================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 26, 1999
Commission File No. 1-12620
PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0312772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Nyala Farms Road
Westport, Connecticut 06880
----------------------------------------
(Address of principal executive offices)
Telephone number: (203) 341-4000
----------------------------------------------------
(Registrant's telephone number, including area code)
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 |_|
At August 2, 1999, 60,491,125 shares of Playtex Products, Inc. common
stock, par value $.01 per share, were outstanding.
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<PAGE>
PLAYTEX PRODUCTS, INC
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements .................. 3 - 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 14 - 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 23
Item 4. Submission of matters to a vote of security holders ......... 23 - 24
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits ................................................ 24
(b) Reports on Form 8-K ..................................... 24
Signatures .................................................. 25
Exhibit Index 26
<PAGE>
PLAYTEX PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 26, December 26,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................... $ 8,057 $ 6,871
Receivables, less allowance for doubtful accounts .................. 133,060 103,185
Inventories ........................................................ 60,568 58,790
Deferred income taxes .............................................. 14,850 14,650
Other current assets ............................................... 2,017 5,650
----------- -----------
Total current assets ............................................ 218,552 189,146
Net property, plant and equipment ..................................... 105,511 78,906
Intangible assets, net ................................................ 619,566 531,592
Deferred financing costs .............................................. 14,882 16,448
Due from related party ................................................ 80,017 80,017
Other non-current assets .............................................. 4,172 3,112
----------- -----------
Total assets .................................................... $ 1,042,700 $ 899,221
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 25,662 $ 38,298
Accrued expenses ................................................... 72,830 59,981
Income taxes payable ............................................... 6,490 8,444
Current maturities of long-term debt ............................... 5,250 3,875
----------- -----------
Total current liabilities ....................................... 110,232 110,598
Long-term debt ........................................................ 920,250 807,875
Due to related party .................................................. 78,386 78,386
Other non-current liabilities ......................................... 13,075 14,049
Deferred income taxes ................................................. 35,628 29,288
----------- -----------
Total liabilities ............................................... 1,157,571 1,040,196
----------- -----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares, issued
60,464,158 shares at June 26, 1999 and
60,401,822 shares at December 26, 1998 ........................... 605 604
Additional paid-in capital ......................................... 518,746 518,179
Retained earnings (deficit) ........................................ (631,599) (656,835)
Foreign currency translation adjustment ............................ (2,623) (2,923)
----------- -----------
Total stockholders' equity ...................................... (114,871) (140,975)
----------- -----------
Total liabilities and stockholders' equity ...................... $ 1,042,700 $ 899,221
=========== ===========
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share data)
Three Months Ended
---------------------
June 26, June 27,
1999 1998
-------- --------
Net sales ............................................ $209,195 $177,560
Cost of sales ........................................ 87,531 70,464
-------- --------
Gross profit ...................................... 121,664 107,096
Operating expenses:
Advertising and sales promotion ................... 49,836 43,278
Selling, distribution and research ................ 20,658 18,996
Administrative .................................... 7,043 5,973
Amortization of intangibles ....................... 5,048 4,451
-------- --------
Total operating expenses ....................... 82,585 72,698
Operating earnings ........................... 39,079 34,398
Interest expense including related party interest
expense of $3,037 for both periods presented,
net of related party interest income of $3,001
for both periods presented ........................ 18,929 18,368
-------- --------
Earnings before income taxes ................. 20,150 16,030
Income taxes ......................................... 8,485 6,926
-------- --------
Net earnings ................................. $ 11,665 $ 9,104
======== ========
Earnings per share:
Basic ............................................. $ 0.19 $ 0.15
======== ========
Diluted ........................................... $ 0.19 $ 0.15
======== ========
Weighted average shares outstanding:
Basic ............................................. 60,448 60,294
======== ========
Diluted ........................................... 64,184 61,397
======== ========
See the accompanying notes to condensed consolidated financial statements
4
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share data)
Six Months Ended
---------------------
June 26, June 27,
1999 1998
-------- --------
Net sales ............................................ $399,647 $350,249
Cost of sales ........................................ 168,438 143,410
-------- --------
Gross profit ...................................... 231,209 206,839
Operating expenses:
Advertising and sales promotion ................... 87,118 80,169
Selling, distribution and research ................ 39,472 34,774
Administrative .................................... 13,267 11,464
Amortization of intangibles ....................... 9,894 8,315
-------- --------
Total operating expenses ....................... 149,751 134,722
Operating earnings ........................... 81,458 72,117
Interest expense including related party interest
expense of $6,075 for both periods presented,
net of related party interest income of $6,001
for both periods presented ........................ 37,767 36,318
-------- --------
Earnings before income taxes ................. 43,691 35,799
Income taxes ......................................... 18,455 15,385
-------- --------
Net earnings ................................. $ 25,236 $ 20,414
======== ========
Earnings per share:
Basic ............................................. $ 0.42 $ 0.35
======== ========
Diluted ........................................... $ 0.41 $ 0.34
======== ========
Weighted average shares outstanding:
Basic ............................................. 60,431 58,632
======== ========
Diluted ........................................... 63,695 59,561
======== ========
See the accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Foreign
Additional Retained Currency
Common Paid-In Earnings Translation
Stock Capital (Deficit) Adjustment Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 26, 1998 ....................... $ 604 $ 518,179 $(656,835) $ (2,923) $(140,975)
Net earnings ..................................... -- -- 25,236 -- 25,236
Foreign currency translation adjustment .......... -- -- -- 300 300
---------
Comprehensive earnings ........................ 25,536
Stock issued to employees exercising stock options 1 567 -- -- 568
--------- --------- --------- --------- ---------
Balance, June 26, 1999 ..................... $ 605 $ 518,746 $(631,599) $ (2,623) $(114,871)
========= ========= ========= ========= =========
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
6
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
---------------------
June 26, June 27,
1999 1998
-------- --------
Cash flows from operations:
Net earnings ....................................... $ 25,236 $ 20,414
Non-cash items included in earnings:
Amortization of intangibles ...................... 9,894 8,315
Amortization of deferred financing costs ......... 1,566 1,474
Depreciation ..................................... 4,651 4,525
Deferred income taxes ............................ 7,532 6,004
Other, net ....................................... 1,311 (150)
Net increase in working capital
accounts, net of acquisitions .................. (28,570) (31,020)
--------- ---------
Net cash flows from operations ................ 21,620 9,562
Cash flows used for investing activities:
Purchases of property, plant and equipment ......... (13,903) (5,483)
Businesses acquired, net of cash acquired .......... (120,849) (106,246)
--------- ---------
Net cash flows used for investing activities .. (134,752) (111,729)
Cash flows provided by (used for) financing activities:
Net borrowings under credit facilities ............. 65,000 7,900
Issuance of note payable ........................... -- 500
Long-term debt borrowings .......................... 50,000 100,000
Long-term debt repayments .......................... (1,250) (1,250)
Payment of financing costs ......................... -- (3,027)
Issuance of shares of common stock ................. 568 967
--------- ---------
Net cash flows provided by financing activities 114,318 105,090
Increase in cash ...................................... 1,186 2,923
Cash at beginning of period ........................... 6,871 3,231
--------- ---------
Cash at end of period ................................. $ 8,057 $ 6,154
========= =========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest .......................................... $ 34,394 $ 33,808
Income taxes, net of refunds ...................... $ 12,856 $ 6,475
In connection with our acquisition of Personal Care Holdings, Inc. in
January 1998, we issued 9,257,345 shares of Common Stock with a value of $9.875
per share, aggregating $91,417.
See the accompanying notes to condensed consolidated financial statements.
7
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
The quarterly condensed consolidated financial statements, which are a
part of our Quarterly Report on Form 10-Q, are unaudited. In preparing our
financial statements, we make certain adjustments (consisting of normal
recurring adjustments) considered necessary in our opinion for a fair
presentation of our financial position and results of operations. The results of
the three and six month interim periods ended June 26, 1999 are not necessarily
indicative of the results that you may expect for the full year.
We presume you have access to the audited financial statements contained
in our Annual Report on Form 10-K for the year ended December 26, 1998. As a
result, we have not included footnote disclosures that would substantially
duplicate the disclosures contained in the 10-K. If you do not have a copy of
our Annual Report on Form 10-K you can obtain one by contacting our Director of
Investor Relations at (203) 341-4000 or view it on-line at the SEC's web site
WWW.SEC.GOV.
2. Acquisitions and Divestitures
1999 Acquisitions
On January 29, 1999, we acquired the Diaper Genie business, the leading
diaper disposal system in the U.S., from privately-held Mondial Industries for
$72 million in cash and the issuance to Mondial of $50 million of convertible
notes. We borrowed the cash portion of the purchase price from our revolving
credit facility. The newly issued convertible notes have an interest rate of 6%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of our Common Stock. The conversion price is
approximately $19.15 per share. The notes will mature in 2004 and are callable
by us after January 29, 2002. The acquisition was accounted for as an asset
purchase.
On June 30, 1999 (four days after the end of our second quarter), we
acquired the Baby Magic brand of infant-related bath, lotion, shampoo, oil and
powder products from The Colgate-Palmolive Company for $90 million in cash. The
results of operations for the three and six months ended June 26, 1999 do not
include Baby Magic since we acquired the business after our second quarter
ended.
1998 Acquisitions
On January 28, 1998, we acquired Personal Care Holdings, Inc. ("PCH") for
approximately $91.0 million in cash and 9,257,345 shares of our Common Stock. We
borrowed money under our credit facility for the cash portion of the deal (see
Note 4). On January 26, 1998, we acquired the Binky(R) pacifier business
("Binky") from Binky-Griptight, Inc. for approximately $1.2 million in cash and
$0.5 million in notes. On January 6, 1998, we acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash. The acquisitions of PCH,
Binky, and Carewell were accounted for as purchases.
In connection with the Diaper Genie and 1998 acquisitions, we reserved
amounts on our balance sheet for certain direct costs likely to be incurred as a
result of the acquisitions. These costs include at June 26, 1999 (in thousands):
Reserved Amount Balance
Amount Spent Remaining
------ ----- ---------
Exit costs ........................... $4,162 $1,541 $2,621
Involuntary terminations ............. 3,031 2,207 824
Relocation costs ..................... 168 135 33
------ ------ ------
Total ............................. $7,361 $3,883 $3,478
====== ====== ======
8
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Acquisitions and Divestitures (continued)
1999 Divestiture
On May 12, 1999, we sold our U.S and International Jhirmack hair care
business to Allegheny Pharmacal Corporation for cash and future guaranteed
minimum royalty payments. We retained the rights to the Jhirmack business in
Canada.
