or discharge such lien before the
Indemnified Party is compelled to do so.
7.08 Access to Records. For a period of six years after the Closing
Date, Buyer shall retain the books of account and other financial and accounting
records relating to Seller's conduct of the Business which are transferred to it
on and as of the Closing Date. At least 30 days prior to the end of such period,
or any subsequent retention period, Seller shall notify Buyer in writing whether
it desires the further retention of any such records for any longer period, and,
in the event it desires any of such records to be retained for any longer
period, such records, at the option of Buyer, shall either be retained by Buyer
or promptly be shipped to Seller at Seller's expense. Buyer shall permit Seller,
from time to time, to inspect and copy such books of account and other records
at reasonable times and after providing written notice to Buyer of its desire to
so inspect.
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7.09 Payment of Intercompany Payable. Buyer and LWG hereby agree
that the intercompany payable to LWG (as reduced by the amount payable by Parent
to Seller on the Closing Date) assumed by Buyer pursuant to Section 1.03(ii) and
(iii) hereof (the "Intercompany Payable") shall be repaid by Buyer to LWG as
follows: (a) $500,000 will be satisfied by payment of or set-off against the
Promissory Note, and (b) the remainder shall be paid by Buyer in cash at
Closing. LWG agrees that Buyer may set-off and retain, from any payment under
the Promissory Note, the amount of any claims of Buyer (including, without
limitation, indemnification claims under Section 7.06 hereof) against Parent,
Seller or LWG under this Agreement or the Related Agreements.
7.10 Surrender of Binky Name. As promptly as practicable after
Closing, Seller agrees to take all necessary actions to change its corporate
name to eliminate the word "Binky". Parent, LWG and Seller agree that they and
their affiliates will not at any time after the Closing use the name "Binky" or
any similar name for any commercial purpose or on any product of any kind or
classification.
7.11 Musical Pacifiers. If any of the Christmas musical pacifiers
(items number 2800, 2800CL, 2800DP and 2851) sold by Seller prior to the Closing
are returned for credit by the customers who purchased such pacifiers, the
amount of any such credit or credits Buyer properly allows to such customers
(the "Credit Amount") with respect to such returns shall constitute an immediate
reduction of the Purchase Price by the Credit Amount and Buyer shall be entitled
to reduce its payment under the Promissory Note by the Credit Amount. Buyer
shall return possession and title to any such returned musical pacifier
inventory to Seller, and Seller shall be entitled to sell such inventory (and
any musical pacifier inventory constituting Retained Assets pursuant to Section
1.02 hereof) wherever it chooses without regard to the Noncompetition Agreement
provided that Seller repackages such inventory to eliminate any use of the
"Binky" name in connection with such inventory or the sale thereof. Buyer agrees
to refer to Seller for resolution any dispute with WalMart as to past sales of
the Christmas musical pacifiers and to advise WalMart that Seller has retained
and is solely responsible for the Christmas musical pacifiers.
7.12 Molds and Designs. As promptly after the Closing as is
reasonably practicable, LWG will deliver to Buyer copies of the plans and
drawings reflecting the designs and specifications for the current versions of
the Transferred Styles and copies of the plans and drawings reflecting the
design and specifications of the molds and tooling used to manufacture the
Transferred Styles of pacifiers. If adequate plans and drawings of the type
contemplated hereby do not exist for any Transferred Style or related molds or
tooling, LWG agrees to cause its personnel to use their best efforts to create
and deliver the same to Buyer as soon as is reasonably practicable.
7.13 Removal of Purchased Assets and Transition Services. As
promptly as reasonably practicable after the Closing, Buyer shall cause the
Purchased Assets to be removed at Buyer's cost from Seller's premises and from
any warehouses in which Seller stores such Purchased Assets. Buyer shall be
responsible for and shall indemnify Seller with respect to any property damage
to Seller's premises or to such warehouses caused by Buyer's employees or agents
in
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connection with such removal and Buyer shall bear the risk of loss of such
Purchased Assets during such removal and in transit to Buyer's premises or
warehouses. During the period between the date hereof and February 27, 1998,
Seller will provide to Buyer the substantially full-time services of Seller's
seven employees (or such lesser number of such employees as Buyer shall from
time to time designate during such period) to assist Buyer with transition of
the Business and removal of the Purchased Assets. In consideration of such
services, Buyer agrees to reimburse Seller's direct payroll costs for salary and
benefits (consistent with the amounts paid to such employees prior to the date
hereof) for such employees during such period ending February 27, 1998.
ARTICLE VIII
MISCELLANEOUS
8.01 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
8.02 Assignment. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party, provided, however,
that Buyer may assign its rights hereunder, in whole or in part, to any
corporation or other entity controlled by, controlling, or under common control
with Buyer, and Buyer or its assignee may assign their rights hereunder, in
whole or in part, to any purchaser of substantially all of the assets or
business of Seller. Any attempted or purported assignment by either party other
than in accordance with this Section 8.02 shall be null and void.
Notwithstanding any assignment by any party, the assignor shall remain jointly
and severally liable with the assignee for all obligations under the terms of
this Agreement or the Related Agreements.
8.03 Counterparts. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which as so
executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party, hereto to produce or account for
more than one such counterpart executed and delivered by such party.
8.04 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of New
Jersey (without regard to conflict of laws principles thereof) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
8.05 Arbitration. Any dispute, controversy or claim arising out of
or relating to this Agreement or the Related Agreements or the transactions
contemplated hereby or thereby shall be settled and finally determined by
arbitration in New York, New York, or at such other location as the parties may
agree, by three arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association in force at the time of such
arbitration. In connection with
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such arbitration, the arbitrators shall apply New Jersey law and shall have no
power to ignore or modify any provision of this Agreement or the Related
Agreements. Judgment upon any award rendered by such an arbitration may be
rendered in any court having jurisdiction. All fees and charges of the American
Arbitration Association and of the arbitrators and all arbitration-related costs
of the parties shall be borne as the arbitrators shall determine in their award.
8.06 Survival. The representations, warranties, covenants,
indemnities and agreements of the parties to this Agreement contained herein or
in any document delivered pursuant to or in connection herewith shall survive
the Closing and shall survive any investigation by the other party.
8.07 Notices. All notices required to be given under the terms of
this Agreement or which any of the parties desires to give hereunder shall be in
writing and personally delivered or sent by registered or certified mail, return
receipt requested, or sent by telecopier, addressed as follows:
(a) To Buyer. If to Buyer addressed to:
Playtex Products, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
Attention: General Counsel
Telecopier No.: 203-341-4080
(b) To Seller or Parent. If to Seller, LWG or Parent addressed to:
Lewis Woolf Griptight Limited
St. Mary's Court
39 Market Place
Henley on Thames
Oxon RG9 2AA
England
Attention: Mr. A. R. Watson
Telecopier No.: 011-44-1386-556362
with a copy to:
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Schiffman, Berger, Abraham, Kaufman & Ritter
Three University Plaza
P.O. Box 568
Hackensack, New Jersey 07602-0568
Attention: Richard G. Berger, Esq.
Telecopier No.: 201-488-5059
Notices personally delivered shall be deemed given upon actual
delivery thereof: notices sent by telecopier shall be deemed given upon
confirmation of receipt; and notices sent by registered or certified mail shall
be deemed given five (5) business days after posting in the United States Mail,
properly addressed, postage pre-paid. Either party may designate a change in
address at any time upon written notice to the other party.
8.08 Amendment and Modification. The Agreement may be amended,
modified or supplemented only by a written instrument executed by the party
against whom such amendment, modification or supplement is sought to be
enforced.
8.09 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party or parties granting such waiver, but any such waiver or the failure to
insist upon strict compliance with any obligation, covenant, agreement or
condition herein, shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure or breach.
8.10 Interpretation. The table of contents and the article and
section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way
affect the meaning or interpretation of this Agreement. As used in this
Agreement, the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof. As
used in this Agreement, the term "subsidiary", when used in reference to any
other person, shall mean any corporation of which outstanding securities having
ordinary voting power to elect a majority of the Board of Directors of such
corporation are owned directly or indirectly by such other person. As used in
this Agreement, the term "generally accepted accounting principles" means
generally accepted accounting principles as in effect and as applied in the
United States. As used in this Agreement, the term "affiliate" of a person means
any company, person or other entity that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, such person. When used herein, the masculine, feminine or neuter gender
and the singular or plural number shall each be deemed to include the others
whenever the context so indicates or permits.
8.11 Entire Agreement. This Agreement and the Related Agreements,
including the schedules, exhibits, documents, certificates and instruments
referred to herein and therein,
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embody the entire agreement and understanding of the parties hereto in respect
of any transactions contemplated by this Agreement and the Related Agreements
and supersede all prior agreements and understandings between the parties with
respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
--------------------------------
Name: Michael F. Goss
Title: Executive Vice President
BINKY-GRIPTIGHT, INC.
By: /s/ Kurt Jetta
--------------------------------
Name: Kurt Jetta
Title: CEO
LEWIS WOOLF GRIPTIGHT LIMITED
By: /s/ Michael Houdret
--------------------------------
Name: Michael Houdret
Title: Director
L.W.G. HOLDINGS LIMITED
By: /s/ Michael Houdret
--------------------------------
Name: Michael Houdret
Title: Director
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Exhibit 10(ai)
OPERATING EQUIPMENT LEASE
THIS LEASE is made as of the 26 day of April, 1996, by and between TETRA
LAVAL CREDIT INC., with offices at 333 West Wacker Drive, Suite 1500, Chicago,
Illinois 60606 (hereinafter "Lessor"), and PLAYTEX MANUFACTURING, INC., a
Delaware corporation and wholly-owned subsidiary of Playtex Products, Inc.
(hereinafter "Lessee").
1. Lease of Equipment: Subject to the terms and conditions of this Lease,
Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to lease from
Lessor certain items of machinery, equipment and spare parts (herein referred to
collectively as the "Equipment" and individually as an "Item" or "Item of
Equipment") more fully described in Exhibit A hereto. A portion of such
Equipment constitutes two separate thermoforming, stacking and packing lines
which are intended to be separately moved from France to a manufacturing
facility to be located in the United States and operated by Playtex or its
subcontractor (the "U.S. Plant"), the first such line to be moved being herein
referred to as the "First Line" and the second such line to be moved being
herein referred to as the "Second Line".
2. Term: The term of this Lease (the "Lease Term") shall commence as of
the Acceptance Date (as hereinafter defined) of First Line and shall expire on
the fifth anniversary of the last day of the calendar quarter during which the
Acceptance Date of the Second Line occurs. For purposes of this Lease, the
"Acceptance Date" shall have the meaning ascribed to such term in the Warranty
Services Agreement (the "Services Agreement") dated the date hereof among Lessee
and Tetra Pak Plastic Packaging R&D GmbH.
3. Rent: A. For the first and second year of the Lease Term, the rent for
the Equipment shall be $[0.003] per Insert produced by the Equipment which
complies with Playtex specifications, subject to a minimum annual rent of
$[300,000] (such minimum to be reduced pro rata to an annualized minimum of
$[150,000] per annum for any portion of such years during which only the First
Line is operating at the U.S. Plant) and a maximum annual rent of $[600,000].
For the third, fourth and fifth years of the Lease Term, rent for the Equipment
shall be $[0.003] per Insert produced by the Equipment which complies with
Playtex specifications subject to a minimum annual rent of $[450,000] and a
maximum annual rent of $[900,000]. Notwithstanding the foregoing, if Playtex
accepts either the First Line and/or the Second Line despite the fact that
Minimum Performance Level (as defined in the Services Agreement) has not been
achieved as contemplated by Article 4 of the Service Agreement, then the
foregoing rental rates and minimum rent amounts shall be reduced on a pro rata
basis with respect to each quarterly rental period during which such Line or
Lines continue to perform below the Minimum Performance Level, provided,
however, that if any such reduction occurs and during any later quarterly rental
period included in the Lease Term such underperforming Line or Lines operate
above the Minimum Performance Level then the foregoing rental rates shall during
such later quarterly rental periods be increased on a pro rata basis but such
increased rental rates shall only apply until such point as Lessor has recovered
the rental amounts which it would
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have otherwise earned if the rental rates and minimum rent amounts had never
been reduced in accordance with the foregoing (none of the foregoing having any
effect on the maximum rent amounts described above).
B. All rent shall be payable in quarterly installments in arrears within
30 days after the first day of January, April, July and October of each year
during the Lease Term. On each rent payment date, Lessee shall pay (i) during
the first and second year of the Lease Term, quarterly installments of
$[150,000] each and (ii) during the third, fourth and fifth year of the Lease
Term, quarterly installments of $[225,000] each. From the Acceptance Date of the
First Line until the commencement of the first complete calendar quarter of the
Lease Term and from the date of the end of the last complete calendar quarter of
the Lease Term until the end of the Lease Term, the rent shall be pro rated
(based on the number of days in each such period) using the above rates.
C. Within 60 days after the end of each year of the Lease Term, Lessee
shall deliver to Lessor a certificate of an officer of Lessee which states the
number of Inserts complying with Playtex specifications which were produced by
the Equipment during such year. Lessor shall be entitled to audit such
statements, on reasonable notice to Lessee, during Lessee's normal business
hours. In the event the actual earned annual rent, calculated using the
information on Lessee's officer's certificate (or such corrected information
resulting from audit) and the rates, minimums (subject to subparagraphs 3.A
above and 3.D below) and maximums set forth in subparagraph 3.A above, is less
than the amount of the rent payments made with respect to such year under
subparagraph 3.B above, Lessee shall be entitled to a refund of such difference,
provided that the refund will not reduce the total amount of rent paid during
such year below any minimum rent amount that may then be in effect. At Lessee's
option, such refund shall either be applied to future rental installments or
paid by Lessor to Lessee in cash within 30 days of Lessee's written request
therefor. All payments provided for in this Lease shall be made to Lessor, or,
if applicable, to Lessee at its respective address for notices provided herein
or such other address as may be designated by such party in writing.
D. If at any time during the period from the date hereof through the end
of the Lease Term, Lessor, Tetra Laval Holdings & Finance S.A., Tetra Pak
Plastic Packaging R&D GmbH, or one of their affiliates licenses or otherwise
grants or gives any rights or interest in the technology used to produce Inserts
or any part thereof to any party other than Lessee (including, without
limitation, to the Unidentified Licensee as defined in the Technology and Patent
License Agreement dated the date hereof between Lessee and Tetra Laval Holdings
& Finance S.A. and Tetra Pak Plastic Packaging R&D GmbH) for use in connection
with unfilled containers for infant feeding (the "Other License"), then for the
year during which such Other License is granted or rights given and for all
years thereafter there shall be no minimum amount of rent payable by Lessee
under this Lease and the minimum annual rent amounts set forth in subparagraph A
above shall be of no further force or effect.
E. Taxes: Lessee will pay any fees, assessments, and taxes, including
sales, use, and property tax, and any interest thereon, lawfully levied against
or upon the
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Equipment, its use or its rental, or otherwise arising out of this Agreement
(except foreign taxes, duties, and Lessor's income taxes and personal property
ad valorem taxes);
F. Late Charge: Any amounts due and owing by either party under this
Agreement by more than seven days after written notice will bear interest at the
lesser of one percent per month or the highest rate allowed by law. Either party
may take any steps, including without limitation (i) classifying payments as
expenses or premiums, (ii) segregating prepayments, or (iii) spreading total
interest charges evenly throughout the Lease Term, as are necessary to reduce
any interest paid or payable under this Agreement below any such statutory
maximum rate.
4. Purchase Option: Lessee may elect to purchase all but not less than all
of the Equipment, by giving written notice to Lessor, (a) at any time during the
Lease Term but prior to the end of the Lease Term and by paying to Lessor,
within 30 days after the date of such notice, the amount contemplated by Exhibit
C hereto, or (b) at the end of the Lease Term and by paying to Lessor within 30
days of the last day of the Lease Term an amount equal to the difference between
$3,410,000 and the principal portion of the rent installments paid hereunder
through the end of the Lease Term. If the Equipment is so purchased by Lessee,
Lessor will convey to Lessee good title to the Equipment, free and clear of any
liens or encumbrances. Lessor and Lessee reasonably believe that the useful life
of the Equipment is at least seven years from the commencement of the Lease
Term.
5. Return of Equipment: Upon the expiration or termination of this Lease,
unless lessee shall have exercised its option to purchase the Equipment, Lessor
shall be entitled to retake the Equipment at its own cost and expense and Lessee
shall make its manufacturing facility reasonably available to Lessor for such
purpose. Lessor shall use all reasonable care not to damage or disrupt the U.S.
Plant or Lessee's other equipment during any such removal of the Leased
Equipment. At the time of such return, the Equipment shall be free and clear of
all liens, security interests, encumbrances and rights of others, other than
those referred to in Article 9 hereof, and shall be in good operating condition,
ordinary wear and tear excepted. Any costs incurred to restore the Equipment to
good working order will be paid by Lessee.
6. Representations and Warranties of Lessor: A. Lessor warrants that it
has good title to the Equipment and transfers possession of the Equipment to
Lessee free of liens and encumbrances. Lessor further warrants that during the
term of the Lease, if no Event of Default has occurred, Lessee's use of the
Equipment shall not be interrupted by Lessor or anyone claiming solely through
or under Lessor.
B. Lessor authorizes Lessee, at Lessee's expense, provided that no Event
of Default shall have occurred and be continuing, to assert for Lessor's
account, during the term of this Lease, all of Lessor's rights under any
manufacturer's, vendor's or dealer's warranty on the Equipment, and Lessor
agrees to cooperate with Lessee in asserting such rights at Lessee's expense.
Any amount received by Lessee as payment under any warranty pursuant to the
above authorization shall be applied to restore the
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Equipment to as good a condition as it was or should have been (but for defects
giving rise to such payment under warranty) when delivered to Lessee, ordinary
wear and tear excepted, with the balance of such amount, if any, to be paid over
to Lessor.
C. Limited Remedy: Lessee's sole and exclusive remedy for breach of any
manufacturer warranty, if any, will be as specified by the manufacturer during
the applicable warranty period. Lessor shall have no liability to Lessee or to
any third party as a result of any Equipment failure or any defects in material
or workmanship of the Equipment, if any.
7. Representations and Warranties of Lessee: A. Lessee is a corporation
duly organized and validly existing under the laws of the state of its
incorporation, and is fully qualified to do business in those jurisdictions
(including those where the Equipment will be located) where such qualification
is necessary to authorize Lessee to carry on its present business and
operations;
B. Lessee has full power, authority and legal right to execute, deliver
and perform the terms of this Lease. This Lease has been duly authorized by all
necessary corporate action on the part of Lessee, and does not require the
approval of, or the giving of notice to, any federal, state, local, or foreign
governmental authority and does not contravene any law binding on Lessee or
contravene Lessee's certificate or articles of incorporation or by-laws or any
indenture, credit agreement or other agreement to which Lessee is a party or by
which it is bound;
C. This Lease constitutes a legal, valid and binding obligation of Lessee,
enforceable in accordance with its terms; and
D. There are no pending or threatened actions or proceedings before any
court, administrative agency or other tribunal or body which may materially
adversely affect Lessee's ability to perform its obligations under this Lease.
8. Title Retained by Lessor: A. Lessor shall be deemed to have retained
title to the Equipment at all times prior to a purchase of the Equipment by
Lessee in accordance with Section 4 above. The Equipment shall be deemed to be
personal property of Lessor, regardless of the manner in which it may be
attached to any other property. Lessee shall deliver to Lessor a waiver from any
landlord or mortgagee of any property at which the Equipment may be located on
or before the Equipment is installed at such property. Any spare parts will
become the property of Lessor immediately upon installation as part of the
Equipment. Lessee authorizes Lessor to file or record this Agreement or copy
thereof or any UCC statement showing Lessor's interest in the Equipment in all
jurisdictions where the Equipment or Lessee may be located and Lessee will sign
all such statements at Lessor's request.
B. Lessee may from time to time add further parts or accessories to any
Item of Equipment provided that such addition does not impair the value or
utility of remaining useful life of such Item and Equipment; and any parts or
accessories so added shall remain the property of Lessee and may be removed by
Lessee at any time
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prior to the expiration of the Lease with respect to such Item or Items of
Equipment, provided such removal does not impair the value or utility or
remaining useful life of such Item of Equipment.
9. Mortgages, Liens, etc. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any mortgage, security interest, pledge, lien,
charge, encumbrance or claim on or with respect to the Equipment, title thereto
or any interest therein (other than any collateral assignment of this Lease
Agreement to Lessee's principal bank lender or lenders) (and Lessee will
promptly, at its own expense, take such action as may be necessary to duly
discharge any such mortgage, security interest, pledge, lien, charge,
encumbrance or claim) except (a) the respective rights of Lessor and Lessee as
herein provided, (b) liens or encumbrances which result from claims against
Lessor except to the extent that such liens and encumbrances arise from failure
of Lessee to perform any of Lessee's obligations hereunder, (c) liens for taxes
either not yet due or being contested in good faith and by appropriate
proceedings, and (d) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees', or other like liens arising in the ordinary course of business and
not delinquent. Notwithstanding anything to the contrary contained herein,
Lessee shall not have the right to challenge such liens if there exists a
material risk of loss, sale or forfeiture of the Equipment.
10. Site; Condition: Lessee is responsible for Site condition, including
adequate flooring, drainage, HVAC, and lighting. Lessee will provide at its cost
adequate utility connections and service to the Site prior to installation,
including electrical circuits, outlets, and breakers, compressed air, water, and
other services required for proper installation and operation of the Equipment.
11. Use, Maintenance, and Operation; Identification: Lessee agrees that
the Equipment will be used solely in the conduct of its business and in
compliance in all material respects with the statutes, laws, ordinances and
regulations of any governmental agency applicable to the use of the Equipment,
and will remain in the possession and control of Lessee or its sub-contractor at
the location of its installation with respect to each Item of Equipment (Lessor
acknowledges that the installation site may be the premises of Lessee's
sub-contractor). Lessee will use reasonable efforts: (i) to operate the
Equipment with properly trained employees and to follow relevant operating,
maintenance, and instruction manuals provided by the manufacturer or Lessor;
(ii) to keep the Equipment in good working order and perform appropriate
maintenance, repairs, and service using appropriate spare parts and service
personnel; and (iii) not to alter or modify the Equipment or Lessee's use
thereof in a manner that would materially damage the Equipment or reduce its
ability to operate properly. Lessor may inspect the Equipment at reasonable
times on reasonable notice to ensure Lessee's compliance with this article.
12. Limitation of Liability: In no event will Lessor's liability for any
failure of performance or other breach of this Agreement or of any warranty
hereunder exceed the total amount of Base Rentals previously paid by Lessee for
the Equipment, and Lessee hereby waives and releases any claims against Lessor
in excess of such amount.
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13. Consequential Damages: Lessor will not be liable for and Lessee hereby
waives and releases any claims against Lessor for any special, incidental,
indirect, exemplary, or consequential damages, including lost sales, revenues or
profit, loss or return of or damage to product, loss of facilities, inventory,
work-in-process, or time and materials, or loss of prospective economic
advantage, arising from any performance or failure to perform under this
Agreement, or from the breach of any warranty hereunder.
14. Indemnification: Lessee will defend, indemnify, and hold harmless
Lessor, its officers, employees, and agents (collectively "Lessor") against and
from any and all liability, claims, suits, judgments, losses, damages, or costs
(including reasonable attorneys' fees and expenses) resulting from any claim,
suit or demand by any third party for injuries to or deaths of persons or loss
of or damage to property arising out of (i) installation, use, operation,
maintenance, or repair of the Equipment by Lessee, (ii) use of facilities,
services, materials, data, or information not provided by Lessor, or (iii) any
packaging, labelling, processing, delivery, or sale of products or services by
Lessee, except to the extent caused by the negligence or willful misconduct of
Lessor. This indemnification will survive termination of this Agreement.
15. Risk of Loss; Insurance: A. Lessee bears the entire risk of loss with
respect to any damage, destruction, loss, theft, or government taking of the
Equipment or any part thereof. Regardless of the occurrence of such loss or
other event, Lessee will remain fully liable to Lessor for and will pay promptly
when due all rentals and other charges under this Agreement.
B. Lessee at its expense will obtain from a Bests B+ rated insurer and
will maintain in full force and effect (i) comprehensive general liability
insurance of at least $1,000,000 for public liability, and (ii) risk of loss
property damage insurance for the replacement value of the Equipment. Such
insurance will be endorsed to name Lessor as loss payee to the extent of the
risk of loss and indemnification obligations assumed by Lessee under this
Agreement. Upon receipt of such insurance proceeds, Lessor will use reasonable
efforts diligently to obtain repair or replacement of the Equipment up to the
amount or value of such insurance proceeds, with Lessee making up any shortfall.
Certificates evidencing such coverage will be provided to Lessor prior to
delivery of the Equipment and will provide that such insurance coverage will not
be cancelled or modified except upon 30 days prior written notice to Lessor.
16. Force Majeure: Neither party will be liable for delays in or
suspension of performance (other than the obligation to pay amounts when due)
caused by acts of God or governmental authority, strikes or labor disputes,
accident, flood, fires or other loss of manufacturing facilities, lack of
adequate fuel, power, raw materials, labor, or transportation facilities, breach
by suppliers of supply agreements, or any other cause, whether similar or
dissimilar, beyond the reasonable control of that party.
17. Remedies for Non-Payment; Breach: A. Lessor hereby waives any right to
terminate this Agreement earlier than as provided in Term, above, including the
right to terminate in the event of breach of this Agreement by Lessee. Upon
receipt of
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written notice from Lessor asserting a breach of this Agreement by Lessee,
Lessee has the option, exercisable by Lessee in writing within 72 hours of
Lessee's receipt of the notice to Lessor, either to terminate this Agreement or
to require that Lessor continue this Agreement and all performance hereunder in
full force and effect. Upon exercise of the option of non-termination by Lessee
(failure of Lessee to notify Lessor of its election within the 72 hour period
will be deemed an election of non-termination), Lessor will have the following
rights as provided in paragraphs B and C below.
B. In any proceeding by Lessor against Lessee seeking injunctive relief
under this Agreement, Lessor will be entitled to seek appropriate injunctive
relief upon a showing by Lessor of likelihood of success on the merits and, in
the case of a willful refusal by Lessee to perform its material obligations
under this Lease, without a showing of irreparable harm, balancing of harms, or
consideration of the public interest, and Lessee will stipulate in such
proceeding that each of the three latter elements will be deemed to be found in
favor of Lessor.
C. If Lessee exercises its right under paragraph A of this Article to have
the Agreement continue in full force and effect, and if Lessor ultimately
prevails on the merits of any claim against Lessee for willful refusal by Lessee
to perform its material obligations under this Lease, and if Lessor would have
been entitled under common law to terminate this Agreement thereby, then Lessor
will be entitled to recover both direct damages and also any consequential
damages (including lost revenues or lost profits) suffered as a result of such
breach. The remedies under paragraphs B and C of this Article are in addition to
any other rights or remedies that Lessor may have at law or otherwise.
