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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 26, 1998
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission File No. 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
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(Address of principal executive offices)
Telephone number: (203) 341-4000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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FORM 10-K
(Facing Sheet Continuation)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K |X|.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 17, 1999 was $420,136,357 (based on the closing sale
price of $14 7/8 on March 17, 1999 as reported by the New York Stock
Exchange-Composite Transactions). For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by named executive officers and directors of the registrant;
such exclusion shall not be deemed to constitute an admission that any such
person is an "affiliate" of the registrant.
At March 17, 1999, 60,417,824 shares of Playtex Products, Inc. common
stock, par value $.01 per share, were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENT PART OF FORM 10-K
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Portions of the registrant's definitive Proxy Statement (the
"Proxy Statement") for the 1999 Annual Meeting of
Stockholders to be held on May 18, 1999, which will be filed
with the Securities and Exchange Commission within 120 days
after the end of the registrant's fiscal year ended December
26, 1998 pursuant to Regulation 14A......................... III
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business.......................................................... 5
Item 2. Properties........................................................ 15
Item 3 Legal Proceedings................................................. 16
Item 4. Submission of Matters to a Vote of Security Holders............... 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 17
Item 6. Selected Financial Data........................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 18
Item 7A Quantitative and Qualitative Disclosure about Market Risk......... 18
Item 8. Financial Statements and Supplementary Data....................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant................ 19
Item 11. Executive Compensation............................................ 19
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 19
Item 13. Certain Relationships and Related Transactions.................... 19
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.... 19
Signatures........................................................ 21
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PART I
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. When used in this document, the words "anticipates," "intends," "plans,"
"believes," "estimates," "expects" and similar expressions are intended to
identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements of Playtex Products, Inc. and its
subsidiaries ("Playtex" or the "Company") to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to: the
Company's highly leveraged capital structure, its substantial principal
repayment obligations, price and product changes and promotional activity by
competitors, the loss of a significant customer, the difficulties of integrating
acquisitions, issues related to the year 2000, adverse publicity and product
liability claims and dependence on key employees. The risk factors described
herein could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements of the Company and investors,
therefore, should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation to update
any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the Company's business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.
TRADEMARKS
The Company has proprietary rights to a number of trademarks important to
its businesses, such as: PLAYTEX, BANANA BOAT, GENTLE GLIDE, MR. BUBBLE, WET
ONES, BINACA, MOST LIKE MOTHER, BINKY, CHUBS, QUICKSTRAW, BIOSUN, DIAPARENE,
DIAPER GENIE, DROP-INS, QUIK BLOK, TAN EXPRESS, NATURAL ACTION, COOLSTRAW,
AVANCE, SAFE'N SURE, EAZY-FEED, WET ONES LUNCHKINS, SLIMFITS, SILK GLIDE,
PORTABLES, SOOTH-A-CAINE, ACTION SPORT, COOL COLORZ, GET ON THE BOAT, LIPPOPS,
BETTER OFF, BLASTERS, DENTAX, DOROTHY GRAY, HANDSAVER, STAIN SOLUTIONS,
JHIRMACK, LIVING, OGILVIE, TEK, and TUSSY. The Company also owns a royalty free
license in perpetuity to the WOOLITE trademark for rug an upholstery cleaning
products in the United States and Canada.
ITEM 1. BUSINESS
A. HISTORY
The Playtex businesses were founded in 1932 under the name International
Latex Company and operated for many years prior to 1986 under the name
International Playtex, Inc. ("IPI"). In the mid-1950's, using the latex
technology developed for the manufacture of girdles, IPI began to market
household gloves, the first of many products to constitute its Family Products
division. Through the marketing of gloves, the addition of disposable nursers in
the mid-1960's, and the acquisition in 1967 and subsequent expansion of its
tampon manufacturing business, Playtex established a major presence in the drug
store, supermarket and mass merchandise channels of distribution.
In 1986, IPI was the subject of a management leveraged buyout and, in
1988, the Company, which was formed by certain management investors and The
Thomas H. Lee Company, acquired the Family Products business from Playtex
Holdings, Inc. ("PHI"), the successor to IPI. Concurrently, Playtex Apparel,
Inc. ("Apparel"), which manufactured woman's intimate apparel, was divested to a
partnership owned by operating management of that business. In November 1991,
Apparel was sold to Sara Lee Corporation ("Sara Lee"). There is no longer any
corporate relationship between the Company and Sara Lee or Apparel, except that
the Company and Apparel each own 50% of the stock of
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Playtex Marketing Corporation ("Playtex Marketing"), which owns the PLAYTEX and
LIVING trademarks and licenses them on a royalty-free basis in perpetuity to the
Company.
In December 1992, the Company acquired, for $5 million, a 22% common
equity interest in BANANA BOAT Holding Corporation ("BBH") in conjunction with
the acquisition by BBH's wholly-owned subsidiary, Sun Pharmaceuticals Corp.
("Sun"), of the assets and certain liabilities of Sun Pharmaceuticals, Ltd. BBH
was controlled by Thomas H. Lee Equity Partners, L.P. and other affiliates and
employees of the Thomas H. Lee Company. Sun manufactured and marketed a line of
sun and skin care products in the United States and abroad under the BANANA BOAT
trademark. Concurrently with its acquisition of the equity interest in BBH, the
Company entered into a distribution agreement with Sun under which it began to
distribute BANANA BOAT sun and skin care products for Sun from November 1993 to
October 1995.
On February 28, 1995, the Company acquired the assets of the WOOLITE Rug
and Upholstery Cleaning Products ("Woolite") from Reckitt & Coleman PLC under an
exclusive, royalty free trademark license in perpetuity in the United States and
Canada.
On June 6, 1995, the Company sold 20 million shares of Common Stock at a
price of $9.00 per share for an aggregate purchase price of $180.0 million (the
"Investment") to HWH Capital Partners, L.P., HWH Valentine Partners, L.P., and
HWH Surplus Valentine Partners, L.P. (collectively, the "Investors"), each a
Delaware limited partnership managed by Haas Wheat & Partners Incorporated,
pursuant to a Stock Purchase Agreement, dated as of March 17, 1995, between the
Company and the Investors (the "Stock Purchase Agreement"). The Investors'
shares constituted approximately 40% of the Company's outstanding Common Stock
at the time of the Investment and designees of the Investors were elected by the
Company's stockholders as a simple majority of the Board of Directors.
Concurrent with the Investment, the Company entered into a new bank credit
agreement and, together with the Investment, the net proceeds were used by the
Company to refinance all outstanding borrowings under the Company's prior credit
agreement.
On October 31, 1995, the Company and BBH Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of the Company, acquired all of the
issued and outstanding common shares of BBH not previously owned by the Company
(the "BBH Acquisition"). Following the BBH Acquisition, the Company's equity
ownership of BBH increased from 22% to 100% and the Company's interest in the
operating profits from the sale of BANANA BOAT products increased to 100%.
Concurrently with the BBH Acquisition, the distribution agreement between the
Company and BBH was terminated. On March 22, 1996, BBH was merged with and into
Sun, with Sun being the surviving corporation. The net funds expended for the
BBH Acquisition included cash of $40.4 million, the retirement of $27.1 million
of BBH's long term debt, the assumption of BBH's working capital facility and
the payment of accrued interest and transaction fees of $4.3 million. The BBH
Acquisition was financed with $34.3 million of existing cash balances and
advances under the Company's previous credit facility of $37.5 million. The BBH
Acquisition was accounted for as a purchase.
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The net proceeds from the 1997 Refinancing were used to
retire the indebtedness outstanding under the Company's previous credit
agreement: concurrently, the former agreement was terminated. The 1997
Refinancing included: (i) the issuance of $150.0 million principal amount of 8
7/8% senior notes due July 15, 2004 (the "Senior Notes"), (ii) a $150.0 million
senior secured term loan due September 15, 2003 (the "1997 Term Loan") and (iii)
senior secured credit facilities (the "1997 Senior Secured Credit Facilities")
in an aggregate amount of $170.0 million comprised of a $115.0 million revolving
credit facility (the "1997 Revolving Credit Facility") and a $55.0 million term
loan facility (the "1997 Term A Loan").
1998 ACQUISITIONS
On January 6, 1998, the Company acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash (exclusive of acquisition
costs). Carewell manufactured and marketed the DENTAX line of toothbrushes,
toothpaste, and dental floss for distribution through food stores, drug chains,
and mass merchandisers. The acquisition, which was financed with borrowings
under the Company's 1997 Revolving Credit Facility, was accounted for as a
purchase.
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On January 26, 1998, the Company acquired certain tangible and intangible
assets related to the BINKY pacifier business ("Binky") from Binky-Griptight,
Inc. for approximately $1.2 million in cash (exclusive of acquisition costs) and
the issuance of a $0.5 million note which was due and paid on July 27, 1998. The
acquisition, which was financed with borrowings under the Company's 1997
Revolving Credit Facility, was accounted for as an asset purchase.
On January 28, 1998, the Company acquired Personal Care Holdings, Inc.
("PCH") for approximately $91 million in cash (exclusive of acquisition costs)
and 9,257,345 shares of Common Stock. PCH manufactured and marketed a number of
leading consumer product brands, including WET ONES pre-moistened towelettes,
CHUBS baby wipes, OGILVIE home permanent products, BINACA breath spray and
drops, MR. BUBBLE children's bubble bath products, DIAPARENE infant care
products, TUSSY deodorants, DOROTHY GRAY skin care products and BETTER OFF
depilatories. The cash portion of the consideration paid for PCH was financed
under the 1997 Term Loan, which was amended concurrently with the PCH
Transaction. The acquisition was accounted for as a purchase.
1999 ACQUISITION
On January 29, 1999, the Company completed the acquisition of the DIAPER
GENIE business, the leading diaper disposal system in the U.S., from
privately-held Mondial Industries L.P. ("Mondial") for approximately $122
million. The purchase price consisted of $72 million in cash and the issuance to
Mondial of $50 million principal amount of convertible notes. The cash portion
of the consideration was financed through the Company's 1997 Revolving Credit
facility. The newly issued convertible notes bear interest at a rate of 6.00%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of the Company's Common Stock. The conversion
price is approximately $19.15 per share. The notes will mature in 2004 and are
callable by the Company after January 29, 2002. The acquisition was accounted
for as an asset purchase.
B. EXECUTIVE OFFICERS OF REGISTRANT
Listed below are the executive officers of the Company as of March 17,
1999. There are no family relationships between any of the executive officers,
and there is no arrangement or understanding between any executive officer and
any other person pursuant to which the executive officer was selected. The
following information is furnished with respect to each of the executive
officers of the Company, each of which is elected by and serves at the pleasure
of the Board of Directors. Ages and positions are shown as of March 17, 1999.
Name Age Position
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Michael R. Gallagher 53 Chief Executive Officer and
Director
Michael F. Goss 39 Executive Vice President, Chief
Financial Officer and Director
Richard G. Powers 53 President, U.S. Personal Products
Division
Max R. Recone 43 President, U.S. Consumer Products
Division
James S. Cook 47 Senior Vice President, Operations
Irwin S. Butensky, Ph.D. 63 Senior Vice President, Biomedical
and Administrative Services
John D. Leahy 45 Senior Vice President, Corporate
Sales / International
Paul E. Yestrumskas 47 Vice President, General Counsel and
Secretary
MICHAEL R. GALLAGHER has been the Chief Executive Officer and a Director
of the Company since 1995. Prior to joining the Company, Mr. Gallagher was Chief
Executive Officer of North America for Reckitt & Colman PLC ("R&C") from 1994 to
1995. Mr. Gallagher was President and Chief Executive Officer of Eastman Kodak's
L&F Products subsidiary from 1988 until the subsidiary was sold to R&C in 1994.
From 1984 to 1988, Mr. Gallagher held various executive positions with the Lehn
& Fink Group of Sterling Drug. From 1982 to 1984, he was Corporate Vice
President and General Manager of the Household Products Division of The Clorox
Company ("Clorox"). Prior to that, Mr. Gallagher had various marketing and
general management assignments with Clorox and with The Procter & Gamble Company
("Proctor & Gamble"). He is presently a director of Fleet Bank N.A., the Grocery
Manufacturers Association and Allergan, Inc.
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MICHAEL F. GOSS has been Executive Vice President and Chief Financial
Officer of the Company since 1994. He has served as a Director of the Company
since 1995. From 1992 to 1994, Mr. Goss was Treasurer and Vice
President-Corporate Development of Oak Industries, Inc. ("Oak"), an electronic
components company. Prior to joining Oak in 1990, Mr. Goss held various
positions with The Thompson Company and Bain Capital, two private investment
firms specializing in leveraged acquisitions.
RICHARD G. POWERS has been the President of the U.S. Personal Products
Division of the Company since 1996. Prior to joining the Company, Mr. Powers was
President of R&C's North American Personal Products Division. From 1992 to 1995,
he was Vice President of Sales for R&C, and from 1990 to 1992 he was Vice
President of Marketing for R&C's Durkee-French Foods Division. From 1973 to
1990, Mr. Powers held various positions in marketing and general management at
General Foods Corp.
MAX R. RECONE has been the President of the U.S. Consumer Products
Division of the Company since 1996. From 1995 to 1996, he was Vice President and
Business Manager for Sun Care, Hair Care and Household Products. From 1993 to
1995, he served as Vice President-Banana Boat. From 1992 to 1993, he was Vice
President-Sales of the Company. From 1990 to 1992, Mr. Recone served as Vice
President/General Manager of Playtex Limited, the Company's Canadian subsidiary.
JAMES S. COOK has been Senior Vice President, Operations of the Company
since 1991. From 1990 to 1991, he was Vice President, Dover Operations of the
Company. From 1988 to 1990, he was Vice President of Distribution, Logistics &
Management Information Systems of the Company. From 1982 to 1988, Mr. Cook held
various senior level positions in manufacturing and distribution with the
Company. From 1974 to 1982, he held various manufacturing and engineering
positions at Procter & Gamble.
IRWIN S. BUTENSKY, PH.D. has been Senior Vice President, Biomedical and
Administrative Services since January 1999. From 1990 to 1999, he was Senior
Vice President Research and Development. From 1979 to 1990, he was Vice
President of Research & Development for the Company. From 1967 to 1979, Dr.
Butensky held several senior technical positions at Richardson-Vicks, Inc., his
last being Director of Dermatology Research.
JOHN D. LEAHY has been Senior Vice President, Corporate Sales /
International since 1998. From 1996 until 1998, he was Vice President of
Corporate Sales / International. From 1993 to 1996, he was Vice President-Sales
for the Company. From 1982 to 1993, Mr. Leahy held various sales positions with
the Company.
PAUL E. YESTRUMSKAS has been the Vice President, General Counsel and
Secretary of the Company since December 1995. Prior to joining the Company, Mr.
Yestrumskas was Senior Counsel of Rhone-Poulenc, Inc. from 1991 to 1995. Mr.