3. Balance Sheet Components
June 26, December 26,
1999 1998
The components of certain balance sheet accounts --------- ---------
are as follows (in thousands): (Unaudited)
Receivables .................................. $ 135,392 $ 105,280
Less allowance for doubtful accounts ......... (2,332) (2,095)
--------- ---------
Net ................................... $ 133,060 $ 103,185
========= =========
Inventories:
Raw materials ............................. $ 21,694 $ 17,722
Work in process ........................... 1,134 763
Finished goods ............................ 37,740 40,305
--------- ---------
Total ................................. $ 60,568 $ 58,790
========= =========
Net property, plant and equipment:
Land ...................................... $ 2,376 $ 1,435
Buildings ................................. 36,266 30,000
Machinery and equipment ................... 152,397 130,000
--------- ---------
191,039 161,435
Less accumulated depreciation ............. (85,528) (82,529)
--------- ---------
Net ................................... $ 105,511 $ 78,906
========= =========
Accrued expenses:
Advertising and sales promotion ........... $ 23,171 $ 22,580
Employee compensation and benefits ........ 8,925 11,917
Interest .................................. 10,860 9,053
Insurance ................................. 2,924 3,038
Other ..................................... 26,950 13,393
--------- ---------
Total ................................. $ 72,830 $ 59,981
========= =========
9
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Long-Term Debt
Long-term debt consists of the following (in thousands):
June 26, December 26,
1999 1998
--------- ---------
(Unaudited)
1997 Credit Agreement:
Term A Loan ................................. $ 55,000 $ 55,000
Revolving Credit Facility ................... 65,000 --
Term Loan ................................... 245,500 246,750
6% Convertible Subordinated Notes due 2004 ..... 50,000 --
8 7/8% Senior Notes due 2004 ................... 150,000 150,000
9% Senior Subordinated Notes due 2003 .......... 360,000 360,000
--------- ---------
925,500 811,750
Less current maturities ..................... (5,250) (3,875)
--------- ---------
Total long-term debt ...................... $ 920,250 $ 807,875
========= =========
In connection with the Diaper Genie acquisition (see Note 2), the sellers
received $50 million of 6% Convertible Subordinated Notes due 2004. Semi-annual
interest payments on these notes began on July 31, 1999 and are convertible
after January 29, 2000, at the holders' option, into approximately 2.6 million
shares of Common Stock. The conversion price is approximately $19.15 per share.
The notes will mature in 2004 and are callable by us after January 29, 2002.
On July 21, 1997, we completed a refinancing of our senior indebtedness
which included:
o the issuance of $150.0 million principal amount of 8 7/8% senior
notes due July 15, 2004,
o a $150.0 million senior secured term loan due September 15, 2003
(the "Term Loan"), and
o senior secured credit facilities of $170.0 million comprised of:
o $115.0 million revolving credit facility (the "Revolving
Credit Facility") and
o $55.0 million term loan facility (the "Term A Loan").
On January 28, 1998, we increased the Term Loan by $100.0 million to pay
for the cash portion of the PCH acquisition (see Note 2). The Term Loan provides
for quarterly repayment of principal of $625,000 from March 15, 1998 through
June 15, 2003. The final payment of $235.5 million is due on September 15, 2003.
The Revolving Credit Facility matures on June 15, 2003. The amounts we are
able to borrow under this facility decrease by:
o $5.0 million on December 15, 2000 and June 15, 2001,
o $7.0 million on December 15, 2001 and June 15, 2002, and
o $8.0 million on December 15, 2002 and June 15, 2003.
The Term A Loan was increased by $100 million on June 30, 1999 (four days
after the end of our second quarter) to pay the cash portion of the Baby Magic
acquisition. Following the increase, principal repayments on the Term A Loan,
are:
o $3.9 million in fiscal 1999,
o $21.3 million in fiscal 2000,
o $42.6 million in fiscal 2001,
o $56.2 million in fiscal 2002, and
o $31.0 million in fiscal 2003.
10
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Long-Term Debt (continued)
The interest rate on our Term Loan, Term A Loan, and Revolving Credit
facility varies over time depending on short term interest rates. At June 26,
1999 and June 27, 1998, our weighted average interest rate was 6.49% and 7.18%,
respectively. The weighted average interest rate for the quarters ended June 26,
1999 and June 27, 1998 was 6.46% and 7.13%, respectively. We also pay fees equal
to three-eighths of 1% on the unused portion of the Revolving Credit Facility.
At June 26, 1999, we had $48.6 million of unused borrowings available to us
under the Revolving Credit Facility.
5. Business Segments
We are organized in three divisions:
Our U.S. Personal Products Division includes Infant Care and Feminine Care
products sold in the United States. The Infant Care product category includes
the following brands:
o Playtex disposable nurser system, cups and reusable hard bottles
o Wet Ones hand and face towelettes
o Binky pacifiers
o Mr. Bubble children's bubble bath
o Chubs baby wipes
o Diaparene infant care products, and
o Diaper Genie diaper disposal system.
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as Playtex: Gentle
Glide, Silk Glide and Slimfits.
Our U.S. Consumer Products Division includes Sun Care, Household Products,
and Personal Grooming products sold in the United States.
Sun Care
--------
o Banana Boat
o BioSun
Household Products
------------------
o Playtex Gloves
o Woolite rug and upholstery cleaning products
Personal Grooming
-----------------
o Binaca breath spray and drops
o Tek toothbrushes
o Better Off depilatories
o Dorothy Gray skin care products
o Ogilvie at-home permanents
o Dentax oral care products
o Tussy deodorant
o Jhirmack hair care products (through May 12, 1999)
Our International and Other Division includes:
o export sales
o sales in Puerto Rico
o results from our Canadian subsidiary
o sales of private label tampons
We evaluate division performance based on their product contribution
before allocating any general corporate overhead costs. Product contribution is
defined as gross profit less advertising and sales promotion expenses. All other
operating expenses are managed at a corporate level and are not used by our
management to evaluate the results of the divisions. We do not look at assets,
amortization, capital expenditures, or interest income and interest expense in
assessing division performance.
11
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Business Segments (continued)
The results of our divisions for the three and six months ended June 26,
1999 and June 27, 1998 are as follows (unaudited, dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------
June 26, 1999 June 27, 1998
---------------------- ----------------------
Net Product Net Product
Sales Contrib. Sales Contrib.
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Personal Products .............. $119,304 $ 45,677 $ 95,611 $ 37,592
U.S. Consumer Products .............. 68,868 22,157 62,162 21,485
International and Other ............. 21,023 5,901 19,787 6,096
Unallocated charges (1) ............. -- (1,907) -- (1,355)
-------- --------- -------- ---------
Total consolidated ............... $209,195 71,828 $177,560 63,818
======== ========= ======== =========
Reconciliation to operating earnings:
Selling, distribution and research .. 20,658 18,996
Administrative ...................... 7,043 5,973
Amortization of intangibles ......... 5,048 4,451
--------- ---------
Operating earnings ............... $ 39,079 $ 34,398
========= =========
<CAPTION>
Six Months Ended
--------------------------------------------------
June 26, 1999 June 27, 1998
---------------------- ----------------------
Net Product Net Product
Sales Contrib. Sales Contrib.
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Personal Products .............. $223,082 $ 90,718 $183,427 $ 72,134
U.S. Consumer Products .............. 137,563 46,621 127,108 46,254
International and Other ............. 39,002 10,614 39,714 11,904
Unallocated charges (1) ............. -- (3,862) -- (3,622)
-------- --------- -------- ---------
Total consolidated ............... $399,647 144,091 $350,249 126,670
======== ========= ======== =========
Reconciliation to operating earnings:
Selling, distribution and research .. 39,472 34,774
Administrative ...................... 13,267 11,464
Amortization of intangibles ......... 9,894 8,315
--------- ---------
Operating earnings ............... $ 81,458 $ 72,117
========= =========
</TABLE>
- ----------
(1) Includes expenses such as business license taxes and product liability
insurance that are included in our reported consolidated gross margin, but
not included in the evaluation of division performance.
12
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Contingent Liabilities
In our opinion, there are no claims, commitments, guarantees or litigation
pending which would materially and negatively impact our financial results.
7. Subsequent Event
On June 30, 1999 (four days after the end of the second quarter), we
acquired the Baby Magic brand of infant-related bath, lotion, shampoo, oil and
powder products from Colgate for $90 million in cash. The Baby Magic brand will
become a part of our U.S Personal Products Division. We borrowed $100.0 million
by increasing our Term A Loan to pay for this acquisition. The acquisition was
accounted for as an asset purchase. The results of operations for the three and
six months ended June 26, 1999 do not include Baby Magic results as we acquired
the business after our second quarter ended.
13
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with:
o the financial statements and condensed notes included in this report
and
o audited consolidated financial statements and notes to consolidated
financial statements included in our report on Form 10-K for the
year ended December 26, 1998.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
This document includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future results. When we use words in this document such as "anticipates,"
"intends," "plans," "believes," "estimates," "expects," and similar expressions
we do so to identify forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements. These
forward-looking statements are affected by risks, uncertainties, and assumptions
that we make, including, among other things:
o price and product changes,
o promotional activity by competitors,
o the loss of a significant customer,
o capacity limitations,
o the difficulties of integrating acquisitions,
o issues related to the year 2000,
o adverse publicity and product liability claims,
o our level of debt, and
o dependence on key employees.
We have no obligation to publicly update or revise any forward-looking
statement that we make. Further, you should keep in mind that any
forward-looking statement made by us in this document, or elsewhere, speaks only
as of the date on which we make it. New risks and uncertainties come up from
time to time, and it's impossible for us to predict these events or how they may
affect us. In light of these risks and uncertainties, you should keep in mind
that any forward-looking statement made in this report or elsewhere might not
occur.
Trademarks
We have proprietary rights to a number of trademarks important to our
businesses, such as: Baby Magic, Binky, Chubs, CoolStraw, Diaparene, Diaper
Genie, Drop-Ins, Mr. Bubble, Most Like Mother, Natural Action, QuickStraw,
Safe'N Sure, SipEase, Soft Comfort, Wet Ones, Gentle Glide, Silk Glide,
Slimfits, Banana Boat, BioSun, Bite Block, Cool Colorz, Quik Blok, Tan Express,
HandSaver, Binaca, Dentax, Tek, Dorothy Gray, Ogilvie, and Tussy. We also own a
royalty free license in perpetuity to the Playtex and Living trademarks, and to
the Woolite trademark for rug and upholstery cleaning products in the United
States and Canada.
14
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Results of Operations
Three Months Ended June 26, 1999 Compared To
Three Months Ended June 27, 1998
Consolidated Net Sales--Our consolidated net sales increased 18% to $209.2
million for the second quarter of 1999. Excluding the impact of the Diaper Genie
acquisition, our consolidated net sales grew by $19.1 million in the second
quarter of 1999, or 11%, compared to the second quarter of 1998.
U.S. Personal Products Division--Net sales for the second quarter of 1999
increased 25% to $119.3 million. Excluding the impact of the Diaper Genie
acquisition, the net sales of the division grew by $12.2 million in the
second quarter of 1999, or 13%, compared to the second quarter of 1998.
Net sales of our Infant Care products increased 24% to $63.7
million in the second quarter of 1999. Excluding the impact of the
Diaper Genie acquisition, our Infant Care net sales grew by $0.8
million in the second quarter of 1999, or 2%, compared to the second
quarter of 1998. The infant feeding category represents 59% of our
Infant Care net sales, excluding Diaper Genie, in the second quarter
of 1999. Our dollar market share in the infant feeding category grew
by 0.2 percentage points to 42.2% in the second quarter of 1999. The
infant feeding category grew 6.1% in dollars and the retail
consumption of our products grew 6.7%.
Net sales of our Feminine Care products increased 26% to $55.6
million in the second quarter of 1999. In December 1997, we
successfully launched Gentle Glide Odor Absorbing, a plastic
applicator tampon with an all-natural material, which absorbs odors
without the use of fragrance or deodorant. In late 1998, we
incorporated the odor-absorbing feature into our cardboard
applicator line, Silk Glide. These introductions, combined with
general strength in our branded tampon business, increased our
dollar market share 2.8 percentage points in the second quarter of
1999 to 29.8% from 27.0% in the second quarter of 1998. Total retail
consumption for the tampon category, in dollars, grew 3.5% in the
second quarter of 1999 while consumer purchases of our tampons grew
14.3%.
U.S. Consumer Products Division--Net sales for the second quarter of 1999
increased 11% to $68.9 million.
Net sales of our Sun Care products increased 20% to $41.4
million in the second quarter of 1999. Our dollar market share of
the sun care category increased 1.9 percentage points to 21.3%. The
category, in dollars, grew 13.1% and consumer purchases of our
products increased 24.5% compared to the same period in 1998. The
category growth and the increase in consumer purchases of our
products were due largely to high consumer demand for the Banana
Boat product and favorable weather across the country.