18. Binding Effect: The provisions of this Lease shall inure to the
benefit of and shall be binding upon Lessor and Lessee and their respective
successors and assigns permitted hereunder.
19. Assignment: Either party may assign this Agreement to a parent,
subsidiary, affiliate, or financial concern, or to a successor in interest of
all or substantially all of its assets. This Agreement may not be otherwise
assigned in whole or in part, and any such assignment will be null and void and
of no force or effect. Nothing in this section will preclude Lessee from
installing the Equipment at the premises of its sub-contractor selected in
accordance with the provisions of the Technology and Patent License Agreement
between Lessee and Tetra Laval Holdings & Finance S.A. and Tetra Pak Plastic
Packaging R&D GmbH,
20. Notices: Notices under the terms of this Agreement will be in writing
and sent by prepaid certified mail, return receipt requested, or by facsimile or
telecopy, to the addresses provided below. Notices will be effective on the
first business day following receipt thereof. Notices sent by certified mail
will be deemed received on the date of delivery as indicated on the return
receipt; notices sent by facsimile or telecopy will be deemed received on the
date transmitted if transmitted by 3:30 pm time of recipient, otherwise on the
next business day.
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If to Lessee:
Playtex Manufacturing Inc.
50 North DuPont Highway
P.O. Box 7016
Dover, Delaware 19903
Attention: Senior Vice President Operations
Facsimile No.: 302-674-6200
with a copy to:
Playtex Products, Inc.
300 Nyala Farms Road
Westport, CT 06880
Attention: General Counsel
Facsimile No.: 203-341-4272
If to Lessor:
Tetra Laval Credit Inc.
333 West Wacker Drive
15th Floor
Chicago, Illinois 60606
Attention: Managing Director
Facsimile No.: (312) 983-3891
or at such other address as such party shall from time to time designate for
itself by like notice to the other party.
21. Severability; Blue-Penciling: If any provision of this Agreement is
held by a court or agency of competent jurisdiction to be invalid or overly
broad and therefore not reasonably necessary to protect Lessor's business
interests and for that reason to be unenforceable, all other provisions hereof
will remain in full force and effect and the unenforceable provision shall be
deemed modified to such extent as to make it enforceable by such court or agency
or, if necessary, shall be deemed deleted and replaced by the most restrictive
provision (either by time, location, or subject matter) permitted under
applicable law.
22. General: This Agreement may be amended only by written agreement of
the parties executed by their authorized representatives. This Agreement will
not create any right in or obligation to any third party. No waiver by either
party of any default or breach by the other party will operate as or be deemed a
waiver of any subsequent default or breach. This Agreement, and any dispute
arising under or with respect to this Agreement will be construed and governed
in accordance with the internal laws of Delaware. The parties hereby consent to
the jurisdiction of the state and federal courts in Chicago, Illinois and
Wilmington, Delaware.
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23. Entirety of Agreement: This Agreement, together with the other
agreements executed herewith, supersedes all prior oral or written
representations, communications, or agreements between the parties, and,
together with any attachments, constitutes the final and entire understanding of
the parties, regarding the subject matter of this Agreement.
THEREFORE, the parties by their authorized representatives have executed
this Agreement effective on the date first provided above.
LESSEE TETRA LAVAL CREDIT INC.
By: /s/ JAMES S. COOK By: /s/ LORAINE D. KIRBY
--------------------- -----------------------
Title: Vice President Title: Controller
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Exhibit 10(aj)
EQUIPMENT LEASING AGREEMENT
EQUIPMENT LEASING AGREEMENT dated as of June 20, 1996 (herein, as amended
and supplemented from time to time, called "this Lease"), between BTM CAPITAL
CORPORATION, a Delaware corporation (herein called "Lessor"), having its
principal place of business at 125 Sumner Street, Boston, Massachusetts 02110,
and PLAYTEX MANUFACTURING, INC., a Delaware corporation (herein called
"Lessee"), having its principal place of business at 300 Nyala Farms Road,
Westport, Connecticut 06880.
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereto agree as follows:
1. Definitions. Unless the context otherwise requires, the following
terms shall have the following meanings for all purposes of this Lease and shall
be equally applicable to both the singular and the plural forms of the terms
herein defined:
"Acceptance Date" for each Item of Equipment means the date on
which Lessee has unconditionally accepted such Item for lease hereunder, as
evidenced by Lessee's execution and delivery of a Lease Supplement for such Item
dated such date.
"Acquisition Cost" of each Item of Equipment means an amount equal
to the sum of (i) the total cost paid by Lessor for such Item, plus (ii) all
sales and excise taxes paid by Lessor on or with respect to the acquisition of
such Item, plus (iii) all costs and expenses approved and paid by Lessor in
connection with the delivery and installation of such Item.
"Acquisition Period" means the period specified as such on each
consecutively numbered Related Exhibit A now or hereafter attached hereto and
made a part hereof.
"Assignee" shall have the meaning given to such term in Section
14(b) hereof.
"Basic Rent" means the rent payable for each Item of Equipment
during (i) the Basic Term thereof pursuant to Section
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7(b) hereof, and (ii) each Renewal Term (if any) thereof pursuant to Section
28(a) hereof.
"Basic Term for each Item of Equipment means the period consisting
of the number of months set forth for the type of Equipment to which such Item
relates on the Related Exhibit A for such Item.
"Basic Term Commencement Date" for each Item of Equipment means the
date specified as such on the Related Exhibit A for such Item.
"Business Day" means any day other than a day on which banking
institutions in the Commonwealth of Massachusetts or the State of Connecticut
are authorized by law to close.
"Casualty Loss Value" of each Item of Equipment as of any Casualty
Loss Value Payment Date means an amount determined by multiplying the
Acquisition Cost of such Item of Equipment by the percentage set forth opposite
such Casualty Loss Value Payment Date on the Schedule of Casualty Loss Values
attached to the Related Exhibit A for such Item.
"Casualty Loss Value Payment Date" of each Item of Equipment shall
mean the Basic Term Commencement Date for such Item and the same day of each
month thereafter and shall be as set forth in the Schedule of Casualty Loss
Values attached to the Related Exhibit A for such Item.
"End of Term Rental Adjustment" shall have the meaning given to
such term in Section 29(d) hereof.
"Equipment" means the equipment of the type (s) described on each
consecutively numbered Exhibit A now or hereafter attached hereto and made a
part hereof and leased or to be leased by Lessor to Lessee hereunder or ordered
by Lessor for lease to Lessee hereunder, together with any and all accessions,
additions, improvements and replacements from time to time incorporated or
installed therein which are the property of Lessor pursuant to the terms of this
Lease.
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"Estimated Residual Value" for any Item of Equipment shall mean an
amount obtained by multiplying (i) the percentage set forth in the Related
Exhibit A for such Item under the caption "Estimated Residual Value Percentage"
applicable to the Basic Term or Renewal Term then ending, by (ii) the
Acquisition Cost for such Item.
"Event of Default" means any of the events referred to in Section
22 hereof.
"Event of Loss" with respect to any Item of Equipment means (i) the
loss of such Item of Equipment or any substantial part thereof, or (ii) the loss
of the use of such Item of Equipment due to theft or disappearance for a period
in excess of 45 days during the Term, or existing at the expiration or earlier
termination of the Term, or (iii) the destruction, damage beyond repair, or
rendition of such Item of Equipment or any substantial part thereof permanently
unfit for normal use for any reason whatsoever, or (iv) the condemnation,
confiscation, seizure, or requisition of use or title to such Item of Equipment
or any substantial part thereof by any governmental authority under the power of
eminent domain or otherwise.
"Guarantor" means Playtex Products, Inc., a Delaware corporation
and any other Guarantor of Lessee's obligations hereunder.
"Guaranty" means any guaranty of Lessee's obligations hereunder
executed by a Guarantor.
"Interim Rent" means the rent payable for each Item of Equipment
for the Interim Term thereof pursuant to Section 7(a) hereof.
"Interim Term" for each Item of Equipment means the period
commencing on the Acceptance Date for such Item (unless the Acceptance Date is
the Basic Term Commencement Date, in which case there shall be no Interim Term
for such Item) and ending on the date immediately prior to the Basic Term
Commencement Date.
"Item of Equipment" or "Item" means a single unitary item of the
Equipment.
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"Lease Supplement" means a Lease Supplement substantially in the
form attached hereto as Exhibit B, to be executed by Lessor and Lessee with
respect to each Item of Equipment as provided in Section 4 hereof, evidencing
that such Item is leased hereunder.
"Lien" means liens, mortgages, encumbrances, pledges, charges and
security interests of any kind.
"Maximum Acquisition Cost" means the amount specified as such on
each consecutively numbered Related Exhibit A now or hereafter attached hereto
and made a part hereof.
"Maximum Lessee Risk Amount" for any Item of Equipment shall mean
the percentage set forth in the Related Exhibit A for such Item under the
caption "Maximum Lessee Risk Percentage" applicable to the Basic Term or Renewal
Term then ending, multiplied by the Acquisition Cost for such Item.
"Maximum Lessor Risk Amount" for any Item of Equipment shall mean
the percentage set forth in the Related Exhibit A for such Item under the
caption "Maximum Lessor Risk Percentage" applicable to the Basic Term or Renewal
Term then ending, multiplied by the Acquisition Cost for such Item.
"Maximum Term" for each Item of Equipment shall mean the maximum
number of months, in aggregate, of the Basic Term and all Renewal Terms of such
Item of Equipment, as specified in the Related Exhibit A applicable to such Item
of Equipment.
"Net Proceeds of Sale" shall have the meaning given to such term in
Section 29(d) hereof.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee(s) of a trust,
unincorporated organization, or government or governmental authority, agency or
political subdivision thereof.
"Purchase Option Amount" shall have the meaning given to such term
in Section 28(b) hereof.
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"Reinvestment Premium" for any Item of Equipment, as of any
determination date, shall mean the excess, if any, of (a) the net present value
of the sum of (i) all payments of Rent remaining to be paid after such
determination date through the expiration of the Maximum Term of such Item, that
would have been payable for such Item following such determination date if this
Lease had been renewed through and inclusive of the expiration of the Maximum
Term of such Item, and (ii) the Estimated Residual Value applicable to such Item
at such expiration of the Maximum Term (together, the sum of (i) and (ii) being
referred to as the "Discounted Payments"), each discounted at a rate equal to
the then current yield for direct obligations of the United States Treasury
having a maturity equal to the average life of the Discounted Payments, over (b)
the Estimated Residual Value applicable to such Item at such time of
determination.
"Related Exhibit A" means, with respect to an Item of Equipment,
the particular numbered Exhibit A now or hereafter attached hereto and made a
part hereof to which such Item relates as specified in Section 4 hereof.
"Renewal Term" for each Item of Equipment means each period
following the end of the Basic Term for such Item with respect to which Lessee
has the option to renew this Lease pursuant to Section 28(a) hereof.
"Rent" means Interim Rent and Basic Rent.
"Rent Payment Date" for each Item of Equipment means (i) for the
Basic Term thereof, each date on which a payment of Basic Rent is due and
payable for such Item pursuant to Section 7(b) hereof, (ii) for the Interim Term
thereof (if any), the Basic Term Commencement Date for such Item, and (iii) for
each Renewal Term thereof, each date on which a payment of Basic Rent is due and
payable for such Item as provided in Section 28(a) hereof.
"Rental Period" for each Item of Equipment means (i) for the
Interim Term of such Item, the period from and inclusive of the Acceptance Date
for such Item to, but not inclusive of, the Basic Term Commencement Date for
such Item, (ii) for the
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Basic Term of such Item, each period for which a payment of Basic Rent is to be
made for such Item during the Basic Term thereof as set forth on the Related
Exhibit A for such Item (opposite the reference to Rental Periods for Basic
Term), and (iii) for each Renewal Term of such Item, each period for which a
payment of Basic Rent is to be made for such Item during such Renewal Term as
set forth on the Related Exhibit A for such Item (opposite the reference to
Rental Periods for Renewal Term).
"Supplemental Payments" means all amounts, liabilities and
obligations which Lessee assumes or agrees to pay hereunder to Lessor or others,
including payments of Casualty Loss Value, indemnities, and any Reinvestment
Premium that may become payable by Lessee hereunder, but excluding Basic Rent
and Interim Rent.
"Term" means the full term of the Lease with respect to each Item
of Equipment, including the Interim Term (if any), the Basic Term, and each
Renewal Term.
"Termination Date", for any Item of Equipment, means the last day
of the Basic Term of such Item, or if the Term of such Item has been renewed
pursuant to Section 28(a), the last day of the Renewal Term of such Item.
The words "this Lease", "herein", "hereunder", "hereof" or other like words mean
and include this Equipment Leasing Agreement, each Related Exhibit A, each Lease
Supplement, and each amendment and supplement hereto and thereto.
2. Agreement for Lease of Equipment. Subject to, and upon all of the
terms and conditions of this Lease, Lessor hereby agrees to lease to Lessee and
Lessee hereby agrees to lease from Lessor each Item of Equipment for the Term
with respect to such Item. Provided that no Event of Default has occurred and is
continuing hereunder, Lessor agrees that it shall not interfere with Lessee's
quiet enjoyment and use of any Item of Equipment leased hereunder during the
Term thereof.
3. Conditions Precedent. Lessor shall have no obligation to purchase any
Item of Equipment and to lease the same to Lessee unless each of the following
conditions are fulfilled to the satisfaction of Lessor: (i) no event which is
(or with notice or
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lapse of time or both would become) an Event of Default or Event of Loss has
occurred and is continuing; (ii) no material adverse change in the financial
condition of Lessee (or of any Guarantor) which, in Lessor's opinion, would
impair the ability of Lessee to pay and perform its obligations under this Lease
(or of any Guarantor to pay and perform such obligations) has occurred since the
date specified as the Financial Condition Reference Date on the Related Exhibit
A for such Item; (iii) such Item of Equipment is specifically identified by
manufacturer and model number on the Related Exhibit A or is otherwise
reasonably acceptable to Lessor, and is free of all Liens, other than any Lien
specifically excepted in Section 15 hereof; (iv) the Acceptance Date for such
Item of Equipment is a date within the Acquisition Period specified on the
Related Exhibit A for such Item and Lessee has executed and delivered to Lessor
the Related Exhibit A for such Item; (v) the Acquisition Cost of such Item of
Equipment, when added to the total Acquisition Cost of all Equipment of the type
to which such Item relates and which has been leased hereunder, or ordered by
Lessor for lease hereunder, will not be such an amount so as to cause the
Maximum Acquisition Cost specified on the Related Exhibit A for such Item to be
exceeded; (vi) Lessor has received an invoice for such Item of Equipment from
the seller thereof, approved for payment by Lessee, showing Lessor as the
purchaser of such Item, or, if Lessee is the seller of such Item, a bill of sale
for such Item from Lessee to Lessor in form and substance satisfactory to
Lessor, together with evidence, satisfactory to Lessor, of Lessee's payment to
the original seller of such Item; (vii) Lessor has received a Lease Supplement
for such Item, duly executed by Lessee, and dated the Acceptance Date for such
Item; (viii) if such Item of Equipment is subject to motor vehicle titling and
registration laws, Lessor has received a copy of the application for certificate
of title therefor, as filed with, and bearing the filing stamp of, the
appropriate department of motor vehicles or other appropriate state authority,
and a copy of the manufacturer's statement or certificate of origin therefor,
reflecting Lessor or its nominee as owner and whomever Lessor shall have
designated (if any) as first lienholder; (ix) all licenses, registrations,
permits, consents and approvals required by Federal, state or local laws or by
any governmental body, agency or authority in connection with Lessor's ownership
of, and the delivery, acquisition, installation, use, and operation of,
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each Item of Equipment shall have been obtained to the satisfaction of Lessor;
and (x) Lessor shall have received the documents set forth on Schedule I hereto
in form and substance reasonably satisfactory to Lessor.
4. Delivery. Acceptance and Leasing of Equipment. Lessor shall not be
liable to Lessee for any failure or delay in obtaining any Item of Equipment or
making delivery thereof. Forthwith upon delivery of each Item of Equipment to
Lessee, Lessee will inspect such Item, and unless Lessee gives Lessor prompt
written notice of any defect in or other proper objection to such Item, Lessee
shall promptly upon completion of such inspection execute and deliver to Lessor
a Lease Supplement for such Item, dated the Acceptance Date of such Item. The
execution by Lessor and Lessee of a Lease Supplement for an Item of Equipment
shall (a) evidence that such Item is leased under, and is subject to all of the
terms, provisions and conditions of, this Lease, and (b) constitute Lessee's
unconditional and irrevocable acceptance of such Item for all purposes of this
Lease. An Item of Equipment shall be conclusively deemed to relate to the
particular numbered Exhibit A now or hereafter attached hereto and made a part
hereof on which is set forth (i) a description of such Item or the type of
Equipment to which such Item relates and (ii) the Acquisition Period within
which the Acceptance Date for such Item has occurred.
5. Term. The Interim Term (if any) for each Item of Equipment shall
commence on the Acceptance Date thereof, and, unless sooner terminated pursuant
to the provisions hereof, shall end on the date immediately prior to the Basic
Term Commencement Date thereof. The Basic Term for each Item of Equipment shall
commence on the Basic Term Commencement Date thereof and, unless this Lease is
sooner terminated with respect to such Item (or all Equipment) pursuant to the
provisions hereof, shall end on the date specified therefor in the Lease
Supplement for such Item. If not sooner terminated pursuant to the provisions
hereof, the Term for each Item of Equipment shall end on the last day of the
Basic Term thereof, or if this Lease is renewed pursuant to Section 28(a)
hereof, on the last day of the last Renewal Term thereof.
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6. Return of Equipment.
(a) Upon the expiration or earlier termination of the Term with respect
to each Item of Equipment (unless Lessee has exercised its purchase option with
respect thereto pursuant to Section 28(b) hereof or a third party sale thereof
acceptable to Lessor is to be consummated on the Termination Date with respect
thereto pursuant to Section 28(c) hereof), Lessee will, at its expense,
surrender and deliver possession of each Item of Equipment to Lessor at such
location within the continental United States as shall be designated by Lessor
in writing, or, in the absence of such designation, at the then location of each
such Item. At the time of such return to Lessor, each Item of Equipment (and
each part or component thereof) shall (i) be in good operating order, and in the
repair and condition as when originally delivered to Lessee, ordinary wear and
tear from proper use thereof excepted, (ii) be capable of being promptly
assembled and operated by a competent third party purchaser or third party
lessee without further material inspection, repair, replacement, alterations or
improvements (excluding third party peculiar requirements for compatibility with
then existing third party products, equipment or facilities), and in accordance
and compliance with any and all statutes, laws, ordinances, rules and
regulations of any Federal, state or local governmental body, agency or
authority applicable to the use and operation of such Item of Equipment by
Lessee, and (iii) be free and clear of all Liens, other than any Lien granted or
placed thereon by Lessor or any Assignee. If any Item of Equipment is originally
equipped with tires, such Item shall, in addition to satisfying the requirements
of the preceding sentence, be returned with all tires installed thereon, with
each tire having at least fifty percent (50%) or more tread remaining thereon.
(b) Until each such Item of Equipment has been returned to Lessor in the
condition and as otherwise provided in this Section 6, Lessee shall continue to
pay Lessor, on the same dates on which Basic Rent for such Item was payable
during the Basic Term thereof (or, if the Term of such Item has been renewed
pursuant to Section 28(a), the most recent Renewal Term thereof), the same Basic
Rent for such Item that was payable on the last Rent Payment Date of the Basic
Term thereof (or, if the Term of such
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Item has been renewed pursuant to Section 28(a), the same Basic Rent that was
payable on the last Rent Payment Date of the most recent Renewal Term);
provided, that during such holdover period, Lessee shall use its best efforts to
secure the return of the Equipment as required under this Section 6. The
provision for payment pursuant to this Section 6(b) shall not be in abrogation
of Lessor's right under this Section 6 to have such Equipment returned to it
hereunder.
(c) The provisions of this Section 6 are of the essence of this Lease,
and upon application to any court of equity having jurisdiction in the premises,
Lessor shall be entitled to a decree against Lessee requiring specific
performance of the covenants of Lessee set forth in this Section 6.
7. Rent.
(a) Interim Rent. Lessee hereby agrees to pay Lessor Interim Rent for
each Item of Equipment as to which there is an Interim Term, payable on the Rent
Payment Date of the Interim Term for such Item, in the amount obtained by
multiplying (i) the Acquisition Cost of such Item by (ii) the percentage set
forth (opposite the Interim Rent Percentage reference) on the Related Exhibit A
for such Item, by (iii) the number of days from and including the Acceptance
Date for such Item through the end of the Interim Term for such Item.
(b) Basic Rent. Lessee hereby agrees to pay Lessor Basic Rent for each
Item of Equipment during the Basic Term thereof at the times and on the Rent
Payment Dates set forth on the Related Exhibit A for such Item and in an amount
obtained by multiplying (i) the Acquisition Cost of such Item by (ii) the
percentage of Acquisition Cost set forth (opposite the Basic Rent Percentage
reference) on such Related Exhibit A.
(c) Supplemental Payments. Lessee also agrees to pay to Lessor, or to
whomsoever shall be entitled thereto as expressly provided herein, all
Supplemental Payments, promptly as the same shall become due and owing, and in
the event of any failure on the part of Lessee so to pay any such Supplemental
Payment hereunder Lessor shall have all rights, powers and remedies
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provided for herein or by law or equity or otherwise in the case of nonpayment
of Rent.
(d) Method of Payment. All payments of Rent and Supplemental Payments
required to be made by Lessee to Lessor shall be made in good funds. If the date
that any payment of Rent is due is other than a Business Day the payment of Rent
otherwise payable on such date shall be payable on the next succeeding Business
Day. In the event of any assignment to an Assignee pursuant to Section 14(b)
hereof, all payments which are assigned to such Assignee, whether Rent,
Supplemental Payments or otherwise, shall be paid in such manner as shall be
designated by Lessor or such Assignee provided that there shall be no adverse
economic effect on Lessee. All payments of Rent required to be made by Lessee to
Lessor hereunder shall be paid to Lessor at its address specified at the
beginning of this Lease or at such other address as Lessor may hereafter
designate in writing to Lessee. Time is of the essence in connection with the
payment of Rent and Supplemental Payments.
8. Net Lease. This Lease is a net lease. Lessee acknowledges and agrees
that its obligations hereunder, including, without limitation, its obligations
to pay Rent for all Equipment leased hereunder and to pay all Supplemental
Payments payable hereunder, shall be unconditional and irrevocable under any and
all circumstances, shall not be subject to cancellation, termination,
modification or repudiation by Lessee, and shall be paid and performed by Lessee
without notice or demand and without any abatement, reduction, diminution,
setoff, defense, counterclaim or recoupment whatsoever, including, without
limitation, any abatement, reduction, diminution, setoff, defense, counterclaim
or recoupment due or alleged to be due to, or by reason of, any past, present or
future claims which Lessee may have against Lessor, any Assignee, any
manufacturer or supplier of the Equipment or any Item thereof, or any other
Person for any reason whatsoever or any defect in the Equipment or Item thereof,
the condition, design, operation or fitness for use thereof, any damage to, or
any loss or destruction of, the Equipment or any Item thereof, any Liens or
rights of others with respect to the Equipment or any Item thereof, any
prohibition or interruption of or other restriction against Lessee's use,
operation or possession of the Equipment or
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any Item thereof, for any reason whatsoever except breach by Lessor or any
Assignee of Lessee's right to quiet enjoyment of the Equipment, or any
interference with such use, operation or possession by any Person or entity, or
any default by Lessor in the performance of its obligations herein contained, or
any other indebtedness or liability, howsoever and whenever arising, of Lessor,
or of any Assignee, or of Lessee to any other Person, or by reason of
insolvency, bankruptcy or similar proceedings by or against Lessor, any Assignee
or Lessee, or for any other reason whatsoever, whether similar or dissimilar to
any of the foregoing, any present or future law to the contrary notwithstanding;
it being the intention of the parties hereto that all Rent and Supplemental
Payments payable by Lessee hereunder shall continue to be payable in all events
and in the manner and at the times herein provided, without notice or demand,
unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Lease.
9. Grant of Security Interest; Equipment to be and Remain Personal
Property. Lessee hereby grants to Lessor a security interest in the Equipment
and all proceeds thereof as collateral security for the payment and performance
by Lessee of Lessee's obligations as Lessee hereunder. It is the intention and
understanding of both Lessor and Lessee, and Lessee shall take all such actions
as may be required to assure, that the Equipment shall be and at all times
remain personal property, notwithstanding the manner in which the Equipment may
be attached or affixed to realty. Lessee shall obtain and record such
instruments and take such steps as may be necessary to prevent any Person from
acquiring any rights in the Equipment by reason of the Equipment being claimed
or deemed to be real property. Upon request by Lessor, Lessee shall obtain and
deliver to Lessor valid and effective waivers, in recordable form, by the
owners, landlords and mortgagees of the real property upon which the Equipment
or any Item of Equipment is located or certificates of Lessee that it is the
owner of such real property or that such real property is not leased and/or
mortgaged. Lessee shall cause each Item of Equipment subject to motor vehicle
titling and registration laws to be titled in the name of Lessee, as owner, with
Lessor to be shown as sole lienholder, and shall cause all certificates of title
to be promptly furnished to Lessor.
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10. Use of Equipment; Compliance with Laws. Lessee agrees that the
Equipment will be used and operated solely in the conduct of its business and in
compliance with any and all insurance policy terms, conditions and provisions
and with all material statutes, laws, ordinances, rules and regulations of any
Federal, state or local governmental body, agency or authority applicable to the
use and operation of the Equipment, including, without limitation,
environmental, noise and pollution laws (including notifications and reports).
Lessee shall procure and maintain in effect all material licenses,
registrations, certificates, permits, approvals and consents required by
Federal, state or local laws or by any governmental body, agency or authority in
connection with the ownership, delivery, installation, use and operation of each
Item of Equipment, including without limitation, those required by
environmental, noise and pollution laws (including notifications and reports),
and including, in the case of any Item subject to motor vehicle titling and
registration laws, all titles, registrations, registration plates, permits,
licenses, and all renewals thereof. The Equipment will at all times be and
remain in the possession and control of Lessee. Lessee shall notify Lessor of
any change in its principal place of business set forth above. Lessee shall not
change the location of any Item of Equipment as specified in the Lease
Supplement with respect thereto without delivering prior written notice to
Lessor of the new location to which such Item will be moved and receiving
Lessor's prior written consent to such move, which consent Lessor agrees not to
unreasonably withhold, provided that Lessor's right, title and interest in and
to the Equipment is at all times unaffected by such move and all Items of
Equipment remain together at one location. The Equipment shall in no event be
used or located outside of the continental limits of the United States. Lessee
shall use and operate the Equipment or cause it to be used and operated only by
personnel authorized by Lessee, and Lessee shall use every reasonable precaution
to prevent loss or damage to each Item of Equipment from fire and other hazards.