Yestrumskas was Assistant General Counsel of Hubbell, Inc. from 1988 to 1991 and
Senior Counsel and Director of Government Relations at Timex Corporation from
1981 to 1988.
C. GENERAL
The Company is a leading manufacturer and marketer of a diversified line
of well-recognized branded consumer products, including PLAYTEX Infant Care
products, PLAYTEX tampons, BANANA BOAT Sun Care products, PLAYTEX household
latex gloves and WOOLITE rug and upholstery cleaning products. Through the
acquisitions of PCH, Carewell and Binky in January 1998 ("1998 Acquisitions"),
the Company acquired a number of widely-recognized branded consumer products to
further strengthen its product lines, including CHUBS baby wipes, WET ONES
pre-moistened towelettes, BINKY pacifiers, MR. BUBBLE children's bubble bath
products, BINACA breath spray and drops, OGILVIE home permanent products and
DENTAX oral care products. In 1998, approximately 89% of the Company's net sales
were derived from the sale of products in which it holds the number one or two
market share position.
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D. BUSINESS SEGMENTS AND PRODUCT LINES
The following discussion of the Company's business segments and product
lines focus on those segments and brands which were a part of the Company's
product portfolio as of December 26, 1998 (See Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 4 of Notes to
Consolidated Financial Statements which appears at pages F-4 to F-14 and at
pages F-21 to F-23, respectively, of this Form 10-K). All references to market
share and market share data are for the twelve month periods indicated and were
obtained from the ACNielsen Corporation.
The Company is organized in three divisions to allow management to focus
on individual product lines, category management initiatives, and the efficient
integration of acquired brands. The two largest divisions, the U.S. Personal
Products Division and the U.S. Consumer Products Division, accounted for 89% of
the Company's consolidated net sales in 1998. The third division, the
International and Other Division, accounted for 11% of the Company's
consolidated net sales in 1998. The Company's divisions have been designated as
business segments in accordance with Statement of Financial Accounting Standard
No. 131, "Disclosures about Segments of an Enterprise and Related Information".
U.S. PERSONAL PRODUCTS DIVISION-The U.S. Personal Products Division
accounted for 59% of the Company's 1998 consolidated net sales. This Division
includes Feminine Care and Infant Care products sold in the United States
(excluding Puerto Rico). The Infant Care product category includes the Playtex
disposable nurser system, cups and mealtime products, reusable hard bottles and
pacifiers. As a result of the 1998 Acquisitions, the following brands were added
to the Company's Infant Care product category: BINKY pacifiers, MR. BUBBLE
children's bubble bath, CHUBS baby wipes, DIAPARENE infant care products, and
WET ONES hand and face towelettes. The Feminine Care product category includes a
wide range of plastic and cardboard applicator tampons marketed under such brand
names as PLAYTEX GENTLE GLIDE, SOFT COMFORT, SLIMFITS and SILK GLIDE.
Infant Care. Infant Care accounted for approximately 50% of 1998 net sales
of the U.S. Personal Products Division. The Company offers disposable feeding
systems, cups and mealtime products, reusable hard bottles, pacifiers,
pre-moistened towelettes and bubble bath products.
The Company's largest Infant Care business is in infant feeding products,
in which the Company held a market leading 43% dollar market share in 1998, up
from 40% in 1997, 37% in 1996, and 30% in 1995. The Company is particularly
strong in both the disposable feeding and the infant cup categories with 1998
dollar market shares of 82% and 68%, respectively. In the pre-moistened
towelette business, the Company's WET ONES hand and face towelette brand held a
24% dollar share of the hand and face segment, while its CHUBS baby wipe brand
held a 5% dollar market share in 1998.
The Playtex disposable feeding system, introduced in 1960, was the first
disposable system on the market. Since that time, Playtex has provided
innovative product improvements as a healthy alternative to breast feeding. In
1996, Playtex continued to lead innovation in this category with its DROP-INS
ready formed disposable bottle. Since its introduction in 1996, DROP-INS has
steadily increased its market share in the disposable feeding category.
In 1994, Playtex introduced the Spill-Proof cup. Sales of the popular
6-ounce version and a larger 9-ounce size have increased the Company's dollar
market share in the infant cup category to 68% in 1998 from 29% in 1994. In
1996, the Company introduced another innovative cup product, the QUICKSTRAW cup,
and in late 1997 introduced an insulated version of the QUICKSTRAW cup, the
COOLSTRAW cup.
The Company entered the baby wipe business in early 1998 with the
acquisition of the CHUBS and DIAPARENE brands. This $600 million category has
grown at a compound annual rate of 10% since 1992. CHUBS is best known for its
patented stackable plastic boxes which can be used as large building block toys
by children following their use as a baby wipe container. Both CHUBS and
DIAPARENE (a lower priced brand) are known for their canister dispensers.
The Company competes in a second category of the pre-moistened towelette
business with WET ONES, the market leader in the hand and face segment of the
market. These products are used by parents in applications other than diaper
changing, such as cleaning up after meals or traveling away from home.
Historically, WET ONES has been offered in both
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canister and travel pack form, but in 1998, the Company introduced new
individually wrapped towelettes, called WET ONES Singles, and a second
individually wrapped product targeted for children's lunch boxes called
LUNCHKINS.
The Company's acquisitions of the MR. BUBBLE children's bubble bath
business and the BINKY pacifier business provide the Company with new platforms
for leveraging strong Infant Care brands into new avenues for growth. MR. BUBBLE
commands an 86% brand awareness level among consumers and, similarly, the
Company believes the BINKY trademark is particularly well known among parents
and is well suited for further growth through product line extensions, better
retail merchandising and more innovative forms of consumer marketing.
The Company's carefully designed message of quality, health and
convenience is delivered in a variety of ways including a professional sampling
and advertising program targeting pediatricians and pediatric nurses. Programs
directed to new mothers include distribution of millions of samples and coupons
prenatally via childbirth instructors and postnatally in hospitals and at home.
Feminine Care. The Company's largest selling brand is PLAYTEX tampons,
which accounted for approximately 50% of 1998 net sales of the U.S. Personal
Products Division. For over 20 years, PLAYTEX tampons have been the second
largest selling tampon brand in the United States.
Tampons represented approximately 40% of the U.S. feminine sanitary
protection market in 1998 and accounted for approximately $825 million in retail
sales. In 1998, the tampon market grew 5% in dollar terms versus 5% in 1997 and
had no growth in 1996. Company research indicates that brand loyalty rates in
the tampon category are high relative to other consumer product categories. The
research further suggests that women generally develop brand preferences during
their adolescent years and early twenties and are likely to maintain a high
degree of brand loyalty over time.
Playtex has two major product lines in the Feminine Care category: plastic
applicator tampons and cardboard applicator tampons. The plastic applicator
business represented approximately 88% of the Playtex branded domestic tampon
business in 1998 and is comprised of three product offerings: GENTLE GLIDE,
Playtex's original plastic tampon; SLIMFITS, developed for the first-time tampon
user. The SILK GLIDE brand is the Company's line of cardboard applicator
tampons. This product line features a rounded-tip cardboard applicator and a
unique surface coating that provides the consumer with a quality product in the
cardboard applicator segment of the tampon market.
The Company's dollar market share of the domestic tampon market declined
from 29% in 1994 to 26% in 1997 as a result of heavy promotional activity by
Tambrands in 1995 and early 1996 as Tambrands management sought to accelerate
category growth and increase its market share. As competitors (including the
Company) responded with their own promotional activities, average retail selling
prices in the category declined, and retail and consumer inventories grew. In
the second half of 1996, the retail price environment stabilized, and since the
fourth quarter of 1996, average retail selling prices for both the category and
the Company have increased.
In December 1997, the Company 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. This introduction
combined with general strength in the Company's branded tampon business has
increased the Company's dollar market share in 1998 to 27% from 26% in 1997. In
the fourth quarter of 1998, the Company's dollar market share increased to 28%
from 25% in the fourth quarter of 1997.
Management's long-term strategy with respect to the Feminine Care business
is to continue shifting its marketing resources into more consumer-driven,
brand-building activities such as advertising and product improvement to
preserve the brand's premium price position and maximize cash flow from the
business.
The introductions of SLIMFITS in late 1996, GENTLE GLIDE Odor Absorbing in
late 1997 and SILK GLIDE Odor Absorbing in late 1998 are examples of the
Company's innovative product development and new advertising and promotional
strategies. SLIMFITS were developed to appeal to a key segment of the tampon
market: young teens. SLIMFITS have a softer and more narrow plastic applicator
providing for greater comfort. The Company believes that SLIMFITS will build its
business by encouraging young women to use tampons rather than pads at an
earlier age, and by developing
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brand loyalty for Playtex tampons at a time when lifelong preferences are being
formed. GENTLE GLIDE Odor Absorbing tampons and SILK GLIDE Odor Absorbing
tampons are plastic and cardboard applicator tampons with an all natural
material in the tampons that absorb odors without the use of a fragrance or
deodorant. These products are designed to appeal to a large group of women who
are concerned with odor protection yet reluctant to use a fragranced tampon.
U.S. CONSUMER PRODUCTS DIVISION-The U.S. Consumer Products Division
constituted 30% of the Company's 1998 consolidated net sales. This division
includes Sun Care, Household Products, and Personal Grooming products sold in
the 50 United States. The Sun Care business consists of an extensive line of sun
care products marketed under the BANANA BOAT and BIOSUN trade names. The
Household Products category includes PLAYTEX Gloves and WOOLITE rug and
upholstery cleaning products. The Company's Personal Grooming product lines
consisted of JHIRMACK hair care products and TEK toothbrushes. As a result of
the 1998 Acquisitions, the following brands were added to the Company's Personal
Grooming product category: BETTER OFF depilatories, BINACA breath spray and
drops, DENTAX oral care products, DOROTHY GRAY skin care products, OGILVIE
at-home permanents and TUSSY deodorant.
Sun Care. The Company's Sun Care product lines, which accounted for 44% of
1998 net sales of the U.S. Consumer Products Division, consists of an extensive
line of sun care products designed for specific uses, such as sun protection in
sun protection factors ("SPFs") from 4 to 50, waterproof and sweat proof
formulas and infant and children's products. The Company also sells a variety of
BANANA BOAT skin care products, including sunless tanning lotion, after-sun
products, moisturizers and skin treatment formulas containing additives such as
vitamin E and aloe vera gel. For 1998, the Company's Sun Care products had a 19%
dollar market share versus 18% and 16% in 1997 and 1996, respectively.
In 1998, the Sun Care category grew 3% in dollar terms versus 12% and 3%
in 1997 and 1996, respectively. The Company believes that the lower category
growth experienced in 1998 was due to weather related issues, including the
effects of El Nino. The Company believes the growth prospects for the sun care
market are favorable as a result of increasing consumer awareness of the need
for sunscreen protection and consumers' desire for sun care products targeted
towards their specific age and needs.
For the 1999 season, the Company launched several new items including COOL
COLORZ (see Item 3. Legal Proceedings), a new product with colored sunscreen
protection, and a line of flavored lip products called LIP POPS, each targeted
for the children's market. The Company also introduced a new line of TAN EXPRESS
products with glitter and added a sport product to the highly successful QUIK
BLOK spray line.
The Company focuses on a number of different distribution outlets to
deliver its sun care products to the consumer. BANANA BOAT is particularly
strong with mass merchandisers among whom the brand held a 22% dollar market
share for 1998. Another valuable part of the focused sales effort for Sun Care
products is the use of more than 35 vans to call on key outlets in the southern
and coastal areas of the country. This ensures product availability and
selection in the key locations during the prime sun care buying season. The van
operators manage product inventory at the store level, invoice customers and
transmit key marketing data to the Company through a network of hand-held
computers. This technology and the information it supplies provide the Company
with a competitive advantage relative to its smaller competitors.
Industry convention and the seasonal nature of the sun care business
require that manufacturers of Sun Care products provide retailers with the
opportunity to return unsold products at the end of the season. To better
reflect the impact of potential returns, the Company provides for estimated
returns in its reported operating results as sales are made throughout the year.
Household Products. Playtex competes in two product lines of the Household
Products category: household latex gloves and rug and upholstery cleaning
products. These products accounted for 29% of 1998 net sales for the U.S.
Consumer Products Division.
Since the Company introduced the first household latex glove in the U.S.
in 1954, PLAYTEX Gloves have held the number one market share. The Company's
leadership position continued in 1998 with a 34% dollar market share of this
category, up from 32% in 1994. Playtex's nationally recognized brand name, based
upon its reputation for superior
11
<PAGE>
quality, durability and protection, provides a strong competitive advantage as
the Company's primary competition is from private label and regional brands. The
non-disposable household latex glove market had retail sales of approximately
$110 million in 1998.
In February 1995, Playtex acquired the assets of the WOOLITE rug and
upholstery cleaning products business for $20 million. WOOLITE is the number two
rug and upholstery cleaning product in the United States with a 19% dollar
market share in 1998. Playtex acquired this product line because of its: (i)
strong brand name; (ii) number two position in a growing category; (iii)
distribution alongside gloves in food stores, drug chains and mass
merchandisers; and (iv) opportunity for product line extensions and more
effective marketing programs. Since acquiring the brand in 1995, the Company has
introduced new, distinctive packaging to enhance communication of the product
attributes to the consumer, an improved Pet Stain spray in 1996, a new foam Pet
Carpet Cleaner in early 1997, and a new liquid carpet cleaning product called
STAIN SOLUTIONS in early 1998.
Personal Grooming. Prior to January 1998, the Company's Personal Grooming
business consisted of JHIRMACK hair care products and TEK toothbrushes.
Following the acquisitions of PCH and Carewell, this category also includes
OGILVIE home hair permanents, BINACA breath freshener products, DENTAX oral care
products, TUSSY deodorants, DOROTHY GRAY skin care products and BETTER OFF
depilatories. In 1998, Personal Grooming contributed approximately 27% of 1998
net sales of the U.S. Consumer Products Division.
The Company competes in the value priced end of the toothbrush business
with its TEK and DENTAX brands of toothbrushes. Additionally, the Company offers
value priced toothpaste and dental floss under the DENTAX brand.
The Company's OGILVIE brand is the market leader of the $42 million market
for home hair permanents with a 52% dollar market share in 1998. Because this
category has declined at an annual rate of approximately 10% per year since
1992, the Company's strategy is to more aggressively consolidate the market
behind its market leadership position and to prudently extend the well known
OGILVIE brand into closely related hair care categories.
The Company's BINACA brand of breath fresheners is also a well known
brand. A leader in the spray segment of the market with a 34% dollar market
share in 1998, this brand also competes in the more rapidly growing drops
segment of the market. Recent Company research indicates that BINACA has the
highest brand awareness among breath freshener users and the Company believes
this brand equity can provide a platform for future growth initiatives.
INTERNATIONAL AND OTHER DIVISION-The International and Other Division
constituted 11% of the Company's 1998 consolidated net sales. The International
and Other Division includes export sales, sales from the Company's Canadian
subsidiary, sales in Puerto Rico and sales of private label tampons. The
International and Other Division sells the majority of the Company's product
lines sold in both the U.S. Personal and the U.S. Consumer Products Divisions.