Net sales of Household Products decreased 7% to $13.7 million
in the second quarter of 1999. The decrease was due, in part, to
strong shipments in the second quarter of 1998 due to retail
inventory stocking for the launch of Woolite Stain Solutions during
that quarter. Net sales of Personal Grooming increased 6% to $13.8
million in the second quarter of 1999. Personal Grooming net sales,
excluding the divested Jhirmack line, increased $2.6 million, or
24%, in the second quarter of 1999 compared to the same quarter in
1998. Net sales increased for every Personal Grooming brand in our
portfolio, except the divested Jhirmack line, in the second quarter
of 1999 versus the previous year.
15
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
International and Other Division--Net sales in the second quarter of 1999
increased 6% to $21.0 million. The increase was due primarily to corporate
efforts to boost international sales and the favorable impact of the
Diaper Genie acquisition in Canada.
Consolidated Gross Profit--Our consolidated gross profit increased 14% to $121.7
million in the second quarter of 1999. As a percent of net sales, our gross
profit decreased 2.1 percentage points, to 58.2% in the second quarter of 1999.
This decline was due primarily to lower overall gross margins for acquired
brands, costs associated with new product launches and extra costs associated
with keeping up with an increase in demand for our products. The dollar increase
in gross profit was primarily due to our higher net sales.
Consolidated Product Contribution--Our consolidated product contribution
increased 13% to $71.8 million in the second quarter of 1999. The increase was
due primarily to our higher net sales. As a percent of net sales, product
contribution decreased 1.6 percentage points to 34.3% in the second quarter of
1999, driven by lower gross margins.
U.S. Personal Products Division--Product contribution increased 22% to
$45.7 million in the second quarter of 1999. As a percent of net sales,
product contribution decreased 1.0 percentage point, to 38.3% in the
second quarter of 1999. This decline was due primarily to a change in
sales mix to lower gross margin products and extra costs associated with
new product launches and keeping up with increased consumer demand. These
costs were offset, in part, by lower advertising and promotional expenses
as a percent of net sales.
U.S. Consumer Products--Product contribution increased 3% to $22.2 million
in the second quarter of 1999. As a percent of net sales, product
contribution decreased 2.4 percentage points to 32.2% due primarily to
a change in sales mix to lower gross margin products offset, in part, by
lower advertising and promotional expenses as a percent of net sales.
International and Other--Product contribution decreased 3% to $5.9 million
in the second quarter of 1999. As a percent of net sales, product
contribution decreased 2.7 percentage points to 28.1% due primarily to a
change in sales mix to lower margin products.
Consolidated Operating Earnings--Our consolidated operating earnings increased
14% to $39.1 million in the second quarter of 1999. The increase in operating
earnings resulted from higher consolidated product contribution and lower
overhead expenses as a percent of net sales.
Consolidated Interest Expense--Our consolidated interest expense increased 3% to
$18.9 million in the second quarter of 1999. This resulted from additional
borrowings to finance the acquisition of the Diaper Genie business partially
offset by payments made since June 1998. The impact of the additional debt was
offset, in part, by lower interest rates in the second quarter of 1999 compared
to the second quarter of 1998
Consolidated Income Taxes--Our consolidated income taxes increased 23% to $8.5
million in the second quarter of 1999. As a percent of pretax earnings, our
effective tax rate decreased 1.1 percentage points to 42.1% of pretax earnings
in the second quarter of 1999. Our effective tax rate decreases as
non-deductible goodwill amortization becomes a smaller portion of operating
earnings.
16
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Six Months Ended June 26, 1999 Compared To
Six Months Ended June 27, 1998
Consolidated Net Sales--Our consolidated net sales increased 14% to $399.7
million for the six months ended June 26, 1999. Excluding the impact of
the Diaper Genie and the 1998 acquisitions, our consolidated net sales grew by
$21.1 million in the six months ended June 26, 1999, or 7%, compared to
the same period in 1998.
U.S. Personal Products Division--Net sales for the six months ended June
26, 1999 increased 22% to $223.1 million. Excluding the impact of the
Diaper Genie and the 1998 acquisitions, the net sales of the division grew
by $18.5 million for the six months ended June 26, 1999, or 13%, compared
to the same period in 1998.
Net sales of Infant Care products increased 25% to $120.3
million for the six months ended June 26, 1999. Excluding the impact
of the Diaper Genie and 1998 acquisitions, our Infant Care net sales
grew by $2.9 million, or 5%, compared to the comparable period in
1998. Our pre-acquisition Infant Care product lines (consisting of
infant feeding and soothing products) benefited from increased
consumer purchases. The infant feeding category grew 6.5% in dollars
during the six month period ended June 26, 1999, and the retail
consumption of our products grew 8.3% during the same period in
1998.
Net sales of Feminine Care products increased 18% to $102.7
million for the six months ended June 26, 1999. In December 1997, we
successfully launched Gentle Glide Odor Absorbing, a plastic
applicator tampon with an all-natural material which absorbs odors
without the use of fragrance or deodorant. In late 1998, we
incorporated the odor-absorbing feature into our cardboard
applicator line, Silk Glide. These introductions, combined with
general strength in our branded tampon business, increased our
dollar market share 2.4 percentage points for the six months ended
June 26, 1999 to 29.2% compared to the same period of 1998. The
tampon category, in dollars, grew 3.7% for the six months ended June
26, 1999, and the retail consumption of our products grew 13.0%.
U.S. Consumer Products Division--Net sales for the six months ended June
26, 1999 increased 8% to $137.6 million. Excluding the impact of the
acquisitions, net sales of the division grew by $5.9 million for the six
months ended June 26, 1999, or 5%, compared to the same period in 1998.
Net sales of Sun Care products increased 13% to $84.1 million
for the six months ended June 26, 1999. Our dollar market share
increased 1.8 percentage points to 20.7% for the six months ended
June 26, 1999. The sun care category, in dollars, grew 14.8% and
retail consumption of our products increased 25.6% compared to the
same period in 1998. The category growth and the growth in our
consumption were due largely to high consumer demand for Banana Boat
products and favorable weather across the country.
Net sales of Household Products decreased 3% to $27.0 million
for the six months ended June 26, 1999 due, in part, to strong
shipments in the second quarter of 1998 due to retail inventory
stocking for the launch of Woolite Stain Solutions during that
quarter.
Net sales of Personal Grooming increased 8% to $26.5 million
for the six months ended June 26, 1999. Personal Grooming net sales,
excluding the divested Jhirmack line, increased $4.6 million, or 24%
for the six months ended June 26, 1999 compared to the same period
in 1998. This sales growth is attributable to strength in Binaca,
Dentax, and Ogilvie.
17
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
International and Other Division--Net sales for the six months ended June
26, 1999 decreased 2% to $39.0 million. The decrease was due primarily to
general economic uncertainties in certain international markets during the
first quarter of 1999 and lower net sales associated with our private
label tampon business.
Consolidated Gross Profit--Our consolidated gross profit increased 12% to $231.2
million for the six months ended June 26, 1999. As a percent of net sales, gross
profit decreased 1.2 percentage points, to 57.9% for the six months ended June
26, 1999. The lower gross profit as a percent of net sales was due primarily to
lower overall gross margins for acquired brands, costs associated with new
product launches and costs associated with keeping up with increased demand for
our products. The dollar increase in gross profit was due primarily to our
higher net sales.
Consolidated Product Contribution--Our consolidated product contribution
increased 14% to $144.1 million for the six months ended June 26, 1999. The
increase was due primarily to our higher net sales. As a percent of net sales,
product contribution decreased marginally to 36.1% for the six months ended June
26, 1999 from 36.2% in the same period of 1998. The decrease was primarily the
result of lower gross margins offset by lower overall advertising and sales
promotion expenses as a percentage of net sales.
U.S. Personal Products Division--Product contribution increased 26% to
$90.7 million for the six months ended June 26, 1999. As a percent of net
sales, product contribution increased 1.4 percentage points to 40.7% for
the six months ended June 26, 1999. The increase in product contribution
was due primarily to lower advertising and promotional expenses as a
percent of net sales offset, in part, by a change in sales mix to lower
gross margin products and extra costs associated with new product launches
and keeping up with increased consumer demand.
U.S. Consumer Products--Product contribution increased 1% to $46.6 million
for the six months ended June 26, 1999. As a percent of net sales, product
contribution decreased 2.5 percentage points to 33.9% for the six months
ended June 26, 1999. This is due primarily to a change in sales mix to
lower gross margin products and the timing of certain advertising and
promotional activities.
International and Other--Product contribution decreased 11% to $10.6
million for the six months ended June 26, 1999. As a percent of net sales,
product contribution decreased 2.8 percentage points to 27.2% for the six
months ended June 26, 1999. This is due primarily to lower gross margins
and higher spending as a percent of net sales.
Consolidated Operating Earnings--Our consolidated operating earnings increased
13% to $81.5 million for the six months ended June 26, 1999. The increase in
operating earnings resulted from higher consolidated product contribution and
lower overhead expenses as a percent of net sales.
Consolidated Interest Expense--Our consolidated interest expense for the six
months ended June 26, 1999, increased 4% to $37.8 million. This resulted from
additional borrowings to finance the acquisition of the Diaper Genie business
partially offset by payments made since June 1998. The impact of the additional
debt was offset, in part, by lower interest rates in the first half of 1999
compared to the same period in 1998.
Consolidated Income Taxes--Our consolidated income taxes increased 20% to $18.5
million for the six months ended June 26, 1999. As a percent of pretax earnings,
our effective tax rate decreased 0.8 percentage points to 42.2% of pretax
earnings for the six months ended June 26, 1999. Our effective tax rate
decreases as non-deductible goodwill amortization becomes a smaller portion of
operating earnings.
18
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Financial Condition and Liquidity
At June 26, 1999, our working capital (current assets net of current
liabilities) increased to $108.3 million from $78.5 million at December 26,
1998. The increase resulted primarily from:
o an increase of $29.9 million in receivables, due to:
o higher net sales in the second quarter of 1999 compared to the
fourth quarter of 1998 and
o the impact of Sun Care seasonal dating programs.
o a decrease of $12.6 million in accounts payable due principally to
the timing of payments, in particular Sun Care inventory production.
These working capital increases were partially offset by an increase in accrued
expenses of $12.8 million due primarily to higher return reserves associated
with the seasonal nature of our Sun Care sales. All other working capital
components increased $0.1 million.
Our product lines, with the exception of Sun Care, generally have not been
seasonal. However, sun care product sales are highly seasonal, with 80 to 90
percent of our sales to retailers occurring from December through June. This
seasonality requires increased inventory from December to June to support the
selling season. We experience higher receivables from March to September due to
extended credit terms on Sun Care sales.
Capital expenditures for equipment and facility improvements were $13.9
million for the six months ended June 26, 1999. These expenditures were used
primarily to expand capacity, upgrade production equipment and maintain our
facilities. Capital expenditures for 1999 are expected to be approximately $23.0
million.
At June 26, 1999, long-term debt (including current portion but excluding
obligations due to related party) was $925.5 million compared to $811.8 million
at December 26, 1998. The increase resulted from additional borrowings to buy
Diaper Genie. At June 26, 1999, we had $48.6 million of unused credit borrowings
under our Revolving Credit Facility available to us.
Terms of the Revolving Credit Facility, Term A Loan and the Term Loan
require us to meet certain financial tests and also include conditions or
restrictions on:
o new indebtedness and liens,
o major acquisitions or mergers,
o capital expenditures and asset sales, and
o dividends and other distributions.
The 9% senior subordinated notes and the 8 7/8% senior notes also contain
similar restrictions and requirements. Under the terms of these debt
instruments, payment of cash dividends on our Common Stock is restricted.