11. Maintenance and Repair of Equipment. Lessee agrees, at its own cost
and expense, to keep, repair, maintain, and preserve the Equipment in good order
and operating condition, and in compliance with such maintenance and repair
standards and procedures as are set forth in the manufacturer's manuals
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<PAGE>
pertaining to the Equipment, and as otherwise may be required to enforce
warranty claims against each vendor and manufacturer of each Item of Equipment,
and in compliance with all requirements of law applicable to the maintenance and
condition of the Equipment, including, without limitation, environmental, noise
and pollution laws and regulations (including notifications and reports). Lessee
shall, at its own cost and expense, supply the necessary power and other items
required in the operation of the Equipment. Lessee hereby waives any right now
or hereafter conferred by law to make repairs on the Equipment at the expense
of Lessor.
12. Replacements; Alterations; Modifications. In case any Item of
Equipment (or any equipment, part or appliance therein) is required to be
altered, added to, replaced or modified in order to comply with any laws,
regulations, requirements or rules ("Required Alteration") pursuant to Sections
10 or 11 hereof, Lessee agrees to make such Required Alteration at its own
expense and the same shall immediately be and become the property of Lessor and
subject to the terms of this Lease. Lessee may make any optional alteration to
any Item of Equipment ("Optional Alteration") provided such Optional Alteration
does not impair the value, use or remaining useful life of such Item of
Equipment. In the event such Optional Alteration is readily removable without
causing material damage to the Item of Equipment, and is not a part, item of
equipment or appliance which replaces any part, item of equipment or appliance
originally incorporated or installed in or attached to such Item of Equipment on
the Acceptance Date therefor or any part, item of equipment or appliance in
replacement of or substitution for any such original part, item of equipment or
appliance, any such Optional Alteration shall be and remain the property of
Lessee. To the extent such Optional Alteration is not readily removable without
causing material damage to the Item of Equipment to which such Optional
Alteration has been made, or is a part, item of equipment or appliance which
replaces any part, item of equipment or appliance originally incorporated or
installed in or attached to such Item of Equipment on the Acceptance Date
therefor or any part, item of equipment or appliance in replacement of or
substitution for any such original part, item of equipment or appliance, the
same shall immediately be and become the property of Lessor and subject to the
terms of this Lease. Lessee agrees
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that, within 30 days after the close of any calendar quarter in which Lessee has
made any Required Alterations, Lessee will give written notice thereof to Lessor
describing, in reasonable detail, the Required Alterations and specifying the
cost thereof with respect to each Item of Equipment and the date or dates when
made. Any parts installed or replacements made by Lessee upon any Item of
Equipment pursuant to its obligation to maintain and keep the Equipment in good
order, operating condition and repair under Section 11 hereof shall be
considered accessions to such Item of Equipment and title thereto or security
interest therein shall be immediately vested in Lessor. Except as required or
permitted by the provisions of this Section 12, Lessee shall not modify an Item
of Equipment without the prior written authority and approval of Lessor.
13. Identification Marks; Inspection. Lessee agrees, upon the request of
Lessor, at Lessee's sole cost and expense, to place markings on the Equipment by
stencil or by a metal tag or plate affixed thereto showing plainly, distinctly
and conspicuously Lessor's security interest therein; provided, however, that
such identification markings are to be placed so as not to interfere with the
usefulness of such Item of Equipment. If during the Term any such identification
marking shall at any time be defaced or destroyed, Lessee shall immediately
cause such defaced or destroyed identification marking to be restored or
replaced. Lessee shall not allow the name of any Person to be placed upon any
Item of Equipment as a designation which might be interpreted as indicating a
claim of ownership thereto or a security interest therein by any Person other
than Lessor or any Assignee. Upon the request of Lessor, Lessee shall make the
Equipment available to Lessor for inspection (including, without limitation, the
use of photographic and video equipment) and shall also make Lessee's records
pertaining to the Equipment available to Lessor for inspection.
14. Assignment and Subleasing.
(a) By Lessee. LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR, SUBLEASE OR OTHERWISE RELINQUISH POSSESSION OF ANY ITEM OF EQUIPMENT, OR
ASSIGN, TRANSFER OR ENCUMBER ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER AND
ANY ATTEMPTED SUBLEASE, RELINQUISHMENT, ASSIGNMENT, TRANSFER OR ENCUMBERING BY
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LESSEE SHALL BE NULL AND VOID; PROVIDED LESSEE SHALL HAVE THE RIGHT TO ASSIGN
THE LEASE TO AN AFFILIATE OR TO A SUCCESSOR IN INTEREST TO LESSEE'S INFANT CARE
BUSINESS AND PROVIDED FURTHER THAT (i) LESSEE SHALL REMAIN LIABLE FOR THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS HEREUNDER (ii) ANY SUCH SUCCESSOR
SHALL COMPLY WITH ALL OF THE COVENANTS CONTAINED IN SECTION 21(b) HEREOF AND
SHALL HAVE AT LEAST THE SAME TANGIBLE NET WORTH AS LESSEE INMEDIATELY PRIOR TO
SUCH ASSIGNMENT.
(b) By Lessor. Lessor may, at any time, (i) without notice to, or the
consent of, Lessee sell, assign, transfer or grant a security interest in all or
any part of Lessor's rights, obligations, title or interest in, to and under the
Equipment or any Item(s) thereof, this Lease, any Lease Supplement and/or any
Rent and Supplemental Payments payable under this Lease or any Lease Supplement
to a commercial banking institution or any wholly owned subsidiary or affiliate
thereof; and (ii) with the prior written consent of Lessee which shall not be
unreasonably withheld, to any other Person. Any entity to whom any such sale,
assignment, transfer or grant of security interest is made is herein called an
"Assignee" and any such sale, assignment, transfer or grant of security interest
is herein called an "assignment". An Assignee may re-assign and/or grant a
security interest in any of such rights, obligations, title or interest assigned
to such Assignee. Lessee agrees to execute related acknowledgments and other
documents that may be reasonably requested by Lessor or an Assignee. Each
Assignee shall have and may enforce all of the rights and benefits of Lessor
hereunder with respect to the Item(s) of Equipment and related Lease
Supplement(s) covered by the assignment, including, without limitation, the
provisions of Section 8 hereof and Lessee's representations and warranties under
Section 21 hereof. Each such assignment shall be subject to Lessee's rights
hereunder. Lessee shall be under no obligation to any Assignee except upon
written notice of such assignment from Lessor or, in the case of a reassignment,
from Assignee. Upon written notice to Lessee of an assignment, Lessee agrees to
pay the Rent and Supplemental Payments with respect to the Item(s) of Equipment
covered by such assignment to such Assignee in accordance with the instructions
specified in such notice (which in all events must be consistent with the terms
of this Lease) without any abatement, defense, setoff, counterclaim or
recoupment whatsoever, and to otherwise
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comply with all notices, directions and demands which may be given by Lessor or
such Assignee with respect to such Item(s), in accordance with the provisions of
this Lease. Notwithstanding any such assignment, all obligations of Lessor to
Lessee under this Lease shall be and remain enforceable by Lessee against Lessor
and any Assignee to whom an assignment has been made.
15. Liens. Lessee will not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to (i) the Equipment or any Item
thereof, Lessor's title thereto, or any interest therein or (ii) this Lease or
any of Lessor's interests hereunder, except any Lien granted or placed thereon
by Lessor or any Assignee pursuant to Section 14(b) hereof. Lessee, at its own
expense, will promptly pay, satisfy and otherwise take such actions as may be
necessary to keep this Lease and the Equipment free and clear of, and to duly
discharge or eliminate or bond in a manner satisfactory to Lessor and each
Assignee, any such Lien not excepted above if the same shall arise at any time.
Lessee will notify Lessor and each Assignee in writing promptly upon becoming
aware of any tax or other Lien (other than any lien excepted above) that shall
attach to the Equipment or any Item of Equipment, and of the full particulars
thereof.
16. Loss, Damage or Destruction.
(a) Risk of Loss, Damage or Destruction. Lessee hereby assumes all risk
of loss, damage, theft, taking, destruction, confiscation, requisition or
commandeering, partial or complete, of or to each Item of Equipment, however
caused or occasioned, such risk to be borne by Lessee with respect to each Item
of Equipment from the date of this Lease, and continuing until such Item of
Equipment has been returned to Lessor in accordance with the provisions of
Section 6 hereof or has been purchased by Lessee in accordance with the
provisions of Section 28 hereof. Lessee agrees that no occurrence specified in
the preceding sentence shall impair, in whole or in part, any obligation of
Lessee under this Lease, including, without limitation, the obligation to pay
Rent.
(b) Payment of Casualty Loss Value Upon an Event of Loss. If an Event of
Loss occurs with, respect to an Item of Equipment during the Term thereof,
Lessee shall give Lessor prompt written
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notice thereof and shall pay to Lessor on the Casualty Loss Value Payment Date
next following the date of such Event of Loss (or on the last day of the Term if
there is no succeeding Casualty Loss Value Payment Date) the sum of (i) all
unpaid Interim Rent and Basic Rent payable for such Item of Equipment for any
Rental Period prior to the Rental Period in which the Event of Loss has
occurred, plus (ii) (x) if Basic Rent for such Item of Equipment is payable in
advance, the Casualty Loss Value of such Item of Equipment determined as of the
Casualty Loss Value Payment Date next preceding or coincident with the date of
such Event of Loss, plus the Basic Rent payable for such Item for the Rental
Period in which such Event of Loss has occurred if such Basic Rent was not paid
on the Rent Payment Date therefor, or (y) if Basic Rent for such Item is payable
in arrears, the Casualty Loss Value of such Item of Equipment determined as of
the Casualty Loss Value Payment Date next following the date of such Event of
Loss, plus the Basic Rent payable for such Item of Equipment for the Rental
Period in which such Event of Loss has occurred if such Casualty Loss Value
Payment Date for such Item is a Rent Payment Date, plus (iii) all other
Supplemental Payments due for such Item of Equipment as of the date of payment
of the amounts specified in the foregoing clauses (i) and (ii). Any payments
received at any time by Lessor or by Lessee from any insurer or other party
(except Lessee) as a result of the occurrence of such Event of Loss will be
applied in reduction of Lessee's obligation to pay the foregoing amounts, if not
already paid by Lessee, or, if already paid by Lessee, will be applied to
reimburse Lessee for its payment of such amount with the balance remaining
payable to the Lessee, unless an Event of Default shall have occurred and be
continuing in which case such balance shall be payable to Lessee only upon
payment to Lessor of all amounts set forth in Section 23(c) hereof. Upon payment
in full of such Casualty Loss Value, Basic Rent, Interim Rent (if applicable)
and Supplemental Payments, (A) the obligation of Lessee to pay Rent hereunder
with respect to such Item of Equipment shall terminate and the Term of such Item
shall terminate, and (E) Lessee shall, as agent for Lessor, as soon as
practicable, dispose of such Item or Items of Equipment in a manner reasonably
acceptable to Lessor.
(c) Application of Payments Not Relating to an Event of Loss. Any
payments (including, without limitation, insurance proceeds) received at any
time by Lessor or Lessee from any
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governmental authority or other party with respect to any loss or damage to any
Item or Items of Equipment not constituting an Event of Loss, will be applied
directly in payment of repairs or for replacement of property in accordance with
the provisions of Section 11 and 12 hereof, if not already paid by Lessee, or if
already paid by Lessee, shall be applied to reimburse Lessee for such payment,
and any balance remaining after compliance with the provisions of said Sections
with respect to such loss or damage shall be retained by Lessee, unless an Event
of Default shall have occurred and be continuing in which such case such balance
shall be payable to Lessee only upon payment to Lessor of all amounts set forth
in Section 23(c) hereof.
17. Insurance. Lessee will cause to be carried and maintained, at its sole
expense, with respect to the Equipment at all times during the Term thereof and
until the Equipment has been returned to Lessor (a) physical damage insurance
(including theft and collision insurance in the case of all Items of Equipment
consisting of motor vehicles) insuring against all risks of physical loss or
damage to the Equipment, in an amount not less than the greater of the Casualty
Loss Value of the Equipment or the replacement value of the Equipment, and (b)
insurance against liability for bodily injury, death and property damage
resulting from the use and operation of the Equipment in an amount not less than
$5,000,000.00 per occurrence, or such higher amount as Lessor may, at any time
reasonably request, in each case with exclusions and deductibles acceptable to
Lessor and no greater than those applicable to insurance on similar equipment
owned by Lessee. Such insurance policy or policies will name Lessor and each
Assignee as the sole loss payees, as their interests may appear, on all policies
referred to in clause (a) of the preceding sentence, and will name Lessor and
each Assignee as additional insureds on all policies referred to in clause (b)
of the preceding sentence. Such policies will provide that the same may not be
invalidated against Lessor or any Assignee by reason of any violation of a
condition or breach of warranty of the policies or the application therefor by
Lessee, that the policies may be cancelled or materially altered or reduced in
coverage (except as otherwise permitted under the terms of this Lease) by the
insurer only after thirty (30) days' prior written notice to Lessor and each
Assignee, and that the insurer will give written notice to Lessor and each
Assignee in
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the event of nonpayment of premium by Lessee when due. The policies of insurance
required under this Section shall be valid and enforceable policies issued by
insurers of recognized responsibility acceptable to Lessor and each Assignee and
authorized to do an insurance business in the state in which each Item of
Equipment is located. In the event that any of such policies referred to in
clause (b) of the first sentence of this Section shall now or hereafter provide
coverage on a "claims-made" basis, Lessee shall continue to maintain such
policies in effect for a period of not less than three (3) years after the
expiration of the Term of the last Item of Equipment leased to Lessee hereunder.
Upon the execution of this Lease and thereafter not less than thirty (30) days
prior to the expiration dates of any expiring policies theretofore furnished
under this Section, certificates of the insurance coverage required by this
Section and, if requested by Lessor or any Assignee, copies of the policies
evidencing such insurance coverage, shall be delivered by Lessee to Lessor and
each other named loss payee and/or additional insured. Any certificate of
insurance issued with respect to a blanket policy covering other equipment not
subject to this Lease shall specifically describe the Equipment as being
included therein and covered thereby to the full extent of the coverages and
amounts required hereunder. If Lessee shall fail to cause the insurance required
under this Section to be carried and maintained, Lessor or any Assignee may
provide such insurance and Lessee shall reimburse Lessor or any such Assignee,
as the case may be, upon demand for the cost thereof as a Supplemental Payment
hereunder.
18. General Tax Indemnity. Lessee agrees to pay, defend and indemnify and
hold Lessor, each Assignee and their respective successors and assigns harmless
on an after-tax basis from any and all Federal, state, local and foreign taxes,
fees, withholdings, levies, imposts, duties, assessments and charges of any kind
and nature whatsoever, together with any penalties, fines or interest thereon
(herein called "taxes or other impositions") howsoever imposed, whether levied
or imposed upon or asserted against Lessor, any Assignee, Lessee, the Equipment,
any Item of Equipment, or any part thereof, by any Federal, state or local
government or taxing authority in the United States, or by any taxing authority
or governmental subdivision of a foreign country, upon or with respect to (a)
the Equipment, or any Item
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of Equipment or any part thereof, (b) the manufacture, construction, ordering,
purchase, ownership, delivery, leasing, subleasing, releasing, possession, use,
maintenance, registration, reregistration, titling, retitling, licensing,
documentation, return, repossession, sale or other application or disposition of
the Equipment, or any Item of Equipment or any part thereof, (c) the rentals,
receipts or earnings arising from the Equipment or any Item of Equipment or any
part thereof, or (d) this Lease, each Lease Supplement, the Rent and/or
Supplemental Payments payable by Lessee hereunder; provided, however, that the
foregoing indemnity shall not apply to any taxes or other impositions to the
extent based upon or measured by Lessor's or any Assignee's net income, and
which are imposed or levied by any Federal, state or local taxing authority in
the United States. Lessee will promptly notify Lessor of all reports or returns
required to be made with respect to any tax or other imposition with respect to
which Lessee is required to indemnify hereunder, and will promptly provide
Lessor with all information necessary for the making and timely filing of such
reports or returns by Lessor. If Lessor requests that any such reports or
returns be prepared and filed by Lessee, Lessee will prepare and file the same
if permitted by applicable law to file the same, and if not so permitted, Lessee
shall prepare such reports or returns for signature by Lessor, and shall forward
the same, together with immediately available funds for payment of any tax or
other imposition due, to Lessor, at least ten (10) days in advance of the date
such payment is to be made. Upon written request, Lessee shall furnish Lessor
with copies of all paid receipts or other appropriate evidence of payment for
all taxes or other impositions paid by Lessee pursuant to this Section 18. All
of the indemnities contained in this Section 18 shall continue in full force and
effect notwithstanding the expiration or earlier termination of this Lease in
whole or in part, including the expiration or termination of the Term with
respect to any Item (or all) of the Equipment, and are expressly made for the
benefit of, and shall be enforceable by, Lessor and each Assignee.
19. Indemnification. Lessee hereby assumes liability for, and does hereby
agree to indemnify, protect, save, defend, and hold harmless Lessor, each
Assignee, and their respective officers, directors, stockholders, successors,
assigns, agents
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and servants (each such party being herein, for purposes of this Section 19,
called an "indemnified party") on an after-tax basis from and against any and
all obligations, fees, liabilities, losses, damages, penalties, claims, demands,
actions, suits, judgments, costs and expenses, including reasonable legal
expenses, of every kind and nature whatsoever, imposed on, incurred by, or
asserted against any indemnified party, in any way relating to or arising out of
(a) the manufacture, construction, ordering, purchase, acceptance or rejection,
ownership, titling or retitling, registration or reregistration, delivery,
leasing, subleasing, releasing, possession, use, operation, storage, removal,
return, repossession, sale or other disposition of the Equipment or any Item of
Equipment, or any part thereof, including, without limitation, any of such as
may arise from (i) loss or damage to any property or death or injury to any
persons, (ii) patent or latent defects in the Equipment (whether or not
discoverable by Lessee or any indemnified party), (iii) any claims based on
strict liability in tort, (iv) any claims based on patent, trademark, tradename
or copyright infringement, and (v) any claims based upon any non-compliance with
or violation of any environmental control, noise or pollution laws, rules,
regulations or requirements, including, without limitation, all fines and
penalties arising from violations of or noncompliance with such requirements or
failure to report discharges, and the costs of clean-up of any discharge; or (b)
any failure on the part of Lessee to perform or comply with any of the terms of
this Lease; or (c) any power of attorney issued to Lessee to license, relicense,
title, retitle, register or reregister Items of Equipment subject to motor
vehicle titling and registration laws, and any towing charges, parking tolls,
fines, parking and speeding tickets, odometer certifications and other civil and
criminal motor vehicle violations with respect to any such Item, and all
penalties and interest applicable thereto. Lessee shall give each indemnified
party prompt notice of any occurrence, event or condition known to Lessee as a
consequence of which any indemnified party may be entitled to indemnification
hereunder. Lessee shall forthwith upon demand of any such indemnified party
reimburse such indemnified party for amounts expended by it in connection with
any of the foregoing or pay such amounts directly. Lessee shall be subrogated to
an indemnified party's rights in any matter with respect to which Lessee has
actually reimbursed such indemnified party for amounts
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expended by it or has actually paid such amounts directly pursuant to this
Section 19. In case any action, suit or proceeding is brought against any
indemnified party in connection with any claim indemnified against hereunder,
such indemnified party will, promptly after receipt of notice of the
commencement of such action, suit or proceeding, notify Lessee thereof,
enclosing a copy of all papers served upon such indemnified party, but failure
to give such notice or to enclose such papers shall not relieve Lessee from any
liability hereunder unless (and only to the extent that) such failure
substantively affects the outcome of any such action, suit or proceeding.
Lessee may, and upon such indemnified party's request will, at Lessee's expense,
resist and defend such action, suit or proceeding, or cause the same to be
resisted or defended by counsel selected by Lessee and reasonably satisfactory
to such indemnified party and in the event of any failure by Lessee to do so,
Lessee shall pay all costs and expenses (including, without limitation,
reasonable attorney's fees and expenses) incurred by such indemnified party in
connection with such action, suit or proceeding. The provisions of this Section
19, and the obligations of Lessee under this Section 19, shall apply from the
date of the execution of this Lease notwithstanding that the Term may not have
commenced with respect to any Item of Equipment, and shall survive and continue
in full force and effect notwithstanding the expiration or earlier termination
of this Lease in whole or in part, including the expiration of termination of
the Term with respect to any Item (or all) of the Equipment, and are expressly
made for the benefit of, and shall be enforceable by, each indemnified party.
20. NO WARRANTIES. LESSOR HEREBY LEASES THE EQUIPMENT TO LESSEE AS-IS AND
EXPRESSLY DISCLAIMS AND MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR
IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY,
DURABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF, OR ANY OTHER
MATTER CONCERNING THE EQUIPMENT. LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING ANY
CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT
HAVE AGAINST LESSOR FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL
DAMAGE) OR EXPENSE CAUSED BY THE EQUIPMENT OR BY LESSEE'S LOSS OF USE THEREOF
FOR ANY REASON WHATSOEVER, INCLUDING COMPLIANCE WITH ENVIRONMENTAL LAWS
EXCEPTING LOSSES RESULTING FROM A BREACH BY
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LESSOR OF ITS OBLIGATIONS TO LESSEE HEREUNDER. So long and only so long as an
Event of Default shall not have occurred and be continuing, and so long and only
so long as the Equipment shall be subject to this Lease and Lessee shall be
entitled to possession of the Equipment hereunder, Lessor authorizes Lessee, at
Lessee's expense, to assert for Lessor's account, all rights and powers of
Lessor under any manufacturer's, vendor's or dealer's warranty on the Equipment
or any part thereof; provided, however, that Lessee shall indemnify, protect,
save, defend and hold harmless Lessor from and against any and all claims, and
all costs, expenses, damages, losses and liabilities incurred or suffered by
Lessor in connection therewith, as a result of, or incident to, any action by
Lessee pursuant to the foregoing authorization.
21. Lessee's Representations and Warranties; Covenants.
(a) Representations and Warranties. Lessee hereby represents and warrants
that (a) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation set forth above, and is
qualified to do business in, and is in good standing in, each state or other
jurisdiction in which the nature of its business makes such qualification
necessary (including each state or other jurisdiction in which the Equipment or
any part thereof will be located); (b) Lessee has the corporate power and
authority to execute and perform this Lease and to lease the Equipment
hereunder, and has duly authorized the execution, delivery and performance of
this Lease; (c) the leasing of the Equipment from Lessor by Lessee, the
execution and delivery of this Lease, each Lease Supplement, and other related
instruments, documents and agreements, and the compliance by Lessee with the
terms hereof and thereof, and the payments and performance by Lessee of all of
its obligations hereunder and thereunder (i) have been duly and legally
authorized by appropriate corporate action taken by Lessee, (ii) are not in
contravention of, and will not result in a violation or breach of, any of the
terms of Lessee's Certificate of Incorporation (or equivalent document), its
By-Laws, or of any provisions relating to shares of the capital stock of Lessee,
and (iii) will not violate or constitute a breach of any provision of law, any
order of any court or other agency of government, or any indenture, agreement or
other
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instrument to which Lessee is a party, or by or under which Lessee or any of
Lessee's property is bound, or be in conflict with, result in a breach of, or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or instrument, or result in the creation or imposition of
any Lien upon any of Lessee's property or assets; (d) this Lease has been
executed by the duly authorized officer or officers of Lessee and delivered to
Lessor and constitutes, and when executed by the duly authorized officer or
officers of Lessee and delivered to Lessor each Lease Supplement and related
instruments, documents and agreements with respect to each Item of Equipment
will constitute, the legal, valid and binding obligations of Lessee, enforceable
in accordance with their terms; (e) neither the execution and delivery of this
Lease or any Lease Supplement by Lessee, nor the payment and performance by
Lessee of all of its obligations hereunder and thereunder, requires the consent
or approval of, the giving of notice to, or the registration, filing or
recording with, or the taking of any other action in respect of, any Federal,
state, local or foreign government or governmental authority or agency or any
other Person; (f) no mortgage, deed of trust, or other Lien which now covers or
affects, or which may hereafter cover or affect, any property or interest
therein of Lessee, now attaches or hereafter will attach to the Equipment or any
Item of the Equipment, the proceeds thereof or this Lease, or in any manner
affects or will affect adversely Lessor's rights and security interest therein;
(g) Lessee holds all licenses, certificates and permits from governmental
authorities necessary to use and operate the Equipment in accordance with the
provisions of this Lease; (h) there is no litigation or other proceeding now
pending or, to the best of Lessee's knowledge, threatened, against or affecting
Lessee, in any court or before any regulatory commission, board or other
administrative governmental agency which would directly or indirectly adversely
affect or impair the title of Lessor to the Equipment, or which, if decided
adversely to Lessee, would materially adversely affect the business operations
or financial condition of Lessee; and (i) all balance sheets, statements of
profit and loss and other financial data that have been delivered to Lessor with
respect to Lessee (x) are complete and correct in all material respects, (y)
accurately present the financial condition of Lessee on the dates for which, and
the results of its operations for the periods for which, the same have been
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furnished, and (z) have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods covered
thereby; and there has been no material adverse change in the condition of
Lessee, financial or otherwise, since the date of the most recent financial
statements delivered to Lessor with respect to Lessee.