E. MARKETING
The Company allocates a significant portion of its revenues to the
advertising and promotion of its products. Expenditures for these purposes were
$145.4 million, $114.3 million, and $119.4 million, in 1998, 1997 and 1996,
respectively. As part of the Company's strategic shift to a more consumer driven
marketing strategy, the Company has shifted a greater percentage of its spending
to brand-building activities, such as advertising and sampling programs, and has
decreased price-oriented trade spending.
The Company believes it is responsible for, and will benefit from, the
building and development of the markets in which it competes. As a result, the
Company is also aggressively developing category management programs-the process
of working with retailers to increase product category sales and profitability
through analysis of consumer buying habits and improved merchandising
techniques.
F. COMPETITION
12
<PAGE>
The markets for the Company's principal products are highly competitive
and they are characterized by the frequent introduction of new products, often
accompanied by major advertising and promotional programs. The Company competes
primarily on the basis of product quality, product differentiation and brand
name recognition supported by advertising and promotion.
The Company's competitors consist of a large number of domestic and
foreign companies, a number of which have significantly greater financial
resources and less leverage than the Company.
The Company believes that the market for consumer products will continue
to be highly competitive. The level of competition may intensify in the future,
including higher spending for advertising and promotion, new product initiatives
and continued activity in the private label sector.
G. REGULATION
Government regulation has not materially restricted or impeded the
Company's operations. Certain of the Company's products are subject to
regulation under the Federal Food, Drug and Cosmetic Act and the Fair Packaging
and Labeling Act. The Company is also subject to regulation by the Federal Trade
Commission with respect to the content of its advertising, its trade practices
and other matters. The Company is subject to regulation by the United States
Food and Drug Administration in connection with its manufacture and sale of
tampons.
H. DISTRIBUTION
The Company sells its products through direct sales personnel of
approximately 180 people, independent food brokers and by exclusive
distributors. Independent food brokers supplement the direct sales force in the
food class of trade, primarily by providing more effective coverage at the store
level. In 1998, mass merchandisers and other outlets, supermarkets, and drug
stores accounted for 48%, 33%, and 19%, respectively, of the Company's net sales
compared to 45%, 36%, and 19%, respectively, of the Company's net sales in 1997.
In recent years, sales through mass merchandisers and price clubs, as a
percentage of total sales, have increased at the expense of drug stores, while
sales through supermarkets have remained generally constant.
The field sales force makes sales presentations at the headquarters or
home offices of its customers, where applicable, as well as to individual retail
outlets. The sales representatives focus their efforts on selling the Company's
products, providing services to its direct customers and executing programs to
ensure sales to the ultimate consumer. Consumer-directed programs include
arranging for on-shelf and separate displays, obtaining temporary retail price
reductions from the retailer, and coordinating cooperative advertising
participation.
During 1996, Playtex restructured its domestic sales force into two
separate organizations: the U.S. Personal Products Division for Feminine Care
and Infant Care Products and the U.S. Consumer Products Division for Sun Care,
Household Products and Personal Grooming. This structure allows the Company's
sales forces to focus on individual product lines, category management
initiatives and efficient integration of acquired brands.
I. RESEARCH AND DEVELOPMENT
The Company maintains ongoing research and development programs.
Approximately 80 employees are engaged in these programs, for which expenditures
were $8.4 million, $8.0 million, and $7.3 million in 1998, 1997 and 1996,
respectively.
J. TRADEMARKS AND PATENTS
The Company has proprietary rights to a number of trademarks important to
its businesses, such as PLAYTEX, BANANA BOAT, GENTLE GLIDE, MR. BUBBLE, WET
ONES, BINACA, MOST LIKE MOTHER, BINKY, CHUBS, QUICKSTRAW, BIOSUN, DIAPARENE,
DIAPER GENIE, DROP-INS, QUIK BLOK, TAN EXPRESS, NATURAL ACTION, COOLSTRAW,
AVANCE, SAFE'N SURE, EAZY-FEED, WET ONES LUNCHKINS, SLIMFITS, SILK GLIDE,
PORTABLES, SOOTH-A-CAINE, ACTION SPORT, COOL COLORZ, GET ON THE BOAT,
13
<PAGE>
LIPPOPS, BETTER OFF, BLASTERS, DENTAX, DOROTHY GRAY, HANDSAVER, STAIN SOLUTIONS,
JHIRMACK, LIVING, OGILVIE, TEK, and TUSSY. The Playtex and Living trademarks in
the United States and Canada are owned by Playtex Marketing. Playtex Marketing
is responsible for protecting, exercising quality control over and enforcing the
trademarks. The Company and Apparel each have licenses from Playtex Marketing
for the use of such trademarks in the United States and Canada on a perpetual,
royalty free basis; Apparel's license is for apparel and apparel-related
products, and the Company's license is for all other products. In all other
countries, Apparel retains title to the PLAYTEX and LIVING trademarks, subject
to a perpetual, royalty free license to the Company to use such trademarks for
all products other than apparel products. The Company also owns a royalty free
license in perpetuity to the WOOLITE trademark for rug and upholstery cleaning
products in the United States and Canada.
The Company also owns various patents related to certain products and
their method of manufacture, including patents for the tampon wrap material, the
assembly of the compact tampon, the tampon inserter, the baby nurser holder, the
configuration of certain baby pacifiers, nipples, caps, and cups and
formulations for certain sun care and hair care products. The patents expire at
varying times, ranging from 1999 to 2014. The Company also has pending patent
applications for various products and methods of manufacture relating to its
tampon, nurser and toothbrush businesses. While the Company considers its
patents to be important to its business, it believes that the success of its
products is more dependent upon the quality of these products and the
effectiveness of its marketing programs. No single patent is material to the
business of the Company.
K. RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in the manufacture of its
products are synthetic fibers, resin-based plastics and other chemicals and
certain natural materials, all of which are normally readily available. While
all raw materials are purchased from outside sources, the Company is not
dependent upon a single supplier in any of its operations for any material
essential to its business or not otherwise commercially available to the
Company. The Company has been able to obtain an adequate supply of raw
materials, and no shortage of such materials is currently anticipated (See Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations-Year 2000).
L. CUSTOMERS AND BACKLOG
No single customer or affiliated group of customers, except Wal-Mart
Stores, Inc., represented over 10% of the net sales of the Company in 1998,
1997, and 1996. For each of these periods, net sales to the Company's next three
largest customers represented an aggregate of approximately 14% in 1998 and
1997, and 12% in 1996 of the total net sales of the Company. In accordance with
industry practice, the Company grants credit to its customers at the time of
purchase. In addition, the Company grants extended payment terms to new
customers and for the initial sales of introductory products and product line
extensions, and it grants extended terms on its Sun Care products due to
industry convention and the seasonal nature of this business (See Note 15 of
Notes to Consolidated Financial Statements).
The Company's practice is not to accept returned goods, except for Sun
Care products, which are seasonal in nature. Exceptions to this practice are
authorized by management of the sales organization. Returns result primarily
from Sun Care seasonal products, damage and shipping discrepancies and generally
are not material to the total net sales of the Company.
Because of the short period between order and shipment dates (generally
less than one month) for most of the Company's sales, the dollar amount of
current backlog is not considered to be a reliable indication of future sales
volume.
M. EMPLOYEES AND LABOR RELATIONS
The Company's worldwide workforce consisted of approximately 1,945
employees as of December 26, 1998, of whom approximately 160 were located
outside the United States, primarily in Canada. Of the United States facilities,
only the operation at Watervliet, New York, has union representation; it is
organized by The Brush Workers Union Local No. 20468 I.U.E. A.F.L.-C.I.O. The
collective bargaining agreement covered approximately 200 workers at December
26,
14
<PAGE>
1998 and expires on June 24, 2000. The Company believes that its labor relations
are satisfactory and no material labor cost increases are anticipated.
N. ENVIRONMENTAL
The Company believes that it is in substantial compliance with federal,
state and local provisions enacted or adopted regulating the discharge of
materials hazardous to the environment. There are no significant environmental
expenditures anticipated for the current year. (See Item 3. Legal Proceedings).
ITEM 2. PROPERTIES
The principal executive offices of the Company are located at 300 Nyala
Farms Road, Westport, Connecticut 06880 and are occupied pursuant to a lease
which expires in 2005. The Company operates manufacturing and distribution
facilities in Dover, Delaware; Sidney, Ohio; Watervliet, New York; and Arnprior
and Malton, Canada. The Company maintained a research and development facility
in Paramus, New Jersey, which was leased on a month-to-month basis. In May 1997,
the Company signed an agreement to lease certain office space located in
Allendale, New Jersey. This facility contains 43,500 square feet and will house
the Company's Research and Development group. This new lease has a term of 15
years with two five-year renewal options. The Paramus facility noted in the
table below was vacated when construction of the Allendale facility was
completed during the first quarter of 1999. The Company operates two facilities
in Canada. The Arnprior facility, primarily a warehouse and assembly operation,
is owned by the Company. The Malton facility, a warehouse and office site, is
leased from Apparel. This lease expires in 2004. The lease on the Montvale, NJ
facility, expiring in 2002, was acquired by the Company in the PCH acquisition
and a substantial portion of the facility has been subleased, for the duration
of the lease term, to a third party. For 1998, the Company's average utilization
rate of manufacturing capacity was an estimated 84%.
The following table sets forth the principal properties of the Company as
of December 26, 1998, which are located in seven states, Puerto Rico and Canada:
Number Estimated
of Square
Facilities Footage
---------- -------
FACILITIES OWNED
- ----------------
MANUFACTURING/OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE........................................ 3 710,000
Watervliet, NY................................... 1 159,600
Arnprior, Canada................................. 1 91,800
Sidney, OH....................................... 1 54,400
FACILITIES LEASED
- -----------------
OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE........................................ 6 390,600
Sidney, OH....................................... 3 227,200
Malton, Canada................................... 1 72,800
Westport, CT..................................... 1 63,100
Allendale, NJ.................................... 1 43,500
Paramus, NJ...................................... 1 33,000
Montvale, NJ..................................... 1 19,500
Guaynabo, PR..................................... 1 15,700
Orlando, FL...................................... 1 10,400
Spokane, WA...................................... 1 8,400
As a result of the Mondial acquisition in January 1999, the Company now
owns and operates a 187,000 square foot manufacturing facility located in
Streetsboro, Ohio.
15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Beginning in 1980, studies were published leading to the hypothesis that
tampons are associated with Toxic Shock Syndrome ("TSS"). Since 1980, numerous
claims have been filed against manufacturers of tampons, a small percentage of
which have been litigated to conclusion. The number of TSS claims relating to
PLAYTEX tampons has declined substantially over the years. During the mid-1980s,
there were approximately 200 pending claims at any one time relating to PLAYTEX
tampons. As of the end of February 1999, there were approximately 12 pending
claims, although additional claims may be asserted in the future. For TSS claims
filed from October 1, 1985 until November 30, 1995, the Company is self-insured
and bears the costs of defending those claims, including settlements and trials.
Effective December 1, 1995, the Company obtained insurance coverage with certain
limits in excess of the self-insured retention of $1.0 million per
occurrence/$4.0 million in the aggregate, on claims occurring on or after
December 1, 1995.
The incidence rate of menstrually associated TSS among tampon users has
declined significantly over the years. In 1982, the rate was reported to be
between six and seventeen occurrences per 100,000 menstruating women per year.
The most recent reported information as of 1989 is that the rate is
approximately one occurrence per 100,000.
Based on the Company's experience with TSS cases, its evaluation of the
currently pending claims, the reported decline in the incidence of menstrually
associated TSS, the federally mandated warning about TSS on and in its tampon
packages and the development of case law upholding the adequacy of tampon
warnings which comply with federally mandated warnings, the Company believes
that there are no claims or litigation pending, including the TSS cases, which
would have a materially adverse effect on the consolidated financial position,
results of operations or cash flows of the Company.
The Company has joined the PRP Group with respect to the Kent County
Landfill Site in Houston, Delaware, which has been designated a "Superfund" site
by the State of Delaware. Based on the information currently available to the
Company, the nature and quantity of material deposited by the Company and the
number of other entities in the PRP Group who are expected to share in the costs
and expenses, the Company does not believe that the costs to the Company will be
material. The Company and Apparel will share equally all expenses and costs
associated with IPI's involvement with this site.
On August 13, 1998, the Company filed an action in the United States
District Court, District of Delaware (the "Court") seeking, among other things,
a judgment declaring that the United States Patent No. 5,747,011 (the " '011
patent"), related to a "sunscreen with disappearing color indicator," and held
by Schering-Plough HealthCare Products, Inc. ("S-P HealthCare"), as assigned, is
invalid. On September 8, 1998, S-P HealthCare answered the Company's complaint
denying its material allegations, and asserted a counterclaim against the
Company for infringement of the '011 patent, seeking unspecified damages and
injunctive relief. On October 19, 1998, S-P HealthCare moved for a preliminary
injunction against the Company which would prohibit the Company from selling its
BANANA BOAT COOL COLORZ Sunscreen, which allegedly infringes the '011 patent. As
of March 17, 1999, the motion for preliminary injunction had not been granted.
The Company intends to vigorously pursue its claims and request for declaratory
relief.
The Company is a defendant in various other legal proceedings, claims and
investigations that arise in the normal course of business. In the opinion of
management, the ultimate disposition of these matters, including those described
above, will not have a material adverse effect on the consolidated financial
position, results of operations or cash flows of the Company.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company has two classes of authorized stock: (a) Common Stock, par
value $.01 per share, of which 100,000,000 shares are authorized, and (b)
preferred stock, par value $.01 per share, of which 50,000,000 shares are
authorized. Of 100,000,000 shares of Common Stock authorized, there were
60,417,824 shares issued and outstanding and 342 holders of record of the Common
Stock, as of March 17, 1999 and there were no shares of preferred stock were
outstanding as of March 17, 1999. The Common Stock is traded on the New York
Stock Exchange ("NYSE") under the symbol "PYX". No cash dividends have ever been
paid on the Common Stock, and the Company is restricted from paying dividends on
the Common Stock by the terms of the 1997 Term Loan, the 1997 Senior Secured
Credit Facilities and the indentures governing the $360 million 9% senior
subordinated notes due 2003, and the Senior Notes (See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Financial Condition and Note 7 of Notes to Consolidated Financial
Statements).