We believe that we will generate sufficient cash flow from operations for:
o working capital,
o capital expenditures,
o interest payments on all of our debt, and
o scheduled principal payments under the Term Loan, Term A Loan and
the Revolving Credit Facility.
19
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
However, we do not expect to generate sufficient cash flow from operations to
make the $360 million principal payment due in 2003 on the 9% senior
subordinated notes or the $150 million principal payment due in 2004 on the 8
7/8% senior notes. Accordingly, we will have to either refinance our obligations
or raise equity capital to repay the principal amounts of the notes.
Historically, our cash flows from operations and refinancing activities have
enabled us to meet all of our obligations. However, we can't guarantee you that
our operating results will continue to be sufficient or that future borrowing
facilities will be available for the payment or refinancing of our debt on
economically attractive terms.
During 1999 we acquired two businesses. The Diaper Genie business was
acquired on January 29, 1999 for a total purchase price of approximately $122.0
million. We paid cash of $72.0 million, which we borrowed from our Revolving
Credit Facility and issued to the sellers a $50.0 million 6% convertible note.
The Baby Magic business was acquired on June 30, 1999 (four days after the end
of our second quarter) for a total purchase price of $90 million in cash, which
we obtained by increasing our Term A Loan by $100.0 million.
We will continue to consider the acquisition of other companies or
businesses that may require us to seek additional debt or equity financing. As
we cannot assure you that such financing will be available to us, our ability to
expand our operations through acquisitions may be restricted. However, we
believe that capital will be available to achieve our acquisition objectives.
Inflation in the United States and Canada has not had a significant effect
on our operations during recent periods.
Change in Estimates
Beginning in 1999, we revised our estimated asset lives used to compute
depreciation on most of our buildings from 30 years to 40 years and on a portion
of our building improvements from 10 and 15 years to 20 years. We also revised
the estimated asset lives of our manufacturing equipment and land improvements.
These revisions were made to more properly reflect how long the assets usually
last. For the six months ended June 26, 1999, the change had the effect of
increasing our net earnings by $0.8 million or $.01 per share on a diluted
basis.
Recently Issued Accounting Standards
In June of 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" which is
effective beginning in fiscal year 2001. The Statement requires the recognition
of certain derivative instruments on the balance sheet, with resulting
transition adjustments reported in other comprehensive earnings or net earnings
as the effect of a change in accounting principle, as appropriate. We are
currently evaluating the effect this Statement will have on our financial
position and results from operations.
Year 2000
Historically, certain computer programs were written using two digits
rather than four to define the applicable year. Accordingly, our software may
recognize a date using "00" as 1900 rather than the year 2000, which could
result in computer system failures or miscalculations, commonly referred to as
the Year 2000 ("Y2K") issue. The Y2K issue can arise at any point in our:
o supply,
o manufacturing,
o processing,
o distribution, and
o financial chains.
20
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Incomplete or untimely resolution of the Y2K issue by:
o our Company,
o key suppliers,
o customers, and
o other parties
could result in a temporary inability to process transactions or engage in
normal manufacturing or other business activities. Such inabilities could
potentially have a material adverse effect on our results of operations,
financial condition and cash flows.
Our technical staff, with the assistance of outside consultants, is
addressing the Y2K issue. We have inventoried and assessed all date-sensitive
information and transaction processing computer systems and determined that a
portion of our information technology must be modified or replaced. We have
identified the critical software and hardware installations that need to be
replaced or modified and have developed a four-tiered program (the "Y2K
Project") to deal with the Y2K issue. These tiers include:
o network and hardware/software infrastructure,
o internally developed and purchased application software,
o critical manufacturing and other operating systems including those
that use embedded technology such as micro-controllers and
micro-processors, and
o external relationships including customers, suppliers and service
providers.
We believe the entire Y2K project will be completed prior to the year
2000. However, unforeseen difficulties may arise which could adversely affect
our ability to complete our systems modifications correctly, on time and/or
within our cost estimates. In addition, we cannot guarantee that our customers,
suppliers and service providers on whom we rely will resolve their Y2K issues
accurately, thoroughly and on time. Failure to complete the Y2K Project by the
year 2000 could have a material adverse effect on our results of operations,
financial condition and cash flows.
At June 26, 1999, we have completed, as planned, necessary modifications
to our primary network and hardware/software infrastructure and have completed
necessary modifications to our core transaction processing and financial
systems. In May, the first of three major off-site integrated tests was
performed. We determined that all modified transaction processing and financial
systems were able to operate successfully with a limited set of test data in a
controlled environment with system dates set to 2000. Additional internal
testing and offsite integrated tests with more robust test scenarios are planned
throughout the remainder of 1999. Modification and testing of non-critical
systems is progressing on plan and will continue through the third and fourth
quarters of 1999. Our efforts as related to embedded chip technology such as
micro-controllers and micro-processors utilized in manufacturing or other
operating systems continues to progress on schedule and will be completed by the
end of the third quarter of 1999. We have initiated formal communications with
our significant suppliers, customers and service providers to determine the
extent to which we may be vulnerable to their failure to correct their own Y2K
issues. We have begun developing contingency plans with respect to our principal
customers, suppliers and service providers and estimate that appropriate plans
will be in place by the end of the third quarter of 1999. We cannot guarantee
you that we will be able to predict adequately Y2K problems experienced by our
suppliers, customers and service providers or our ability to address these
potential issues on a timely basis or to develop adequate contingency plans
related thereto.
The total cost associated with required modifications of hardware and
software is not expected to be material to our financial position. We anticipate
that our total cost associated with the Y2K Project will be approximately $3.9
million, including $0.6 million spent in 1997, $2.2 million spent in 1998 and
$1.1 million estimated to be spent in 1999. Costs related to addressing the Y2K
issues are either expensed as incurred or capitalized as appropriate. All Y2K
related costs have been and will be funded from operating cash flows.
21
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The failure to properly anticipate and correct a material Y2K problem
could result in an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and adversely affect
our results of operations, financial condition and cash flows. Due to the
general uncertainty inherent in the Y2K problem, resulting in part from the
uncertainty of the Y2K readiness of suppliers, customers and service providers,
we are unable to determine at this time whether the consequences of Y2K failures
will have a material impact on our results of operations, financial condition or
cash flows. The Y2K Project is expected to significantly reduce our level of
uncertainty about the Y2K problem. We believe that, with the implementation of
new business systems and completion of the Y2K Project as scheduled, the
possibility of significant interruptions of normal operations should be reduced.
While we believe our efforts to address the Y2K issue will be successful
in avoiding any material adverse effect on our results of operations, financial
condition and cash flows, you and other interested third parties should
recognize that our failure to resolve Y2K issues on a timely basis would, in a
"most reasonably likely worst case scenario," significantly limit our ability to
manufacture and distribute our products. Further, such Y2K failures could limit
our ability to process our daily business transactions for a period of time,
especially if such failure is coupled with third party or infrastructure
failures. Adverse effects on us could include:
o business disruptions,
o increased costs,
o loss of business and other similar risks, and
o litigation.
We believe that contingency plans will be developed prior to the year 2000,
which address the most likely risks related to the Y2K problem.
This discussion regarding Y2K Project timing, effectiveness,
implementation and costs is based on our current evaluation using available
information. Factors that might cause material changes include, but are not
limited to, the availability of key Y2K personnel, the readiness of third
parties, and our ability to respond to unforeseen Y2K complications.
22
<PAGE>
PLAYTEX PRODUCTS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The following should be read in conjunction with Part 1, Item 3., "Legal
Proceedings" in our Annual Report on Form 10-K for the year ended December 26,
1998.
The United States District Court, District of Delaware, decided in our
favor in the patent dispute with Schering-Plough HealthCare Products, Inc.
regarding "sunscreen with disappearing color indicator." The Schering-Plough
patent was declared invalid, and an appeal is pending.
As of the end of June 1999, there were approximately 10 pending toxic
shock syndrome claims relating to Playtex tampons, although additional claims
may be made in the future.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on May 18, 1999, the following
actions were taken:
Eleven Nominees were elected as Directors to hold office until the Annual
Meeting of Stockholders in 2000 and until their successors are duly authorized
and qualified.
Name Votes For Votes Withheld
--------------------- --------- --------------
Robert B. Haas 53,976,478 155,109
Michael R. Gallagher 53,974,228 157,359
Michael F. Goss 53,975,793 155,794
Richard C. Blum 53,974,928 156,659
Michael R. Eisenson 53,971,628 159,959
Timothy O. Fisher 53,976,693 154,894
C. Ann Merrifield 53,982,271 149,316
Jeffrey W. Ubben 53,971,706 159,881
Wyche H. Walton 53,971,671 159,916
Douglas D. Wheat 53,970,771 160,816
Keneth F. Yontz 53,974,193 157,394
The amendment to our By-laws was ratified, requiring that two
Non-Purchaser Directors (as defined in our By-laws) be designated by RCBA
PLAYTEX, L.P.
Votes For Votes Against Votes Abstain
--------- ------------- -------------
50,080,183 136,658 55,150
The amendment to the Playtex 1994 Stock Option Plan for Directors and
Executives and Key Employees was ratified.
Votes For Votes Against Votes Abstain
--------- ------------- -------------
52,432,894 1,655,047 43,645
23
<PAGE>
PLAYTEX PRODUCTS, INC.
PART II - OTHER INFORMATION (Continued)
Item 4. Submission of Matters to a Vote of Security Holders (continued)
The selection of the firm of KPMG LLP was ratified as our independent
auditors for fiscal 1999.
Votes For Votes Against Votes Abstain
--------- ------------- -------------
54,082,613 27,768 21,206
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
(11) Computation of Earnings Per Share
(27) Financial Data Schedule
b. Reports on Form 8-K
On May 24, 1999, we filed a Current Report on Form 8-K with the Securities
and Exchange Commission pursuant to Item 5 of that Form. We filed a copy of our
press release announcing a definitive agreement to acquire the Baby Magic brand
of infant-related bath, lotion, shampoo, oil and powder products in the U.S,
Canada, and Puerto Rico from The Colgate-Palmolive Company.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PLAYTEX PRODUCTS, INC.
Date: August 4, 1999 By: /S/ MICHAEL R. GALLAGHER
------------------ ------------------------
Michael R. Gallagher
Chief Executive Officer
(Principal Executive Officer)
Date: August 4, 1999 By: /S/ MICHAEL F. GOSS
------------------ -------------------
Michael F. Goss
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
25
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ---------- -----------
3(B) ByLaws of the Company, as amended through May 18, 1999
10(L) 1994 Stock Option Plan, as amended through April 6, 1999
10(M) Memorandum of Understanding, dated May 18, 1999 with Michael R.
Gallagher, Chief Executive Officer
11 Statement re Computation of Earnings Per Share
27 Financial Data Schedule
26
EXHIBIT 3(B)
BY-LAWS
OF
PLAYTEX PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders shall be held at any place
within or outside the State of Delaware designated by the Board of Directors. In
the absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
Section 2. The annual meeting of stockholders shall be held each
year on a date and a time designated by the Board of Directors. At each annual
meeting directors shall be elected and any other proper business may be
transacted.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted
<PAGE>
which might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 5. At each meeting of the Stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such Stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof. All elections shall be had and all
questions decided by a plurality vote.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take
any action at a meeting, a written notice of the meeting shall be given which
notice shall state the place, date and hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation.