(b) Covenants. Lessee hereby agrees that during the term of this Lease,
Guarantor shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly:
(i) Interest Coverage. Permit, for any period of four
consecutive fiscal quarters ending on or about any "Test Date" set
forth below (a "Test Period"), the ratio of (x) Consolidated EBITDA
of Guarantor less Consolidated Capital Expenditures of Guarantor
for such Test Period to (y) Consolidated Interest Expense of
Guarantor for such period to be less than the ratio set forth
opposite such Test Date below:
Test Date Interest Coverage Ratio
--------- -----------------------
June 30, 1996 1.30 to 1.00
September 30, 1996 1.30 to 1.00
December 31, 1996 1.40 to 1.00
March 31, 1997 1.40 to 1.00
June 30, 1997 1.55 to 1.00
September 30, 1997 1.55 to 1.00
December 31, 1997 1.70 to 1.00
March 31, 1998 1.80 to 1.00
June 30, 1998 1.80 to 1.00
September 30, 1998 1.80 to 1.00
December 31, 1998 2.05 to 1.00
March 31, 1999 2.05 to 1.00
June 30, 1999 2.05 to 1.00
September 30, 1999 2.05 to 1.00
December 31, 1999 2.30 to 1.00
March 31, 2000 2.30 to 1.00
June 30, 2000 2.30 to 1.00
September 30, 2000 2.30 to 1.00
December 31, 2000 2.80 to 1.00
March 31, 2001 2.80 to 1.00
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Test Date Interest Coverage Ratio
--------- -----------------------
June 30, 2001 2.80 to 1.00
September 30, 2001 2.80 to 1.00
December 31, 2001 2.80 to 1.00
March 31, 2002 3.40 to 1.00
June 30, 2002 3.40 to 1.00
September 30, 2002 3.40 to 1.00
December 31, 2002 3.40 to 1.00
March 31, 2003 3.40 to 1.00
June 30, 2003 3.40 to 1.00
September 30, 2003 3.40 to 1.00
December 31, 2003 3.40 to 1.00
March 31, 2004 3.40 to 1.00
(ii) Funded Debt Ratio. Permit for any period of four
consecutive fiscal quarters ending on or about any "Test Date" set
forth below (a "Test Period"), the ratio of (x) Consolidated Funded
Indebtedness of Guarantor on the last day of such Test Period to
(y) Consolidated EBITDA for such Test Period to be greater than
the ratio set forth opposite such Test Date below:
Test Date Funded Debt Ratio
--------- -----------------
June 30, 1996 7.25 to 1.00
September 30, 1996 6.90 to 1.00
December 31, 1996 6.60 to 1.00
March 31, 1997 6.60 to 1.00
June 30, 1997 6.60 to 1.00
September 30, 1997 5.90 to 1.00
December 31, 1997 5.75 to 1.00
March 31, 1998 5.75 to 1.00
June 30, 1998 5.75 to 1.00
September 30, 1998 5.40 to 1.00
December 31, 1998 5.20 to 1.00
March 31, 1999 5.20 to 1.00
June 30, 1999 5.20 to 1.00
September 30, 1999 4.80 to 1.00
December 31, 1999 4.70 to 1.00
March 31, 2000 4.70 to 1.00
June 30, 2000 4.70 to 1.00
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Test Date Funded Debt Ratio
--------- -----------------
September 30, 2000 4.40 to 1.00
December 31, 2000 4.00 to 1.00
March 31, 2001 4.00 to 1.00
June 30, 2001 4.00 to 1.00
September 30, 2001 3.50 to 1.00
December 31, 2001 3.50 to 1.00
March 31, 2002 3.50 to 1.00
June 30, 2002 3.50 to 1.00
September 30, 2002 3.50 to 1.00
December 31, 2002 3.50 to 1.00
March 31, 2003 3.50 to 1.00
June 30, 2003 3.50 to 1.00
September 30, 2003 3.50 to 1.00
December 31, 2003 3.50 to 1.00
March 31, 2004 3.50 to 1.00
For purposes of this Section 21(b) the following terms shall have the
following meanings:
"Subsidiary" as to any Person, a corporation, partnership or other entity
of which shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person.
Consolidated Capital Expenditures" of any Person for any period, the amount of
expenditures of such Person, determined on a consolidated basis in accordance
with GAAP, for such period in respect of the purchase or other acquisition of
fixed or capital assets (excluding (i) any such asset acquired in connection
with normal replacement and maintenance programs properly charged to current
operations, (ii) any such asset purchased with the net cash proceeds of the sale
or disposition of assets within 12 months after such sale or disposition, (iii)
any such asset acquired in connection with a business acquisition or (iv) any
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expenditures from the proceeds of casualty insurance used to repair or replace
the assets affected by such casualty loss).
"Consolidated EBITDA" of any Person for any period, Consolidated Net Income of
such Person for such period plus, without duplication and to the extent
reflected as a charge in the statement of such Consolidated Net Income, the sum
of (a) total income and franchise tax expense, (b) interest expense net of any
payments or receipts under any Interest Rate Agreements, amortization or
write-off of debt discount and debt issuance costs and commissions and discounts
and other fees and charges associated with Indebtedness, (c) depreciation and
amortization expense, (d) the expenses associated with amortization of
intangibles (including, but not limited to, goodwill) and organization costs,
(e) write-off of goodwill and other non cash charges, (f) any extraordinary and
unusual losses (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income, losses on the sale of
assets outside the ordinary course of business) and (g) any similar non-cash
charges, minus any extraordinary and unusual gains (including, whether or not
otherwise includable as a separate item in the statement of such Consolidated
Net Income, gains on the sale of assets outside the ordinary course of
business); provided, that for purposes of this subsection (b), if a business
acquisition or investment occurs during any period, Consolidated EBITDA of the
Guarantor for such period shall include the pro forma Consolidated EBITDA for
such period of the business acquired or investment made after giving effect to
management's reasonable estimate of the performance of such business or
investment as if such business had been acquired or investment made as of the
beginning of such period.
"Consolidated Funded Indebtedness" of any Person, as of the date of
determination, all Indebtedness (other than under any Interest Rate Agreement)
of such Person and its Subsidiaries which other Indebtedness by its terms
matures more than one year after the date of calculation, and any such
Indebtedness maturing within one year from such date which is renewable or
extendable at the option of the obligor to a date more than one year from such
date.
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"Consolidated Interest Expense" of any Person for any period, the amount of
interest expense payable in cash (excluding any amounts paid or payable in
additional securities of such Person) net of (i)any payments or receipts under
any Interest Rate Agreements of such Person and (ii) any consolidated interest
income of such Person, determined on a consolidated basis in accordance with
GAAP (but excluding the amortization of deferred financing costs), for such
period on the aggregated principal amount of its Indebtedness.
"Consolidated Net Income", of any Person for any period, net income of such
person, determined on a consolidated basis in accordance with GAAP.
"GAAP" generally accepted accounting principles in the United States of America
in effect from time to time.
"Interest Rate Agreement" with respect to any Person, any interest rate swap
agreement, interest rate future, interest rate option, interest rate cap or
other interest rate hedge arrangement, to or under which such Person is a party
or beneficiary.
"Indebtedness" of any Person at any date, (a) all indebtedness of such Person
for borrowed money or for the deferred purchase price of property or services
(other than current trade liabilities and accrued expenses incurred in the
ordinary course of business and payable in accordance with customary practices),
(b) any other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in respect of banker's
acceptances issued or created for the account of such Person and (e) all
liabilities secured by any Lien on any property owned by such person even though
such Person has not assumed or otherwise become liable for the payment thereof
(it being understood that Indebtedness shall not include (i) any obligations
under any Interest Rate Agreement and (ii) any Guarantee Obligation). For
purposes of any calculation thereunder, the amount of any Indebtedness
outstanding at any time, except Indebtedness under, clause (e) of this
definition, shall be deemed to be equal to the than outstanding principal amount
of such Indebtedness (including, with respect to Financing
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Leases, the implied principal amount thereof calculated in accordance with GAAP)
and the amount of any Indebtedness outstanding at any time under clause (e) of
this definition shall be equal to the lesser of (i) the than outstanding
principal amount of, and all accrued and unpaid interest on, the liability
secured by the applicable property and (ii) the then fair market value of such
property.
"Financing Lease" any lease of property, real or personal, the obligations of
the Guarantor in respect of which are required in accordance with GAAP to be
capitalized on a balance sheet of the Guarantor.
"Guarantee Obligation" as to any Person ("the guaranteeing person") any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity
or similar obligation, in either case guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations (the "primary
obligations") of any third person (the "primary obligor") in any manner, whether
directly or indirectly, including without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor or otherwise maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the owner of any such primary obligation against loss
in respect thereof; provided, however, that the term Guarantee Obligation shall
not include endorsements of instruments for deposit for collection in the
ordinary course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person
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made be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall not be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by
Guarantor in good faith.
22. Events of Default. Any of the following events shall constitute an
Event of Default:
(a) Lessee shall fail to make any payment of Interim Rent or Basic Rent
or any Supplemental Payment within five (5) days after written notice from
Lessor to Lessee that the same is due and payable; or
(b) Lessee shall fail to observe or perform in any material manner any of
the covenants, agreements or obligations of Lessee set forth in Sections 6,
14(a), 17, 28 or 29 hereof; or
(c) Lessee shall fail to perform or observe any other covenant,
condition, or agreement to be performed or observed by it under this Lease, or
in any agreement or certificate furnished to Lessor or any Assignee in
connection herewith, and such failure shall continue unremedied for thirty (30)
days after written notice to Lessee specifying such failure and demanding the
same to be remedied, or if it cannot be remedied within 30 days, with due
diligence by the Lessee, then within a reasonable time thereafter but in no
event greater than 90 days; or
(d) Lessee (or any Guarantor) shall be in default (i) under any lease,
loan agreement or other agreement, instrument or document heretofore, now or
hereafter entered into between Lessee (or any Guarantor) and Lessor, or between
Lessee (or any Guarantor) and any parent, subsidiary or affiliate of Lessor, and
such default shall have been declared by the party entitled to declare the same,
or (ii) under any promissory note heretofore, now or hereafter executed by
Lessee (or any Guarantor) and delivered to any party referred to in clause (i)
above evidencing a loan made by any such party to Lessee (or any Guarantor) or
(iii) in the payment or performance of any obligation of Lessee (or of any
Guarantor) to any Person (other than Lessor, or any
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parent, subsidiary or affiliate of Lessor, and other than any Guarantor) in
excess of $1,000,000.00 (excluding any such non-payment or non-performance which
is being contested in good faith by Lessee or any Guarantor by appropriate
proceedings and the liability for which has not been reduced to judgment)
relating to the payment of borrowed money or the payment of rent or hire under
any lease agreement, and such obligation shall be declared to be due and payable
or otherwise accelerated prior to the maturity thereof; or (iv) an attachment or
other Lien shall be filed or levied against a substantial part of the property
of Lessee (or any Guarantor), and such judgment shall continue unstayed and in
effect, or such attachment or Lien shall continue undischarged or unbonded, for
a period of 90 days; except, in the cases of (i), (ii) and (iii) above, where
such default continues for at least 90 days and has not been waived by the other
party or cured by Lessee; or
(e) Lessee (or any Guarantor) shall become insolvent or make an
assignment for the benefit of creditors or consent to the appointment of a
trustee or receiver; or a trustee or a receiver shall be appointed for Lessee
(or for any Guarantor) or for a substantial part of its property without its
consent and shall not be dismissed for a period of 60 days; or any petition for
the relief, reorganization or arrangement of Lessee (or any Guarantor), or any
other petition in bankruptcy or for the liquidation, insolvency or dissolution
of Lessee (or any Guarantor), shall be filed by or against Lessee (or any
Guarantor) and, if filed against Lessee (or any Guarantor), shall be consented
to or be pending and not dismissed for a period of 60 days, or an order for
relief under any bankruptcy or insolvency law shall be entered by any court or
governmental authority of competent jurisdiction with respect to Lessee (or any
Guarantor); or any execution or writ or process shall be issued under any action
or proceeding against Lessee whereby any of the Equipment may be taken or
restrained; or Lessee's (or any Guarantor's) corporate existence shall cease; or
Lessee (or any Guarantor) shall (whether in one transaction or a series of
transactions), without Lessor's prior written consent, sell, transfer, dispose
of, pledge or otherwise encumber, all or substantially all of its assets or
property, or consolidate or merge with any other entity, or become the subject
of, or engage in, a leveraged buy-out or any other form of corporate
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reorganization unless (i) the Person assuming the obligations of Lessee or
Guarantor shall expressly assume in writing all of the obligations of the Lessee
hereunder and Guarantor under the Guaranty, including, without limitation,
compliance with the covenants contained in Section 21(b) hereof; (ii) shall have
at least the same tangible net worth as the Guarantor had immediately prior to
such event; or
(f) any representation, warranty, statement or certification made by
Lessee under this Lease or in any Lease Supplement or in any document or
certificate furnished Lessor or any Assignee in connection herewith or pursuant
hereto (or made by any Guarantor under any Guaranty or other document or
certificate furnished to Lessor or any Assignee by any Guarantor), shall prove
to be untrue or incorrect in any material respect when made, or shall be
breached and not remedied in accordance with this Lease.
23. Remedies Upon Default. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may
exercise one or more of the following remedies as Lessor in its sole discretion
shall elect:
(a) Lessor may terminate or cancel this Lease, without prejudice to any
other remedies of Lessor hereunder, with respect to all or any Item of
Equipment, and whether or not this Lease has been so terminated, may enter the
premises of Lessee or any other party to take immediate possession of the
Equipment and remove all or any Item of Equipment by summary proceedings or
otherwise, or may cause Lessee, at Lessee's expense, to store, maintain,
surrender and deliver possession of the Equipment or such Item in the same
manner as provided in Section 6 hereof, all without liability to Lessor for or
by reason of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise except for gross
negligence;
(b) Lessor may hold, keep idle or lease to others the Equipment or any
Item of Equipment, as Lessor in its sole discretion may determine, free and
clear of any rights of Lessee and without any duty to account to Lessee with
respect to such action or inaction or for any proceeds with respect thereto,
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except that Lessee's obligation to pay Basic Rent for any Rental Periods
commencing after Lessee shall have been deprived of possession pursuant to this
Section 23 shall be reduced by the net proceeds, if any, received by Lessor from
leasing the Equipment or such Item to any Person other than Lessee for the same
Rental Periods or any portion thereof;
(c) Lessor may sell the Equipment or any Item of Equipment at public or
private sale as Lessor may determine, free and clear of any rights of Lessee,
and Lessee shall pay to Lessor, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Basic Rent due for the Equipment or Item(s) so
sold for any Rental Period commencing after the date on which such sale occurs),
the sum of (i) all unpaid Interim Rent and Basic Rent payable for each Item of
Equipment for all Rental Periods through the date on which such sale occurs,
plus (ii) an amount equal to the excess, if any, of (x) the Casualty Loss Value
of the Item(s) of Equipment so sold, computed as of the Rent Payment Date
coincident with or next preceding the date of such sale, over (y) the net
proceeds of such sale, plus interest at the rate specified in Section 25 hereof
on the amount of such excess from the Rent Payment Date as of which such
Casualty Loss Value is computed until the date of actual payment, plus (iii) all
unpaid Supplemental Payments due with respect to each Item of Equipment so sold;
(d) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under subsection (a) or (b) above with
respect to any Item(s) of Equipment, Lessor, by written notice to Lessee
specifying a payment date, may demand that Lessee pay to Lessor, and Lessee
shall pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent
due for any Item(s) of Equipment for any Rental Period commencing after the
payment date specified in such notice and in lieu of the exercise by Lessor of
its remedies under subsection (b) above in the case of a re-lease of such
Item(s) or under subsection (c) above with respect to a sale of such Item(s)),
the sum of (i) all unpaid Interim Rent and Basic Rent payable for such Item(s)
for all Rental Periods through the payment date specified in such notice, plus
(ii) all unpaid Supplemental Payments due with respect to such Item(s) as
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of the payment date specified in such notice, plus (iii) an amount, with respect
to each such Item, equal to the Casualty Loss Value of such Item(s) computed as
of the Rent Payment Date coincident with or next preceding the payment date
specified in such notice; provided, however, that if Lessee shall pay the
foregoing amounts to Lessor in full, Lessor shall convey to Lessee all of its
right, title and interest in and to the Equipment to Lessee without recourse or
warranty whatsoever; and
(e) Lessor may exercise any other right or remedy which may be available
to it under applicable law or proceed by appropriate court action to enforce the
terms hereof or to recover without duplication, damages for the breach hereof or
to rescind this Lease.
In addition, Lessee shall be liable for all costs and expenses, including
reasonable attorney's fees, incurred by Lessor or any Assignee by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies with
respect thereto, including all costs and expenses incurred in connection with
the return of the Equipment in accordance with Section 6 hereof or in placing
the Equipment in the condition required by said Section, and for any
Reinvestment Premium. Except as otherwise expressly provided above, no remedy
referred to in this Section 23 is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity; and the exercise or beginning of
exercise by Lessor of any one or more of such remedies shall not constitute the
exclusive election of such remedies and shall not preclude the simultaneous or
later exercise by Lessor of any or all of such other remedies. No express or
implied waiver by Lessor of any Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Event of Default.
24. Lessor's Right to Perform for Lessee. If Lessee fails to make any
Supplemental Payment required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor may itself, after
notice to Lessee, make such payment or perform or comply with such agreement,
and the amount of such payment and the amount of the reasonable expenses of
Lessor incurred in connection with such
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payment or the performance of or compliance with such agreement, as the case may
be, together with interest thereon at the rate specified in Section 25 hereof,
shall, if not paid by Lessee to Lessor on demand, be deemed a Supplemental
Payment hereunder; provided, however, that no such payment, performance or
compliance by Lessor shall be deemed to cure any Event of Default hereunder.
25. Late Charges. Lessee shall pay to Lessor, upon demand, to the extent
permitted by applicable law, interest on any installment of Basic Rent or
Interim Rent not paid when due, and on any Supplemental Payment or other amount
payable under this Lease which is not paid when due, for any period for which
any of the same is overdue (without regard to any grace period) at a rate equal
to the lesser of (a) twelve percent (12%) per annum, or (b) the maximum rate of
interest permitted by law.
26. Further Assurances. Lessee will promptly and duly execute and deliver
to Lessor and any Assignee such other documents and assurances, including,
without limitation, such amendments to this Lease as may be reasonably required
by Lessor and by any Assignee, and Uniform Commercial Code financing statements
and continuation statements, and will take such further action as Lessor or any
Assignee may from time to time reasonably request in order to carry out more
effectively the intent and purposes of this Lease and to establish and protect
the rights and remedies created or intended to be created in favor of Lessor and
of any Assignee and their respective rights, title and interests in and to the
Equipment.
27. Notices. All notices provided for or required under the terms and
provisions hereof shall be in writing, and any such notice shall be deemed given
when personally delivered or when deposited in the United States mails, with
proper postage prepaid, for first class certified mail, return receipt
requested, addressed (i) if to Lessor or Lessee, at their respective addresses
as set forth herein or at such other address as either of them shall, from time
to time, designate in writing to the other, and (ii) if to any Assignee, to the
address of such Assignee as such Assignee shall designate in writing to Lessor
and Lessee.
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28. Lessee's Renewal and Purchase Options; Third Party Sale.
(a) Lessee's Renewal Option. If this Lease shall not have been earlier
terminated, Lessee shall be entitled, at its option, to renew this Lease with
respect to all, but not less than all, Items of Equipment then subject to this
Lease for the Renewal Term(s) specified on the Related Exhibit A for such Item.
The first Renewal Term with respect to each such Item of Equipment will commence
at the expiration of the Basic Term of such Item, and each succeeding Renewal
Term will commence at the expiration of the next preceding Renewal Term. All of
the provisions of this Lease, including the Basic Rent Percentage, shall be
applicable during each Renewal Term for each such Item of Equipment, except that
Basic Rent during each Renewal Term shall be payable at the times and on the
Rent Payment Dates set forth on said Related Exhibit A. If Lessee intends not to
exercise said renewal option with respect to any of said Renewal Terms, Lessee
shall give written notice to Lessor to such effect at least one hundred eighty
(120) days prior to the expiration of the Basic Term of the Item(s) of Equipment
whose Basic Term first expires hereunder, in the case of the first Renewal Term,
and at least one hundred eighty (120) days prior to the expiration of the then
current Renewal Term of the Item(s) of Equipment whose Basic Term first expires
hereunder, in the case of the then next succeeding Renewal Term. If Lessee fails
to give such written notice to Lessor with respect to any of said Renewal Terms,
it shall be conclusively presumed that Lessee has elected to exercise said
renewal option with respect to said Renewal Term. In the event Lessee elects not
to exercise said renewal option (unless Lessor has otherwise agreed in writing
or Lessee has exercised its purchase option under Section 28(b) hereof) each
such Item of Equipment shall be returned to Lessor in accordance with the
provisions of Section 6(a) hereof (unless delivered to a bidder in accordance
with Section 28(c) hereof) and until each such Item has been so returned or
delivered Lessee shall continue to pay Lessor the Basic Rent for each such Item
as specified in Section 6(b) hereof.
(b) Lessee's Purchase Option. If this Lease shall not have been earlier
terminated, Lessee shall be entitled, at its option, upon written notice to
Lessor, as hereinafter provided, to
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purchase all, but not less than all, Items of Equipment then subject to this
Lease, on the Termination Date for each such Item of Equipment, for an amount
(the "Purchase Option Amount"), with respect to each Item of Equipment, payable
in immediately available funds, equal to the sum of (v) the Estimated Residual
Value of such Item of Equipment applicable to the Basic Term or Renewal Term
thereof then ending, plus (w) the Basic Rent due and payable for such Item of
Equipment on the Termination Date, if Basic Rent for such Item is payable in
arrears, plus (x) any applicable sales, excise or other taxes imposed as a
result of such sale (other than gross or net income taxes, attributable to such
sale), plus (y) any Supplemental Payments then due and owing to Lessor
hereunder, plus, in the event that Lessee exercises its purchase option
hereunder prior to the end of the Maximum Term, (z) the Reinvestment Premium.
Lessor's sale of each Item of Equipment shall be on an as-is, where-is basis,
without any representation or warranty by, or recourse to, Lessor. If Lessee
intends to exercise said purchase option, Lessee shall give written notice to
Lessor to such effect at least one hundred eighty (120) days prior to the
expiration of the Basic Term of the Item(s) of Equipment whose Basic Term first
expires hereunder, or, if Lessee has renewed this Lease pursuant to Section 28
(a) hereof, then at least one hundred eighty (120) days prior to the expiration
of the then current Renewal Term of the Item(s) of Equipment whose Basic Term
first expires hereunder. If Lessee gives such written notice to Lessor same
shall constitute a binding obligation of Lessee to purchase all of such Items of
Equipment and to pay Lessor the Purchase Option Amount on the Termination Date
thereof.
(c) Third Party Sale of Equipment.
(i) Remarketing Obligations. In the event Lessee does not exercise
either its option to renew this Lease or to purchase the Equipment pursuant to
this Section, then Lessee shall have the obligation during the last one hundred
eighty (120) days of the Basic Term, or the then current Renewal Term, if
applicable (the "Remarketing Period"), to obtain bona fide bids for not less
than all Items of Equipment then subject to this Lease from prospective
purchasers who are financially capable of purchasing such Items of Equipment for
cash on an as-is, where-is basis, without recourse or warranty. All bids
received by Lessee prior
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to the end of the Basic Term, or Renewal Term if applicable, of each such Item
of Equipment shall be immediately certified to Lessor in writing, setting forth
the amount of such bid and the name and address of the person or entity
submitting such bid. Notwithstanding the foregoing, Lessor shall have the right,
but not the obligation, to seek bids for the Equipment during the Remarketing
Period.
(ii) Sale of Equipment to Third Party Buyer. On the Termination
Date of each Item of Equipment, provided that all the conditions hereof have
been met, Lessor shall sell (or cause to be sold) all Items of Equipment then
subject to this Lease whose Term is then expiring, for cash to the bidder, if
any, who shall have submitted the highest bid during the Remarketing Period on
an as-is, where-is basis and without recourse or warranty, and upon receipt by
Lessor of the sales price, Lessor shall instruct Lessee to deliver and Lessee
shall deliver such Item(s) of Equipment to such bidder; provided, that (x) any
such sale to a third party shall be consummated, and the sales price for such
Item shall be paid to Lessor in immediately available funds, on or before the
Termination Date; and (y) Lessor shall not be obligated to sell such Equipment
(I) if the Net Proceeds of Sale of such Item(s) are less than the aggregate
Maximum Lessor Risk Amount applicable to such Item(s) as of the Termination Date
of such Item(s), or (II) if Lessor has not received the amounts, if any, payable
by Lessee pursuant to Section 29(a) and, if applicable, Section 29(c).
29. End of Term Rental Adjustment.
(a) Third Party Sale of Equipment. This Section 29(a) shall apply only
if, with respect to any Item(s) of Equipment, a sale of such Item(s) to a third
party pursuant to Section 28 (c) hereof has been consummated on the Termination
Date thereof. If the Net Proceeds of Sale of such Item(s) are less than the
aggregate Estimated Residual Value of such Item(s) as of such Termination Date,
Lessee shall, on the Termination Date, pay to Lessor as an End of Term Rental
Adjustment, in immediately available funds, an amount equal to such deficiency
(a "Deficiency") as an adjustment to the Rent payable under this Lease for such
Item, plus the Basic Rent due and payable for such Item of Equipment on the
Termination Date, if Basic Rent for such
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Item is payable in arrears, plus any Supplemental Payments then due and owing to
Lessor hereunder; provided, however, that if no Event of Default or event which,
with notice or passage of time or both would constitute an Event of Default,
shall have occurred and be continuing hereunder, the amount of the Deficiency
payable by Lessee with respect to such Item(s) shall not exceed the aggregate
Maximum Lessee Risk Amount then applicable to such Item(s). If the aggregate Net
Proceeds of Sale of all Item(s) of Equipment subject to this Lease exceed the
aggregate Estimated Residual Value of such Item(s) and if no Event of Default or
event which, with notice or passage of time or both would constitute an Event of
Default, shall have occurred and be continuing hereunder and Lessee shall have
paid Lessor on or before each Termination Date the Basic Rent due and payable
for the Item(s) of Equipment whose Term is expiring on such Termination Date, if
Basic Rent for such Item(s) is payable in arrears, plus all Supplemental
Payments then due and owing with respect to such Item(s), plus any amounts due
pursuant to Section 29(c) hereof, Lessor shall pay to Lessee on the Termination
Date of the Item(s) of Equipment whose Term expires last under this Lease an
amount equal to such excess as an adjustment to the Rent payable under this
Lease.
(b) Lessee Payment. If a sale of all Items of Equipment whose Term is
then expiring either to Lessee pursuant to Section 28(b) hereof or to a third
party pursuant to Section 28(c) hereof has not been consummated on the
Termination Date with respect thereto for any reason, then Lessee shall, on the
Termination Date of such Item(s), pay to Lessor as an End of Term Rental
Adjustment, in immediately available funds, as an adjustment to the Rent payable
under this Lease for such Item(s), an amount equal to (i) the Maximum Lessee
Risk Amount of all of such Item(s), if on such Termination Date no Event of
Default or event which, with notice or passage of time or both would constitute
an Event of Default, shall have occurred and be continuing hereunder, or (ii)
the Estimated Residual Value of all of such Items, if on such Termination Date
an Event of Default or event which, with notice or passage of time or both would
constitute an Event of Default, shall have occurred and be continuing hereunder,
plus, in either case, the Basic Rent due and payable for such Item(s) of
Equipment on such Termination Date, if Basic Rent for such Item(s) is payable in
arrears, plus all
-41-
<PAGE>
Supplemental Payments then due and owing with respect to such Item(s). Lessee
shall remain liable for the payment of, and upon the consummation by Lessor of
the sale of any Item(s) of Equipment after the Termination Date thereof, Lessee
shall pay, or reimburse Lessor for the payment of, all applicable sales, excise
or other taxes imposed as a result of such sale, other than gross or net income
taxes attributable to such sale, and such obligation shall survive the
termination of this Lease.
(c) Reinvestment Premium. In the event a Termination Date of any Item of
Equipment occurs prior to the last day of the Maximum Term hereof relating to
such Item, Lessee shall pay to Lessor on the Termination Date of such Item, in
immediately available funds, in addition to any other obligations hereunder, the
Reinvestment Premium relating to such Item.
(d) Certain Definitions.
(i) "End of Term Rental Adjustment" means the amounts payable
pursuant to Section 29(a) or, as applicable, 29(b).