The following table sets forth the high and low sale price per share of
the Common Stock during the fiscal years ended December 26, 1998 and December
27, 1997 as reported by the New York Stock Exchange-Composite Transactions:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Fiscal 1998
- -----------
High ............... $14 15/16 $17 $17 1/8 $16 3/4
Low ................ $ 9 7/16 $13 5/16 $10 1/8 $12 1/4
Fiscal 1997
- -----------
High ............... $11 3/4 $11 1/2 $10 1/4 $11
Low ................ $ 7 7/8 $ 9 $ 8 13/16 $ 9
On January 29, 1999, the Company completed the acquisition of the Diaper
Genie business, the leading diaper disposal system in the U.S., from
privately-held Mondial for approximately $122 million. In connection with the
asset purchase agreement, dated as of January 6, 1999, by and between Playtex
and Mondial, the Company issued $50 million of unregistered 6% Convertible
Subordinated Notes due 2004 (the "Convertible Notes") to Mondial and $72 million
in cash. The newly issued Convertible Notes bear interest at a rate of 6.00% 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 the Company after January 29, 2002. The holders of the Common Stock issuable
upon conversion of the Convertible Notes will have certain registration rights
that require the Company to register those shares under the Securities Act of
1933.
The issuance of the convertible notes was exempt from registration under
the Securities Act of 1933, as amended, under Section 4(2) thereof. Each of
Mondial and its partners was either (i) an accredited investor as defined in
Rule 501(a)(3),(5) or (6) under the Securities Act or (ii) had such knowledge
and experience in financial and business matters that he or she was capable of
evaluating the merits and risks of the investment in the convertible notes;
there were fewer than 35 partners who were not described in clause (i); the
Company and Mondial furnished to each of such partners the information about the
Company prescribed by Rule 502(b)(2)(ii) a reasonable time prior to the sale of
these securities; and the Company complied with the other applicable
requirements of Rules 501 and 502 under the Securities Act.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears at page F-3 of this Form
10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears at pages F-4 to F-14 of this
Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has interest rate risk associated with variable rate
indebtedness. From time to time, the Company utilizes off-balance sheet
financial instruments to manage market risks associated with fluctuations in
interest rates. It is the Company's policy to use derivative financial
instruments to protect against market risks arising in the normal course of
business. Company policies prohibit the use of derivative instruments for the
sole purpose of trading for profit on price fluctuations or to enter into
contracts which intentionally increase the Company's underlying exposure. Based
on the Company's interest rate exposure including all variable rate indebtedness
and interest rate protection agreements, as of December 26, 1998, a 1% increase
in interest rates on an annualized basis would have resulted in $2.0 million of
additional interest expense for the fiscal year then ended (See Note 7 of Notes
to Consolidated Financial Statements and Note 16 of Notes to Consolidated
Financial Statements, which appears at pages F-25 to F-27 and at page F-35,
respectively, of this Form 10-K).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related Notes to Consolidated
Financial Statements are filed as part of this Form 10-K and are set forth on
pages F-1 to F-51. The Independent Auditors' Report, dated February 4, 1999 and
the Report of Management, dated February 4, 1999, are filed as part of this Form
10-K and are set forth on pages F-52 and F-53, respectfuly, of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this Item is incorporated by reference to the information
in the section entitled "Election of Directors" in the Company's Proxy Statement
for the 1999 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this Item is incorporated by reference to the information
in the section entitled "Executive Compensation" in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this Item is incorporated by reference to the information
in the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item is incorporated by reference to the information
in the section entitled "Certain Transactions" and "Executive
Compensation-Arrangements with Former Chief Executive Officer" in the Company's
Proxy Statement for the 1999 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
(a)(1) The Consolidated Financial Statements and related Notes to
Consolidated Financial Statements are filed as part of this Form 10-K and are
set forth on pages F-15 to F-51. The Independent Auditors' Report, dated
February 4, 1999, is set forth on page F-52 of this Form 10-K.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule-Schedule II-Valuation and
Qualifying Accounts, is filed as part of this Annual Report on Form 10-K and is
set forth on page 20.
All other schedules are omitted as the required information is not
applicable or the information is presented in the consolidated financial
statements or related notes to consolidated financial statements.
(A)(3) EXHIBITS
See Exhibit Index on Pages X-1 to X-8 for exhibits filed with this Annual
Report on Form 10-K.
(B) REPORTS ON FORM 8-K
None
19
<PAGE>
PLAYTEX PRODUCTS, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 26, 1998, December 27, 1997, and December 28, 1996
(In thousands)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS NET ADDITIONS BALANCE
BEGINNING CHARGED TO RESULTING FROM AT END
OF PERIOD INCOME ACQUISITIONS DEDUCTIONS(1) OF PERIOD
---------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Receivables:
Allowance for doubtful accounts
December 28, 1996........................ $ (2,042) $ (325) - $ 609 $ (1,758)
December 27, 1997........................ $ (1,758) $ (64) - $ 153 $ (1,669)
December 26, 1998........................ $ (1,669) $ (243) $ (568) $ 385 $ (2,095)
</TABLE>
- -----------
(1) Represent accounts written-off.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PLAYTEX PRODUCTS, INC.
By: /s/ MICHAEL R. GALLAGHER
--------------------------
Michael R. Gallagher
Chief Executive Officer
March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated this 24th day of March 1999.
Signatures Title
- --------------------------- --------------------------------------------
- ---------------------------
Robert B. Haas Chairman of the Board and Director
/s/ Michael R. Gallagher
- ---------------------------
Michael R. Gallagher Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Michael F. Goss
- ---------------------------
Michael F. Goss Executive Vice President, Chief Financial
Officer and Director (Principal Financial
and Accounting Officer)
- ---------------------------
Richard C. Blum Director
/s/ Michael R. Eisenson
- ---------------------------
Michael R. Eisenson Director
/s/ Timothy O. Fisher
- ---------------------------
Timothy O. Fisher Director
- ---------------------------
C. Ann Merrifield Director
- ---------------------------
Jeffrey W. Ubben Director
/s/ Wyche H. Walton
- ---------------------------
Wyche H. Walton Director
/s/ Douglas D. Wheat
- ---------------------------
Douglas D. Wheat Director
- ---------------------------
Kenneth F. Yontz Director
21
<PAGE>
PLAYTEX PRODUCTS, INC.
1998 ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
PLAYTEX PRODUCTS, INC.
1998 ANNUAL REPORT TO STOCKHOLDERS
INDEX
PAGE(S)
------------
PART I--FINANCIAL INFORMATION
Selected Financial Data........................................... F-3
Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... F-4 to F-14
Consolidated Financial Statements................................. F-15 to F-18
Notes to Consolidated Financial Statements........................ F-19 to F-51
PART II--OTHER INFORMATION
Independent Auditors' Report...................................... F-52
Report of Management.............................................. F-53
Other Information................................................. F-54 to F-55
F-2
<PAGE>
PLAYTEX PRODUCTS, INC.
SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales .................................... $ 669,613 $ 500,632 $ 498,742 $ 483,581 $ 473,275
Gross profit ................................. 392,058 304,652 306,230 295,452 306,674
Operating expenses, excluding
amortization of intangibles ............... 243,288 192,056 194,184 195,457 166,799
Amortization of intangibles .................. 17,336 12,894 12,846 11,268 10,181
Write-off of intangible assets ............... -- -- -- 6,441 --
Operating earnings ........................... 131,434 99,702 99,200 82,286 129,694
Interest expense, net ........................ 71,518 64,470 64,860 71,361 76,153
Earnings (loss) available to common
stockholders .............................. $ 34,230 $ 14,653(1) $ 18,199 $ (5,161)(2) $ 28,384(3)
Earnings (loss) per share available to
common stockholders:
Basic ..................................... $ .58 $ .29 $ .36 $ (.12) $ .97
Diluted ................................... $ .57 $ .29 $ .36 $ (.12) $ .97
Earnings before extraordinary loss and
preferred stock dividends ................. $ 34,230 $ 18,731 $ 18,199 $ 2,774 $ 29,547
Earnings per share before extraordinary
loss and preferred stock dividends:
Basic ..................................... $ .58 $ .37 $ .36 $ .07 $ 1.01
Diluted ................................... $ .57 $ .37 $ .36 $ .07 $ 1.01
Weighted average common shares outstanding:
Basic ..................................... 59,486 50,923 50,883 42,309 29,212
Diluted ................................... 60,411 51,006 50,939 42,342 29,213
BALANCE SHEET DATA (AT PERIOD END):
Working capital .............................. $ 78,548 $ 56,402 $ 6,522 $ 28,637 $ 17,623
Total assets ................................. 899,221 652,558 660,331 682,861 599,400
Total long-term debt, excluding due to
related party ............................. 811,750 737,800 739,700 790,050 875,700
Stockholders' equity (deficit) ............... $(140,975) $(268,063) $(282,727) $(300,976) $(465,997)
</TABLE>
- -----------
(1) Includes the effect of extraordinary loss of $4.1 million (net of $2.3
million of income tax benefit) related to the early extinguishment of debt
in connection with the 1997 Refinancing. See Note 11 of Notes to
Consolidated Financial Statements.
(2) Includes the effect of extraordinary loss of $7.9 million (net of $5.2
million of income tax benefit) related to the early extinguishment of the
Company's senior indebtedness.
(3) Includes dividends on preferred stock of $1.2 million.
F-3
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the historical
audited consolidated financial statements and notes thereto, presented on pages
F-15 through F-51 hereof.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. When used in this document, the words "anticipates," "intends," "plans,"
"believes," "estimates," "expects" and similar expressions are intended to
identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, but are not
limited to: the Company's highly leveraged capital structure, its substantial
principal repayment obligations, price and product changes and promotional
activity by competitors, the loss of a significant customer, the difficulties of
integrating acquisitions, issues related to the year 2000, adverse publicity and
product liability claims and dependence on key employees. The risk factors
described herein could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements of the Company and
investors, therefore, should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for management to predict all of such factors.
Further, management cannot assess the impact of each such factor on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements.
F-4
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company is organized in three divisions to allow management to focus
more effectively on individual product lines, category management initiatives,
and the efficient integration of acquired brands (see Note 4 of Notes to
Consolidated Financial Statements). The two largest divisions, the U.S. Personal
Products Division and the U.S. Consumer Products Division, constituted 89% of
the Company's consolidated net sales in 1998. The third division, the
International and Other Division, constituted 11% of the Company's consolidated
net sales in 1998. The Company's divisions have been designated as business
segments in accordance with Statement of Financial Accounting Standard No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
The U.S. Personal Products Division constituted 59% of the Company's 1998
consolidated net sales. This Division includes Feminine Care and Infant Care
products sold in the 50 United States. The Infant Care product category includes
the Playtex(R) disposable nurser system, cups and mealtime products, reusable
hard bottles and pacifiers. As a result of the 1998 Acquisitions, the following
brands were added to the Company's Infant Care product category: Binky(R)
pacifiers, Mr. Bubble(R) children's bubble bath, Chubs(R) baby wipes,
DIAPARENE(R) infant care products, and Wet Ones(R) hand and face towelettes. The
Feminine Care product category includes a wide range of plastic and cardboard
applicator tampons marketed under such brand names as Playtex Gentle Glide(R),
Soft Comfort(R), Slimfits(R) and Silk Glide(R).
The U.S. Consumer Products Division constituted 30% of the Company's 1998
consolidated net sales. This Division includes Sun Care, Household Products, and
Personal Grooming products sold in the 50 United States. The Sun Care business
consists of an extensive line of sun care products marketed under the Banana
Boat(R) and BioSun(R) trade names. The Household Products category includes
PLAYTEX Gloves and Woolite(R) rug and upholstery cleaning products. The
Company's Personal Grooming business consisted of Jhirmack(R) hair care products
and Tek(R) toothbrushes. As a result of the 1998 Acquisitions, the following
brands were added to the Company's Personal Grooming product category: Better
Off(R) depilatories, Binaca(R) breath spray and drops, Dentax(R) oral care
products, Dorothy Gray(R) skin care products, Ogilvie(R) at-home permanents and
Tussy(R) deodorant.
The International and Other Division constituted 11% of the Company's 1998
consolidated net sales. The International and Other Division includes export
sales, sales from the Company's Canadian subsidiary, sales in Puerto Rico and
sales of private label tampons. The International and Other Division sells the
majority of the Company's product sold in both the U.S. Personal and U.S.
Consumer Products Divisions.
F-5
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The following table sets forth the principal divisional product lines and
certain related data for 1998 (dollars in millions):
<TABLE>
<CAPTION>
1998 PERCENT OF
PRODUCT LINE 1998 PRINCIPAL BRAND NAMES NET SALES NET SALES
- ------------ -------------------------------------- --------- ---------
<S> <C> <C> <C>
U.S. Personal Products Division:
Infant Care.................................. PLAYTEX, CHUBS, WET ONES, BINKY,
MR. BUBBLE $ 197.5 29%
FEMININE CARE................................ PLAYTEX 198.0 30%
-------- ------
TOTAL U.S. PERSONAL PRODUCTS DIVISION...... 395.5 59%
U.S. CONSUMER PRODUCTS DIVISION:
SUN CARE..................................... BANANA BOAT, BIOSUN 88.0 13%
HOUSEHOLD PRODUCTS........................... PLAYTEX, WOOLITE 58.3 9%
PERSONAL GROOMING............................ OGILVIE, BINACA, JHIRMACK, TEK, DENTAX 53.2 8%
-------- ------
Total U.S. Consumer Products Division...... 199.5 30%
International and Other......................... 74.6 11%
-------- ------
Total...................................... $ 669.6 100%
======== ======
</TABLE>
The Company evaluates a division's performance based on its product
contribution excluding general corporate expense allocations. 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 management to evaluate the results of the divisions. The Company
does not segregate assets, amortization, capital expenditures, or interest
income and interest expense to divisions. Although allocated to the divisions,
depreciation is not a measurement used by management to evaluate the performance
of the divisions.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations presents a consolidated view of the Company's results
and where appropriate also provides insight to the key indicators of the
division's performance.
TWELVE MONTHS ENDED DECEMBER 26, 1998 COMPARED TO
TWELVE MONTHS ENDED DECEMBER 27, 1997
Consolidated Net Sales--Consolidated net sales in 1998 increased $169.0
million, or 34%, to $669.6 million from $500.6 million in 1997. The 1998
Acquisitions accounted for $123.0 million of the increase in net sales.
Excluding the impact of the 1998 Acquisitions, the Company's net sales grew by
$46.0 million or more than 9% compared to 1997.
U.S. PERSONAL PRODUCTS DIVISION--Net sales in 1998 increased $118.4
million, or 43%, to $395.5 million from $277.1 million in 1997. The 1998
Acquisitions accounted for $72.3 million of the increase in net sales. Excluding
the impact of the 1998 Acquisitions, the net sales of the U.S. Personal Products
Division grew by $46.1 million, or 17%, compared to 1997.
Net sales of Infant Care products increased $90.4 million, or 84%, to
$197.5 million from $107.1 million in 1997. These results reflect the impact of
the Infant Care brands acquired in the 1998 Acquisitions and continued growth in
the Company's base Infant Care product line. Net sales of the acquired Infant
Care brands were $72.3 million. Net sales of the Company's pre-acquisition
Infant Care product line consisting of infant feeding and soothing products
increased by $18.1 million, or 17% over the comparable period in 1997. These
results reflect: (i) an increase in the Company's dollar market share in the
infant feeding category of 2.2 points to 42.6% in 1998 from 40.4% in 1997 and
(ii) an 8.5% dollar increase in the infant feeding category. The Company's
retail takeaway grew 14.4% during the same period.