Section 8. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
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Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 9. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 10. (a) From the Closing until the Termination Date, at any
annual or special meeting of stockholders, persons who are nominated for
election as directors by stockholders ("stockholder nominees") shall only be
considered for election if such stockholder nominees are nominated in accordance
with the terms of this paragraph. All nominations of stockholder nominees must
be made by written notice given by or on behalf of a stockholder of record of
the corporation (the "Notice of Nomination"). The Notice of Nomination must be
delivered personally to, or mailed to, and received at the principal executive
office of the corporation, addressed to the attention of the Secretary, no later
than ten days after the first date of public disclosure by the Company of the
date of the annual meeting or special meeting of stockholders; provided,
however, that such Notice of Nomination shall not be required to be given more
than sixty (60) days prior to an annual or special meeting of stockholders. For
purposes of this Section 10(a), disclosure shall be deemed to be first made when
disclosure of such date of the annual meeting or special meeting of stockholders
is first made in a press release reported by the Dow Jones News Services,
Associated Press or comparable national news service, or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any successor thereto. Such Notice of Nomination shall set
forth (i) the name and address of the person proposing to make nominations, (ii)
the class and number of shares of capital stock held of record, held
beneficially and represented by proxy held by such person as of the record date
for the meeting and as of the date of such Notice of Nomination, (iii) all
information regarding each stockholder nominee that would be required to be set
forth in a definitive proxy statement filed with the Securities and Exchange
Commission pursuant to Section 14 of the Exchange Act, or any successor thereto,
and the written consent of each such stockholder nominee to serve if elected,
and (iv) all other information that would be required to be filed with the
Securities and Exchange Commission if the person proposing such nominations were
a participant in a solicitation subject to Section 14 of the Exchange Act or any
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successor thereto. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting, that any proposed nomination of a
stockholder nominee was not made in accordance with the foregoing procedures
and, if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
(b) "Termination Date" means the first date on which no party is
contractually obligated to vote for nominees for director under the Stock
Purchase Agreement, dated as of March 17, 1995, among the corporation, HWH
Capital Partners, L.P., HWH Valentine Partners, L.P. and HWH Surplus Valentine
Partners, L.P. (as such agreement may be amended, restated or otherwise
modified, the "Stock Purchase Agreement"). "Closing" means the consummation of
the sale and purchase of common stock under the Stock Purchase Agreement.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall not be less than one (l) nor more than fifteen (15). The directors
need not be stockholders. The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified;
provided, however, that unless otherwise restricted by the Certificate of
Incorporation or By-Laws, any director or the entire Board of Directors may be
removed, either with or without cause, from the Board of Directors at any
meeting of stockholders by a majority of the stock represented thereat.
Notwithstanding the foregoing provisions of this paragraph, from the Closing
until the Termination Date (as defined in Article II, Section 10 (b), the number
of directors which shall constitute the whole Board shall be an odd number that
is not less than nine (9) nor more than fifteen (15).
Section 2. Except as provided for in Sections 14 and 15 of this
Article III, vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute.
Section 3. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these By-Laws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
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MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The directors may hold their meetings and have one or
more offices, and keep the books of the corporation outside of the State of
Delaware.
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board.
Section 6. Special meetings of the Board of Directors may be called
by the President on forty-eight hours' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
President or the Secretary in like manner and on like notice on the written
request of two directors unless the Board consists of only one director; in
which case special meetings shall be called by the President or Secretary in
like manner or on like notice on the written request of the sole director.
Section 7. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum.
Section 8. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more
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of the directors of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
INDEMNIFICATION
Section 13.1. Right to Indemnification. The corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the written request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorney's fees) reasonably incurred by such person. The corporation
shall be required to indemnify a person in connection with a proceeding (or part
thereof) initiated by such person only if the proceeding (or
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part thereof) was authorized by the Board of Directors of the corporation.
Section 13.2. Prepayment of Expenses. The corporation shall pay the
expenses (including attorneys' fees) incurred by a director or officer in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a director or officer in advance of the
final disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should be ultimately determined that the director or officer is not entitled to
be indemnified under this Article or otherwise.
Section 13.3. Claims. If a claim for indemnification or payment of
expenses under this Article is not paid in full within sixty days after a
written claim therefor has been received by the corporation, the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 13.4. Non-Exclusivity of Rights. The rights conferred on any
person by this Article III shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 13.5 Other Indemnification. The corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit entity.
Section 13.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article III shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
PURCHASER NOMINATING COMMITTEE
Section 14. (a) From the Closing until the Termination Date, a
committee of the Board of Directors shall be constituted and designated as the
"Purchaser Nominating Committee", which committee shall consist of those members
of the Board of Directors who both (i) were specified in Section 3.1.4(A) of the
Stock Purchase Agreement, were nominated for election as directors in accordance
with Section 14(b) of this Article III, or were elected in accordance with
Section 14(c) of this Article III (the "Purchaser Directors") and (ii) are
Obligated Parties or Affiliates of any Obligated Parties or who are directors,
officers or employees of any Obligated Party or any of its Affiliates.
"Obligated Party" means any person or
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persons contractually obligated under the Stock Purchase Agreement to vote for
nominees for election as directors of the corporation. An "Affiliate" of a
specified person mains a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified. The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract, or otherwise.
(b) From the Closing until the Termination Date, the Purchaser
Nominating Committee shall exclusively have and exercise all power and authority
of the Board of Directors in respect of nominating, on behalf of the Board of
Directors, a number of nominees for election as directors, at any meeting of
stockholders of the corporation at which one or more directors are to be elected
or by written consent of the stockholders, which (when added to the number of
continuing directors who are not then subject to election and who are Purchaser
Directors) is equal to the smallest number that constitutes a majority of the
total number of directors of the corporation as set in accordance with Section 1
of this Article III (a "Simple Majority of the Board of Directors"). In the
event that the Board of Directors solicits proxies from the stockholders of the
corporation for the election of any directors at any meeting of stockholders or
for any written consent of stockholders pursuant to this Section 14(b), then the
Board of Directors shall solicit proxies for the election at such meeting or by
such written consent of the persons nominated by the Purchaser Nominating
Committee pursuant to the immediately preceding sentence.
(c) From the Closing until the Termination Date, the Purchaser
Nominating Committee shall exclusively have and exercise all power and authority
of the Board of Directors in respect of filling (i) any vacancy occurring in a
directorship which was held by Purchaser Director or (ii) any newly created
directorship that results from increasing the size of the Board of Directors
(but only to the extent that the number of any such newly created directorships,
when added to the number of continuing directors who are Purchaser Directors,
equals a Simple Majority of the Board of Directors); provided, however, that if
there are no members of the Purchaser Nominating Committee, then such vacancy or
newly created directorship will be filled by a majority of the Purchaser
Directors and, if there are no Purchaser Directors to fill any such vacancy or
newly created directorship, then a special meeting of the stockholders shall be
called as soon an practicable and the stockholders shall have and exercise power
to fill any and all such vacancies or newly created directorships then existing.
NON-PURCHASER NOMINATING COMMITTEE
Section 15. (a) From the Closing until the Termination Date, a
committee of the Board of Directors shall be constituted and designated as the
"Non-Purchaser Nominating Committee" which committee shall consist of the
members of the Board of Directors who are not Purchaser Directors (the
"Non-Purchaser Directors").
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(b) (A) From the Closing until the Termination Date, at least two of
the Non-Purchaser Directors shall be Unaffiliated Persons (one of whom must be
qualified under New York Stock Exchange rules and policies to sit on the audit
committee of the corporation) and at least two of the Non-Purchaser Directors
shall be executive officers of the corporation (as defined in Regulation 405
promulgated under the Securities Act of 1933, as amended, or any successor
thereto, for purposes of this Section 15), one of whom shall be the chief
executive officer of the corporation (or the person acting in such capacity).
"Unaffiliated Person" means any Person (i) who is not an Obligated Party, (ii)
who is not a partner or an Affiliate of any Obligated Party, (iii) who is not a
director, officer or employee of any Obligated Party, any of their partners or
any of their Affiliates, (iv) who is not an officer or employee of the
corporation, and (v) who does not have a material business relationship with any
Obligated Party, or any of their Affiliates.
(B) From the Effective Date until the earlier of (1) the date
upon which the Principal Stockholder holds, in the aggregate, less than
4,628,375 shares of common stock of the Company or (2) the tenth anniversary of
the Effective Date, one of the Non-Purchaser Directors shall be the Target
Director. The "Effective Date" shall have the meaning given that term in the
Merger Agreement. The "Merger Agreement" means the Merger Agreement, dated as of
December 22, 1997 among the Corporation, PCG Acquisition Corp., Personal Care
Holdings, Inc. and J.W. Childs Equity Partners, L.P. (the "Principal
Stockholder"). The "Target Director" means the Director designated by the
Principal Stockholder."
(B) From the Effective Date until the earlier of (1) the date upon
which the Principal Stockholder holds, in the aggregate, less than 11% of the
outstanding shares of common stock of the Company or (2) the tenth anniversary
of the Effective Date, two of the NonPurchaser Directors shall be Designated
Directors, provided, that (1) one Designated Director is either Jeffrey W. Ubben
or N. Colin Lind for so long as he is an employee, officer, director, member or
partner of the Principal Stockholder or any of its Affiliates, and (2) any other
Designated Director shall be approved by a majority of the members of the Board
who are either Purchaser Directors or officers of the Company, which approval
shall not be unreasonably withheld. The "Effective Date" shall have the meaning
given to that term in the Amended and Restated Stockholders Agreement, dated as
of September 3, 1998, among the Company, and RCBA PLAYTEX, L.P. (the "Principal
Stockholder") and RCBA Strategic Partners, L.P. (the "Fund"). The "Designated
Directors" means one Director designated by the Principal Stockholder and one
Director designated by the Fund.
(C) From the Closing until the Termination Date, the
Non-Purchaser Nominating Committee shall exclusively have and exercise all power
and authority of the Board of Directors in respect of nominating, on behalf of
the Board of Directors, a number of nominees for election as directors at any
meeting of stockholders of the corporation at which one or more directors are to
be elected or by written consent of the stockholders, which (when added to the
number of continuing directors who are not then subject to election and who are
Non-Purchaser Directors but who are not executive officers of the corporation)
is equal to (i) the total number of
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directors of the corporation as set in accordance with Section 1 of this Article
III less (ii) a Simple Majority of the Board of Directors and the number of
Non-Purchaser Directors who are executive officers. Through December 31, 1997,
if the Non-Purchaser Nominating Committee in unable to agree to nominate persons
for any one or more of the board seats governed by this Section 15(c), then (x)
if any Non-Purchaser Director currently holding any such board seat is willing
to continue to serve as a director, each such Non-Purchaser Director shall be
the nominee for each such board seat and (y) if any Non-Purchaser Director
currently holding any such board seat is unwilling to continue to serve as a
director, the nominee for such seat shall be chosen by a majority of the other
members of the Non-Purchaser Nominating Committee who are either (i) the
Non-Purchaser Directors who are executive officers of the corporation or (ii) a
Non-Purchaser Director who is willing to continue to serve as a director. After
December 31, 1997, if the Non-Purchaser Nominating Committee is unable to agree
on any nominee for any one or more of the board seats governed by this Section
15(c), then the Board of Directors shall have and exercise the power to nominate
the nominees for such board seats; provided, that any person nominated for
election as a director by the Board of Directors pursuant to this sentence must
be an Unaffiliated Person. In the event that the Board of Directors solicits
proxies from the stockholders of the corporation for the election of any
directors at any meeting of stockholders or for any written consent of
stockholders referred to in the first sentence of this Section 15(c), then the
Board of Directors shall solicit proxies for the election at such meeting or by
such written consent of the persons nominated pursuant to this Section 15(c) and
the officers of the corporation nominated pursuant to Section 15(e) of this
Article III. The Non-Purchaser Nominating Committee shall at all times act in
conformity with section 15(b) of this Article III.