(ii) "Net Proceeds of Sale" means with respect to each Item of
Equipment sold by Lessor to a third party pursuant to Section 28(c), the net
amount of the proceeds of sale of such Item, after deducting from the gross
proceeds of such sale (i) all sales taxes and other taxes (excluding income
taxes on or measured by Lessor's income) as may be applicable to the sale or
transfer of such Item, (ii) all fees, costs and expenses of such sale incurred
by Lessor and (iii) any other amounts for which, if not paid, Lessor would be
liable or which, if not paid, would constitute a Lien on such Item.
(e) Time of the Essence. The provisions of Sections 28 and 29 are of the
essence of this Lease, and time is of the essence for any payment and
performance of the obligations of Lessee set forth therein.
30. Financial Information. Lessee agrees to furnish Lessor (a) as soon as
available, and in any event within 120 days after the last day of each fiscal
year of Guarantor, a copy of the consolidated balance sheet of Guarantor and its
consolidated subsidiaries as of the end of such fiscal year, and related
-42-
<PAGE>
consolidated statements of income and retained earnings of Guarantor and its
consolidated subsidiaries for such fiscal year, certified by an independent
certified public accounting firm of recognized standing, each on a comparative
basis with corresponding statements for the prior fiscal year, and a copy of
Guarantor's form 10-K, if any, filed with the Securities and Exchange Commission
for such fiscal year; (b) within 45 days after the last day of each fiscal
quarter of Guarantor (except the last such fiscal quarter), a copy of the
balance sheet as of the end of such quarter, and statement of income and
retained earnings covering the fiscal year to date of Guarantor and its
consolidated subsidiaries, each on a comparative basis with the corresponding
period of the prior year, all in reasonable detail and certified by the
treasurer or principal financial officer of Guarantor, together with a copy of
Guarantor's form 10-Q, if any, filed with the Securities and Exchange Commission
for such quarterly period; (c) contemporaneously with its transmittal to each
stockholder of Guarantor and to the Securities and Exchange Commission, all such
other financial statements and reports as Guarantor shall send to its
stockholders and to the Securities and Exchange Commission; (d) as soon as
available to Guarantor, the notice of any adjustment resulting from any audit of
the books and/or records of Guarantor by any taxing authority having
jurisdiction over Guarantor; and (e) such additional financial information as
Lessor may reasonably request concerning Guarantor or Lessee.
31. Expenses. Lessee agrees, whether or not the transactions contemplated
by this Lease are consummated, to pay (or reimburse Lessor for the payment of)
lien searches, filing fees, and fees and expenses relating to the titling and
registration of any Item(s) of Equipment incurred by or on behalf of Lessor in
connection with the negotiation and documentation of this Lease, any Guaranty
and any other related instruments and documents.
32. Owner for Income Tax Purposes. Lessor agrees that Lessee shall be
deemed the owner of the Equipment for federal, state and local income tax
purposes and that, so long as no Event of Default shall have occurred and be
continuing, Lessor shall take no action inconsistent with such ownership for
income tax purposes.
-43-
<PAGE>
33. No Reliance. Lessee hereby acknowledges that in negotiating the terms
of this Lease and all other related agreements and documents, it has sought,
obtained and relied exclusively upon such accounting, actuarial, tax and legal
advice from its own or other independent sources as it has deemed necessary, and
further acknowledges that neither Lessor nor any of Lessor's parent,
subsidiaries, affiliates or personnel has represented or warranted the legal,
tax economic, accounting, or other consequences of the terms and provisions
hereof and of the other related agreements and documents.
34. Miscellaneous. Any provision of this Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating or
diminishing Lessor's rights under the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, Lessee hereby waives any provision of law which
renders any provision of this Lease prohibited or unenforceable in any respect.
No term or provision of this Lease may be amended, altered, waived, discharged
or terminated orally, but may be amended, altered, waived, discharged or
terminated only by an instrument in writing signed by a duly authorized officer
of the party against which the enforcement of the amendment, alteration, waiver,
discharge or termination is sought. _________ (Lessee's Initials) A waiver on
any one occasion shall not be construed as a waiver on a future occasion. All of
the covenants, conditions and obligations contained in this Lease shall be
binding upon and shall inure to the benefit of the respective successors and
assigns of Lessor and (subject to the restrictions of Section 14 (a) hereof)
Lessee. If there is more than one Lessee named herein, the liability of each
Lessee shall be joint and several. This Lease, each Lease Supplement and each
related instrument, document, agreement and certificate, collectively constitute
the complete and exclusive statement of the terms of the agreement between
Lessor and Lessee with respect to the acquisition and leasing of the Equipment,
and cancel and supersede any and all prior oral or written understandings with
respect thereto.
-44-
<PAGE>
35. Governing Law; Venue. Lessee agrees that at Lessor's sole election
any suit, action or proceeding brought by Lessor against Lessee in connection
with or arising out of this Lease may be brought in any federal or state court
located in the Commonwealth of Massachusetts, and Lessee waives personal service
of all process upon it and consents that service of process may be made by mail
or messenger directed to it at its address set forth above and that service so
made shall be deemed to be completed upon the earlier of actual receipt or three
(3) days after the same shall have been posted to Lessee's said address. Nothing
herein contained shall affect Lessor's right to serve legal process in any other
manner permitted by law or to bring any suit, action or proceeding against
Lessee or its property in the courts of any other jurisdiction. This Lease shall
in all respects be governed by, and construed in accordance with, the laws of
the Commonwealth of Massachusetts, including all matters of construction,
validity and performance.
-45-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed by their duly authorized representatives as of the date first above
written.
BTM CAPITAL CORPORATION
Attest: (Lessor)
/s/ MARK A. HELMAN By: /s/ JOE PORTA
- ------------------ ----------------
Assistant Secretary Title: VICE PRESIDENT
(Corporate Seal)
PLAYTEX MANUFACTURING, INC.
Attest: (Lessee)
/s/ WILLIAM STAMMER By: /s/ MICHAEL R. GALLAGHER
- ------------------- ------------------------
Secretary Title: President
(Corporate Seal)
COUNTERPART NO. 2 OF 3 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE
EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM
COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH
THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
-46-
<PAGE>
EXHIBIT A-1 TO EQUIPMENT LEASING AGREEMENT
DATED AS OF JUNE 20, 1996
Type of Equipment: Extrusion line equipment, including silos and material
handling equipment, a Davis Standard Corporation single screw extruder, cooling
and winding equipment and spare and support equipment; Illig model 70K
thermoformer and packaging equipment, including a Hoyer cartoner, a Marden
Edwards overwrapper and a Marden Edward bundler. All Equipment is specifically
identified by manufacturer and model number or is otherwise subject to review
and approval of Lessor, which Lessor agrees not to unreasonably withhold.
Maximum Acquisition Cost: $4,000,000
Acquisition Period: From June 20, 1996 to June 30, 1997, both dates inclusive.
Number of Months in Basic Term: Twelve (12)
Basic Term Commencement Date: First day of calendar month next following the
Acceptance Date of an Item of Equipment, or such Acceptance Date if it is the
first day of a calendar month.
Basic Rent Percentage*: 1.5068680%
Interim Rent Percentage*: 0.05023%
Rental Periods for Basic Term: Each full calendar month.
Rent Payment Dates for Basic Term: The first day of each calendar month during
the Basic Term. If Rent is payable in arrears, the Basic Rent for the last
calendar month of the Basic Term is payable on the last day of such month.
Periodicity of Basic Rent Payments During Basic Term: Monthly in arrears on each
Rent Payment Date.
Maximum Term: Eighty-four (84) months.
Renewal Terms: Six (6) Renewal Terms of Twelve (12) months each.
Rental Periods for Renewal Term(s): Each full calendar month.
<PAGE>
Rent Payment Dates for Renewal Terms(s): The first day of each calendar month
during each Renewal Term.
Periodicity of Basic Rent Payments During Renewal Term: Monthly in arrears on
each Rent Payment Date.
Financial Condition Reference Date: December 31, 1995
* as a percentage of Acquisition Cost and subject to the adjustments set forth
below.
The Basic Rent Percentage and Interim Rent Percentage set forth above for each
Item of Equipment was computed on the assumption that the interest rate for a
7-year United States Treasury Note (the "7-year Treasury Rate") as reported on
page 217 of the Dow Jones Telerate Access Service for the Rent Adjustment
Computation Date (hereafter defined) would be 6.58%. In the event that on the
Rent Adjustment Computation Date the said 7-year Treasury Rate is actually
greater or lesser than 6.58%, (i) the Basic Rent Percentage applicable to each
Item of Equipment will, effective on and as of the first Rent Payment Date for
each such Item of Equipment for the Basic Term thereof, be increased (if the
said 7-year Treasury Rate is greater than 6.58% on the Rent Adjustment
Computation Date) or be decreased (if the said 7-year Treasury Rate is less than
6.58% on the Rent Adjustment Computation Date) by .000560% for each basis point
in the differential between 6.58% and the actual said 7-year Treasury Rate on
the Rent Adjustment Computation Date, and (ii) the Interim Rent Percentage
applicable to each such Item of Equipment will, effective on and as of the Rent
Payment Date for each such Item of Equipment for the Interim Term thereof, be
increased (if the said 7-year Treasury Rate is greater than 6.58% on the Rent
Adjustment Computation Date) or be decreased (if the said 7-year Treasury Rate
is less than 6.58% on the Rent Adjustment Computation Date) and be determined by
dividing the Basic Rent Percentage for each such Item of Equipment (after giving
effect to the adjustment, if any, in the Basic Rent Percentage specified in
clause (i) of this sentence) by 30. The term "Rent Adjustment Computation Date"
means the date that is six (6) business days prior to the applicable Acceptance
Date. As used herein the term "basis point" means 1/100th of 1%. In the event of
any such adjustment in the Interim Rent Percentage or Basic Rent Percentage, the
Casualty Loss Values, Estimated Residual Value, Maximum Lessee Risk Percentage
and Maximum Lessor Risk Percentage will be appropriately adjusted to preserve
Lessor's economic return.
<PAGE>
Certain Values:
Estimated Maximum Maximum
Residual Lessee Lessor
Value Risk Risk
Expiration of: Percentage:* Percentage*: Percentage:*
- -------------- ------------ ------------ ------------
Basic Term 92.278334 80.012504 12.265830
Renewal Term 1 82.112299 71.124992 10.987307
(if any)
Renewal Term 2 70.989615 61.357354 9.632261
(if any)
Renewal Term 3 58.820259 50.622432 8.197827
(if any)
Renewal Term 4 45.505737 38.824436 6.681301
(if any)
Renewal Term 5 30.938285 25.858091 5.080194
(if any)
Renewal Term 6 15.000000 11.607695 3.392305
(if any)
* as a percentage of Acquisition Cost and subject to adjustments corresponding
to adjustments in the Basic Rent Factor.
PLAYTEX MANUFACTURING, INC. BTM CAPITAL CORPORATION
By: /s/ Michael R. Gallagher By: /s/ Joe Porta
------------------------------ ---------------------------------
Title: President Title: VICE PRESIDENT
Date: July 30, 1996 Date: 8/14/96
<PAGE>
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)
<TABLE>
<CAPTION>
Twelve Months Ended
------------------------------------------------------------------------
December 27, December 28, December 30, December 31, December 25,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before
cumulative effect of
accounting changes and $ 18,731 $ 18,199 $ 2,774 $ 29,547 $(124,845)
extraordinary loss
Income taxes 16,501 16,141 8,151 23,994 2,049
--------- --------- --------- --------- ---------
Earnings (loss) before
income taxes, cumulative
effect of accounting changes
and extraordinary loss 35,232 34,340 10,925 53,541 (122,796)
Fixed charges:
Interest 64,470 64,860 71,361 76,153 115,949
One-third of rental 1,750 1,734 1,697 1,413 1,180
--------- --------- --------- --------- ---------
Total fixed charges 66,220 66,594 73,058 77,566 117,129
--------- --------- --------- --------- ---------
Earnings (loss) before fixed
charges, income taxes,
cumulative effect of
accounting changes and
extraordinary loss $ 101,452 $ 100,934 $ 83,983 $ 131,107 $ (5,667)
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 1.53X 1.52X 1.15X 1.69X --
========= ========= ========= ========= =========
Pre-tax earnings required for
preferred stock dividends(1) N/A N/A N/A $ 2,107 $ --
========= ========= ========= ========= =========
Ratio of earnings to fixed
charges and preferred dividends 1.53X 1.52X 1.15X 1.65X --
========= ========= ========= ========= =========
Coverage (deficiency) of
earnings to fixed charges $ 35,232 $ 34,340 $ 10,925 $ 53,541 $(122,796)
========= ========= ========= ========= =========
Coverage (deficiency) of
earnings to fixed charges and
preferred dividends $ 35,232 $ 34,340 $ 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.
<PAGE>
EXHIBIT 13
PLAYTEX PRODUCTS, INC.
1997 ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
PLAYTEX PRODUCTS, INC.
1997 ANNUAL REPORT TO STOCKHOLDERS
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PART I--FINANCIAL INFORMATION
Selected Financial Data................................................................................. 3
Management's Discussion and Analysis of Financial Condition and Results of Operations................... 4--9
Consolidated Financial Statements....................................................................... 10--13
Notes to Consolidated Financial Statements.............................................................. 14--45
PART II--OTHER INFORMATION
Independent Auditors' Report............................................................................ 46
Report of Management.................................................................................... 47
Other Information....................................................................................... 48--49
</TABLE>
2
<PAGE>
PLAYTEX PRODUCTS, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------------------------------------------
DEC. 27, DEC. 28, DEC. 30, DEC. 31, DEC. 25,
1997 1996 1995 1994 1993
---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $ 500,632 $ 498,742 $ 483,581 $ 473,275 $ 409,858
Gross profit.......................... 304,652 306,230 295,452 306,674 273,136
Operating expenses, excluding
amortization of intangibles......... 192,056 194,184 195,457 166,799 143,834
Amortization of intangibles........... 12,894 12,846 11,268 10,181 14,529
Write-off of SMILETOTE and Beauty Care
intangible assets--1995 and 1993,
respectively........................ -- -- 6,441 -- 121,620
Operating earnings (loss)............. 99,702 99,200 82,286 129,694 (6,847)
Interest expense, net................. 64,470 64,860 71,361 76,153 115,949
Earnings (loss) available to common
stockholders........................ $ 14,653(1) $ 18,199 $ (5,161)(2) $ 28,384(3) $ (176,107)(4)
Earnings (loss) per share available to
common stockholders (basic and
diluted)............................ $ 0.29 $ 0.36 $ (0.12) $ 0.97 $ (16.21)
Earnings (loss) before extraordinary
loss, cumulative effect of
accounting changes and preferred
stock dividends..................... $ 18,731 $ 18,199 $ 2,774 $ 29,547 $ (124,845)
Earnings (loss) per share before
extraordinary loss, cumulative
effect of accounting changes and
preferred stock dividends (basic and
diluted)............................ $ 0.37 $ 0.36 $ 0.07 $ 0.99 $ (11.49)(5)
Weighted average common shares
outstanding:
Basic............................... 50,923 50,883 42,309 29,212 10,867
Diluted............................. 51,006 50,939 42,342 29,213 10,867
BALANCE SHEET DATA (AT PERIOD END):
Working capital....................... $ 56,402 $ 6,522 $ 28,637 $ 17,623 $ (24,632)
Total assets.......................... 652,558 660,331 682,861 599,400 588,457
Total long-term debt, excluding due to
related party....................... 737,800 739,700 790,050 875,700 915,413
Redeemable preferred stocks........... -- -- -- -- 139,644
Stockholders' equity (deficit)........ $ (268,063) $ (282,727) $(300,976) $ (465,997) $ (723,408)
</TABLE>
- ------------------------
(1) Includes the effect of extraordinary loss of $4.1 million (net of $2.3
million of income tax benefit) related to the early extinguishment of debt
in connection with the 1997 Refinancing. See Note 11 of Notes to
Consolidated Financial Statements.
(2) Includes the effect of extraordinary loss of $7.9 million (net of $5.2
million of income tax benefit) related to the early extinguishment of debt
in connection with the 1995 Transaction. See Note 11 of Notes to
Consolidated Financial Statements.
(3) Includes dividends on preferred stock of $1.2 million.
(4) Includes the effects of the write-off of Beauty Care intangible assets of
$121.6 million, dividends on preferred stock of $12.8 million, extraordinary
loss of $39.4 million (net of $25.4 million of income tax benefit) related
to the early extinguishment of debt and $0.9 million, net of $0.7 million of
income tax benefit, related to changes in accounting.
(5) Basic and diluted loss per share includes the effect of the write-off of
Beauty Care intangible assets ($11.19 loss per share).
3
<PAGE>
PLAYTEX PRODUCTS, INC.
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
consolidated financial statements and notes thereto, presented on pages 10
through 45 hereof.
In accordance with Rule 14a-3(c) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), information contained herein is provided solely
for the information of stockholders and of the Securities and Exchange
Commission. Such information shall not be deemed to be "soliciting material" or
to be "filed" with the Commission or subject to Regulation 14A under the
Exchange Act (except as provided in Rule 14a-3) or to the liabilities of Section
18 of the Exchange Act, unless, and only to the extent that, it is expressly
incorporated by reference into the Annual Report on Form 10-K of Playtex
Products, Inc. for its fiscal year ended December 27, 1997.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this document may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this document, the words "anticipates", "intends",
"plans", "believes", "estimates", "expects", and similar expressions are
intended to identify forward-looking statements. 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: price and product changes and promotional activity by competitors,
timing of technological advances and new product initiatives by the Company and
its competitors, acceptance by consumers of new replacement products, continued
activity in the private label sector, the loss of a significant customer,
product liability litigation, integration of acquisitions and changes in
governmental regulation.
RESULTS OF OPERATIONS
BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company is a leading manufacturer and marketer of a diversified line of
well recognized branded consumer products in a variety of categories. The
Feminine Care product category includes a wide range of plastic and cardboard
applicator tampons marketed under such brand names as
Playtex-Registered Trademark- Gentle Glide-Registered Trademark-, Soft
Comfort-TM-, Slimfits-TM- and Silk Glide-Registered Trademark-. The Company's
second largest product category based on 1997 net sales is Infant Care, which is
comprised of the Playtex-Registered Trademark- disposable nurser system, cups
and mealtime products, reusable hard bottles and pacifiers. The Company's Sun
Care business consists of an extensive line of sun care products marketed under
the Banana Boat-Registered Trademark- and BioSun-Registered Trademark- trade
names. The Household Products category includes Playtex-Registered Trademark-
household latex gloves and Woolite-Registered Trademark- rug and upholstery
cleaning products ("WOOLITE"). The Company's Personal Grooming business consists
of Jhirmack-Registered Trademark- hair care products and
Tek-Registered Trademark- toothbrushes.
In January 1998, the Company acquired Personal Care Holdings, Inc. ("PCH"),
Carewell Industries, Inc. ("Carewell"), and certain tangible and intangible
assets related to the Binky-Registered Trademark- pacifier business from
Binky-Griptight, Inc. ("Binky")(see Note 21 of Notes to Consolidated Financial
Statements). These acquisitions had no impact on the results of operations of
the Company in fiscal 1997. As a result of these acquisitions, revenues from the
Infant Care and Personal Grooming product categories will increase as a percent
of total revenue in the future.
4
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The following table sets forth the Company's principal product lines and
certain related data for 1997 (dollars in millions):
<TABLE>
<CAPTION>
PRIMARY 1997 PERCENT OF
PRODUCT LINE BRAND NAMES NET SALES NET SALES
- ---------------------------------------------------------------- ------------------------- ----------- -------------
<S> <C> <C> <C>
Feminine Care................................................... PLAYTEX $ 201.5 40%
Infant Care..................................................... PLAYTEX 124.0 25
Sun Care........................................................ BANANA BOAT, BIOSUN 95.7 19
Household Products.............................................. PLAYTEX, WOOLITE 55.3 11
Personal Grooming............................................... JHIRMACK, TEK 24.1 5
----------- ---
Total......................................................... $ 500.6 100%
----------- ---
----------- ---
</TABLE>
TWELVE MONTHS ENDED DECEMBER 27, 1997 VERSUS
TWELVE MONTHS ENDED DECEMBER 28, 1996
NET SALES--Net sales in 1997 were $500.6 million, an increase $1.9 million,
or less than 1%, from $498.7 million in 1996.
Net sales of Feminine Care products decreased 11%, or $24.0 million, to
$201.5 million from $225.5 million in 1996. The Company's shipments to retailers
in the first half of 1997 were negatively impacted by high retail inventories
created by earlier price-oriented promotional activity and by management's
strategic decision to reduce these excess inventories by curtailing the
off-price programs. During the first half of 1997, shipments of Feminine Care
products fell 22% versus the prior year. During the same period in 1997, retail
sales of the Company's products exceeded the Company's shipments by 90 million
tampons, indicating that retailers reduced their inventories of Playtex tampons
by approximately six weeks worth of sales. The Company believes that trade
inventories returned to more normal levels by mid-year 1997 given that: 1)
shipments in the second half of 1997 were even with the same period in 1996 and
30% higher than shipments in the first half of 1997, and 2) shipments and retail
sales in the second half of 1997 were in greater balance with one another.
Infant Care net sales increased $14.5 million, or 13%, to $124.0 million in
1997 from $109.5 million in 1996 while net sales of Sun Care products increased
$22.4 million, or 31%, to $95.7 million in 1997 versus $73.3 million in 1996.
The growth in both Infant Care and Sun Care was due to: (i) successful new
product launches, (ii) increased distribution, (iii) continued market share
gains for the Playtex businesses, and (iv) continued growth for the Infant Care
and Sun Care markets overall.
Household Products 1997 net sales decreased $5.2 million, or 9%, to $55.3
million due, in part, to a change in pricing strategy for PLAYTEX GLOVES which
resulted in both lower reported revenue offset by lower trade spending versus
1996. In addition, the introduction of a new competitor in the carpet cleaning
business negatively impacted sales of WOOLITE during the year.
Net sales in Personal Grooming declined by $5.8 million, or 19%, to $24.1
million in fiscal 1997. The decline is attributable to the strategic decision on
the part of the Company to reduce ineffective trade spending associated with the
JHIRMACK brand and to maximize the cash flow generated by the brand.
GROSS PROFIT--Gross profit decreased $1.5 million, or less than 1%, to
$304.7 million for 1997 versus $306.2 million for 1996. The gross profit margin
decreased to 60.9% for the 1997 fiscal year versus 61.4% for the prior fiscal
year. The decrease in gross profit in fiscal 1997 was attributable primarily to
the mix of products sold, offset in part, by marginally higher sales.
5
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OPERATING EARNINGS--Operating earnings increased $0.5 million, or less than
1%, to $99.7 million for 1997 versus $99.2 million for 1996. Contributing to
this increase was lower trade spending in line with the Company's consumer
oriented marketing strategy. For fiscal 1997, trade spending was $8.0 million,
or 12%, lower than in fiscal 1996. The lower trade spending was offset by higher
consumer spending, up $2.9 million versus fiscal 1996, lower gross profit of
$1.6 million as noted above, and increased selling, distribution, research, and
administrative expenses which were collectively $3.0 million higher than fiscal
1996.
INTEREST EXPENSE--Interest expense of $64.5 million for fiscal 1997
decreased $0.4 million, or 1%, from $64.9 million in 1996.
EXTRAORDINARY LOSS--In July 1997, the Company refinanced its senior credit
agreement. The Company recorded an extraordinary loss of $4.1 million (net of
income tax benefit of $2.3 million) for costs and expenses related to the
write-off of the unamortized portion of the deferred financing costs associated
with the previous credit agreement.
NET EARNINGS--As a result of the factors noted above, net earnings were
$14.7 million in 1997 compared to $18.2 million in 1996.
TWELVE MONTHS ENDED DECEMBER 28, 1996 VERSUS
TWELVE MONTHS ENDED DECEMBER 30, 1995
RESULTS OF OPERATIONS
NET SALES--Net sales in 1996 increased to $498.7 million, up $15.1 million,
or 3%, from $483.6 million in 1995.
Net sales for the Feminine Care business were $225.5 million for 1996, down
$18.1 million, or 7%, versus $243.6 million in 1995. These results reflect (i)
the rigorous competitive environment in the tampon category, particularly in the
first half of the year; and (ii) a reduction in the level of inventories carried
by retailers during the year. Although shipments to retailers declined 7% during
the year, retail sales to consumers in units decreased only 1%, and the
Company's unit market share was stable at 23% for the year.
Infant Care net sales increased $21.9 million, or 25%, to $109.5 million in
1996 from $87.5 million in 1995. The increase was due primarily to the continued
growth of the 6-ounce Spill-Proof-TM- cup and the successful introductions in
1996 of the 9-ounce SPILL-PROOF cup and the QuickStraw-TM- cup.
Sun Care net sales increased $23.0 million, or 46%, to $73.3 million in 1996
from $50.3 million in 1995. This increase resulted from a higher market share
for the year, which increased from 18% to 19%, category growth of 2% versus 1995
and, the addition of $10.3 million of revenues as a result of the acquisition of
the remaining portion of the Banana Boat Holding Corporation (see Note 3 of
Notes to Consolidated Financial Statements).
Household Products net sales increased $3.2 million, or 6%, to $60.5 million
in 1996 from $57.3 million in 1995. The WOOLITE brand's net sales increased $4.1
million, or 17%, to $27.8 million in 1996 compared to $23.7 million in 1995,
while Glove net sales decreased $0.8 million, or 2%, to $32.8 million compared
to $33.6 million in the prior year. The increase in the WOOLITE brand's net
sales was attributable to the complete integration of this business after its
acquisition in early 1995. Gloves net sales declined primarily due to a change
in pricing strategy which resulted in lower reported revenue, more than offset
by
6
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
lower trade spending. The Company's market share in the household latex glove
category grew by three percentage points in 1996 from 35% to 38%.
Personal Grooming net sales declined by $14.8 million, or 33%, to $30.0
million, compared to $44.8 million in 1995. Much of this decline was
attributable to the strategic decision on the part of the Company to
significantly reduce ineffective and unprofitable trade spending associated with
the JHIRMACK brand.
GROSS PROFIT--Gross profit increased $10.7 million, or 4%, to $306.2 million
for 1996 compared to $295.5 million for 1995. For the year, gross margin was
61.4% of net sales compared to 61.1% of net sales in 1995. The increase in
margin was due, in part, to $3.4 million of pre-tax charges having been included
in the 1995 cost of sales related to the BBH Acquisition, partially offset by a
shift in product sales mix to lower margin goods.
OPERATING EARNINGS--Operating earnings increased $16.9 million, or 21%, to
$99.2 million for 1996 compared to $82.3 million for the prior year. This
increase was due to the margin impact of the increased net sales described above
and the fact that $15.5 million of one time pre-tax charges were included in the
1995 results. These one time charges consisted of $3.4 million in the cost of
sales as previously described, $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 the SMILETOTE business.