F-6
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Net sales of Feminine Care products increased $28.0 million, or 16%, to
$198.0 million from $170.0 million in 1997. In December 1997, the Company
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. This introduction combined with general strength in the Company's
branded tampon business increased the Company's dollar market share 1.5 points
in 1998 to 27.0% from 25.5% in 1997. The tampon category, in dollars, grew 5.2%
in 1998 and the Company's retail takeaway grew 11.6%. Shipments to retailers in
the first half of 1997 were negatively impacted by high retail inventories
created by earlier price-oriented promotional activity and by management's
strategic decision to reduce these excess inventories by curtailing its trade
discount programs.
U.S. CONSUMER PRODUCTS DIVISION--Net sales in 1998 increased $43.8
million, or 28%, to $199.5 million from $155.7 million in 1997. The 1998
Acquisitions accounted for $39.2 million of the increase in net sales. Excluding
the impact of the 1998 Acquisitions, net sales of the U.S. Consumer Products
Division grew by $4.6 million, or 3%, compared to 1997.
Net sales of Sun Care products increased $3.5 million, or 4%, to $88.0
million from $84.5 million in 1997. This growth was attributable to strong
distribution techniques, improved shelf placement at key retailers and targeted,
highly efficient merchandising and marketing programs. The Company's Sun Care
line continued to gain market share. The Company's dollar market share grew to
18.7% in 1998 from 18.1% in 1997. The sun care category, in dollars, grew 3.2%
for the year, while the Company's retail takeaway increased 6.6% in 1998.
Net sales of Household Products increased $6.7 million, or 13%, to $58.3
million from $51.6 million in 1997. These results reflect: (i) an increase in
WOOLITE dollar market share of 0.9 points to 19.2% in 1998 from 18.3% in 1997
and (ii) category growth in latex gloves of 6.7%. The Company is the leader in
the latex gloves category.
Net sales of Personal Grooming increased $33.6 million, or 171%, to $53.2
million from $19.6 million in 1997. The Personal Grooming brands acquired in the
1998 Acquisitions increased net sales by $39.2 million offsetting a decrease in
net sales of Jhirmack products.
INTERNATIONAL AND OTHER DIVISION--Net sales in 1998 increased $6.8
million, or 10%, to $74.6 million from $67.8 million in 1997. The 1998
Acquisitions accounted for $11.5 million of the increase in net sales. Excluding
the impact of the 1998 Acquisitions, net sales for International and Other
Division decreased by $4.7 million, or 7%, compared to 1997. The reasons for the
decrease, were as follows: lower reported net sales due to unfavorable foreign
currency translation adjustments for the Company's Canadian subsidiary, lower
net sales associated with the Company's private label tampon business, and
general uncertainty in certain international markets including South America and
Asia.
Consolidated Gross Profit--Consolidated gross profit increased $87.4
million, or 29%, to $392.1 million from $304.7 million in 1997. As a percent of
net sales, gross profit decreased 2.3 points, to 58.6% from 60.9% in 1997 due
primarily to lower overall gross margins for acquired brands. The dollar
increase in gross profit was primarily due to the higher net sales noted
previously.
Consolidated Product Contribution--Consolidated product contribution
increased $56.3 million, or 30%, to $246.7 million from $190.4 million in 1997.
As a percent of net sales, product contribution decreased 1.2%, to 36.8% from
38.0% due primarily to lower overall gross margins for the acquired brands. The
product contribution dollar increase was primarily due to the higher net sales
noted previously.
U.S. PERSONAL PRODUCTS DIVISION--Product contribution in 1998 increased
$46.3 million, or 38%, to $166.8 million from $120.5 million in 1997. As a
percent of net sales, product contribution decreased 1.3 points, to 42.2% from
43.5% in 1997.
F-7
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
U.S. CONSUMER PRODUCTS--Product contribution in 1998 increased $13.0
million, or 26%, to $63.9 million from $50.9 million in 1997. As a percent of
net sales, product contribution decreased 0.7 points, to 32.0% from 32.7% in
1997.
INTERNATIONAL AND OTHER--Product contribution in 1998 increased $1.2
million, or 6%, to $23.0 million from $21.8 million in 1997. As a percent of net
sales, product contribution decreased 1.4 points, to 30.8% from 32.2% in 1997.
In all three divisions, the increase in product contribution was primarily
the result of the higher net sales previously noted and the decline in product
contribution as a percent of net sales was due primarily to lower gross margins
for the acquired brands.
Consolidated Operating Earnings--Consolidated operating earnings increased
$31.7 million, or 32%, to $131.4 million from $99.7 million in 1997. The
increase in operating earnings resulted from (i) higher net sales resulting from
the 1998 Acquisitions, (ii) higher net sales in the Company's pre-acquisition
product lines, and (iii) lower operating expenses as a percent of net sales.
Consolidated Interest Expense--Consolidated interest expense increased
$7.0 million, or 11%, to $71.5 million from $64.5 million in 1997. This resulted
from an increase in long-term debt of $74.0 million (including current
obligations). The Company incurred $110.4 million of additional indebtedness in
conjunction with the 1998 Acquisitions. Repayments funded by cash generated from
operations partially offset the increase in long-term debt associated with the
1998 Acquisitions.
Consolidated Income Taxes--Consolidated income taxes increased $9.2
million, or 56%, to $25.7 million from $16.5 million in 1997. As a percent of
pretax earnings, the Company's effective tax rate decreased 3.9 points to 42.9%
of pretax earnings from 46.8% of pretax earnings in 1997. The decrease in the
Company's effective tax rate is primarily due to the fixed nature of the
Company's non-deductible amortization expenses.
Consolidated Net Earnings--Consolidated net earnings before extraordinary
loss increased approximately 83%, or $15.5 million, to $34.2 million from $18.7
million in 1997. This increase is due to the combined effects of all of the
factors described above.
TWELVE MONTHS ENDED DECEMBER 27, 1997 COMPARED TO
TWELVE MONTHS ENDED DECEMBER 28, 1996
Consolidated Net Sales--Consolidated net sales in 1997 were $500.6
million, an increase of $1.9 million, or less than 1%, from $498.7 million in
1996.
U.S. PERSONAL PRODUCTS DIVISION--Net sales in 1997 decreased $7.6 million,
or 3%, to $277.1 million from $284.7 million in 1996, primarily as the result of
decreased net sales of Feminine Care products as explained below, offset in part
by increased net sales of Infant Care products.
Net sales of Infant Care increased $14.1 million, or 15%, to $107.1
million in 1997 from $93.0 million in 1996. The growth in Infant Care product
lines was due to: (i) successful new product launches, (ii) increased
distribution, (iii) continued market share gains for the Playtex businesses, and
(iv) continued category growth.
Net sales of Feminine Care decreased $21.7 million, or 11%, to $170.0
million from $191.7 million in 1996. The Company's shipments to retailers in the
first half of 1997 were negatively impacted by high retail inventories created
by earlier price-oriented promotional activity and by management's strategic
decision to reduce these excess inventories by curtailing its trade discount
programs. During the first half of 1997, shipments of Feminine Care products
fell 22% compared to the prior year. During the same period in 1997, retail
sales of the Company's products exceeded the Company's shipments
F-8
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
by 90 million tampons, indicating that retailers reduced their inventories of
PLAYTEX tampons by approximately six weeks worth of sales. The Company believes
that trade inventories returned to more normal levels by mid-year 1997 given
that: (i) shipments in the second half of 1997 were even with the same period in
1996 and 30% higher than shipments in the first half of 1997 and (ii) shipments
and retail sales in the second half of 1997 were in greater balance with one
another. Furthermore, retail sales of PLAYTEX tampons in the second half of 1997
increased 12% over the same period in 1996, the result of both higher market
shares and overall category growth.
U.S. CONSUMER PRODUCTS DIVISION--Net sales in 1997 increased $10.9
million, or 8%, to $155.7 million from $144.8 million in 1996. This increase was
attributable to strong sales growth of Sun Care products as explained below,
offset in part by lower Household Products and Personal Grooming net sales.
Net sales of Sun Care increased $20.1 million, or 31%, to $84.5 million
from $64.4 million in 1996. The growth was due to: (i) successful new product
launches, (ii) increased distribution, (iii) continued market share gains for
the Playtex businesses, and (iv) continued category growth.
Net sales of Household Products decreased $5.2 million, or 9%, to $51.6
million from $56.8 million in 1996. The decrease was due, in part, to a change
in pricing strategy for Playtex Gloves which resulted in both lower reported
revenue offset by lower trade spending compared to 1996. In addition, the
introduction of a new competitor in the carpet cleaning business negatively
impacted sales of WOOLITE during the year.
Net sales of Personal Grooming declined by $4.0 million, or 17%, to $19.6
million from $23.6 million in 1996. The decline is attributable to the strategic
decision on the part of the Company to reduce ineffective trade spending
associated with the JHIRMACK brand and to maximize the cash flow generated by
the brand.
INTERNATIONAL AND OTHER DIVISION--Net sales in 1997 decreased $1.5
million, or 2%, to $67.8 million from $69.3 million in 1996. The reasons for
this decrease were as follows: a decrease in Canadian net sales and a decrease
in net sales of the Company's private label tampon business, offset in part by
an increase in export net sales.
Consolidated Gross Profit--Consolidated Gross profit decreased $1.5
million, or 1%, to $304.7 million for 1997 compared to $306.2 million for 1996.
The gross profit margin decreased to 60.9% for the 1997 fiscal year compared to
61.4% for the prior fiscal year. The decrease in gross profit in fiscal 1997 was
attributable primarily to the mix of products sold, offset in part, by
marginally higher sales.
Consolidated Product Contribution--Consolidated product contribution
increased $3.5 million, or 2%, to $190.4 million from $186.9 million in 1996. As
a percent of net sales, product contribution increased 0.5%, to 38.0% from 37.5%
due primarily to the same factors that impacted gross profit and lower
advertising and sales promotion expenses.
U.S. PERSONAL PRODUCTS DIVISION--Product contribution in 1997 decreased
$1.6 million, or 1%, to $120.5 million from $122.1 million in 1996. As a percent
of net sales, product contribution increased 0.6 points, to 43.5% from 42.9% due
primarily to lower advertising and sales promotion expenses and to the mix of
products sold.
U.S. CONSUMER PRODUCTS DIVISION--Product contribution in 1997 increased
$4.9 million, or 11%, to $50.9 million from $46.0 million in 1996. As a percent
of net sales, product contribution increased 1.0 points, to 32.7% from 31.7% due
to lower advertising and sales promotion expenses and to the mix of products
sold.
F-9
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
INTERNATIONAL AND OTHER DIVISION--Product contribution in 1997 decreased
$0.8 million, or 4%, to $21.8 million from $22.6 million in 1996. As a percent
of net sales, product contribution decreased 0.4 points, to 32.2% from 32.6% due
primarily to the mix of products sold.
Consolidated Operating Earnings--Consolidated operating earnings increased
$0.5 million, or 1%, to $99.7 million for 1997 compared to $99.2 million for
1996. Contributing to this increase was lower trade spending in line with the
Company's consumer oriented marketing strategy. For fiscal 1997, trade spending
was $8.0 million, or 12%, lower than in fiscal 1996. The lower trade spending
was offset by higher consumer spending, up $2.9 million compared to fiscal 1996,
lower gross profit of $1.5 million as noted above, and increased selling,
distribution, research, and administrative expenses which were collectively $3.0
million higher than fiscal 1996.
Consolidated Interest Expense--Consolidated interest expense of $64.5
million for fiscal 1997 decreased $0.4 million, or less than 1%, from $64.9
million in 1996.
Consolidated Income Taxes--Consolidated income taxes increased $0.4
million, or 2%, to $16.5 million from $16.1 million in 1996. As a percent of
pretax earnings, the Company's effective tax rate decreased 0.2 points to 46.8%
of pretax earnings from 47.0% of pretax earnings in 1996. The decrease in the
Company's effective tax rate is primarily due to the fixed nature of the
Company's non-deductible amortization expenses.
Consolidated Extraordinary Loss--In July 1997, the Company refinanced its
senior credit agreement. The Company recorded an extraordinary loss of $4.1
million (net of income tax benefit of $2.3 million) for costs and expenses
related to the write-off of the unamortized portion of the deferred financing
costs associated with the previous credit agreement.
Consolidated Net Earnings--As a result of the factors noted above, net
earnings were $14.7 million in 1997 compared to $18.2 million in 1996.
FINANCIAL CONDITION AND LIQUIDITY
At December 26, 1998, the Company's working capital (current assets net of
current liabilities) increased to $78.5 million from $56.4 million at December
27, 1997. The increase resulted primarily from (i) an increase of $36.3 million
in receivables, primarily as a result of higher net sales compared to the fourth
quarter of 1997 and the impact of the 1998 Acquisitions, and (ii) an increase of
$16.3 million in inventories and $6.8 million in current deferred tax assets,
both due principally to the 1998 Acquisitions. These working capital increases
were partially offset by an increase in accrued expenses of $21.2 million
primarily as a result of the 1998 Acquisitions. All other working capital
components decreased $16.1 million.
The Company's 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 sales occurring in the first six months of the year.
This seasonality requires increased inventory to support the selling season and
the extended credit terms which are typical in the sun care industry result in
higher receivables for the Company.
Capital expenditures for equipment and facility improvements were $16.4
million, $9.0 million and $9.7 million for the twelve months ended December 26,
1998, December 27, 1997 and December 28, 1996, respectively. These expenditures
were used primarily to upgrade production equipment and maintain facilities in
the ordinary course of business. Capital expenditures for 1999 are expected to
be approximately $20.0 million, mostly for production related equipment and
facility improvements and for projects consistent with those of the prior years.
The 1999 projection includes increased capital expenditures related to the
acquisition of the Diaper Genie(R) business in January 1999.
F-10
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The net proceeds from the 1997 Refinancing were used to
retire the indebtedness outstanding under the Company's previous credit
agreement; concurrently, the former agreement was terminated.
The 1997 Refinancing included: (i) the issuance of $150.0 million
principal amount of 8 7/8% senior notes due July 15, 2004 (the "Senior Notes"),
(ii) a $150.0 million senior secured term loan due September 15, 2003 (the "1997
Term Loan") and (iii) senior secured credit facilities of $170.0 million (the
"1997 Senior Secured Credit Facilities") comprised of a $115.0 million revolving
credit facility (the "1997 Revolving Credit Facility") and a $55.0 million term
loan facility (the "1997 Term A Loan").