(D) From the Closing until the Termination Date, the
Non-Purchaser Nominating Committee shall exclusively have and exercise all power
and authority of the Board of Directors in respect of filling (i) any vacancy
occurring in a directorship which was held by Non-Purchaser Director who was not
an executive officer of the Company or (ii) any newly created directorship that
results from increasing the size of the Board of Directors to the extent such
newly created directorship is not required to be filled pursuant to Section
14(c) of this Article III; provided, however, that if there are no Non-Purchaser
Directors then in office to exercise such power to fill any such vacancy or
newly created directorship, then the Board of Directors shall have and exercise
such power to fill any and all such vacancies or newly created directorships
then existing; and provided, further, that any directors elected pursuant to the
immediately preceding proviso of this Section 15(d) must be Unaffiliated
Persons. The Non-Purchaser Nominating Committee shall at all times act in
conformity with Section 15(b) of this Article III.
(E) Subject to the requirements of Section 15(b) of this
Article III, from the Closing until the Termination Date, (i) any nomination by
the Board of Directors of a nominee for election by the stockholders of the
corporation as a director to succeed a Non-Purchaser Director who is an
executive officer of the corporation must be made by the Board of Directors and
(ii) any vacancy occurring in a directorship which, immediately prior to
occurrence of such vacancy, was held by a Non-Purchaser Director who was at the
time an executive officer
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of the corporation may only be filled by the Board of Directors, and such
vacancy may not be filled by action of the stockholders of the corporation."
ARTICLE IV
OFFICERS
Section 1. The officers of this corporation shall be chosen by the
Board of Directors and shall include a President, a Secretary, and a Treasurer.
The corporation may also have at the discretion of the Board of Directors such
other officers as are desired, including a Chairman of the Board, one or more
Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 3 hereof. In the event there are two or more Vice Presidents, then one
or more may be designated as Executive Vice President, Senior Vice President, or
other similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose the officers of the corporation.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if such an officer be elected,
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these By-Laws. If
there is no President, the Chairman of the Board shall in addition be the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article IV.
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PRESIDENT
Section 7. Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such an officer,
the President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. He shall
preside at all meetings of the stockholders and, in the absence of the Chairman
of the Board, or if there be none, at all meetings of the Board of Directors. He
shall be an ex-officio member of all committees and shall have the general
powers and duties of management usually vested in the office of President and
Chief Executive Officer of corporations, and shall have such other powers and
duties as may be prescribed by the Board of Directors or these By-Laws.
VICE PRESIDENTS
Section 8. In the absence or disability of the President, the Vice
Presidents in order of their rank as fixed by the Board of Directors, or if not
ranked, the Vice President designated by the Board of Directors, shall perform
all the duties of the President, and when so acting shall have all the powers of
and be subject to all the restrictions upon the President. The Vice Presidents
shall have such other duties as from time to time may be prescribed for them,
respectively, by the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors.. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors, or
if there be no such determination, the Assistant Secretary designated by the
Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of
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Directors may from time to time prescribe.
TREASURER AND ASSISTANT TREASURER
Section 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he "shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 12. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors,
or if there be no such determination, the Assistant Treasurer designated by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the corporation shall be
entitled to have a certificate signed by, or in the name of the corporation by,
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
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Section 3. If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation, or the transfer agent
of the corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights
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in respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix a record date which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
ARTICLE VI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the shall be fixed by resolution of
the Board of Directors.
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SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
NOTICES
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
to be equivalent.
ANNUAL STATEMENT
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
ARTICLE VII
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal ByLaws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
Section 2. From the Closing until the Termination Date, the
provisions of (i) Section 10 in Article II of these By-Laws , (ii) the third
sentence of Section 1 in Article III of
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these By-Laws, (iii) Sections 14 and 15 in Article III of these By-Laws and (iv)
Section 2 in Article VII of these. By-Laws may not be repealed or amended
without the affirmative vote of holders of shares of common stock representing
at least 662/3% of the outstanding shares of common stock of the corporation.
17
EXHIBIT 10(M)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING (this "Memorandum") dated as of May 18,
1999, sets forth the mutual and binding understanding of the undersigned
regarding the material terms of employment of Michael R. Gallagher ("MRG") by
Playtex Products, Inc. (the "Company").
POSITION:
MRG shall continue to be employed as Chief Executive Officer of the
Company and will continue to be a member of the Company's Board of
Directors (the "Board").
TERM:
The term of MRG's employment agreement (the "Term") shall be from the date
hereof to June 30, 2003, unless earlier terminated or extended in
accordance with this Memorandum or otherwise by agreement of the parties.
BASE SALARY:
The base salary shall be payable at the rate of $900,000 per annum as of
June 1, 1999 through May 31, 2000, subject to upward adjustment thereafter
at the discretion of the Board.
INCENTIVE BONUSES:
MRG shall be afforded the opportunity to earn an Incentive Bonus with
respect to each calendar year occurring during the term of his employment
as Chief Executive Officer with the Company based upon the attainment of
financial objectives established by the Compensation and Stock Option
Committee of the Board following consideration of the recommendation of
senior management of the Company; provided that with respect to any
partial year at the conclusion of MRG's employment, the amount of the
Incentive Bonus otherwise payable shall be prorated to reflect the portion
of such year during which MRG is employed by the Company.
The target Incentive Bonus for each calendar year shall equal 125% of
MRG's base salary as in effect as of the first day of such calendar year.
<PAGE>
The maximum Incentive Bonus for each calendar year shall equal 187.5% of
MRG's base salary as in effect as of the first day of such calendar year.
STOCK OPTIONS:
It is the intention of the parties that MRG shall be included in
consideration for additional options during the term of his employment,
and, as circumstances warrant, the Company shall give consideration to
such further grants in its discretion.
SPECIAL PRICE-BASED INCENTIVE ARRANGEMENT
As additional incentive, MRG shall be eligible to receive Special
Price-Based Incentive Compensation based upon the trading price of the
Company's common stock in accordance with the following criteria.
-------------------------------------------------
For 30 consecutive trading
days, closing price equals
or exceeds, at any
time prior to 6/30/03 Cash Bonus
--------------------- ----------
-------------------------------------------------
$20.00 $1,000,000
-------------------------------------------------
$25.00 $1,500,000
-------------------------------------------------
$30.00 $1,500,000
-------------------------------------------------
$35.00 $2,000,000
-------------------------------------------------
$40.00 $2,000,000
-------------------------------------------------
MRG will be entitled to the cash bonus when and if the respective 30
consecutive trading day price targets are achieved, provided that MRG is
employed as Chief Executive Officer of the Company at such time.
TERMINATION OF EMPLOYMENT PRIOR TO THE EXPIRATION OF TERM:
- MRG resignation or termination by Company for "cause":
MRG entitled to payment of base salary through date of termination.
No entitlement to any other cash compensation from the Company.
- Termination by the Company without "cause":
MRG entitled to the amounts set forth in the Retention Agreement
dated July 22, 1997 between the Company and MRG.
<PAGE>
- Death/Disability:
MRG entitled to the amounts set forth in the Retention Agreement
dated July 22, 1997 between the Company and MRG.
SHAREHOLDER APPROVAL:
In order that certain payments described in this Memorandum qualify as
performance based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended, arrangements providing for the Incentive
Bonus and the Special Price-Based Incentive Compensation will be subject
to the approval of the shareholders of the Company. Haas Wheat & Partners,
L.P. ("Haas Wheat") has agreed with MRG to vote the shares of common stock
of the Company controlled by Haas Wheat (approximately 33% of the
outstanding shares of such stock) to approve such arrangements.
FRINGE BENEFITS:
MRG shall be eligible to receive fringe benefits customary for a position
of this nature.
ADDITIONAL DOCUMENTATION:
This Memorandum is a successor to the Memorandum of Understanding between
the parties dated June 21, 1995. References to that Memorandum of
Understanding in the Retention Agreement dated July 22, 1997 between the
Company and MRG, and any other agreements between the parties, are amended
so that they refer to this Memorandum instead.
PLAYTEX PRODUCTS, INC.
By /s/ Robert B. Haas
-------------------------------
Its Chairman
MICHAEL R. GALLAGHER
/s/ Michael R. Gallagher
---------------------------------
EXHIBIT 10(L)
PLAYTEX 1994 STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF
PLAYTEX PRODUCTS, INC.
(as amended through #6-April, 1999)
Playtex Products, Inc. (known at the date of adoption of this Stock Option
Plan as Playtex FP Group Incorporated), a corporation organized under the laws
of the State of Delaware, hereby adopts this Stock Option Plan for Directors and
Executive and Key Employees of Playtex Products, Inc. The purposes of this Plan
are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its directors and
executive and other key Employees who have been or will be given responsibility
for the management or administration of the Company's business affairs, by
assisting them to become owners of the Company's Common Stock and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type of
professional, technical and managerial employees considered essential to the
long-range success of the Company by providing and offering them an opportunity
to become owners of the Company's Common Stock under options, including options
that are intended to qualify as "incentive stock options" under Section 422 of
the Code.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include
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the feminine and neuter and the singular shall include the plural, where the
context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the Stock Option Committee of the Board, appointed
as provided in Section 7.1.
Section 1.4 - Company
"Company" shall mean Playtex Products, Inc. (known at the date of adoption
of this Stock Option Plan as Playtex FP Group Incorporated). In addition,
"Company" shall mean any corporation assuming, or issuing new employee stock
options i substitution for, Incentive Stock Options, outstanding under Plan, in
a transaction to which Section 424(a) of the Code applies.
Section 1.5 - Director
"Director" shall mean a member of the Board.
Section 1.6 - Disinterested Director
"Disinterested Director" shall mean a Director who is a "disinterested
person" as defined by Rule 16b-3 and an "outside director" as described in Code
Section 162(m)(4)(C)(i).
Section 1.7 - Employee
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent Corporation
or a Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
Section 1.8 - Exchange Act
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
Section 1.9 - Executive Officers
"Executive Officers" shall mean (a) the Chief Executive Officer of the
Company (or the individual acting in such capacity) and (b) the four highest
compensated Officers of the Company (other than the Chief Executive Officer)
whose total compensation is required to be reported to the Company's
shareholders under the Exchange Act.
Section 1.10 - Incentive Stock Option
"Incentive Stock Option" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Committee.
Section 1.11 - Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the Committee.
Section 1.12 - Officer
"Officer" shall mean an officer of the Company, as defined in Rule
16a-l(f) under the Exchange Act, as such Rule may be amended in the future.
Section 1.13 - Option
"Option" shall mean an option to purchase Common Stock of the Company,
granted under the Plan. "Options" includes both Incentive Stock Options and
Non-Qualified Options.
Section 1.14 - Optionee
"Optionee" shall mean an Employee or a Director to whom an Option is
granted under the Plan.
Section 1.15 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50t or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
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Section 1.16 - Plan
"Plan" shall mean this Playtex 1994 Stock Option Plan for Directors and
Executive and Key Employees of Playtex Products, Inc.
Section 1.17 - Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended in the future.
Section 1.18 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.19 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.20 - Stock Appreciation Right
"Stock Appreciation Right" shall mean a stock appreciation right granted
under the Plan.
Section 1.21 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50t or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.22 - Termination of Employment
"Termination of Employment" shall mean the time (i) the term of a Director
is terminated for any reason or (ii) the employee-employer relationship between
the Optionee and the Company, a Parent Corporation or a Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death or retirement, but excluding
terminations where there is a simultaneous reemployment by the Company, a Parent
Corporation or a Subsidiary. The Committee, in its absolute discretion, shall
determine the effect of all other matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge
4
<PAGE>
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
Incentive Stock Options, a leave of absence shall constitute a Termination of
Employment if, and to the extent that, such leave of absence interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options and Stock Appreciation Rights shall
be shares of the Company's $.01 per value Common Stock. Subject to adjustment as
provided in Sections 2.4 and 4.6 of the Plan: the aggregate number of such
shares which may be issued upon exercise of Options and Stock Appreciation
Rights shall not exceed 7,047,785; and the maximum number of shares with respect
to which Options and Stock Appreciation Rights may be granted to any employee
under the Plan shall not exceed 2,000,000 in any calendar year or in total;
provided, that shares which may be issued upon exercise of Options or Stock
Appreciation Rights which expire or are canceled (whether pursuant to Section
3.3(b) or otherwise) shall, solely to the extent required by Code Section
162(m), be counted against this limitation.