Advertising and promotional expenses increased by $1.8 million, or 2%, in
1996 compared to 1995. As part of its consumer oriented marketing strategy, the
Company invested more heavily in advertising and consumer spending and focused
less on trade spending. Excluding the impact of the 1995 one time items, the
remaining operating expenses increased $4.2 million, or 5%, compared to 1995,
mainly as a result of the BBH Acquisition in the fourth quarter of 1995 and a
continued focus on new product development.
INTEREST EXPENSE--The decrease in interest expense of $6.5 million for the
1996 year resulted from both lower debt levels and lower interest rates.
NET EARNINGS--As a result of the factors noted above, net earnings were
$18.2 million in 1996 compared to a net loss of $5.2 million in 1995.
FINANCIAL CONDITION AND LIQUIDITY
At December 27, 1997, the Company's working capital (current assets net of
current liabilities) increased to $56.4 million from $6.5 million at December
28, 1996. The increase resulted primarily from (i) a decrease of $23.5 million
in current maturities of long-term debt, due to the 1997 Refinancing (as defined
below), (ii) a reduction in accounts payable of $11.6 million, due to the timing
of payments, (iii) a reduction in accrued expenses of $10.4 million, primarily
as a result of lower accrued employee compensation and lower accruals for
advertising and sales promotions, and (iv) higher inventory of $4.9 million due
to increased production to support new product launches.
The Company's businesses, with the exception of Sun Care, generally have not
been seasonal. However, Sun Care product sales are highly seasonal, with 85 to
90 percent of sales occurring in the first six months of the year. This
seasonality requires increased inventory to support the selling season and the
extended credit terms which are typical in the sun care industry result in
higher receivables for the Company.
Capital expenditures for equipment and facility improvements were $9.0
million, $9.7 million and $12.4 million for the twelve months ended December 27,
1997, December 28, 1996 and December 30,
7
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1995, respectively. These expenditures were used primarily to upgrade production
equipment and maintain facilities in the ordinary course of business. Capital
expenditures for 1998 are expected to be $18.0 million, mostly for production
related equipment and facility improvements and for projects consistent with
those of the prior years. The 1998 projection includes increased capital
expenditures related to the acquisitions of PCH, Carewell, and Binky.
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The net proceeds from the 1997 Refinancing were used to
retire the indebtedness outstanding under the Company's previous credit
agreement; concurrently, the former agreement was terminated.
The 1997 Refinancing included: (i) the issuance of $150.0 million principal
amount of 8 7/8% unsecured senior notes due July 15, 2004 (the "Senior Notes"),
(ii) a $150.0 million senior secured term loan due September 15, 2003 (the "1997
Term Loan") and (iii) senior secured credit facilities of $170.0 million (the
"1997 Senior Secured Credit Facilities") comprised of a $115.0 million revolving
credit facility (the "1997 Revolving Credit Facility") and a $55.0 million term
loan facility (the "1997 Term A Loan").
At December 27, 1997 long-term debt (including current portion but excluding
obligations due to related party) was $737.8 million versus $739.7 million at
December 28, 1996 a decrease of $1.9 million. The net decrease in long-term
borrowings since December 28, 1996 was the result of favorable cash flow from
operations offset, in part, by fees and expenses associated with the 1997
Refinancing. At December 27, 1997, the Company had unused lines of credit
(giving effect to outstanding letters of credit) under the 1997 Revolving Credit
Facility of $90.4 million.
The credit facilities require the Company 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 indebtedness or equity capitalization. The Senior Notes and
the 9% Senior Subordinated Notes with an aggregate amount of $360 million due
2003 (the "9% Notes") also contain restrictions and requirements with regard to
similar matters. Under the terms of these debt instruments, payment of cash
dividends on the Common Stock of the Company is restricted.
The Company believes that it will generate sufficient cash flow from
operations for working capital, capital expenditures and to make the scheduled
interest and principal payments under the 1997 Term Loan and the 1997 Senior
Secured Credit Facilities, and interest payments on the 9% Notes and the Senior
Notes. However, the Company does not expect to generate sufficient cash flow
from operations to make the $360 million principal payment due in 2003 on the 9%
Notes nor the $150 million principal payment due in 2004 on the Senior Notes.
Accordingly, the Company will have to either refinance its obligations with
respect to the 9% Notes and Senior Notes prior to their maturity, sell assets or
raise equity capital to repay the principal amounts of the 9% Notes and Senior
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 is, in part,
subject to prevailing economic conditions and to financial, business and other
factors beyond its control. Although the Company's cash flow from 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.
In January 1998, the Company acquired PCH, Carewell, and Binky. The purchase
of Carewell and Binky were financed from available borrowings under the 1997
Revolving Credit Facility. The Company
8
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
increased its borrowings under the 1997 Term Loan by $100 million to fund the
cash portion of the acquisition price of PCH. The Company also issued 9,257,345
shares of its Common Stock as part of the PCH acquisition.
The Company will continue to regularly consider the acquisition of other
companies or businesses engaged in the manufacture and distribution of related
products. Such potential transactions may require substantial capital resources,
which would in certain circumstances require the Company to seek additional debt
or equity financing. As there can be no assurance that such financing will be
available, the Company's ability to expand its operations through acquisition
may be restricted. However, The Company believes that capital will be available
to acheive its acquisition objectives.
Inflation in the United States and Canada has not had a significant effect
on the Company during recent periods.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income"("SFAS No. 130"). SFAS No. 130
establishes requirements for reporting and display of comprehensive income. The
new standard becomes effective for the Company's fiscal year 1998 and requires
reclassification of earlier financial statements for comparative purposes.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information"("SFAS No. 131"). SFAS No. 131
establishes requirements for disclosure about operating segments in the interim
financial reports and annual financial statements. It also establishes standards
for related disclosures about products and services, geographic area and major
customers. This statement supersedes SFAS No. 14, "Financial Reporting for
Segments of Business Enterprises". SFAS No. 131 becomes effective for the
Company's fiscal year 1998 and requires that comparative information from
earlier years be restated to conform to the requirements of the new standard.
The Company is in the process of evaluating the disclosure requirements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits"("SFAS No. 132"), which revises
employers' disclosures about these types of benefits. SFAS No. 132 does not
change the measurement or recognition of those plans, but requires additional
information to facilitate financial analysis and eliminates certain disclosures
which are no longer useful. To the extent practicable, the Statement also
standardizes disclosure for retiree benefits. SFAS No. 132 becomes effective for
the Company's fiscal year 1998 and requires that comparative information from
earlier years be restated to conform to the requirements of the new standard.
YEAR 2000
The Company has assessed and continues to assess the impact of the Year 2000
issue on its operations, including the development and implementation of project
plans and cost estimates required to make its information systems infrastructure
Year 2000 compliant. Based on existing information, the Company believes that
anticipated spending necessary to become Year 2000 compliant will not have a
material effect on the results of operations, financial position, or cash flows
of the Company. However, if appropriate modifications are not made by the
Company's suppliers or customers information infrastructure on a timely basis,
or if the Company's actual costs or timing for the year 2000 date conversion
differ materially from its present estimates, the Company's operations and
financial results could be adversely affected.
9
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................................. $ 500,632 $ 498,742 $ 483,581
Cost of sales......................................................... 195,980 192,512 188,129
------------ ------------ ------------
Gross profit........................................................ 304,652 306,230 295,452
------------ ------------ ------------
Operating expenses:
Advertising and sales promotion..................................... 114,279 119,380 117,581
Selling, distribution and research.................................. 58,657 56,776 54,251
Administrative...................................................... 19,120 18,028 23,625
Amortization of intangibles......................................... 12,894 12,846 11,268
Write-off of SMILETOTE intangible assets............................ -- -- 6,441
------------ ------------ ------------
Total operating expenses.......................................... 204,950 207,030 213,166
------------ ------------ ------------
Operating earnings.............................................. 99,702 99,200 82,286
Interest expense including related party interest expense of $12,150,
net of related party interest income of $12,003 for all periods
presented........................................................... 64,470 64,860 71,361
------------ ------------ ------------
Earnings before income taxes.................................... 35,232 34,340 10,925
Income taxes.......................................................... 16,501 16,141 8,151
------------ ------------ ------------
Earnings before extraordinary loss.............................. 18,731 18,199 2,774
Extraordinary loss on early extinguishment of debt, net of $2,344 and
$5,180 tax benefit in 1997 and 1995, respectfully................... (4,078) -- (7,935)
------------ ------------ ------------
Net earnings (loss)............................................. $ 14,653 $ 18,199 $ (5,161)
------------ ------------ ------------
------------ ------------ ------------
Earnings (loss) per share (basic and diluted):
Before extraordinary loss........................................... $ .37 $ .36 $ .07
Net earnings (loss)................................................. $ .29 $ .36 $ (.12)
Weighted average shares outstanding:
Basic............................................................... 50,923 50,883 42,309
Diluted............................................................. 51,006 50,939 42,342
</TABLE>
See the accompanying notes to consolidated financial statements.
10
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................... $ 3,231 $ 6,205
Receivables, less allowance for doubtful accounts.................................. 66,876 63,982
Inventories........................................................................ 42,500 37,637
Deferred income taxes.............................................................. 7,806 9,702
Other current assets............................................................... 4,949 4,965
------------ ------------
Total current assets............................................................. 125,362 122,491
Net property, plant and equipment.................................................... 54,810 53,408
Intangible assets, net:
Goodwill........................................................................... 337,157 348,449
Patents, trademarks and other...................................................... 34,835 36,405
Deferred financing costs........................................................... 16,751 15,337
Due from related party............................................................... 80,017 80,017
Other noncurrent assets.............................................................. 3,626 4,224
------------ ------------
Total assets..................................................................... $ 652,558 $ 660,331
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................... $ 24,512 $ 36,131
Accrued expenses................................................................... 38,827 49,252
Income taxes payable............................................................... 4,121 5,586
Current maturities of long-term debt............................................... 1,500 25,000
------------ ------------
Total current liabilities........................................................ 68,960 115,969
Long-term debt....................................................................... 736,300 714,700
Due to related party................................................................. 78,386 78,386
Other noncurrent liabilities......................................................... 13,563 14,207
Deferred income taxes................................................................ 23,412 19,796
------------ ------------
Total liabilities................................................................ 920,621 943,058
------------ ------------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares, issued 50,941,812
shares at December 27,1997 and 50,887,200 shares at December 28,1996............. 509 509
Additional paid-in capital......................................................... 424,706 424,277
Retained earnings (deficit)........................................................ (691,065) (705,718)
Foreign currency translation adjustment............................................ (2,213) (1,795)
------------ ------------
Total stockholders' equity....................................................... (268,063) (282,727)
------------ ------------
Total liabilities and stockholders' equity....................................... $ 652,558 $ 660,331
------------ ------------
------------ ------------
</TABLE>
See the accompanying notes to consolidated financial statements.
11
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL RETAINED CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION
STOCK CAPITAL (DEFICIT) ADJUSTMENT
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994....................................... $ 309 $ 254,417 $ (718,756) $ (1,967)
Net loss....................................................... -- -- (5,161) --
Issuance of shares of common stock............................. 200 169,800 -- --
Foreign currency translation adjustment........................ -- -- -- 182
----- ---------- ----------- -----------
Balance, December 30, 1995....................................... 509 424,217 (723,917) (1,785)
Net earnings................................................... -- -- 18,199 --
Issuance of shares of common stock............................. -- 60 -- --
Foreign currency translation adjustment........................ -- -- -- (10)
----- ---------- ----------- -----------
Balance, December 28, 1996....................................... 509 424,277 (705,718) (1,795)
Net earnings................................................... -- -- 14,653 --
Issuance of shares of common stock............................. -- 429 -- --
Foreign currency translation adjustment........................ -- -- -- (418)
----- ---------- ----------- -----------
Balance, December 27, 1997....................................... $ 509 $ 424,706 $ (691,065) $ (2,213)
----- ---------- ----------- -----------
----- ---------- ----------- -----------
</TABLE>
See the accompanying notes to consolidated financial statements.
12
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
Cash flows from operations:
Net earnings (loss)................................................. $ 14,653 $ 18,199 $ (5,161)
Non-cash items included in earnings:
Extraordinary loss, net of tax benefit............................ 4,078 -- 7,935
Write-off of SMILETOTE intangible assets.......................... -- -- 6,441
Amortization of intangibles....................................... 12,894 12,846 11,268
Amortization of deferred financing costs.......................... 2,163 2,089 2,246
Depreciation...................................................... 7,520 8,929 8,496
Deferred income taxes............................................. 5,493 6,842 (133)
Other, net........................................................ 249 48 (291)
Changes in working capital items,
net of effects of acquisitions:
Increase in receivables......................................... (2,894) (5,963) (4,471)
(Increase) decrease in inventories.............................. (4,863) 11,553 4,629
Increase in other current assets................................ (948) (420) (1,802)
(Decrease) increase in accounts payable......................... (11,619) 16,074 6,967
Decrease in accrued expenses.................................... (14,791) (12,794) (7,076)
Increase (decrease) in income taxes payable..................... 1,843 3,689 (4,207)
Increase (decrease) in accrued interest......................... 3,090 (788) 2,238
------------ ------------ ------------
Net cash flows from operations................................ 16,868 60,304 27,079
Cash flows used for investing activities:
Purchases of property, plant and equipment.......................... (9,004) (9,740) (12,395)
Businesses acquired................................................. -- -- (94,429)
------------ ------------ ------------
Net cash flows used for investing activities.................. (9,004) (9,740) (106,824)
Cash flows (used for) from financing activities:
Net borrowings (repayments) under working capital credit
facilities........................................................ 23,550 (2,850) (42,650)
Long-term debt borrowings........................................... 355,000 -- 425,000
Long-term debt repayments........................................... (380,450) (47,500) (468,000)
Payment of financing costs.......................................... (9,367) -- (9,113)
Issuance of shares of common stock.................................. 429 60 170,000
Other, net.......................................................... -- (9) 75
------------ ------------ ------------
Net cash flows (used for) from financing activities........... (10,838) (50,299) 75,312
(Decrease) increase in cash........................................... (2,974) 265 (4,433)
Cash at beginning of period........................................... 6,205 5,940 10,373
------------ ------------ ------------
Cash at end of period................................................. $ 3,231 $ 6,205 $ 5,940
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest.......................................................... $ 59,217 $ 63,559 $ 66,884
Income taxes, net of refunds...................................... $ 9,165 $ 5,610 $ 10,748
</TABLE>
See the accompanying notes to consolidated financial statements.
13
<PAGE>
PLAYTEX PRODUCTS, INC.
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.
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 ($5.2 million in
1997, $5.5 million in 1996 and $5.1 million in 1995) are expensed; renewals and
betterments are capitalized
INTANGIBLE AND LONG-LIVED ASSETS Intangible assets include goodwill, which
represents costs in excess of net assets of businesses acquired, patents,
trademarks, and organization costs. Intangible assets are amortized on a
straight-line basis over a period not exceeding 40 years. The Company
systematically reviews the recoverability of its goodwill using certain
financial indicators, such as historical and future ability to generate income
from operations. The Company systematically reviews the recoverability of the
other long-lived assets by comparing their unamortized carrying value to their
related anticipated undiscounted future cash flows. Any impairment related to
goodwill or other long-lived assets is measured by reference to the assets' fair
market value. Impairments are charged to expense when such determination is
made.
DEFERRED FINANCING COSTS Costs incurred in connection with the issuance of
long-term debt have been capitalized and are being amortized over the life of
the related debt agreements. Such costs, net of accumulated amortization,
amounted to $16.8 million and $15.3 million at December 27, 1997 and December
28, 1996, respectively.
INCOME TAXES Deferred tax assets and liabilities are provided using the
asset and liability method for temporary differences between financial and tax
reporting basis 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 In February 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
128 ("SFAS 128") "Earnings per Share". This statement establishes and simplifies
standards for computing and presenting earnings per share ("EPS"). SFAS 128
replaces primary and fully diluted EPS with basic and diluted earnings per
share. Basic EPS excludes dilution and is computed by dividing net earnings by
the weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that would then share in the earnings
of the Company. The Company has adopted SFAS 128 with its December 27, 1997
consolidated financial statements. For the periods presented, stock options
outstanding under the Company's 1994 Stock Option Plan are the only potentially
dilutive instrument that caused the diluted weighted average shares outstanding
to increase over the basic
14
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
weighted average shares outstanding. The Company utilizes the treasury stock
method to determine the dilutive impact of potentially exercised stock options.
USE OF ESTIMATES The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect 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.
RECLASSIFICATIONS For comparative purposes, certain amounts have been
reclassified to conform to the current year presentation.
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 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 & Partners Incorporated,
pursuant to a Stock Purchase Agreement, dated as of March 17, 1995, between the
Company and the Investors. The Investors' shares constituted approximately 40%
of the Company's then outstanding Common Stock as of June 6, 1995. At the 1995
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 a new credit agreement to refinance all existing
bank debt.
3. ACQUISITION OF 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-Registered Trademark-sun and skin
care products (the "BBH Acquisition"). The BBH Acquisition was completed
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%. Concurrently with the BBH acquisition, the distribution
agreement was terminated.
The net funds expended for the BBH Acquisition included cash of $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 $4.3 million. The BBH Acquisition was financed with $34.3
million of existing cash balances and advances under the Company's previous
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 statements of operations from the date of acquisition. The purchase
price was allocated to the assets acquired and the liabilities assumed based on
the fair values at the date of
15
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITION OF BANANA BOAT HOLDING CORPORATION ("BBH") (CONTINUED)
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.
The following consolidated unaudited pro forma results of operations assumes
the BBH acquisition occurred as of January 1, 1995. The pro forma financial
information is not necessarily indicative of operating results that would have
occurred had the BBH acquisition been consummated as of December 31, 1994, nor
indicative of future operating results (In millions, except per share data).
<TABLE>
<CAPTION>
TWELVE
MONTHS ENDED
DECEMBER 30,
1995
---------------
<S> <C>
Net sales.......................................................................................... $ 495.6
Earnings before extraordinary loss................................................................. 4.0
Net loss........................................................................................... (4.0)
Earnings (loss) per share (basic and diluted):
Before extraordinary loss.................................................................. $ 0.09
Net loss................................................................................... (0.09)
</TABLE>
4. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Receivables.......................................................................... $ 68,545 $ 65,740
Less allowance for doubtful accounts................................................. (1,669) (1,758)
------------ ------------
Net................................................................................ $ 66,876 $ 63,982
------------ ------------
------------ ------------
Inventories:
Raw materials...................................................................... $ 14,866 $ 13,854
Work in process.................................................................... 845 1,004
Finished goods..................................................................... 26,789 22,779
------------ ------------
Total............................................................................ $ 42,500 $ 37,637
------------ ------------
------------ ------------
Net property, plant and equipment:
Land............................................................................... $ 1,190 $ 1,190
Buildings.......................................................................... 24,650 24,818
Machinery and equipment............................................................ 103,767 95,938
------------ ------------
129,607 121,946
Less accumulated depreciation...................................................... (74,797) (68,538)
------------ ------------
Net.............................................................................. $ 54,810 $ 53,408
------------ ------------
------------ ------------
</TABLE>
16
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BALANCE SHEET COMPONENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Goodwill............................................................................. $ 446,607 $ 446,602
Less accumulated amortization........................................................ (109,450) (98,153)
------------ ------------
Net.............................................................................. $ 337,157 $ 348,449
------------ ------------
------------ ------------
Patents, trademarks and other........................................................ $ 49,669 $ 49,644
Less accumulated amortization........................................................ (14,834) (13,239)
------------ ------------
Net.............................................................................. $ 34,835 $ 36,405
------------ ------------
------------ ------------
Deferred financing costs............................................................. $ 20,350 $ 19,463
Less accumulated amortization........................................................ (3,599) (4,126)
------------ ------------
Net.............................................................................. $ 16,751 $ 15,337
------------ ------------
------------ ------------
Accrued expenses:
Advertising and sales promotion.................................................... $ 13,480 $ 19,191
Employee compensation and benefits................................................. 7,808 14,167
Interest........................................................................... 8,622 5,532
Insurance.......................................................................... 2,945 2,913
Other.............................................................................. 5,972 7,449
------------ ------------
Total............................................................................ $ 38,827 $ 49,252
------------ ------------
------------ ------------
</TABLE>
5. DUE FROM RELATED PARTY
Playtex Investment Corp., a wholly-owned subsidiary of the Company, is the
holder of $40 million aggregate principal amount of 15% debentures (the "Apparel
Debenture") issued by Playtex Apparel Partners, L.P. (the "Apparel Partnership")
in connection with its 1988 acquisition of Playtex Apparel, Inc. Interest on the
Apparel Debenture is payable annually in cash on each December 15. However, with
respect to any such interest amount payable prior to maturity, Apparel
Partnership may elect and elected for periods through December 15, 1993 to make
such payments in additional Apparel Debenture. For the periods ended after
December 15, 1993, the Apparel Partnership paid in cash the accrued interest.
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 27, 1997 and December
28, 1996 of approximately $8.4 and $7.7 million, respectively, cash of
approximately $0.3 and $0.4 million, respectively, and Playtex's 15 1/2%
Subordinated Notes (see Note 7). Playtex believes that the Apparel Debenture
represents the only material liability of the Apparel Partnership.
17
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
1997 Credit Agreement:
Term A Loan........................................................................ $ 55,000 $ --
Revolving Credit Facility.......................................................... 23,550 --
Term Loan.......................................................................... 149,250 --
1995 Credit Agreement:
Working Capital Facility........................................................... -- 2,200
Term Loan Facility................................................................. -- 367,500
Acquisition Credit Facility........................................................ -- 10,000
8 7/8% Unsecured Senior Notes due 2004............................................... 150,000 --
9% Senior Subordinated Notes due 2003................................................ 360,000 360,000
------------ ------------
737,800 739,700
Less current maturities............................................................ (1,500) (25,000)
------------ ------------
Total long-term debt............................................................. $ 736,300 $ 714,700
------------ ------------
------------ ------------
</TABLE>
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The 1997 Refinancing includes: (i) the issuance of
$150.0 million principal amount of 8 7/8% unsecured senior notes due July 15,
2004 (the "Senior Notes"), (ii) a $150.0 million senior secured term loan due
September 15, 2003 (the "1997 Term Loan"), and (iii) senior secured credit
facilities (the "1997 Senior Secured Credit Facilities") of $170.0 million
comprised of a $115.0 million revolving credit facility (the "1997 Revolving
Credit Facility") and a $55.0 million term loan facility (the "1997 Term A
Loan"). The 1997 Term Loan and the 1997 Senior Secured Credit Facilities are
known collectively as the 1997 Credit Agreement ("1997 Credit Agreement").
The 1997 Term Loan provides for quarterly principal repayments of $375,000
from September 15, 1997 through June 15, 2003 and a payment of $141.0 million on
September 15, 2003. The 1997 Revolving Credit Facility will mature on June 15,
2003 and commitments thereunder are automatically and permanently reduced by (i)
$5.0 million on December 15, 2000 and June 15, 2001, (ii) $7.0 million on
December 15, 2001 and June 15, 2002, and (iii) $8.0 million on December 15, 2002
and June 15, 2003. The 1997 Term A Loan will require a reduction in commitment
amounts of $1.4 million in fiscal 1999, $7.6 million in fiscal 2000, $15.1
million in fiscal 2001, $19.9 million in fiscal 2002, and $11.0 million in
fiscal 2003.
The net proceeds from the 1997 Refinancing were used to retire the
indebtedness outstanding under the Company's prior credit agreement originated
in 1995. Concurrently, this credit agreement was terminated. Fees and expenses
associated with the 1997 Refinancing of $10.0 million are amortized over the
term of the associated financial instruments.
The rates of interest on borrowings under the 1997 Credit Agreement are, at
the Company's option, a function of various alternative short-term borrowing
rates, as defined in the associated credit agreement. Quarterly commitment fees
of three-eighths of one percent on the unutilized portion of the 1997 Revolving
Credit Facility and an agency fee of approximately $0.1 million per annum are
also required. At December 27, 1997 and December 28, 1996 the weighted average
interest rate on the Company's variable
18
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
rate indebtedness was 7.38% and 7.32%, respectively. In addition, the weighted
average interest rates on the Company's variable rate indebtedness were 7.35%,
7.35% and 8.11% for the twelve month periods ended December 27, 1997, December
28, 1996, and December 30, 1995, respectively. At December 27, 1997, aggregate
unused lines of credit (giving effect to outstanding letters of credit) under
the 1997 Revolving Credit Facility amounted to $90.4 million.
The provisions of the 1997 Senior Secured Credit Facilities require the
Company to meet certain financial covenants and ratios and also include
limitations or restrictions on: indebtedness and liens; major acquisitions or
mergers; capital expenditures; disposition of assets; certain dividends and
other distributions; and prepayment and modification of all indebtedness or
equity capitalization. The 9% senior subordinated notes due 2003 in an aggregate
principal amount of $360 million (the "9% Notes"), the Senior Notes and the 1997
Term Loan also contain certain restrictions and requirements. Under the terms of
each of these agreements, payment of cash dividends on the common stock of the
Company is restricted. Certain wholly-owned subsidiaries of the Company are
guarantors of the 9% Notes and the Senior Notes (see Note 19).
In connection with the Company's acquisition of Personal Care Holdings, Inc.
("PCH") on January 28, 1998 (see Note 21), the Company increased its borrowings
under the 1997 Term Loan by $100 million. Quarterly principal repayments on the
incremental borrowings will commence on March 15, 1998, in aggregate annual
amounts equal to $1.0 million through and including December 15, 2002, and in
the amount of $250,000 on March 15, 2003 and June 15, 2003, with a final payment
of $94.5 million on September 15, 2003. Fees and expenses associated with the
incremental borrowings are being amortized over its term.
On February 2, 1994, Playtex issued $360 million aggregate principal of the
9% Notes. The interest on the 9% Notes is payable in cash semi-annually on each
June 15 and December 15. Principal of the 9% Notes is due on December 15, 2003.
The Company selectively enters into interest rate protection agreements to
reduce the impact of interest rate changes on its variable rate indebtedness.
The interest rate protection agreements involve exchanges of floating for fixed
rate interest payments without the exchange of the underlying notional amount.
The Company may also use interest rate caps which limit net interest expense if
interest rates rise above a defined level. The notional amounts of such
agreements are used to measure the interest to be paid or received and do not
represent the amount of exposure to loss.
On August 26 1997, the Company entered into an interest rate cap agreement,
whereby, for a one year period commencing November 28, 1997 the London Interbank
Offered Rate ("LIBOR") with respect to $100 million of its variable rate
outstanding indebtedness will be capped at 6.5% per annum (the "Cap Rate"). The
agreement provides for quarterly payments by the counterparty to the extent that
LIBOR, as determined on the quarterly reset dates, exceeds the Cap Rate. This
agreement effectively caps the rate on $100 million of variable rate
indebtedness at 8.00%, after giving effect to the 1.50% spread as provided for
in the 1997 Term Loan.
Prior to the 1997 Refinancing, the Company was party to three interest rate
protection agreements which hedged substantially all of the Company's
outstanding variable rate debt under the previous credit agreement. On July 7,
1997, an agreement with a notional amount of $125 million expired and in
conjunction with the 1997 Refinancing, the remaining two agreements with a
combined notional amount of
19
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
$250 million were canceled. The net gain associated with the canceled interest
rate protection agreements was $0.3 million.