At December 26, 1998, long-term debt (including current portion but
excluding obligations due to related party) was $811.8 million compared to
$737.8 million at December 27, 1997 an increase of $74.0 million. The increase
was as a result of debt incurred to fund the 1998 Acquisitions. In January 1998,
the Company acquired PCH, Carewell, and Binky. The Company increased its
borrowings under the 1997 Term Loan by $100 million to fund the cash portion of
the acquisition price of PCH (the Company also issued 9,257,345 shares of its
Common Stock as part of the PCH acquisition) and the purchase of Carewell and
Binky was financed from available borrowings under the Company's revolving
credit facility. At December 26, 1998, the Company had paid down in its entirety
its revolving credit facility with cash generated from operations and has unused
lines of credit (giving effect to outstanding letters of credit) under the 1997
Revolving Credit Facility of $114.0 million.
Terms of the 1997 Senior Secured Credit Facilities and the 1997 Term Loan
require the Company to meet certain financial covenants and ratios and also
include conditions or restrictions on new indebtedness and liens, major
acquisitions or mergers, capital expenditures and disposition of assets, certain
dividends and other distributions, and prepayment and modification of
indebtedness or equity capitalization. The 9% Senior Subordinated Notes and the
Senior Notes (collectively, the "Notes") also contain restrictions and
requirements with regard to similar matters. Under the terms of these debt
instruments, payment of cash dividends on the Common Stock of the Company is
restricted.
The Company believes that it will generate sufficient cash flow from
operations for working capital, capital expenditures and to make the scheduled
interest and principal payments under the 1997 Term Loan and the 1997 Senior
Secured Credit Facilities, and interest payments on the Notes. However, the
Company does not expect to generate sufficient cash flow from operations to make
the $360 million principal payment due in 2003 on the 9% Senior Subordinated
Notes or the $150 million principal payment due in 2004 on the 8 7/8% Senior
Notes. Accordingly, the Company will have to either refinance its obligations
with respect to the Notes prior to their maturity, or raise equity capital to
repay the principal amounts of the Notes. The Company's ability to make
scheduled principal payments, to refinance its obligations with respect to its
indebtedness, or raise equity capital depends on its financial and operating
performance, which is, in part, subject to prevailing economic conditions and to
financial, business and other factors beyond its control. Although the Company's
cash flow from operations and borrowings have been sufficient to meet its
historical debt service obligations, there can be no assurance that the
Company's operating results will continue to be sufficient or that future
borrowing facilities will be available for the payment or refinancing of the
Company's indebtedness.
On January 29, 1999, the Company completed the acquisition of the DIAPER
GENIE business, the leading diaper disposal system in the U.S., from
privately-held Mondial Industries L.P. ("Mondial") for approximately $122
million. The purchase price consisted of $72 million in cash and the issuance to
Mondial of $50 million principal amount of convertible notes. The cash portion
of the consideration was financed through the Company's 1997 Revolving Credit
facility. The newly issued convertible notes bear a rate of interest of 6.00%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of the Company's Common Stock. The conversion
price is approximately $19.15 per share. The convertible notes will mature in
2004 and are callable by the Company after January 29, 2002.
F-11
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company will continue to regularly consider the acquisition of other
companies or businesses engaged in the manufacture and distribution of related
products. Such potential transactions may require substantial capital resources,
which would in certain circumstances require the Company to seek additional debt
or equity financing. As there can be no assurance that such financing will be
available, the Company's ability to expand its operations through acquisition
may be restricted. However, the Company believes that capital will be available
to achieve its acquisition objectives.
Inflation in the United States and Canada has not had a significant effect
on the Company during recent periods.
On August 13, 1998, the Company filed an action in the United States
District Court, District of Delaware (the "Court") seeking, among other things,
a judgment declaring that United States Patent No. 5,747,011 (the " '011
patent"), related to a "sunscreen with disappearing color indicator," and held
by Schering-Plough HealthCare Products, Inc. ("S-P HealthCare"), as assigned, is
invalid. On September 8, 1998, S-P HealthCare answered the Company's complaint
denying its material allegations, and asserted a counterclaim against the
Company for infringement of the '011 patent, seeking unspecified damages and
injunctive relief. On October 19, 1998, S-P HealthCare moved for a preliminary
injunction against the Company which would prohibit the Company from selling its
BANANA BOAT Cool Colorz(TM) sunscreen, which allegedly infringes the '011
patent. As of March 23, 1999 the motion for preliminary injunction had not been
granted. The Company intends to vigorously pursue its claim and request for
declaratory relief.
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 for the Company beginning in fiscal year 2000. 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. The
Company is currently evaluating the effect this Statement will have on its
financial position and results from operations.
In 1998, the Accounting Standards Executive Committee ("AcSEC") issued
Statement of Position ("SOP") 98-1 "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use," which is effective for fiscal years
beginning after December 15, 1999. The Company will adopt this SOP in 1999 and
does not expect it to have a material impact on its financial position and
results from operations.
Additionally in 1998, AcSEC issued SOP 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"), which is effective for the Company for fiscal
years beginning after December 15, 1998. Start-up activities are broadly defined
as one time activities related to opening a new facility, introducing a new
product or service, conducting business in a new territory, conducting business
with a new class of customer or beneficiary, initiating a new process in an
existing facility, or commencing some new operation. Start-up activities include
activities related to organizing a new entity (commonly referred to as
organization costs). This SOP provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. The effect of the adoption is
required to be accounted for as a cumulative effect of change in accounting
principle. The Company is currently evaluating the effect this SOP will have on
its 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, the Company's
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
F-12
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Y2K issue can arise at any point in the Company's supply, manufacturing,
processing, distribution and financial chains. Incomplete or untimely resolution
of the Y2K issue by the Company, key suppliers, customers and 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 the Company's results of
operations, financial condition and cash flows.
The Company, with the assistance of outside consultants, is addressing the
Y2K issue. The Company has inventoried and assessed all date-sensitive
information and transaction processing computer systems and determined that a
portion of its information technology must be modified or replaced. The Company
has identified the critical software and hardware installations that need to be
replaced or modified and has developed a four-tiered program to deal with the
Y2K issue. These tiers include: (i) network and hardware/software
infrastructure, (ii) internally developed and purchased application software,
(iii) critical manufacturing and other operating systems including those that
use embedded technology such as micro-controllers and micro-processors, and (iv)
external relationships including customers, suppliers and service providers.
The Company believes the complete Y2K project will be completed prior to
the year 2000. However, unforeseen difficulties may arise which could adversely
affect the Company's ability to complete its systems modifications correctly,
completely, on time and/or within its cost estimate. In addition, there can be
no assurance that customers, suppliers and service providers on whom the Company
relies 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
affect on the Company's results of operations, financial condition and cash
flows.
The Company anticipates that necessary modifications to (i) the primary
network and hardware/software infrastructure will be completed during the first
quarter of 1999; (ii) integration and validation testing will commence during
the second quarter of 1999; and (iii) embedded chip technology such as
micro-controllers and micro-processors utilized in manufacturing or other
operating systems will be updated, replaced and validated as necessary by the
third quarter of 1999. The Company has initiated formal communications with its
significant suppliers, customers and service providers to determine the extent
to which the Company may be vulnerable to their failure to correct their own Y2K
issues. The Company will seek updates from these parties to attempt to ascertain
the adequacy of their programs as it relates to the Company. The Company
anticipates that it will develop contingency plans with respect to its principal
customers, suppliers and service providers by July 1999. There can be no
assurance, however, that the Company will be able to predict adequately Y2K
problems experienced by its suppliers, customers and service providers or the
Company's 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 the Company's financial position. The
Company anticipates that its total cost associated with the Y2K project will be
approximately $3.9 million, including $0.6 million expended in 1997, $2.2
million expended 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.
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
the Company's 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 third-party suppliers, customers and service
providers, the Company is unable to determine at this time whether the
consequences of Y2K failures will have a material impact on the Company's
results of operations, financial condition or cash flows. The Y2K project is
expected to significantly reduce the Company's level of uncertainty about the
Y2K problem. The Company believes that, with the
F-13
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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 the Company believes its efforts to address the Y2K issue will be
successful in avoiding any material adverse effect on the Company's results of
operations, financial condition and cash flows, investors and other interested
third parties should recognize that the Company's failure to resolve Y2K issues
on a timely basis would, in a "most reasonably likely worst case scenario",
significantly limit its ability to manufacture and distribute its products and
process its daily business transactions for a period of time, especially if such
failure is coupled with third party or infrastructure failures. Similarly, the
failure of significant suppliers, customers and service providers, or one or
more components of the Company's infrastructure, could significantly affect the
Company's operations subsequent to 1999. Adverse affects on the Company could
include, among other things, business disruption, increased costs, loss of
business and other similar risks, and litigation related thereto. The Company
believes that contingency plans will be developed prior to the year 2000, which
address the most likely risks related to the Y2K problem.
The foregoing discussion regarding Y2K project timing, effectiveness,
implementation and costs are based on management's 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 the Company's ability to respond to unforeseen Y2K
complications.
F-14
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales........................................................................ $ 669,613 $ 500,632 $ 498,742
Cost of sales.................................................................... 277,555 195,980 192,512
----------- ----------- -----------
Gross profit................................................................. 392,058 304,652 306,230
----------- ----------- -----------
Operating expenses:
Advertising and sales promotion.............................................. 145,379 114,279 119,380
Selling, distribution and research........................................... 73,266 58,657 56,776
Administrative............................................................... 24,643 19,120 18,028
Amortization of intangibles.................................................. 17,336 12,894 12,846
----------- ----------- -----------
Total operating expenses................................................. 260,624 204,950 207,030
----------- ----------- -----------
Operating earnings.................................................... 131,434 99,702 99,200
Interest expense including related party interest expense of $12,150, net of
related party interest income
of $12,003 for all periods presented......................................... 71,518 64,470 64,860
----------- ----------- -----------
Earnings before income taxes and extraordinary loss................... 59,916 35,232 34,340
Income taxes..................................................................... 25,686 16,501 16,141
----------- ----------- -----------
Earnings before extraordinary loss.................................... 34,230 18,731 18,199
Extraordinary loss on early extinguishment of debt,
net of $2,344 tax benefit ................................................... -- (4,078) --
----------- ----------- -----------
Net earnings.......................................................... $ 34,230 $ 14,653 $ 18,199
=========== =========== ===========
Earnings per share--Basic:
Before extraordinary loss.................................................... $ .58 $ .37 $ .36
Net earnings................................................................. $ .58 $ .29 $ .36
Earnings per share--Diluted:
Before extraordinary loss.................................................... $ .57 $ .37 $ .36
Net earnings................................................................. $ .57 $ .29 $ .36
Weighted average shares outstanding:
Basic........................................................................ 59,486 50,923 50,883
Diluted...................................................................... 60,411 51,006 50,939
</TABLE>
See the accompanying notes to consolidated financial statements.
F-15
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 6,871 $ 3,231
Receivables, less allowance for doubtful accounts............................. 103,185 66,876
Inventories................................................................... 58,790 42,500
Deferred income taxes......................................................... 14,650 7,806
Other current assets.......................................................... 5,650 4,949
----------- -----------
Total current assets.................................................... 189,146 125,362
Net property, plant and equipment................................................. 78,906 54,810
Intangible assets, net:
Goodwill...................................................................... 430,228 337,157
Patents, trademarks and other................................................. 101,364 34,835
Deferred financing costs.......................................................... 16,448 16,751
Due from related party............................................................ 80,017 80,017
Other noncurrent assets........................................................... 3,112 3,626
----------- -----------
Total assets............................................................ $ 899,221 $ 652,558
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 38,298 $ 24,512
Accrued expenses.............................................................. 59,981 38,827
Income taxes payable.......................................................... 8,444 4,121
Current maturities of long-term debt.......................................... 3,875 1,500
----------- -----------
Total current liabilities............................................... 110,598 68,960
Long-term debt.................................................................... 807,875 736,300
Due to related party.............................................................. 78,386 78,386
Other noncurrent liabilities...................................................... 14,049 13,563
Deferred income taxes............................................................. 29,288 23,412
----------- -----------
Total liabilities....................................................... 1,040,196 920,621
----------- -----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares, issued
60,401,822 shares at December 26,1998 and
50,941,812 shares at December 27,1997...................................... 604 509
Additional paid-in capital.................................................... 518,179 424,706
Retained earnings (deficit)................................................... (656,835) (691,065)
Foreign currency translation adjustment....................................... (2,923) (2,213)
----------- -----------
Total stockholders' equity.............................................. (140,975) (268,063)
----------- -----------
Total liabilities and stockholders' equity.............................. $ 899,221 $ 652,558
=========== ===========
</TABLE>
See the accompanying notes to consolidated financial statements.
F-16
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL RETAINED CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION
STOCK CAPITAL (DEFICIT) ADJUSTMENT TOTAL
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 30, 1995................................. $ 509 $ 424,217 $ (723,917) $ (1,785) $ (300,976)
Net earnings............................................... -- -- 18,199 -- 18,199
Foreign currency translation adjustment.................... -- -- -- (10) (10)
-----------
Comprehensive earnings.................................. 18,189
Stock issued to employees exercising stock options......... -- 60 -- -- 60
------ ----------- ----------- --------- -----------
Balance, December 28, 1996........................... 509 424,277 (705,718) (1,795) (282,727)
Net earnings............................................... -- -- 14,653 -- 14,653
Foreign currency translation adjustment.................... -- -- -- (418) (418)
------------
Comprehensive earnings.................................. 14,235
Stock issued to employees exercising stock options......... -- 429 -- -- 429
------ ----------- ----------- --------- -----------
Balance, December 27, 1997........................... 509 424,706 (691,065) (2,213) (268,063)
Net earnings............................................... -- -- 34,230 -- 34,230
Foreign currency translation adjustment.................... -- -- -- (710) (710)
-----------
Comprehensive earnings.................................. 33,520
Stock issued to employees exercising stock options......... 2 2,149 -- -- 2,151
Stock issued in conjunction with business acquisition...... 93 91,324 -- -- 91,417
------ ----------- ----------- --------- -----------
Balance, December 26, 1998........................... $ 604 $ 518,179 $ (656,835) $ (2,923) $ (140,975)
====== =========== =========== ========= ===========
</TABLE>
See the accompanying notes to consolidated financial statements.