Section 2.2 - Unexercised Options
If any Option expires or is canceled (other than upon exercise of a
related Stock Appreciation Right) without having been fully exercised, the
number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may again be optioned
hereunder, subject to the limitations of Section 2.1.
Section 2.3 - Exercised Stock Appreciation Rights
Notwithstanding Section 2.2, to the extent that a Stock Appreciation Right
shall have been exercised for cash, the number of shares subject to the related
Option, or portion thereof, may again be optioned hereunder, subject to the
limitations of Section 2.1.
5
<PAGE>
Section 2.4 - Changes in Company's Shares
In the event that the outstanding shares of Common Stock of the Company
are hereafter changed into or exchanged for a different number or kind of shares
or other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares, appropriate adjustments shall
be made by the Committee in the number and kind of shares for the purchase of
which Options may be granted, including adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued on
exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any Director or executive or other key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary shall be eligible
to be granted Options, except as provided in Section 3.2. Any Director who is a
member of the Committee shall only be granted options pursuant to Section
3.3(c).
Section 3.2 - Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the Code.
Section 3.3 - Granting of Options
(a) The Committee shall from time to time, in its absolute discretion:
(i) Determine which Employees are executive or other key Employees
and select from among the Directors who are not members of the Committee and the
executive or other key Employees (including those to whom Options and/or Stock
Appreciation Rights have been previously granted under the Plan) such of them as
in its opinion should be granted Options; and
(ii) Determine the number of shares to be subject to such Options
granted to such selected Directors or executive or other key Employees, and
determine whether, in the case of such executive or other key Employees, such
Options are to be
6
<PAGE>
Incentive Stock Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options, consistent
with the Plan.
(b) Upon the selection of a Director or an executive or other key Employee
to be granted an Option pursuant to Section 3.3(a), the Committee shall instruct
the Secretary to issue such Option and may impose such conditions on the grant
of such Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to a
Director or an Employee that the Director or Employee surrender for cancellation
some or all of the unexercised Options which have been previously granted to
him.
An Option the grant of which is conditioned upon such surrender may have an
Option price lower (or higher) than the Option price of the surrendered Option,
may cover the same (or a lesser or greater) number of shares as the surrendered
Option, may contain such other terms as the Committee deems appropriate and
shall be exercisable in accordance with its terms, without regard to the number
of shares, price, Option period or any other term or condition of the
surrendered Option.
(c) The Secretary shall issue to each Director who is a member of the
Committee,
(i) on of the date of commencement of his first term as a Director,
9,000 Options, twenty percent of which shall become exercisable on each of the
first five anniversaries of the day of grant,
(ii) on the first anniversary of the date of commencement of his
first term as a Director, so long as such person is a Director at such time,
8,000 Options, twenty-five percent of which shall become exercisable on each of
the first four anniversaries of the day of grant, and
(iii)on the second anniversary of the date of commencement of his
first term as a Director, so long as such person is a Director at such time,
8,000 Options, thirty-three and a third percent of which shall become
exercisable on each of the first three anniversaries of the day of grant,
at an exercise price per Option equal to the fair market value of a share of the
Company~s Common Stock, as defined in Section 4.2(b), on the day the Option was
granted.
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ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to qualify
such Options as "incentive stock options" under Section 422 of the Code.
Section 4.2 - Option Price
(a) Except with respect to Options granted pursuant to Section 3.3(c), the
price of the shares subject to each Option shall be set by the Committee;
provided, however, that the price per share shall be not less than 100% of the
fair market value of such shares on the date such Option is granted; provided,
further, that, in the case of an Incentive Stock Option, the price per share
shall not be less than 110t of the fair market value of such shares on the date
such Option is granted in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10t of the total combined
voting power of all classes of stock of the Company, any Subsidiary or any
Parent Corporation.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be: (i) the closing price of a
share of the Company~s Common Stock on the principal exchange on which shares of
the Company's Common Stock are then trading, if any, on the day previous to such
date, or, if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or (ii) if such
Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the last sales price (if the Company's Common Stock is
then listed as a National Market Issue under the NASD National Market System) or
(2) the mean between the closing representative bid and asked prices (in all
other cases) for the Company's Common Stock on the day previous to such date as
reported by NASDAQ or such successor quotation system; or (iii) if such Common
Stock is not publicly traded on an exchange and not quoted on NASDAQ or a
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successor quotation system, the mean between the closing bid and asked prices
for the Company's Common Stock, on the day previous to such date, as determined
in good faith by the Committee; or (iv) if the Company's Common Stock is not
publicly traded, the fair market value established by the Committee acting in
good faith.
Section 4.3 - Commencement of Exercisability
(a) Except as the Committee may otherwise provide with respect to Options
granted to Employees who are not Officers, no Option may be exercised in whole
or in part during the first year after such Option is granted.
(b) Except with respect to Options granted pursuant to Section 3.3(c), and
subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d) and 8.3, Options
shall become exercisable at such times and in such installments (which may be
cumulative) as the Committee shall provide in the terms of each individual
Option; provided, however, that by a resolution adopted after an Option is
granted the Committee may, on such terms and conditions as it may determine to
be appropriate and subject to Sections 4.3(a), 4.3(c), 4.3(d) and 8.3,
accelerate the time at which such Option or any portion thereof may be
exercised.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
(d) To the extent that the aggregate fair market value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company, any Subsidiary and any Parent
Corporation) exceeds $100,000, such options shall be taxed as Non-Qualified
Options. The rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted. For purposes of
this Section 4.3(d), the fair market value of stock shall be determined as of
the time the option with respect to such stock is granted.
Section 4.4 - Expiration of Options
(a) No Option may be exercised to any extent by anyone after the first to
occur of the following events:
(i) The expiration of ten years from the date the
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Option was granted; or
(ii) With respect to an Incentive Stock Option in the case of an
Optionee owning (within the meaning of Section 424(d) of the Code), at the time
the Incentive Stock Option was granted, more than 10% of the total combined
voting power of all classes of stock of the Company, any Subsidiary or any
Parent Corporation, the expiration of five years from the date the Incentive
Stock Option was granted; or
(iii) Except in the case of any Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of three months from
the date of the Optionee's Termination of Employment for any reason other than
such Optionee's death unless the Optionee dies within said three-month period;
or
(iv) In the case of an Optionee who is disabled (within the meaning
of Section 22(e)(3) of the Code), the expiration of one year from the date of
the Optionee's Termination of Employment for any reason other than such
Optionee's death unless the Optionee dies within said one-year period; or
(v) The expiration of one year from the date of the Optionee's
death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; and (without limiting the generality of the foregoing)
the Committee may provide in the terms of individual Options that said Options
expire immediately upon a Termination of Employment for any reason.
Section 4.5 - Consideration
The consideration for the granting of an Option shall be the Optionee's
continued rendering of services to the Company, a Parent Corporation or a
Subsidiary after the Option is granted. Nothing in this Plan or in any Stock
Option Agreement hereunder shall confer upon any Optionee any right to continue
in the employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company, its Parent
Corporations and its Subsidiaries, which are hereby expressly reserved, to
discharge any Optionee at any time for any reason whatsoever, with or without
cause.
Section 4.6 - Adjustments in Outstanding Options
10
<PAGE>
In the event that the outstanding shares of the stock subject to Options
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
or portions thereof then unexercised, shall be exercisable, to the end that
after such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share; provided, however,
that, in the case of Incentive Stock Options, each such adjustment shall be made
in such manner as not to constitute a "modification" within the meaning of
Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall
be final and binding upon all Optionees, the Company and all other interested
persons.
4.7 Merger. Consolidation. Acquisition. Liquidation or Dissolution
Notwithstanding the provisions of Section 4.6, in its absolute discretion,
and on such terms and conditions as it deems appropriate, the Committee may
provide by the terms of any Option that such Option cannot be exercised after
the merger or the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, the acquisition of Common Stock from the Haas Wheat
group (the "Purchasers") of 25% or more of the Company's Voting Securities (all
such terms as defined in the Stock Purchase Agreement dated March 17, 1995)
("The Agreement"), the change in the majority of the Board of Directors of the
Company during any period of two consecutive years (excepting, however, such new
directors elected by or nominated by either a majority of all the Directors or a
majority of the Directors on either the "Purchaser Nominating Committee" or the
"Non-Purchaser Nominating Committee" as such terms are defined by the Agreement,
in each case who were either directors at the beginning of such period or were
previously so elected or nominated), or the liquidation or dissolution of the
Company and if the Committee so provides, it may, in its absolute discretion and
on such terms and conditions as it deems appropriate, also provide either by the
terms of such Option or by a resolution
11
<PAGE>
adopted prior to the occurrence of such merger, consolidation, acquisition,
Board change, liquidation or dissolution, that, for some period of time prior to
such event, such Option shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in Section 4.3(a), Section 4.3(b)
and/or any installment provisions of such Option, but subject to Section 4.3(d).
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise an Option (or
any portion thereof) granted to him. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement,
be exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
Notwithstanding the foregoing, any Optionee may, at any time after April
1, 1998, transfer any Nonqualified Option or portion thereof to a Permitted
Transferee (as defined in (d) below), subject to the following:
(a) Such transfer shall be permitted only if the Optionee does not receive
any consideration for the transfer.
(b) Such transfer shall not be effective unless and until the Optionee has
furnished the Committee with written notice of the transfer and copies of all
documents evidencing the transfer.
(c) Any Nonqualified Option or portion thereof transferred by an Optionee
to a Permitted Transferee may be exercised by the Permitted Transferee to the
same extent as the Optionee would have been entitled to exercise it, and shall
remain subject to all of the terms and conditions that would have applied to
such Nonqualified Option under the provisions thereof and this Plan, if the
Optionee had not transferred the Nonqualified Option or portion thereof to the
Permitted Transferee.
(d) As used herein, the term "Permitted Transferee" shall mean, with
respect to any Optionee, (i) one or more members of his or her Immediate Family,
(ii) a trust solely for the benefit of the Optionee and/or one or more members
of his or her Immediate Family, or (iii) a partnership or limited liability
12
<PAGE>
company whose only partners or members are the Optionee and/or one or more
members of his or her Immediate Family. For this purpose, members of an
Optionee's "Immediate Family" shall include his or her spouse, children or
grandchildren (including adopted children and grandchildren and step-children
and step-grandchildren).
To the extent that the terms of the Stock Option Agreement for any
Nonqualified Option granted prior to April 1, 1998 prohibited the transfer of
such Nonqualified Option, the terms of such Agreement shall be deemed to be
automatically amended effective as of April 1, 1998 to permit such Nonqualified
Option to be transferred in accordance with the provisions set forth above.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under the Plan or
the applicable Stock Option Agreement, such Option or portion thereof may be
exercised in whole or in part; provided, however, that the Company shall not be
required to issue fractional shares and the Committee may, by the terms of the
Option, require any partial exercise to be with respect to a specified minimum
number of shares.