Aggregate annual maturities of the Company's long-term debt for the next
five years and thereafter as of December 27, 1997 are as follows (in millions):
$1.5 in fiscal 1998, $2.9 in fiscal 1999, $9.1 in fiscal 2000, $16.6 in fiscal
2001, $21.4 in fiscal 2002, and $686.3 thereafter.
7. 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. For the periods ended after December 15, 1993, Playtex paid
in cash the accrued interest. Principal and any unpaid accrued interest on the
15 1/2% Subordinated Notes are payable in cash on December 15, 2003.
8. 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.
Earnings before income taxes and extraordinary loss are as follows (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
U.S................................................................... $ 35,129 $ 32,650 $ 8,579
Foreign............................................................... 103 1,690 2,346
------------ ------------ ------------
Total............................................................... $ 35,232 $ 34,340 $ 10,925
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
20
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Playtex's provisions for income taxes for the twelve months ended December
27, 1997, December 28, 1996, and December 30, 1995 are as follows (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-----------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ -------------
Current:
Federal............................................................. $ 10,197 $ 7,851 $ 9,174
State and local..................................................... 600 553 (2,123)
Foreign............................................................. 211 895 1,233
------------ ------------ ------
11,008 9,299 8,284
------------ ------------ ------
Deferred:
Federal............................................................. 4,939 6,851 (82)
State and local..................................................... 516 311 (26)
Foreign............................................................. 38 (320) (25)
------------ ------------ ------
5,493 6,842 (133)
------------ ------------ ------
Total............................................................. $ 16,501 $ 16,141 $ 8,151
------------ ------------ ------
------------ ------------ ------
</TABLE>
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to Playtex's deferred tax assets and liabilities at December 27,
1997 and December 28, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Allowances and reserves not currently deductible................................... $ 9,356 $ 12,468
Net operating loss carryforwards................................................... 5,302 6,185
Postretirement benefits reserve.................................................... 2,915 2,256
Capitalized book expenses for tax purposes......................................... 564 675
State tax credits.................................................................. 242 58
------------ ------------
Total............................................................................ $ 18,379 $ 21,642
------------ ------------
------------ ------------
Deferred tax liabilities:
Deferred gain on sale of business.................................................. $ 14,650 $ 14,650
Property, plant and equipment...................................................... 10,126 8,845
Trademarks......................................................................... 5,980 5,139
Undistributed earnings of foreign subsidiary....................................... 2,622 2,622
Other.............................................................................. 607 480
------------ ------------
Total............................................................................ $ 33,985 $ 31,736
------------ ------------
------------ ------------
</TABLE>
Undistributed earnings of the Company's Canadian subsidiary for which U.S.
income taxes have not been provided were approximately $3.5 million at December
27, 1997. Such undistributed earnings are expected to be permanently reinvested
in the Canadian subsidiary.
21
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
The Company has available net operating loss carryforwards of $13.8 million
at December 27, 1997 that expire in years 2008 through 2010. These net operating
loss carryforwards, primarily related to operations of BBH prior to its
acquisition by the Company, can be utilized by Playtex, with certain
limitations, on its federal, state and local tax returns for tax periods
subsequent to October 31, 1995. Playtex expects to fully utilize these net
operating loss carryforwards prior to their expiration.
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-----------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ -------------
Expected federal income tax at statutory rates........................ $ 12,331 $ 12,019 $ 3,824
Amortization and write-off of intangible assets....................... 3,618 3,618 5,647
Settlement of tax examinations........................................ -- -- (2,385)
State and local income taxes.......................................... 725 562 786
Foreign tax rate differential......................................... 179 279 331
Effect on deferred taxes due to change in
Canadian withholding tax rates...................................... -- (214) --
Other, net............................................................ (352) (123) (52)
------------ ------------ ------
Total tax provision................................................. $ 16,501 $ 16,141 $ 8,151
------------ ------------ ------
------------ ------------ ------
</TABLE>
During 1995, several state jurisdictions concluded their examinations of tax
returns filed by the Company for various years 1987 through 1992 or the statute
of limitations related to other specific situations lapsed. As a result of these
favorable developments, Playtex recorded a $2.4 million tax benefit in the
provision for income taxes for the year ended December 30, 1995.
9. COMMON STOCK
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.
In February 1998, the Company's stockholders approved an amendment to the
1994 Stock Option Plan increasing the number of shares of common stock available
for issuance upon exercise of options and SARs from 3,047,785 to 5,047,785.
In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). As permitted by SFAS 123, the Company continues to
follow the provisions of APB No. 25,
22
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMON STOCK (CONTINUED)
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for compensation expense related to the issuance of stock options.
Had compensation costs related to the issuance of stock options under the
Company's 1994 Stock Option Plan been determined based on the estimated fair
value at the grant dates under SFAS 123, the Company's earnings and earnings per
share for the twelve months ended December 27, 1997, December 28, 1996, and
December 30, 1995 would have been reduced to the pro forma amounts listed below
(in thousands, except per share data):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings (loss):
As reported:
Before extraordinary loss..................................... $ 18,731 $ 18,199 $ 2,774
Net earnings (loss)........................................... $ 14,653 $ 18,199 $ (5,161)
Pro forma:
Before extraordinary loss..................................... $ 17,071 $ 15,649 $ 1,324
Net earnings (loss)........................................... $ 12,993 $ 15,649 $ (6,611)
Earnings (loss) per share (basic and diluted):
As reported:
Before extraordinary loss..................................... $ .37 $ .36 $ .07
Net earnings (loss)........................................... $ .29 $ .36 $ (.12)
Pro forma:
Before extraordinary loss..................................... $ .34 $ .31 $ .03
Net earnings (loss)........................................... $ .25 $ .31 $ (.16)
Weighted average shares outstanding:
Basic............................................................... 50,923 50,883 42,309
Diluted............................................................. 51,006 50,939 42,342
</TABLE>
The fair value of each stock option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
weighted average risk-free interest rates of 6.10%, 6.63% and 6.26% for fiscal
1997, 1996 and 1995, respectively; no dividend yield; expected lives of 5 years;
and volatility of 35%. A summary of the status of the Company's 1994 Stock
Option Plan for fiscal 1997, 1996 and 1995 and the changes during those years is
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- ---------- ----------- ---------- -----------
Outstanding at beginning of year.................... 2,315,434 $ 9.14 2,240,800 $ 9.17 297,500 $ 12.21
Granted............................................. 636,000 9.59 166,000 8.76 2,080,700 8.82
Exercised........................................... (54,612) 7.88 (7,499) 7.87 -- --
Forfeited........................................... (80,224) 9.13 (83,867) 9.47 (137,400) 10.43
---------- ---------- ----------
Outstanding at end of year........................ 2,816,598 9.27 2,315,434 9.14 2,240,800 9.17
---------- ---------- ----------
---------- ---------- ----------
Options exercisable at year-end..................... 1,334,087 9.26 715,452 9.37 76,348 11.98
Weighted-average fair value of options granted
during the year................................... $ 4.72 $ 4.40 $ 4.43
</TABLE>
23
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMON STOCK (CONTINUED)
The following table summarizes information about fixed stock options
outstanding at December 27, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 27, CONTRACTUAL EXERCISE DECEMBER 27, EXERCISE
RANGE OF EXERCISE PRICES 1997 LIFE PRICES 1997 PRICES
- ------------------------------------------------- ------------ --------------- --------- ------------ ---------
$6.750 to 7.000.................................. 37,500 6.97 $ 6.7500 37,500 $ 6.7500
$7.000 to 8.000.................................. 867,498 7.61 7.8750 570,581 7.8750
$8.000 to 9.000.................................. 66,000 8.44 8.1269 22,601 8.1302
$9.000 to 10.000................................. 1,495,000 8.43 9.6904 435,334 9.8069
$10.000 to 13.000................................ 350,600 7.10 11.3776 268,071 11.7632
------------ ------------
$6.750 to 13.000................................. 2,816,598 7.99 9.2655 1,334,087 9.2594
------------ ------------
------------ ------------
</TABLE>
10. WRITE-OFF OF SMILETOTE-REGISTERED TRADEMARK- INTANGIBLE ASSETS
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, 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.
11. EXTRAORDINARY LOSS
In July 1997, in connection with the 1997 Refinancing, the Company recorded
an extraordinary loss of $4.1 million (net of income tax benefit of $2.3
million) for costs and expenses related to the write-off of the unamortized
portion of deferred financing costs associated with the Company's previous
credit agreement (see Note 6).
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 a previous credit agreement (see Note
6).
12. LEASES
Future minimum payments under non-cancelable operating leases for fiscal
years ending after December 27, 1997 are as follows (in thousands): $5,988 in
1998, $5,399 in 1999, $4,667 in 2000, $3,997 in 2001, $3,343 in 2002 and $10,353
in later years.
Rent expense for operating leases amounted to (in thousands): $5,250,
$5,201, and $5,092 for the twelve months ended December 27, 1997, December 28,
1996, and December 30, 1995, respectively.
24
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS
Defined Benefit Pension Plans--Substantially all Playtex U.S. hourly and
approximately 90% of all Canadian employees participate in pension plans. At
December 27, 1997, approximately 1,165 employees were covered by these plans, of
which approximately 210 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) 9.0% 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 for the twelve months ended December 27, 1997, December
28, 1996, and December 30, 1995 includes the following components (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------- ------------- -------------
Service cost-benefits earned during the period........................ $ 875 $ 721 $ 616
Interest cost on projected benefit obligation......................... 2,003 1,688 1,559
Actual return on plan assets.......................................... (4,632) (3,711) (6,000)
Amortization of prior service cost.................................... 84 73 73
Amortization of unrecognized net gain................................. (29) (51) (2)
Amortization of transition gain over 10 years......................... (42) (193) (193)
Excess of actual return on plan assets over estimated................. 1,910 1,479 4,190
------ ------ ------
Net pension expense................................................. $ 169 $ 6 $ 243
------ ------ ------
------ ------ ------
</TABLE>
A reconciliation of the projected benefit obligation for the pension plans
to the prepaid pension expense recorded at December 27, 1997 and December 28,
1996 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Projected benefit obligation for service rendered to date............................ $ (29,116) $ (24,347)
Plan assets at fair value, primarily listed stocks, money market funds and guaranteed
investment contracts............................................................... 34,862 31,171
------------ ------------
Plan assets in excess of projected benefit obligation.............................. 5,746 6,824
Unrecognized net gain from past experience different from that assumed and effects of
changes in assumptions............................................................. (3,743) (4,398)
Prior service cost not yet recognized in net periodic pension cost................... 527 365
Unrecognized transition gain......................................................... (335) (395)
------------ ------------
Prepaid pension expense............................................................ $ 2,195 $ 2,396
------------ ------------
------------ ------------
</TABLE>
The portion of the projected benefit obligation at December 27, 1997 and
December 28, 1996 representing the accumulated benefit obligation was $26.4
million, of which $25.6 million was vested, and $22.0 million, of which $21.2
million was vested, respectively.
25
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Postretirement Benefits Other than Pensions--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 88% 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 components of the postretirement benefit expense
for the twelve months ended December 27, 1997, December 28, 1996, and December
30, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-----------------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------- --------------- ---------------
Service cost-benefits earned during the period........................ $ 240 $ 218 $ 172
Interest cost on accumulated benefit obligation....................... 621 534 487
Net amortization and deferral......................................... 217 97 114
------ ----- -----
Net periodic expense................................................ $ 1,078 $ 849 $ 773
------ ----- -----
------ ----- -----
</TABLE>
The accumulated benefit obligations recorded on the consolidated balance
sheets as of December 27, 1997 and December 28, 1996 consist of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
Retirees............................................................................. $ 3,945 $ 3,745
Fully eligible active employees...................................................... 2,211 2,099
Other active plan participants....................................................... 2,782 2,641
------ ------
Accumulated postretirement benefit obligations..................................... 8,938 8,485
Unrecognized prior service costs..................................................... (1,686) (1,903)
Unrecognized net loss................................................................ (50) (344)
------ ------
Accrued postretirement benefit obligations......................................... $ 7,202 $ 6,238
------ ------
------ ------
</TABLE>
The assumed health care cost trend rate for 1997 was 9.0%. This rate grades
down until the final trend rate of 5.25% is reached in 2005. A one percentage
point increase in the assumed health care costs trend rate increases the sum of
the service and interest costs components of the fiscal 1997 periodic
postretirement benefit cost by 17%, and the accumulated postretirement benefit
obligation as of December 27, 1997 by 15%. The discount rate used to estimate
the accumulated postretirement benefit obligations was 7.5% at December 27, 1997
and December 28, 1996.
Defined Contribution Benefit Plans -- 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 $4.1 million, $4.6 million, and $4.7 million
for the twelve months ended December 27, 1997, December 28, 1996, and December
30, 1995, respectively.
14. RELATED PARTY TRANSACTIONS
Joel E. Smilow and Hercules P. Sotos, both former directors and senior
executive officers of Playtex, are general partners of the Apparel Partnership,
holding beneficial interests of 58.5% and 13.5%, respectively, in the Apparel
Partnership. Under a consulting agreement, which commenced in the third
26
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. RELATED PARTY TRANSACTIONS (CONTINUED)
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
issued and outstanding common shares of BBH not previously owned by Playtex.
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 a significant
stockholder of Playtex. Beginning 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 BBH Acquisition, the distribution
agreement between Sun and Playtex was canceled. For the ten months ended October
31, 1995 Playtex purchased $30.1 million of Banana Boat products from Sun.
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.
15. BUSINESS AND CREDIT CONCENTRATIONS
Most of Playtex's customers are dispersed throughout the United States and
Canada. No single customer accounted for more than 10% of Playtex's net sales in
1997, 1996, or 1995 with the exception of its largest customer (approximately
20% in 1997, 18% in 1996, and 17% in 1995). At December 27, 1997 and December
28, 1996, no account receivable from any customer was significant, except for
the Company's largest customer (approximately $12.6 million in 1997 and $11.9
million in 1996). Aggregate receivables from high risk 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.
16. 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.
1997 CREDIT AGREEMENT The carrying amounts approximate fair value because
the rate of interest on borrowings under the 1997 Credit Agreement is, at
Playtex's option, a function of various alternative short-term borrowing rates,
as defined in the associated Credit Agreement.
27
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LONG-TERM DEBT AND OTHER FINANCIAL INSTRUMENTS The fair value of the
following financial instruments was estimated at December 27, 1997 and December
28, 1996 as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, 1997 DECEMBER 28, 1996
---------------------- ----------------------
<S> <C> <C> <C> <C>
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
9% Senior Subordinated Notes (a)................................. $ 360,000 $ 369,000 $ 360,000 $ 353,400
8 7/8% Unsecured Senior Notes (a)................................ 150,000 153,750 -- --
15% Notes due from Playtex Apparel Partners, L.P. (b)............ 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to Playtex Apparel Partners, L.P.
(b)............................................................ 78,386 78,386 78,386 78,386
Other noncurrent assets (c)...................................... 3,626 3,520 4,224 4,100
Noncurrent liabilities (c)....................................... 13,563 12,340 14,207 12,930
</TABLE>
- ------------------------
(a) At December 27, 1997 and December 28, 1996, 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 27,
1997 and December 28, 1996, based on the amount of future cash flows
associated with these instruments, discounted using an 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.
28
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. 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 (in thousands).
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
Sales:
United States....................................................... $ 463,910 $ 459,075 $ 445,880
Canada.............................................................. 36,722 39,667 37,701
------------ ------------ ------------
$ 500,632 $ 498,742 $ 483,581
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Operating earnings is defined as total revenue less operating expenses. In
computing operating earnings, interest and income taxes have not been deducted
(in thousands).
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------
<S> <C> <C> <C>
DECEMBER 27, DECEMBER 28, DECEMBER 30,
1997 1996 1995
------------ ------------ ------------
Operating earnings:
United States....................................................... $ 94,837 $ 97,702 $ 80,085
Canada.............................................................. 4,865 1,498 2,201
------------ ------------ ------------
$ 99,702 $ 99,200 $ 82,286
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Identifiable assets by geographic area represent those assets that are used
in Playtex's operations in each area (in thousands).
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
Identifiable assets (at period end):
United States...................................................................... $ 642,085 $ 647,629
Canada............................................................................. 10,473 12,702
------------ ------------
$ 652,558 $ 660,331
------------ ------------
------------ ------------
</TABLE>
29
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. QUARTERLY DATA (UNAUDITED)
The following is a summary of the quarterly results of operations and market
price data for the Company for the twelve months ended December 27, 1997 and
December 28, 1996 (in thousands, except per share data):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
FISCAL 1997
Net sales..................... $136,410 $134,872 $117,675 $111,675
Operating earnings............ 30,679 26,287 24,130 18,606
Earnings before extraordinary
loss........................ 7,848 5,517 4,034 1,332
Net earnings (loss)........... 7,848 5,517 (44) 1,332
Earnings per share (a):
Before extraordinary loss..... $ .15 $ .11 $ .08 $ .03
Net earningps.................. $ .15 $ .11 $ .00 $ .03
Market price--high............ $ 11 3/4 $ 11 1/2 $ 10 1/4 $ 11
--low.............. $ 7 7/8 $ 9 $ 8 13/16 $ 9
FISCAL 1996
Net sales..................... $143,067 $131,872 $117,500 $106,303
Operating earnings............ 27,841 26,735 26,334 18,290
Net earnings.................. 5,981 5,489 5,408 1,321
Earnings per share (a)........ $ .12 $ .11 $ .11 $ .03
Market price--high............ $ 8 5/8 10 3/8 $ 9 1/2 $ 9 1/2
--low.............. $ 6 5/8 $ 7 1/8 $ 7 1/2 $ 7 1/8
</TABLE>
- ------------------------
(a) Earnings 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. Amounts represent basic and
diluted earnings per share.
30
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
8 7/8% UNSECURED SENIOR NOTES DUE 2004
The Senior Notes are guaranteed by certain wholly-owned subsidiaries of the
Company (the "8 7/8% Guarantors"), namely Playtex Sales & Services, Inc.
("PSSI"), Playtex Manufacturing, Inc. ("PMI"), Playtex Beauty Care, Inc.
("PBCI"), Playtex Investment Corp. ("PIC"), Playtex International Corp.
("PINTL"), TH Marketing Corp. ("THMC"), SmileTote, Inc. ("STI") and Sun
Pharmaceuticals Corp. ("Sun"). The remaining first tier and lower tier
subsidiaries of the Company are not guarantors of the 8 7/8% Notes (the " 8 7/8%
Non-Guarantors"). PSSI provides sales solicitation, management and
administrative services to Playtex and its U.S. affiliates. PMI is a contract
manufacturer and contract research and development services provider for Playtex
and its U.S. affiliates. PBCI is a manufacturer and distributor of JHIRMACK hair
care products. PIC is an investment holding company which holds the Apparel
Debentures (see Note 5). PINTL is sole shareholder of Playtex Limited, a
manufacturer and distributor of Playtex products in Canada. THMC is the sole
shareholder of Playtex Foreign Sales Corporation. STI is owner of certain infant
care related intangible assets. Sun owns the BANANA BOAT trade name and certain
other intangible assets associated with the BANANA BOAT business. Sun
distributes its products outside the U.S. and Puerto Rico and to certain U.S.
distributors excluding Playtex. Sun has entered into license agreements with
Playtex and other unrelated licensors for the right to use the BANANA BOAT trade
name and intangible assets associated with the BANANA BOAT sun and skin care
business and manufacture and distribute BANANA BOAT products.
The 8 7/8% Non-Guarantors include Playtex Limited and Playtex Foreign Sales
Corporation("PFSC"), a foreign sales corporation as defined by Internal Revenue
Code Section 922.
The 8 7/8% Guarantors are joint and several guarantors of the 8 7/8% Notes.
Such guarantees are joint and several obligations of the 8 7/8% Guarantors, are
irrevocable, full and unconditional and are limited to the largest amount that
would not render such 8 7/8% Guarantors' obligations under the guarantees
subject to avoidance under any applicable federal or state fraudulent conveyance
or similar law. The guarantees are senior subordinated obligations of the
applicable 8 7/8% Guarantor, and are subordinated to all senior obligations of
such 8 7/8% Guarantor, including guarantees of the Company's obligations under
the 1997 Credit Agreement.
The 8 7/8% Notes contain certain restrictions and limitations, which, among
other things, restrict the type and/or amount of additional indebtedness that
may be incurred by Playtex or its subsidiaries, payment of dividends and other
distributions, issuance of preferred stock; loans and advances; certain
transactions with Playtex stockholders and affiliates; certain mergers and
consolidations; certain sales or transfers of assets; the creation of certain
liens; the transfer of assets to certain subsidiaries; and restrictions on
dividends and other distributions by subsidiaries, including the 8 7/8%
Guarantors.
The information which follows presents the condensed financial position as
of December 27, 1997 and December 28, 1996 and condensed results of operations
and cash flows for each of the fiscal years in the three year period ended
December 27, 1997 of (a) the Company on a consolidated basis, (b) the parent
company only ("Parent Company"), (c) the combined 8 7/8% Guarantors, and (d) the
combined 8 7/8% Non-Guarantors.