F-17
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operations:
Net earnings ......................................................... $ 34,230 $ 14,653 $ 18,199
Non-cash items included in earnings:
Extraordinary loss, net of tax benefit............................. -- 4,078 --
Amortization of intangibles........................................ 17,336 12,894 12,846
Amortization of deferred financing costs........................... 2,995 2,163 2,089
Depreciation....................................................... 9,690 7,520 8,929
Deferred income taxes.............................................. 6,244 5,493 6,842
Other, net......................................................... 36 249 48
Changes in working capital items, net of effects of acquisitions:
Increase in receivables.......................................... (24,003) (2,894) (5,963)
Decrease (increase) in inventories............................... 254 (4,863) 11,553
Increase in other current assets................................. (696) (948) (420)
Increase (decrease) in accounts payable.......................... 7,064 (11,619) 16,074
Decrease in accrued expenses..................................... (4,687) (14,791) (12,794)
Increase in income taxes payable................................. 4,323 1,843 3,689
Increase (decrease) in accrued interest.......................... 431 3,090 (788)
----------- ----------- -----------
Net cash flows from operations................................. 53,217 16,868 60,304
Cash flows used for investing activities:
Purchases of property, plant and equipment............................ (16,405) (9,004) (9,740)
Businesses acquired................................................... (106,581) -- --
----------- ----------- -----------
Net cash flows used for investing activities................... (122,986) (9,004) (9,740)
Cash flows provided by (used for) financing activities:
Net (repayments) borrowings under working capital credit facilities... (23,550) 23,550 (2,850)
Long-term debt borrowings............................................. 100,000 355,000 --
Long-term debt repayments............................................. (2,500) (380,450) (47,500)
Payment of financing costs............................................ (2,692) (9,367) --
Issuance of shares of common stock.................................... 2,151 429 60
Other, net............................................................ -- -- (9)
----------- ----------- -----------
Net cash flows provided by (used for) financing activities..... 73,409 (10,838) (50,299)
Increase (decrease) in cash............................................... 3,640 (2,974) 265
Cash at beginning of period............................................... 3,231 6,205 5,940
----------- ----------- -----------
Cash at end of period..................................................... $ 6,871 $ 3,231 $ 6,205
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest............................................................ $ 68,092 $ 59,217 $ 63,559
Income taxes, net of refunds........................................ $ 14,753 $ 9,165 $ 5,610
</TABLE>
In connection with the acquisition of Personal Care Holdings, Inc., the
Company issued 9,257,345 shares of Common Stock with a value of $9.875 per
share, aggregating $91,417.
See the accompanying notes to consolidated financial statements.
F-18
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Playtex Products, Inc. and all of its subsidiaries ("Playtex" or
the "Company"). All significant intercompany balances have been eliminated.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Inventory costs include material, labor and
manufacturing overhead.
NET PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are
stated at cost and depreciation is provided on the straight-line method over the
estimated useful lives of the respective asset. The estimated useful lives for
significant fixed asset classes is as follows: land improvements range from 4 to
20 years, building and improvements range from 4 to 30 years, machinery and
equipment range from 3 to 12 years, and furniture and fixtures range from 5 to 8
years. Repair and maintenance costs ($6.4 million in 1998, $5.2 million in 1997
and $5.5 million in 1996) are expensed as incurred; renewals and betterments are
capitalized.
INTANGIBLE AND LONG-LIVED ASSETS--Intangible assets include goodwill,
which represents costs in excess of net assets of businesses acquired, patents,
and trademarks. Intangible assets are amortized on a straight-line basis over
periods not exceeding 40 years. The Company systematically reviews the
recoverability of its goodwill using certain financial indicators, such as
historical and future ability to generate income from operations. The Company
systematically reviews the recoverability of the other long-lived assets by
comparing their unamortized carrying value to their related anticipated
undiscounted future cash flows. Any impairment related to goodwill or other
long-lived assets is measured by reference to the assets' fair market value.
Impairments are charged to expense when such determination is made.
DEFERRED FINANCING COST--Costs incurred in connection with the issuance of
long-term debt have been capitalized and are being amortized over the life of
the related debt agreements. Such costs, net of accumulated amortization,
amounted to $16.4 million and $16.8 million at December 26, 1998 and December
27, 1997, respectively.
INCOME TAXES--Deferred tax assets and liabilities are provided using the
asset and liability method for temporary differences between financial and tax
reporting basis using the enacted tax rates in effect for the period in which
the differences are expected to reverse. Valuation allowances are established,
when necessary, to reduce deferred tax assets to amounts that are more likely
than not to be realized.
FOREIGN CURRENCY TRANSLATION--Assets and liabilities of foreign
subsidiaries, where the local currency is the functional currency, have been
translated at year-end exchange rates and revenues and expenses have been
translated using weighted average-for-the-year exchange rates. Net exchange
gains or losses resulting from the translation of assets and liabilities are
accumulated in a separate section of stockholders' equity titled "Foreign
currency translation adjustment".
INTEREST RATE PROTECTION AGREEMENTS--The Company selectively enters into
interest rate protection agreements to reduce the impact of interest rate
changes on its variable rate indebtedness. The interest rate protection
agreements involve exchanges of floating for fixed rate interest payments
without the exchange of the underlying notional amount. The Company may also use
interest rate caps, which limit net interest expense if interest rates rise
above a defined level. The differential, which was not material in any of the
years presented, was paid or received as interest rates change and was accounted
for on the accrual basis as an adjustment to interest expense. The notional
amounts of such agreements are used to measure the interest to be paid or
received and do not represent the amount of exposure to loss.
The Company does not enter into interest rate protection agreements for
trading or speculative purposes. Further, the Company has a policy of only
entering into contracts with parties that have at least a "A" (or equivalent)
credit rating. The counterparties to these instruments are major financial
institutions.
F-19
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE--The Company calculates basic and diluted earnings per
share ("EPS") in accordance with Statement of Financial Accounting Standards
("SFAS") No. 128. Basic EPS excludes dilution and is computed by dividing net
earnings by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that would then
share in the earnings of the Company. For the periods presented, stock options
outstanding under the Company's 1994 Stock Option Plan are the only potentially
dilutive instrument that caused the diluted weighted average shares outstanding
to increase over the basic weighted average shares outstanding. The Company
utilizes the treasury stock method to determine the dilutive impact of
potentially exercised stock options.
USE OF ESTIMATES--The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could vary from those estimates.
RECLASSIFICATIONS--For comparative purposes, certain amounts have been
reclassified to conform to the current year presentation.
2. 1998 ACQUISITIONS
On January 6, 1998, the Company acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash (exclusive of acquisition
costs). Carewell manufactured and marketed the Dentax(R) line of toothbrushes,
toothpaste, and dental floss for distribution through food stores, drug chains,
and mass merchandisers. The acquisition, which was financed with borrowings
under the Company's 1997 Revolving Credit Facility, was accounted for as a
purchase.
On January 26, 1998, the Company acquired certain tangible and intangible
assets related to the Binky(R) pacifier business ("Binky") from Binky-Griptight,
Inc. for approximately $1.2 million in cash (exclusive of acquisition costs) and
the issuance of a $0.5 million note, which was due and paid on July 27, 1998.
The acquisition, which was financed with borrowings under the Company's 1997
Revolving Credit Facility, was accounted for as a purchase.
On January 28, 1998, the Company acquired Personal Care Holdings, Inc.
("PCH") for approximately $91 million in cash (exclusive of acquisition costs)
and 9,257,345 shares of Common Stock. PCH manufactured and marketed a number of
leading consumer product brands, including Wet Ones(R) pre-moistened towelettes,
CHUBS(R) baby wipes, Ogilvie(R) home permanent products, Binaca(R) breath spray
and drops, Mr. Bubble(R) children's bubble bath products, Diaparene(R) infant
care products, Tussy(R) deodorants, Dorothy Gray(R) skin care products and
Better Off(R) depilatories. The cash portion of the consideration paid for PCH
was financed under the 1997 Term Loan, which was amended concurrently with the
PCH transaction. The acquisition was accounted for as a purchase.
The following consolidated unaudited pro forma results of operations for
the Company's 1997 fiscal year assume the acquisitions of PCH, BINKY, and
Carewell (the "1998 Acquisitions") occurred as of December 29, 1996. The pro
forma financial information is not necessarily indicative of operating results
that would have occurred had the 1998 Acquisitions been consummated as of
December 29, 1996, nor of future operating results (in thousands, except per
share data).
F-20
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. 1998 ACQUISITIONS (CONTINUED)
TWELVE MONTHS
ENDED
DECEMBER 27,
1997
-------------
Net sales..................................................... $ 635,544
Earnings before extraordinary items........................... 17,940
Net earnings.................................................. 13,862
Earnings per share--(Basic and Diluted):
Before extraordinary items................................ $ .30
Net earnings.............................................. $ .23
Weighted average shares outstanding:
Basic..................................................... 60,180
Diluted................................................... 60,263
In connection with the 1998 Acquisitions, the Company accrued for certain
direct costs as part of the purchase price allocations. These costs include $3.6
million for costs to exit activities of the acquired companies, $2.1 million of
costs to involuntarily terminate employees of the acquired companies, and $0.2
million to relocate employees of the acquired companies. As of December 26,
1998, the Company has incurred $1.9 million of costs associated with involuntary
terminations, $1.4 million of costs associated with exit activities and $0.1
million associated with relocating employees of the acquired companies. As of
December 26, 1998, the Company's remaining acquisition liability of $2.5 million
relates primarily to lease obligations.
3. COMPREHENSIVE EARNINGS
The Company adopted SFAS No. 130 "Reporting Comprehensive Income" at the
beginning of fiscal year 1998. The only component of comprehensive earnings that
impacts the Company is foreign currency translation adjustments. Such amount is
presented net of income taxes of $533 thousand, $367 thousand, and $9 thousand
for the years ended December 26, 1998, December 27, 1997, and December 28, 1996,
respectively.
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
BUSINESS SEGMENTS
The Company is organized in three divisions: the U.S. Personal Products
Division, the U.S. Consumer Products Division, and the International and Other
Division. The Company's divisions have been designated as business segments in
accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". This divisional structure allows management to focus on
individual product lines, category management initiatives and efficient
integration of acquired brands. The two largest divisions, the U.S. Personal
Products Division and the U.S. Consumer Products Division constituted 89% of the
Company's 1998 consolidated net sales. All of the sales in these two divisions
are within the 50 United States. The third division, International and Other
Division constituted 11% of the Company's 1998 consolidated net sales. Net sales
from the International and Other Division are derived from: export sales, sales
of the Company's Canadian subsidiary, sales in Puerto Rico and sales of private
label tampons. The International and Other Division sell the majority of the
Company's products sold in both the U.S. Personal and U.S. Consumer Products
Divisions.
The U.S. Personal Products Division constituted 59% of the Company's 1998
consolidated total net sales. This Division includes Infant Care and Feminine
Care products sold in the 50 United States. The Infant Care product category
F-21
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
includes the Playtex(R) disposable nurser system, cups and mealtime products,
reusable hard bottles and pacifiers. As a result of the 1998 Acquisitions, the
following brands were added to the Company's Infant Care product category: BINKY
pacifiers, MR. BUBBLE children's bubble bath, CHUBS baby wipes, DIAPARENE infant
care products, and WET ONES hand and face towelettes. The Feminine Care product
category includes a wide range of plastic and cardboard applicator tampons
marketed under such brand names as Playtex(R) Gentle Glide(R), Soft Comfort(R),
Slimfits(R) and Silk Glide(R).
The U.S. Consumer Products Division constituted 30% of the Company's 1998
consolidated net sales. This Division includes Sun Care, Household Products, and
Personal Grooming brands sold in the 50 United States. The Sun Care category
consists of an extensive line of sun care products marketed under the Banana
Boat(R) and BioSun(R) trade names. The Household Products category includes
Playtex Gloves and Woolite(R) rug and upholstery cleaning products. The
Company's Personal Grooming category consisted of Jhirmack(R) hair care products
and Tek(R) toothbrushes. As a result of the 1998 Acquisitions, the following
brands were added to the Company's Personal Grooming product category: BETTER
OFF depilatories, BINACA breath spray and drops, DENTAX oral care products,
DOROTHY GRAY skin care products, OGILVIE at-home permanents and TUSSY deodorant.
The Company evaluates division performance based on the division's product
contribution excluding general corporate allocations. 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
management to evaluate the results of the divisions. The Company does not
segregate assets, amortization, capital expenditures, or interest income and
interest expense to its divisions. (dollars in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------------------------------------------------------------------------
DECEMBER 26, 1998 DECEMBER 27, 1997 DECEMBER 28, 1996
----------------------------- ----------------------------- ---------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Personal Products.......... $ 395,505 $ 166,811 $ 277,137 $ 120,484 $ 284,710 $ 122,075
U.S. Consumer Products.......... 199,552 63,927 155,715 50,920 144,767 45,964
International and Other......... 74,556 22,961 67,780 21,828 69,265 22,605
Unallocated Charges (1)......... -- (7,020) -- (2,859) -- (3,794)
----------- ----------- ----------- ---------- ----------- ----------
Total Consolidated.......... $ 669,613 246,679 $ 500,632 190,373 $ 498,742 186,850
=========== =========== ===========
Reconciliation to
operating earnings:
Selling, distribution
and research.................... 73,266 58,657 56,776
Administrative.................. 24,643 19,120 18,028
Amortization of intangibles..... 17,336 12,894 12,846
----------- ---------- ----------
Operating earnings.......... $ 131,434 $ 99,702 $ 99,200
=========== ========== ==========
</TABLE>
- -----------
(1) Certain unallocated corporate charges such as business license taxes and
product liability insurance that are included in consolidated gross
margin, but not included in the evaluation of the division's performance.
F-22
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
Although allocated to the divisions, depreciation is not a measurement
used by management to evaluate the performance of the divisions (dollars in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
U.S. Personal Products.................................. $ 5,416 $ 3,489 $ 4,405
U.S. Consumer Products.................................. 1,466 850 1,250
International and Other................................. 1,176 1,342 1,225
---------- ----------- ----------
Depreciation included in product contribution....... 8,058 5,681 6,880
Depreciation not allocated to divisions................. 1,632 1,839 2,049
---------- ----------- ----------
Consolidated depreciation........................... $ 9,690 $ 7,520 $ 8,929
========== =========== ==========
</TABLE>
GEOGRAPHIC AREA INFORMATION
Net sales and associated product contribution represents sales to
unaffiliated customers only. Intergeographic sales and transfers between
geographic areas are nominal and have not been disclosed separately. Net sales
and associated product contribution within the United States includes all 50
states and territories under its control. Corporate charges that are not
allocated to divisions (see preceding table) are included in product
contribution for the United States. International net sales and associated
product contribution represents business activity outside of the United States
and territories under its control.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------------------------------------------------
DECEMBER 26, 1998 DECEMBER 27, 1997 DECEMBER 28, 1996
---------------------------- ---------------------------- ----------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States................. $ 609,866 $ 227,359 $ 448,995 $ 173,054 $ 445,869 $ 167,078
International................. 59,747 19,320 51,637 17,319 52,873 19,772
----------- ----------- ----------- ----------- ----------- -----------
Total..................... $ 669,613 $ 246,679 $ 500,632 $ 190,373 $ 498,742 $ 186,850
=========== =========== =========== =========== =========== ===========
</TABLE>
Identifiable assets by geographic area represent those assets that are
used in the Company's operations in each area.