Section 5.3- Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person then entitled
to exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by the
Committee; and (b) (i) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is thereby exercised; or
(ii) With the consent of the Committee, (A) Shares of the Companies
Common Stock owned by the Optionee duly endorsed for transfer to the Company or
(B) except with respect to Incentive Stock Options and subject to the timing
requirements of Section 5.4, shares of the Company's Common Stock issuable to
the Optionee upon exercise of the Option, with a fair market value
13
<PAGE>
(as determined under Section 4.2(b)) on the date of Option exercise equal to the
aggregate Option price of the shares with respect to which such Option or
portion is thereby exercised; or
(iii) With the consent of the Committee, a full recourse promissory
note bearing interest (at no less than such rate as shall then preclude the
imputation of interest under the Code or any successor provision) and payable
upon such terms as may be prescribed by the Committee. The Committee may also
prescribe the form of such note and the security to be given for such note. No
Option may, however, be exercised by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of credit is
prohibited by law; or
(iv) With the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i), (ii) and (iii); and
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; with the consent of the Committee,
(i) shares of the Company's Common Stock owned by the Optionee duly endorsed for
transfer or (ii) except with respect to Incentive Stock Options and subject to
the timing requirements of Section 5.4, shares of the Company's Common Stock
issuable to the optionee upon exercise of the Option, valued in accordance with
Section 4.2(b) at the date of Option exercise, may be used to make all or part
of such payment;
(d) Such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option
or portion thereof.
Section 5.4 - Certain Timing Requirements
Shares of the Company's Common Stock issuable to the
14
<PAGE>
Optionee upon exercise of the Option may be used to satisfy the Option price or
the tax withholding consequences of such exercise only (i) during the period
beginning on the third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of the Company and
ending on the twelfth business day following such date or (ii) pursuant to an
irrevocable written election by the Optionee to use shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes (subject to the approval of
the Committee) made at least six months prior to the payment of such Option
price or withholding taxes.
Section 5.5 - Conditions to Issuance of Stock Certificates
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may establish from time to time for reasons of
administrative convenience.
15
<PAGE>
Section 5.6 - Rights as Shareholders
The holders of Options shall not be, nor have any of the rights or privileges
of, shareholders of the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such holders.
Section 5.7 - Transfer Restrictions
Unless otherwise approved in writing by the Committee, no shares acquired
upon exercise of any Option by any Officer may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have elapsed from
(but excluding) the date that such Option was granted. The Committee, in its
absolute discretion, may impose such other restrictions on the transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such other restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of stock, acquired by exercise of an
Incentive Stock Option, within two years from the date of granting such Option
or one year after the transfer of such shares to such Employee. The Committee
may direct that the certificates evidencing shares acquired by exercise of an
Option refer to such requirement to give prompt notice of disposition.
ARTICLE VI
STOCK APPRECIATION RIGHTS
Section 6.l - Grant of Stock Option Rights
A Stocks Appreciation Right may be granted to any Employee who receives a
grant of an Option under the Plan. A Stock Appreciation Right may be granted in
connection and simultaneously with the grant of an Option or with respect to a
previously granted Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose, including the following:
(a) A Stock Appreciation Right shall be related to a particular Option and
shall be exercisable only to the extent the related Option is exercisable.
(b) A Stock Appreciation Right shall be granted to the Optionee to the
maximum extent of 100% of the number of shares
16
<PAGE>
subject to the simultaneously or previously granted Option.
(c) A Stock Appreciation Right shall entitle the Optionee (or other person
entitled to exercise the Option pursuant to Section 5.1) to surrender
unexercised a portion of the Option to which the Stock Appreciation Right
relates to the Company and to receive from the Company in exchange therefor an
amount, payable in shares of the Company's Common Stock (valued pursuant to
Section 4.2 (b)) or, in the discretion of the Committee, in cash, determined by
multiplying the lesser of (i) the difference obtained by subtracting the Option
exercise price per share of the Company's Common Stock subject to the related
Option from the fair market value (as determined under Section 4.2 (b) of a
share of the Company' s Common Stock on the date of exercise of the Stock
Appreciation Right or (ii) two times the Opting Exercise price per share of the
Company's Common Stock subject to the related Option, by the number of shares of
the Company's Common Stock subject to the related Option with respect to which
the stock Appreciation Right shall have been exercised.
Section 6.2 - Exercise of Stock Appreciation Rights
(a) Except in the case of death or disability (within the meaning of
Section 22(e)(3) of the Code) of the Optionee, no Stock Appreciation Right shall
be exercisable during the first six months after a Stock Appreciation Right is
granted with respect to an outstanding Option.
(b) A Stock Appreciation Right may be exercised for cash only (i) during
the period beginning on the third business day following the date of release of
the quarterly or annual summary statement of sales and earnings of the Company
and ending on the twelfth business day following such date or (ii) pursuant to
an irrevocable written election by the Employee to receive cash, in whole or in
part, upon exercise of his Stock Appreciation Right (subject to the approval of
the Committee) made at least six months prior to the exercise of the Stock
Appreciation Right.
ARTICLE VII
ADMINISTRATION
Section 7.1 - Stock Option Committee
The Stock Option Committee shall consist of two or more Disinterested
Directors, appointed by and holding office at the pleasure of the Board.
Appointment of Committee members shall be
17
<PAGE>
effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee shall
be filled by the Board.
Section 7.2 - Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock options"
within the meaning of Section 422 of the Code. The Board shall have no right to
exercise any of the rights or duties of the Committee under the Plan.
Section 7.3 - Majority Rule.
The Committee shall act by a majority of its members i office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
Section 7.4 - Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Company and its Officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation.
ARTICLE VIII
OTHER PROVISIONS
18
<PAGE>
Section 8.1 - Options and Stock Appreciation Rights Not Transferable
No Option, Stock Appreciation Right or interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 8.1 shall prevent transfers by will or by the applicable laws of descent
and distribution.
Section 8.2 - Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee;
provided that the provisions set forth in Section 3.3(c) of the Plan shall not
be amended more than once every six months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder. However, without approval of the Company's shareholders given within
12 months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 2.4, increase any limit imposed in
Section 2.1 on the maximum number of shares which may be issued on exercise of
Options, materially modify the eligibility requirements of Section 3.1, reduce
the minimum Option price requirements of Section 4.2(a), extend the limit
imposed in this Section 8.2 on the period during which Options or Stock
Appreciation Rights may be granted or amend or modify the Plan in a manner
requiring shareholder approval under Rule l6b-3 or Code Section 162(m). Neither
the amendment, suspension nor termination of the Plan shall, without the consent
of the holder of the Option or Stock Appreciation Right, alter or impair any
rights or obligations under any Option or Stock Appreciation Right theretofore
granted. No Option or Stock Appreciation Right may be granted during any period
of suspension nor after termination of the Plan, and in no event may any Option
or Stock Appreciation Right be granted under this Plan after the first to occur
of the following events:
(a) The expiration of ten years from the date the Plan is adopted by the
Board; or
19
<PAGE>
(b) The expiration of ten years from the date the Plan is approved by the
Company's shareholders under Section 8.3.
Section 8.3 - Approval of Plan by Shareholders
This Plan will be submitted for the approval of the Company's shareholders
within 12 months after the date of the Board's initial adoption of the Plan.
Options and Stock Appreciation Rights may be granted prior to such shareholder
approval; provided, however, that such Options and Stock Appreciation Rights
shall not be exercisable prior to the time when the Plan is approved by the
shareholders; provided, further, that if such approval has not been obtained at
the end of said 12-month period, all Options and Stock Appreciation Rights
previously granted under the Plan shall thereupon be canceled and become null
and void. The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of Rule 16b-3(b) and Code Section 162(m).
Section 8.4 - Effect of Plan Upon Other Option and Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for Directors or employees of the Company,
any Parent Corporation or any Subsidiary or (b) to grant or assume options
otherwise than under this Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
Section 8.5 - Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
Section 8.6 - Conformity to Securities and Tax Laws
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act, the Exchange Act and the Code and any and all
regulations and rules promulgated by the Securities and Exchange Commission and
the United States Treasury
20
<PAGE>
thereunder, including without limitation Rule 16b-3 and Regulations adopted
pursuant to Code Section 162(m). Notwithstanding anything herein to the
contrary, the Plan shall be administered, and Options shall be granted and may
be exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and Options
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations."Without limiting the generality of the
foregoing, it is intended that the grant of Options to Directors pursuant to
Section 3.3(c) be fixed and automatic and that the Plan be administered in a
manner so as to preclude the exercise of any discretion by the Committee with
respect to Options granted to Directors pursuant to Section 3.3(c) (other than
the limited discretion provided in Sections 2.4 and 4.6, relating to changes in
shares and adjustments in outstanding Options, Section 4.1 relating to certain
terms and conditions consistent with the Plan, and Sections 5.3(d) and 5.5
relating to compliance with securities laws). Consequently, notwithstanding any
provision of the Plan or any award agreement issued hereunder to the contrary,
the Committee shall not have the authority to consent to or take any of the
discretionary actions set forth in Sections 1.22, 4.4(b), 4.7, 5.2, 5.3(b) (ii),
5.3(b)(iii), 5.3(b)(iv), 5.3(c)(i), 5.3(c)(ii), 5.4(ii) and 5.7 with respect to
Options granted to Directors pursuant to Section 3.3(c) and any purported
consent or discretionary action shall be deemed null and void and without
effect. In conformity with the foregoing, the Option expiration date with
respect to Options granted pursuant to Section 3.3(c) shall be determined in
accordance with the fixed periods prescribed by Section 4.4(a).
21
Exhibit 11
Playtex Products, Inc.
Computation of Earnings Per Share
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic Earnings Per Common Share
- -------------------------------
Net Earnings Available to Common Stockholders .......... $11,665 $ 9,104 $25,236 $20,414
======= ======= ======= =======
Weighted Average Common Shares Outstanding ............. 60,448 60,294 60,431 58,632
======= ======= ======= =======
Net Earning Per Common Share ......................... $ 0.19 $ 0.15 $ 0.42 $ 0.35
======= ======= ======= =======
Diluted Earnings Per Common Share
- ---------------------------------
Net Earnings Available to Common Stockholders .......... $11,665 $ 9,104 $25,236 $20,414
Adjustment to Net Earnings (1) ......................... 473 -- 788 --
------- ------- ------- -------
Adjusted Net Earnings Available to Common Stockholders $12,138 $ 9,104 $26,024 $20,414
======= ======= ======= =======
Weighted Average Common Shares Outstanding ............. 60,448 60,294 60,431 58,632
Assumed Dilutive Effect of Stock Options (2) ........... 1,125 1,103 1,126 929
Assumed Conversion of the Convertible Notes (1) ....... 2,611 -- 2,138 --
------- ------- ------- -------
Weighted Average Common Shares Outstanding - Diluted . 64,184 61,397 63,695 59,561
======= ======= ======= =======
Net Earning Per Common Share - Diluted ............... $ 0.19 $ 0.15 $ 0.41 $ 0.34
======= ======= ======= =======
</TABLE>
(1) Based on the If-Converted Method for Convertible Securities.
(2) Based on the Treasury Stock Method.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> JUN-26-1999
<CASH> 8,057
<SECURITIES> 0
<RECEIVABLES> 135,392
<ALLOWANCES> 2,332
<INVENTORY> 60,568
<CURRENT-ASSETS> 218,552
<PP&E> 191,039
<DEPRECIATION> 85,528
<TOTAL-ASSETS> 1,042,700
<CURRENT-LIABILITIES> 110,232
<BONDS> 925,500
0
0
<COMMON> 605
<OTHER-SE> (115,476)
<TOTAL-LIABILITY-AND-EQUITY> 1,042,700
<SALES> 399,647
<TOTAL-REVENUES> 399,647
<CGS> 168,438
<TOTAL-COSTS> 168,438
<OTHER-EXPENSES> 149,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,767
<INCOME-PRETAX> 43,691
<INCOME-TAX> 18,455
<INCOME-CONTINUING> 25,236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,236
<EPS-BASIC> .42
<EPS-DILUTED> .41
</TABLE>