31
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
ASSETS CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets........................ $ 125,362 $ -- $ 71,923 $ 43,820 $ 9,619
Investment in subsidiaries............ -- (87,940) 77,776 10,164 --
Intercompany receivable............... -- (158,030) 143,647 13,286 1,097
Net property, plant and equipment..... 54,810 -- 235 53,718 857
Intangible assets..................... 388,743 -- 322,216 66,522 5
Other noncurrent assets............... 83,643 (503) 3,629 80,517 --
----------- ----------- --------- ----------- -----------
Total assets........................ $ 652,558 $(246,473) $ 619,426 $ 268,027 $ 11,578
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities................... $ 68,960 $ 22 $ 57,590 $ 8,807 $ 2,541
Intercompany payable.................. -- (158,029) -- 157,641 388
Long-term debt........................ 814,686 -- 814,686 -- --
Other noncurrent liabilities.......... 36,975 (507) 15,213 22,649 (380)
----------- ----------- --------- ----------- -----------
Total liabilities................... 920,621 (158,514) 887,489 189,097 2,549
Stockholders' equity.................. (268,063) (87,959) (268,063) 78,930 9,029
----------- ----------- --------- ----------- -----------
Total liabilities and stockholders'
equity............................ $ 652,558 $(246,473) $ 619,426 $ 268,027 $ 11,578
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
ASSETS CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets........................ $ 122,491 $ -- $ 66,474 $ 44,104 $ 11,913
Investment in subsidiaries............ -- (79,245) 70,924 8,321 --
Intercompany receivable............... -- (126,782) 120,717 6,065 --
Net property, plant and equipment..... 53,408 -- 309 52,310 789
Intangible assets..................... 400,191 -- 331,394 68,797 --
Other noncurrent assets............... 84,241 (504) 4,219 80,526 --
----------- ----------- --------- ----------- -----------
Total assets........................ $ 660,331 $(206,531) $ 594,037 $ 260,123 $ 12,702
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities................... $ 115,969 $ -- $ 69,584 $ 42,348 $ 4,037
Intercompany payable.................. -- (127,281) -- 126,500 781
Long-term debt........................ 793,086 -- 793,086 -- --
Other noncurrent liabilities.......... 34,003 (504) 14,094 20,850 (437)
----------- ----------- --------- ----------- -----------
Total liabilities................... 943,058 (127,785) 876,764 189,698 4,381
Stockholders' equity.................. (282,727) (78,746) (282,727) 70,425 8,321
----------- ----------- --------- ----------- -----------
Total liabilities and stockholders'
equity............................ $ 660,331 $(206,531) $ 594,037 $ 260,123 $ 12,702
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------
</TABLE>
32
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 500,632 $ (226,874) $ 443,673 $ 245,797 $ 38,036
Cost of sales.................................. 195,980 (177,208) 186,482 168,411 18,295
------------ ------------ ---------- ----------- -----------
Gross profit................................. 304,652 (49,666) 257,191 77,386 19,741
Operating expenses:
Advertising, selling and administrative........ 192,056 (49,666) 160,671 62,606 18,445
Amortization of intangibles.................... 12,894 -- 10,618 2,276 --
------------ ------------ ---------- ----------- -----------
Total operating expenses..................... 204,950 (49,666) 171,289 64,882 18,445
------------ ------------ ---------- ----------- -----------
Operating earnings........................... 99,702 -- 85,902 12,504 1,296
Interest expense, net.......................... 64,470 -- 76,594 (12,003) (121)
Equity in net earnings of subsidiaries......... -- 17,216 (16,110) (1,106) --
------------ ------------ ---------- ----------- -----------
Earnings before income taxes................. 35,232 (17,216) 25,418 25,613 1,417
Income taxes................................... 16,501 -- 6,687 9,503 311
------------ ------------ ---------- ----------- -----------
Earnings before extraordinary loss........... 18,731 (17,216) 18,731 16,110 1,106
Extraordinary loss on early extinguishment of
debt, net.................................... (4,078) -- (4,078) -- --
------------ ------------ ---------- ----------- -----------
Net earnings................................. $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 498,742 $ (167,269) $ 438,127 $ 188,217 $ 39,667
Cost of sales.................................. 192,512 (104,374) 161,849 116,884 18,153
------------ ------------ ---------- ----------- -----------
Gross profit................................. 306,230 (62,895) 276,278 71,333 21,514
Operating expenses:
Advertising, selling and administrative........ 194,184 (62,895) 171,534 65,721 19,824
Amortization of intangibles.................... 12,846 -- 10,570 2,276 --
------------ ------------ ---------- ----------- -----------
Total operating expenses..................... 207,030 (62,895) 182,104 67,997 19,824
------------ ------------ ---------- ----------- -----------
Operating earnings........................... 99,200 -- 94,174 3,336 1,690
Interest expense, net.......................... 64,860 -- 76,864 (12,004) --
Equity in net earnings of subsidiaries......... -- 11,339 (10,456) (883) --
------------ ------------ ---------- ----------- -----------
Earnings before income taxes................. 34,340 (11,339) 27,766 16,223 1,690
Income taxes................................... 16,141 -- 9,567 5,767 807
------------ ------------ ---------- ----------- -----------
Net earnings................................. $ 18,199 $ (11,339) $ 18,199 $ 10,456 $ 883
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
33
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L9. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 483,581 $ (7,879) $ 417,894 $ 35,865 $ 37,701
Cost of sales.................................. 188,129 (6,817) 163,233 15,196 16,517
------------ ------------ ---------- ----------- -----------
Gross profit................................. 295,452 (1,062) 254,661 20,669 21,184
Operating expenses:
Advertising, selling and administrative........ 195,457 (1,062) 152,975 24,685 18,859
Amortization of intangibles.................... 17,709 -- 10,427 7,282 --
------------ ------------ ---------- ----------- -----------
Total operating expenses..................... 213,166 (1,062) 163,402 31,967 18,859
------------ ------------ ---------- ----------- -----------
Operating earnings........................... 82,286 -- 91,259 (11,298) 2,325
Interest expense, net.......................... 71,361 -- 83,326 (11,944) (21)
Equity in net earnings of subsidiaries......... -- 491 808 (1,299) --
------------ ------------ ---------- ----------- -----------
Earnings before income taxes................. 10,925 (491) 7,125 1,945 2,346
Income taxes................................... 8,151 -- 4,351 2,753 1,047
------------ ------------ ---------- ----------- -----------
Earnings before extraordinary loss........... 2,774 (491) 2,774 (808) 1,299
Extraordinary loss on early extinguishment of
debt, net.................................... (7,935) -- (7,935) -- --
------------ ------------ ---------- ----------- -----------
Net (loss) earnings.......................... $ (5,161) $ (491) $ (5,161) $ (808) $ 1,299
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
34
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings.................................... $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
Non-cash items included in earnings:
Extraordinary loss.......................... 4,078 -- 4,078 -- --
Amortization of intangibles................. 12,894 -- 10,618 2,276 --
Amortization of deferred financing costs.... 2,163 -- 2,163 -- --
Depreciation................................ 7,520 -- 94 7,191 235
Deferred taxes.............................. 5,493 -- 3,752 1,798 (57)
Other, net.................................. 249 17,216 (16,742) 42 (267)
Increase in net working capital............... (30,182) -- (15,852) (11,173) (3,157)
------------ ------------ ---------- ----------- -----------
Net cash flows from (used for)
operations.............................. 16,868 -- 2,764 16,244 (2,140)
------------ ------------ ---------- ----------- -----------
Cash flows used for investing activities:
Purchase of property, plant and equipment..... (9,004) -- (82) (8,599) (323)
------------ ------------ ---------- ----------- -----------
Net cash flows used for investing
activities.............................. (9,004) -- (82) (8,599) (323)
------------ ------------ ---------- ----------- -----------
Cash flows used for financing activities:
Net repayments under working capital
facilities and long-term debt obligations... (1,900) -- (1,900) -- --
Payment of financing costs.................... (9,367) -- (9,367) -- --
Issuance of shares of common stock, net....... 429 -- 429 -- --
Receipt (payment) of dividends................ -- -- 7,645 (7,645) --
------------ ------------ ---------- ----------- -----------
Net cash flows used for financing
activities.............................. (10,838) -- (3,193) (7,645) --
------------ ------------ ---------- ----------- -----------
Decrease in cash................................ (2,974) -- (511) -- (2,463)
Cash at beginning of period..................... 6,205 -- 1,179 -- 5,026
------------ ------------ ---------- ----------- -----------
Cash at end of period........................... $ 3,231 $ -- $ 668 $ -- $ 2,563
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
35
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. Condensed Consolidated Financial Information (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings..................................... $ 18,199 $ (11,339) $ 18,199 $ 10,456 $ 883
Non-cash items included in earnings:
Amortization of intangibles.................. 12,846 -- 10,570 2,276 --
Amortization of deferred financing costs..... 2,089 -- 2,089 -- --
Depreciation................................. 8,929 -- 72 8,605 252
Deferred taxes............................... 6,842 -- 7,963 (1,130) 9
Other, net................................... 48 11,339 (10,279) (1,003) (9)
Decrease (increase) in net working capital..... 11,351 -- 13,273 (1,976) 54
------------ ------------ ----------- ----------- -----------
Net cash flows from operations............. 60,304 -- 41,887 17,228 1,189
------------ ------------ ----------- ----------- -----------
Cash flows used for investing activities:
Purchase of property, plant and equipment...... (9,740) -- (45) (9,426) (269)
------------ ------------ ----------- ----------- -----------
Net cash flows used for investing
activities............................... (9,740) -- (45) (9,426) (269)
------------ ------------ ----------- ----------- -----------
Cash flows used for financing activities:
Net repayments under working capital facilities
and long-term debt obligations............... (50,350) -- (50,350) -- --
Issuance of shares of common stock, net........ 60 -- 60 -- --
Receipt (payment) of dividends................. -- -- 7,802 (7,802) --
Other, net..................................... (9) -- (9) -- --
------------ ------------ ----------- ----------- -----------
Net cash flows used for financing
activities................................. (50,299) -- (42,497) (7,802) --
------------ ------------ ----------- ----------- -----------
Increase (decrease) in cash...................... 265 -- (655) -- 920
Cash at beginning of period...................... 5,940 -- 1,834 -- 4,106
------------ ------------ ----------- ----------- -----------
Cash at end of period............................ $ 6,205 $ -- $ 1,179 $ -- $ 5,026
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
</TABLE>
36
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings.................................... $ (5,161) $ (491) $ (5,161) $ (808) $ 1,299
Non-cash items included in earnings:
Extraordinary loss.......................... 7,935 -- 7,935 -- --
Write-off of SMILETOTE intangibles.......... 6,441 -- -- 6,441 --
Amortization of intangibles................. 11,268 -- 10,424 844 --
Amortization of deferred financing costs.... 2,246 -- 2,246 -- --
Depreciation................................ 8,496 -- 8,000 295 201
Deferred taxes.............................. (133) -- 1,039 (1,147) (25)
Other, net.................................. (291) 491 268 (1,299) 249
(Increase) decrease in net working capital.... (3,722) -- (6,443) 2,838 (117)
------------ ----- ---------- ----------- -----------
Net cash flows from operations............ 27,079 -- 18,308 7,164 1,607
------------ ----- ---------- ----------- -----------
Cash flows (used for) from investing activities:
Purchase of property, plant and equipment..... (12,395) -- (12,296) (99) --
Business or investments acquired.............. (94,429) 737 (95,166) -- --
------------ ----- ---------- ----------- -----------
Net cash flows (used for) from investing
activities.............................. (106,824) 737 (107,462) (99) --
------------ ----- ---------- ----------- -----------
Cash flows from (used for) financing activities:
Net repayments under working capital
facilities and long-term debt obligations... (42,650) -- (42,650) -- --
Long-term debt borrowings..................... 425,000 -- 425,000 -- --
Long-term debt repayments..................... (468,000) -- (468,000) -- --
Payment of financing costs.................... (9,113) -- (9,113) -- --
Issuance of shares of common stock............ 170,000 -- 170,000 -- --
Receipt (payment) of dividends................ -- -- 7,802 (7,802) --
Other, net.................................... 75 -- 75 -- --
------------ ----- ---------- ----------- -----------
Net cash flows from (used for) financing
activities.............................. 75,312 -- 83,114 (7,802) --
------------ ----- ---------- ----------- -----------
(Decrease)increase in cash...................... (4,433) 737 (6,040) (737) 1,607
Cash at beginning of period..................... 10,373 (737) 7,874 737 2,499
------------ ----- ---------- ----------- -----------
Cash at end of period........................... $ 5,940 $ -- $ 1,834 $ -- $ 4,106
------------ ----- ---------- ----------- -----------
------------ ----- ---------- ----------- -----------
</TABLE>
37
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
9% SENIOR SUBORDINATED NOTES DUE 2003
The 9% Notes are guaranteed by certain wholly-owned subsidiaries of the
Company (the "9% Guarantors"), PSSI, PMI, THMC, STI, and Sun. The remaining
first tier and lower tier subsidiaries of the Company are not guarantors of the
9% Notes (the "9% Non-Guarantors"). The 9% Non-Guarantors include PBCI, PIC,
PINTL, Playtex Limited and PFSC.
The 9% Guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are joint and several obligations of the 9% Guarantors, are
irrevocable, and full and unconditional and are limited to the largest amount
that would not render such 9% Guarantors' obligations under the guarantees
subject to avoidance under any applicable federal or state fraudulent conveyance
or similar law. The guarantees are senior subordinated obligations of the
applicable 9% Guarantor, and are subordinated to all senior obligations of such
9% Guarantor, including guarantees of the Company's obligations under the 1997
Refinancing.
The 9% Notes contain certain restrictions and limitations, which, among
other things, restrict the type and/or amount of additional indebtedness that
may be incurred by Playtex or its subsidiaries, payment of dividends and other
distributions, issuances of preferred stock; loans and advances; certain
transactions with Playtex stockholders and affiliates; certain mergers and
consolidations; certain sales or transfers of assets; the creation of certain
liens; the transfer of assets to certain subsidiaries; and restrictions on
dividends and other distributions by subsidiaries, including the 9% Guarantors.
The information which follows presents the condensed financial position as
of December 27, 1997 and December 28, 1996 and condensed results of operations
and cash flows for each of the fiscal years in the three year period ended
December 27, 1997 of (a) the Company on a consolidated basis, (b) the parent
company only ("Parent Company"), (c) the combined 9% Guarantors, and (d) the
combined 9% Non-Guarantors. In July 1997, the 9% Notes Indenture was amended
adding THMC and STI as guarantors of the 9% Notes. The 9% Notes Guarantor
financial statements for 1996 and 1995 have been restated to reflect the
addition of THMC and STI as guarantors.
38
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets................................. $ 125,362 $ -- $ 71,923 $ 40,293 $ 13,146
Investment in subsidiaries..................... -- (80,084) 77,776 1,154 1,154
Intercompany receivable........................ -- (158,024) 143,647 13,280 1,097
Net property, plant and equipment.............. 54,810 -- 235 53,210 1,365
Intangible assets.............................. 388,743 -- 322,216 64,542 1,985
Other noncurrent assets........................ 83,643 (503) 3,629 -- 80,517
------------ ------------ ---------- ----------- -----------
Total assets................................. $ 652,558 $ (238,611) $ 619,426 $ 172,479 $ 99,264
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............................ $ 68,960 $ 22 $ 57,590 $ 7,520 $ 3,828
Intercompany payable........................... -- (158,023) -- 29,179 128,844
Long-term debt................................. 814,686 -- 814,686 -- --
Other noncurrent liabilities................... 36,975 (507) 15,213 4,636 17,633
------------ ------------ ---------- ----------- -----------
Total liabilities............................ 920,621 (158,508) 887,489 41,335 150,305
Stockholders' equity........................... (268,063) (80,103) (268,063) 131,144 (51,041)
------------ ------------ ---------- ----------- -----------
Total liabilities and stockholders' equity... $ 652,558 $ (238,611) $ 619,426 $ 172,479 $ 99,264
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets................................. $ 122,491 $ -- $ 66,474 $ 39,436 $ 16,581
Investment in subsidiaries..................... -- (70,209) 70,209 -- --
Intercompany receivable........................ -- (127,497) 122,393 5,103 1
Net property, plant and equipment.............. 53,408 -- 309 51,743 1,356
Intangible assets.............................. 400,191 -- 331,394 66,749 2,048
Other noncurrent assets........................ 84,241 (495) 4,219 -- 80,517
------------ ------------ ---------- ----------- -----------
Total assets................................. $ 660,331 $ (198,201) $ 594,998 $ 163,031 $ 100,503
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............................ $ 115,969 $ -- $ 70,545 $ 38,762 $ 6,662
Intercompany payable........................... -- (127,272) -- -- 127,272
Long-term debt................................. 793,086 -- 793,086 -- --
Other noncurrent liabilities................... 34,003 (504) 14,094 2,813 17,600
------------ ------------ ---------- ----------- -----------
Total liabilities............................ 943,058 (127,776) 877,725 41,575 151,534
Stockholders' equity........................... (282,727) (70,425) (282,727) 121,456 (51,031)
------------ ------------ ---------- ----------- -----------
Total liabilities and stockholders' equity... $ 660,331 $ (198,201) $ 594,998 $ 163,031 $ 100,503
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
39
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 500,632 $ (226,538) $ 443,673 $ 230,102 $ 53,395
Cost of sales.................................. 195,980 (176,872) 186,482 160,609 25,761
------------ ------------ ---------- ----------- -----------
Gross profit................................. 304,652 (49,666) 257,191 69,493 27,634
Operating expenses:
Advertising, selling and administrative........ 192,056 (49,666) 160,671 51,826 29,225
Amortization of intangibles.................... 12,894 -- 10,618 2,208 68
------------ ------------ ---------- ----------- -----------
Total operating expenses..................... 204,950 (49,666) 171,289 54,034 29,293
------------ ------------ ---------- ----------- -----------
Operating earnings (loss).................... 99,702 -- 85,902 15,459 (1,659)
Interest expense, net.......................... 64,470 -- 76,594 -- (12,124)
Equity in net earnings of subsidiaries......... -- 18,418 (16,110) (1,154) (1,154)
------------ ------------ ---------- ----------- -----------
Earnings before income taxes................. 35,232 (18,418) 25,418 16,613 11,619
Income taxes................................... 16,501 -- 6,687 6,229 3,585
------------ ------------ ---------- ----------- -----------
Earnings before extraordinary loss............. 18,731 (18,418) 18,731 10,384 8,034
Extraordinary loss on early extinguishment of
debt, net.................................... (4,078) -- (4,078) -- --
------------ ------------ ---------- ----------- -----------
Net earnings................................. $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 498,742 $ (167,269) $ 438,127 $ 169,020 $ 58,864
Cost of sales.................................. 192,512 (104,374) 161,849 108,699 26,338
------------ ------------ ---------- ----------- -----------
Gross profit................................. 306,230 (62,895) 276,278 60,321 32,526
Operating expenses:
Advertising, selling and administrative........ 194,184 (62,895) 171,534 53,671 31,874
Amortization of intangibles.................... 12,846 -- 10,570 2,208 68
------------ ------------ ---------- ----------- -----------
Total operating expenses..................... 207,030 (62,895) 182,104 55,879 31,942
------------ ------------ ---------- ----------- -----------
Operating earnings........................... 99,200 -- 94,174 4,442 584
Interest expense, net.......................... 64,860 -- 76,864 -- (12,004)
Equity in net earnings of subsidiaries......... -- 10,456 (10,456) -- --
------------ ------------ ---------- ----------- -----------
Earnings before income taxes................. 34,340 (10,456) 27,766 4,442 12,588
Income taxes................................... 16,141 -- 9,567 2,034 4,540
------------ ------------ ---------- ----------- -----------
Net earnings................................. $ 18,199 $ (10,456) $ 18,199 $ 2,408 $ 8,048
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
40
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 483,581 $ (7,427) $ 417,894 $ 1,622 $ 71,492
Cost of sales.................................. 188,129 (6,365) 163,233 1,227 30,034
------------ ------------ ---------- ----------- -----------
Gross profit................................. 295,452 (1,062) 254,661 395 41,458
Operating expenses:
Advertising, selling and administrative........ 195,457 (1,062) 152,975 830 42,714
Amortization of intangibles.................... 17,709 -- 10,427 7,214 68
------------ ------------ ---------- ----------- -----------
Total operating expenses..................... 213,166 (1,062) 163,402 8,044 42,782
------------ ------------ ---------- ----------- -----------
Operating earnings (loss).................... 82,286 -- 91,259 (7,649) (1,324)
Interest expense, net.......................... 71,361 -- 83,326 -- (11,965)
Equity in net earnings of subsidiaries......... -- (808) 808 -- --
------------ ------------ ---------- ----------- -----------
Earnings before income taxes................. 10,925 808 7,125 (7,649) 10,641
Income taxes................................... 8,151 -- 4,351 (150) 3,950
------------ ------------ ---------- ----------- -----------
Earnings before extraordinary loss........... 2,774 808 2,774 (7,499) 6,691
Extraordinary loss on early extinguishment of
debt, net.................................... (7,935) -- (7,935) -- --
------------ ------------ ---------- ----------- -----------
Net (loss) earnings.......................... $ (5,161) $ 808 $ (5,161) $ (7,499) $ 6,691
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
41
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings..................................... $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
Non-cash items included in earnings:
Extraordinary loss........................... 4,078 -- 4,078 -- --
Amortization of intangibles.................. 12,894 -- 10,618 2,208 68
Amortization of deferred financing costs..... 2,163 -- 2,163 -- --
Depreciation................................. 7,520 -- 94 7,074 352
Deferred taxes............................... 5,493 -- 3,752 1,823 (82)
Other, net................................... 249 18,418 (16,742) (5) (1,422)
Increase in net working capital................ (30,182) -- (15,852) (12,943) (1,387)
------------ ------------ ----------- ----------- -----------
Net cash flows from operations............. 16,868 -- 2,764 8,541 5,563
------------ ------------ ----------- ----------- -----------
Cash flows used for investing activities:
Purchase of property, plant and equipment...... (9,004) -- (82) (8,541) (381)
------------ ------------ ----------- ----------- -----------
Net cash flows used for investing
activities............................... (9,004) -- (82) (8,541) (381)
------------ ------------ ----------- ----------- -----------
Cash flows used for financing activities:
Net payments under working capital facilities
and long-term debt obligations............... (1,900) -- (1,900) -- --
Payment of financing costs..................... (9,367) -- (9,367) -- --
Issuance of shares of common stock............. 429 -- 429 -- --
Receipt (payment) of dividends................. -- -- 7,645 -- (7,645)
------------ ------------ ----------- ----------- -----------
Net cash flows used for financing
activities............................... (10,838) -- (3,193) -- (7,645)
------------ ------------ ----------- ----------- -----------
Decrease in cash................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period...................... 6,205 -- 1,179 -- 5,026
------------ ------------ ----------- ----------- -----------
Cash at end of period............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
</TABLE>
42
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996:
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings................................... $ 18,199 $ (10,456) $ 18,199 $ 2,409 $ 8,047
Non-cash items included in earnings:
Amortization of intangibles................ 12,846 -- 10,570 2,208 68
Amortization of deferred financing costs... 2,089 -- 2,089 -- --
Depreciation............................... 8,929 -- 72 8,428 429
Deferred taxes............................. 6,842 -- 7,963 (1,437) 316
Other, net................................. 48 10,456 (10,279) (120) (9)
Decrease (increase) in net working capital... 11,351 -- 13,273 (2,074) 152
------------ ------------ ---------- ----------- -----------
Net cash flows from operations........... 60,304 -- 41,887 9,414 9,003
------------ ------------ ---------- ----------- -----------
Cash flows used for investing activities:
Purchase of property, plant and equipment.... (9,740) -- (45) (9,414) (281)
------------ ------------ ---------- ----------- -----------
Net cash flows used for investing
activities............................. (9,740) -- (45) (9,414) (281)
------------ ------------ ---------- ----------- -----------
Cash flows used for financing activities:
Net payments under working capital facilities
and long-term debt obligations............. (50,350) -- (50,350) -- --
Issuance of shares of common stock........... 60 -- 60 -- --
Receipt (payment) of dividends............... -- -- 7,802 -- (7,802)
Other, net................................... (9) -- (9) -- --
------------ ------------ ---------- ----------- -----------
Net cash flows used for financing
activities............................. (50,299) -- (42,497) -- (7,802)
------------ ------------ ---------- ----------- -----------
Increase (decrease) in cash.................... 265 -- (655) -- 920
Cash at beginning of period.................... 5,940 -- 1,834 -- 4,106
------------ ------------ ---------- ----------- -----------
Cash at end of period.......................... $ 6,205 $ -- $ 1,179 $ -- $ 5,026
------------ ------------ ---------- ----------- -----------
------------ ------------ ---------- ----------- -----------
</TABLE>
43
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings................................... $ (5,161) $ 808 $ (5,161) $ (7,499) $ 6,691
Non-cash items included in earnings:
Extraordinary loss......................... 7,935 -- 7,935 -- --
Write-off of SMILETOTE intangibles......... 6,441 -- -- 6,441 --
Amortization of intangibles................ 11,268 -- 10,424 776 68
Amortization of deferred financing costs... 2,246 -- 2,246 -- --
Depreciation............................... 8,496 -- 8,000 -- 496
Deferred taxes............................. (133) -- 1,039 191 (1,363)
Other, net................................. (291) (808) 268 -- 249
(Increase) decrease in net working capital... (3,722) -- (6,443) (646) 3,367
------------ ----- ----------- ----------- -----------
Net cash flows from operations........... 27,079 -- 18,308 (737) 9,508
------------ ----- ----------- ----------- -----------
Cash flows (used for) from investing
activities:
Purchase of property, plant and equipment.... (12,395) -- (12,296) -- (99)
Business or investments acquired............. (94,429) 737 (95,166) -- --
------------ ----- ----------- ----------- -----------
Net cash flows (used for) from investing
activities............................. (106,824) 737 (107,462) -- (99)
------------ ----- ----------- ----------- -----------
Cash flows from (used for) financing
activities:
Net payments under working capital facilities
and long-term debt obligations............. (42,650) -- (42,650) -- --
Long-term debt borrowings.................... 425,000 -- 425,000 -- --
Long-term debt payments...................... (468,000) -- (468,000) -- --
Payment of financing costs................... (9,113) -- (9,113) -- --
Issuance of shares of common stock........... 170,000 -- 170,000 -- --
Receipt (payment) of dividends............... -- -- 7,802 -- (7,802)
Other, net................................... 75 -- 75 -- --
------------ ----- ----------- ----------- -----------
Net cash flows from (used for) financing
activities............................. 75,312 -- 83,114 -- (7,802)
------------ ----- ----------- ----------- -----------
(Decrease) increase in cash.................... (4,433) 737 (6,040) (737) 1,607
Cash at beginning of period.................... 10,373 (737) 7,874 737 2,499
------------ ----- ----------- ----------- -----------
Cash at end of period.......................... $ 5,940 $ -- $ 1,834 $ -- $ 4,106
------------ ----- ----------- ----------- -----------
------------ ----- ----------- ----------- -----------
</TABLE>
44
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. SUBSEQUENT EVENTS
On January 6, 1998, the Company acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash. Carewell manufactures and
markets the Dentax-Registered Trademark- line of toothbrushes, toothpaste, and
dental floss for distribution through food stores, drug chains, and mass
merchandisers. The acquisition, which was financed through the Company's 1997
Revolving Credit Facility, will be accounted for as a purchase.
On January 26, 1998, the Company acquired certain tangible and intangible
assets related to the Binky-Registered Trademark- pacifier business from
Binky-Griptight, Inc. for approximately $1.2 million cash and $0.5 million in
notes payable due July 27,1998. The acquisition, which was financed through the
Company's 1997 Revolving Credit Facility, will be accounted for as a purchase.
On January 28, 1998, the Company acquired PCH for approximately $91.0
million in cash and 9,257,345 shares of the Company's common stock. PCH
manufactures and markets a number of leading consumer product brands, including
Wet Ones-Registered Trademark- pre-moistened towelettes,
Chubs-Registered Trademark- baby wipes, Ogilvie-Registered Trademark- home
permanent products, Binaca-Registered Trademark- breath spray and drops, Mr.
Bubble-Registered Trademark- children's bubble bath products,
Diaparene-Registered Trademark- infant care products,
Tussy-Registered Trademark- deodorants, Dorothy Gray-Registered Trademark- skin
care products and Better Off-Registered Trademark- depilatories. The cash
portion of the consideration paid for the PCH transaction was financed with
borrowings under the 1997 Term Loan (see Note 6). The acquisition will be
accounted for as a purchase.
45
<PAGE>
PLAYTEX PRODUCTS, INC.
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 27, 1997 and December 28, 1996,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the twelve months ended December 27, 1997, December
28, 1996 and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Playtex Products, Inc. and subsidiaries as of December 27, 1997 and December 28,
1996 and the results of their operations and their cash flows for the twelve
months ended December 27, 1997, December 28, 1996 and December 30, 1995, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
February 5, 1998
Stamford, Connecticut
46
<PAGE>
PLAYTEX PRODUCTS, INC.
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 judgements.
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
Chief Executive Officer
and Director
/s/ MICHAEL F. GOSS
Executive Vice President,
Chief Financial Officer,
and Director
Westport, Connecticut
February 5, 1998
47
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
CORPORATE INFORMATION
Shares of Playtex's Common Stock are traded on 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
ChaseMellon Shareholder Services, L.L.C.
80 Challenger Road
Ridgefield Park, New Jersey 07660
(800)851-9677
www.chasemellon.com
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
3001 Summer Street
Stamford, CT 06905
CORPORATE OFFICES
Playtex Products, Inc.
300 Nyala Farms Road
Westport, CT 06880
10-K REPORT
A copy of Annual Report on Form 10-K filed with the Securities and Exchange
Commission by Playtex Products, Inc. for the year ended December 27, 1997 is
available upon request from the Secretary of the Corporation at the Company's
corporate offices. Requests may be faxed to (203)341-4260. A copy of Annual
Report on Form 10-K may also be obtained on-line at www.playtexproductsinc.com.
48
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION (CONTINUED)
<TABLE>
<S> <C>
BOARD OF DIRECTORS
Robert B. Haas Chairman and Director, Chairman of the Board and Chief
Executive Officer of Haas Wheat & Partners Incorporated
Michael R. Gallagher Chief Executive Officer
Michael F. Goss Executive Vice President and Chief Financial Officer
Thomas H. Lee President of the Thomas H. Lee Company
Kenneth F. Yontz Chairman of the Board, President and Chief Executive Officer
of Sybron International Corporation
Douglas D. Wheat President of Haas Wheat & Partners Incorporated
Michael R. Eisenson President and Chief Executive Officer of Harvard Private
Capital Group, Inc.
Timothy O. Fisher Vice President of The Hillman Group
C. Ann Merrifield President of Genzyme Genetics
John W. Childs President of J.W. Childs Associates, L.P.
Wyche H. Walton Senior Vice President of Haas Wheat & Partners Incorporated
PRINCIPAL OFFICERS
Michael R. Gallagher Chief Executive Officer and Director
Michael F. Goss Executive Vice President, Chief Financial Officer, and
Director
Richard G. Powers President, Personal Products Division
Max R. Recone President, Consumer Products Division
James S. Cook Senior Vice President, Operations
Irwin S. Butensky Senior Vice President, Research & Development
John D. Leahy Senior Vice President, Corporate Sales/International
Paul E. Yestrumskas Vice President, General Counsel and Secretary
Frank M. Sanchez Vice President, Human Resources
Glenn A. Forbes Vice President, Finance
</TABLE>
49
<PAGE>
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
Sun Pharmaceuticals Corp. 100% Delaware
SmileTote, Inc. 100% California
Playtex Investment Corp. 100% Delaware
Playtex International Corp. 100% Delaware
Playtex Ltd. 100% Canada
TH Marketing Corp. 100% Delaware
Playtex Foreign Sales Corporation 100% Barbados
Personal Care Holdings, Inc. 100% Delaware
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Playtex Products, Inc.:
We consent to the incorporation by reference in the Registration Statements
(No. 33-88806, No. 333-31703, and No. 333-48461) on Form S-8 of Playtex
Products, Inc. of our reports dated February 5, 1998, relating to the
consolidated balance sheets of Playtex Products, Inc. and Subsidiaries as of
December 27, 1997 and December 28, 1996, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the twelve months ended December 27, 1997, December 28, 1996 and December 30,
1995 and the related schedule, which reports appear in the Annual Report on
Form 10-K of Playtex Products, Inc. for the fiscal year ended December 27,
1997.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 27, 1998
<TABLE> <S> <C>
<PAGE>
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