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
Identifiable Assets 1998 1997
- ------------------- ----------- -----------
<S> <C> <C>
United States................................................................................. $ 885,538 $ 642,085
International................................................................................. 13,683 10,473
----------- -----------
Total..................................................................................... $ 899,221 $ 652,558
=========== ===========
</TABLE>
F-23
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
--------- ---------
Receivables .................................... $ 105,280 $ 68,545
Less allowance for doubtful accounts ........... (2,095) (1,669)
--------- ---------
Net ...................................... $ 103,185 $ 66,876
========= =========
Inventories:
Raw materials .............................. $ 17,722 $ 14,866
Work in process ............................ 763 845
Finished goods ............................. 40,305 26,789
--------- ---------
Total .................................... $ 58,790 $ 42,500
========= =========
Net property, plant and equipment:
Land ....................................... $ 1,435 $ 1,190
Buildings .................................. 30,000 24,650
Machinery and equipment .................... 130,000 103,767
--------- ---------
161,435 129,607
Less accumulated depreciation .............. (82,529) (74,797)
--------- ---------
Net ...................................... $ 78,906 $ 54,810
========= =========
Goodwill ....................................... $ 553,443 $ 446,607
Less accumulated amortization .................. (123,215) (109,450)
--------- ---------
Net ...................................... $ 430,228 $ 337,157
========= =========
Patents, trademarks and other .................. $ 119,769 $ 49,669
Less accumulated amortization .................. (18,405) (14,834)
--------- ---------
Net ...................................... $ 101,364 $ 34,835
========= =========
Deferred financing costs ....................... $ 23,042 $ 20,350
Less accumulated amortization .................. (6,594) (3,599)
--------- ---------
Net ...................................... $ 16,448 $ 16,751
========= =========
Accrued expenses:
Advertising and sales promotion ............ $ 22,580 $ 13,480
Employee compensation and benefits ......... 11,917 7,808
Interest ................................... 9,053 8,622
Insurance .................................. 3,038 2,945
Other ...................................... 13,393 5,972
--------- ---------
Total .................................... $ 59,981 $ 38,827
========= =========
6. DUE FROM RELATED PARTY
Playtex Investment Corp., a wholly-owned subsidiary of the Company, is the
holder of $40 million aggregate principal amount of 15% debentures (the "Apparel
Debenture") issued by Playtex Apparel Partners, L.P. (the "Apparel Partnership")
in connection with its 1988 acquisition of Playtex Apparel, Inc. Interest on the
Apparel Debenture is payable
F-24
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DUE FROM RELATED PARTY (CONTINUED)
annually in cash on each December 15. However, with respect to any such interest
amount payable prior to maturity, Apparel Partnership may elect and elected for
periods through December 15, 1993 to make such payments in additional Apparel
Debentures. For the periods ended after December 15, 1993, the Apparel
Partnership paid in cash the accrued interest. Principal and any unpaid accrued
interest are due in cash on December 15, 2003. The obligations of the Apparel
Partnership are nonrecourse to the partners of the Apparel Partnership. The
assets of the Apparel Partnership are Sara Lee Corporation common stock with a
market value at December 26, 1998 and December 27, 1997 of approximately $7.9
and $8.4 million, respectively, cash of approximately $0.2 million and $0.3
million, respectively, and the Company's 15 1/2% Subordinated Notes (see Note
8). The Company believes that the Apparel Debenture represents the only material
liability of the Apparel Partnership.
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
----------- -----------
1997 Credit Agreement:
Term A Loan............................... $ 55,000 $ 55,000
Revolving Credit Facility................. -- 23,550
Term Loan................................. 246,750 149,250
8 7/8% Senior Notes due 2004.................. 150,000 150,000
9% Senior Subordinated Notes due 2003......... 360,000 360,000
----------- -----------
811,750 737,800
Less current maturities................... (3,875) (1,500)
----------- -----------
Total long-term debt................... $ 807,875 $ 736,300
=========== ===========
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The 1997 Refinancing included: (i) the issuance of
$150.0 million principal amount of 8 7/8% senior notes due July 15, 2004 (the
"Senior Notes"), (ii) a $150.0 million senior secured term loan due September
15, 2003 (the "1997 Term Loan"), and (iii) senior secured credit facilities (the
"1997 Senior Secured Credit Facilities") of $170.0 million comprised of a $115.0
million revolving credit facility (the "1997 Revolving Credit Facility") and a
$55.0 million term loan facility (the "1997 Term A Loan"). The 1997 Term Loan
and the 1997 Senior Secured Credit Facilities are known collectively as the 1997
Credit Agreement ("1997 Credit Agreement"). In connection with the Company's
acquisition of PCH on January 28, 1998 (see Note 2), the Company increased its
borrowings under the 1997 Term Loan by $100.0 million.
The 1997 Revolving Credit Facility matures on June 15, 2003 and
commitments thereunder are automatically and permanently reduced by (i) $5.0
million on December 15, 2000 and June 15, 2001, (ii) $7.0 million on December
15, 2001 and June 15, 2002, and (iii) $8.0 million on December 15, 2002 and June
15, 2003. The 1997 Term A Loan requires a reduction in commitment amounts of
$1.4 million in fiscal 1999, $7.6 million in fiscal 2000, $15.1 million in
fiscal 2001, $19.9 million in fiscal 2002, and $11.0 million in fiscal 2003. The
Term Loan provides for quarterly repayment of principal of $625,000 from March
15, 1998 through June 15, 2003. The remaining principal balance on the Term
Loan, expected to be $235.5 million, is due on September 15, 2003.
The net proceeds from the 1997 Refinancing were used to retire the
indebtedness outstanding under the Company's prior credit agreement originated
in 1995. Concurrently, this credit agreement was terminated. Fees and expenses
associated
F-25
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. LONG-TERM DEBT (CONTINUED)
with the 1997 Refinancing and the incremental borrowings associated with the
1997 Term Loan of $10.0 million and $2.7 million, respectively, are amortized
over the term of the associated financial instruments.
The rates of interest on borrowings under the 1997 Credit Agreement are,
at the Company's option, a function of various alternative short-term borrowing
rates, as defined in the associated credit agreement. Quarterly commitment fees
of three-eighths of one percent on the unutilized portion of the 1997 Revolving
Credit Facility and an agency fee of approximately $0.1 million per annum are
also required. At December 26, 1998 and December 27, 1997, the weighted average
interest rate on the Company's variable rate indebtedness was 6.66% and 7.38%,
respectively. In addition, the weighted average interest rates on the Company's
variable rate indebtedness were 7.09%, 7.35% and 7.35% for the twelve months
ended December 26, 1998, December 27, 1997, and December 28, 1996, respectively.
At December 26, 1998, aggregate unused lines of credit (giving effect to
outstanding letters of credit) under the 1997 Revolving Credit Facility amounted
to $114.0 million.
The provisions of the 1997 Senior Secured Credit Facilities require the
Company to meet certain financial covenants and ratios and also include
limitations or restrictions on: indebtedness and liens; major acquisitions or
mergers; capital expenditures; disposition of assets; certain dividends and
other distributions; and prepayment and modification of all indebtedness or
equity capitalization. The 9% senior subordinated notes due 2003 in an aggregate
principal amount of $360.0 million (the "9% Notes"), the Senior Notes and the
1997 Term Loan also contain certain restrictions and requirements. Under the
terms of each of these agreements, payment of cash dividends on the common stock
of the Company is restricted. Certain wholly owned subsidiaries of the Company
are guarantors of the 9% Notes and the Senior Notes (see Note 18).
On February 2, 1994, the Company issued $360.0 million aggregate principal
of the 9% Notes. The interest on the 9% Notes is payable in cash semi-annually
on each June 15 and December 15. Principal of the 9% Notes is due on December
15, 2003.
The Company periodically uses financial instruments to manage the impact
of interest rate changes on earnings and cash flows. Accordingly, from time to
time, the Company enters into interest rate protection agreements to hedge
portions of its variable rate indebtedness. Based on the Company's interest rate
exposure including all variable-rate indebtedness and interest rate protection
agreements, as of December 26, 1998, a 1% increase in interest rates on an
annualized basis would have resulted in $2.0 million of additional interest
expense for the fiscal year then ended. The Company does not enter into
financial instruments for trading or speculative purposes.
On August 26, 1997, the Company entered into an interest rate cap
agreement, under which, for a one-year period commencing November 28, 1997, the
London Interbank Offered Rate ("LIBOR") with respect to $100.0 million of the
Company's variable rate outstanding indebtedness was capped at 6.5% per annum
(the "Cap Rate"). The agreement provided for quarterly payments by the
counterparty to the extent that LIBOR, as determined on the quarterly reset
dates, exceeded the Cap Rate. This agreement effectively capped the Company's
annual rate of interest on $100.0 million of variable rate indebtedness at
8.00%, after giving effect to the 1.50% spread as provided for in the 1997 Term
Loan. The interest rate cap agreement expired on November 28, 1998.
On July 21, 1998, the Company entered into an interest rate swap agreement
whereby, for a four-year period commencing July 23, 1998, the LIBOR rate with
respect to $100.0 million of the Company's variable rate outstanding
indebtedness has been swapped for a fixed rate of 5.455%. This agreement
effectively fixes the annual rate of interest on $100.0 million of variable rate
indebtedness at 6.955%, after giving effect to the 1.50% spread as provided for
in the 1997 Term Loan. The Company, at its sole discretion, may cancel this
agreement on any monthly reset date occurring on or after July 23, 2000 upon two
days prior written notice to the counterparty.
F-26
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. LONG-TERM DEBT (CONTINUED)
Aggregate annual maturities of the Company's long-term debt for the next
five years and thereafter as of December 26, 1998 are as follows (in millions):
$3.9 in fiscal 1999, $10.1 in fiscal 2000, $17.6 in fiscal 2001, $22.4 in fiscal
2002, $607.8 in fiscal 2003, and $150.0 thereafter.
8. DUE TO RELATED PARTY
Due to related party consists of 15 1/2% Subordinated Notes held by the
Apparel Partnership. Interest on the 15 1/2% Subordinated Notes is payable
annually in cash on each December 15. However, with respect to any such interest
amount payable prior to maturity, the Company may elect and elected for periods
through December 15, 1993 to make such payments in additional 15 1/2%
Subordinated Notes. For the periods ended after December 15, 1993, the Company
paid in cash the accrued interest. Principal and any unpaid accrued interest on
the 15 1/2% Subordinated Notes are payable in cash on December 15, 2003.
9. INCOME TAXES
The provision for income taxes is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities, as adjusted for the impact of the 1998 Acquisitions. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to amounts that are more likely than not to be realized.
Earnings before income taxes and extraordinary loss are as follows (in
thousands):
TWELVE MONTHS ENDED
------------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
U.S. ..................... $58,682 $35,129 $32,650
Foreign .................. 1,234 103 1,690
------- ------- -------
Total ................ $59,916 $35,232 $34,340
======= ======= =======
F-27
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. INCOME TAXES (CONTINUED)
The Company's provisions for income taxes for the twelve months ended
December 26, 1998, December 27, 1997, and December 28, 1996 are as follows (in
thousands):
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
Current:
Federal .................... $ 17,568 $ 10,197 $ 7,851
State and local ............ 1,242 600 553
Foreign .................... 632 211 895
-------- -------- --------
19,442 11,008 9,299
Deferred:
Federal .................... 6,177 4,939 6,851
State and local ............ 34 516 311
Foreign .................... 33 38 (320)
-------- -------- --------
6,244 5,493 6,842
-------- -------- --------
Total .................... $ 25,686 $ 16,501 $ 16,141
======== ======== ========
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to the Company's deferred tax assets and liabilities at December
26, 1998 and December 27, 1997 are as follows (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
Deferred tax assets:
Allowances and reserves not currently deductible.. $13,838 $ 9,356
Net operating loss carryforwards ................. 7,404 5,302
Postretirement benefits reserve .................. 3,495 2,915
Other ............................................ 1,006 806
------- -------
Total .......................................... $25,743 $18,379
======= =======
Deferred tax liabilities:
Deferred gain on sale of business ................ $14,298 $14,650
Property, plant and equipment .................... 12,574 10,126
Trademarks ....................................... 10,458 5,980
Undistributed earnings of foreign subsidiary ..... 2,515 2,622
Other ............................................ 536 607
------- -------
Total .......................................... $40,381 $33,985
======= =======
Undistributed earnings of the Company's Canadian subsidiary for which U.S.
income taxes have not been provided were approximately $4.1 million at December
26, 1998. Such undistributed earnings are expected to be permanently reinvested
in the Canadian subsidiary.
The Company has available net operating loss carryforwards ("NOLs") of
$20.8 million at December 26, 1998 that expire in years 2005 through 2012. These
NOLs, primarily related to operations of Banana Boat Holdings, PCH, and Carewell
prior to their acquisition by the Company, can be utilized by the Company, with
certain limitations, on its federal, state and local tax returns. The Company
expects to utilize these NOLs prior to their expiration. The benefit realized
from these NOLs was $3.0 million, $0.9 million, and $0.9 million for the fiscal
years ended December 26, 1998, December 27, 1997, and December 28, 1996,
respectively.
F-28
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. INCOME TAXES (CONTINUED)
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Expected federal income tax at statutory rates ... $ 20,971 $ 12,331 $ 12,019
Amortization and write-off of intangible assets .. 4,414 3,618 3,618
State and local income taxes ..................... 829 725 562
Other, net ....................................... (528) (173) (58)
-------- -------- --------
Total tax provision .......................... $ 25,686 $ 16,501 $ 16,141
======== ======== ========
</TABLE>
10. COMMON STOCK
During 1994, the Company established a long-term incentive plan (the "1994
Stock Option Plan") under which awards of incentive stock options, nonqualified
stock options and stock appreciation rights ("SARs") may be granted to directors
and key employees of the Company. Stock options granted under the 1994 Stock
Option Plan may have a term not in excess of ten years. The exercise price for
stock options may not be less than the fair market value of the common stock on
the date of grant. Except with respect to formula grants to certain non-employee
directors, options vest over a period determined by the Compensation and Stock
Option Committee.
SARs may be granted in tandem with a stock option grant or at any time
following the stock option grant. Upon exercise of a SAR, the grantee will
receive cash equal to the excess of the fair market value of a share of common
stock over the exercise price. No SARs have been granted.
In February 1998, the Company's stockholders approved an amendment to the
1994 Stock Option Plan increasing the number of shares of Common Stock available
for issuance upon exercise of options and SARs from 3,047,785 to 5,047,785.
The Company accounts for stock-based compensation in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As permitted by
SFAS 123, the Company continues to follow the provisions of APB No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for compensation expense related to the issuance of stock options.
Had compensation costs related to the issuance of stock options under the
Company's 1994 Stock Option Plan been determined based on the estimated fair
value at the grant dates under SFAS 123, the Company's earnings and earnings per
share for the twelve months ended December 26, 1998, December 27, 1997, and
December 28, 1996 would have been reduced to the pro forma amounts listed below
(in thousands, except per share data):
F-29
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMON STOCK (CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings:
As reported:
Before extraordinary loss............. $34,230 $18,731 $18,199
Net earnings.......................... $34,230 $14,653 $18,199
Pro forma:
Before extraordinary loss............. $31,168 $17,071 $15,649
Net earnings.......................... $31,168 $12,993 $15,649
Earnings per share:
As reported--Basic:
Before extraordinary loss............. $ .58 $ .37 $ .36
Net earnings.......................... $ .58 $ .29 $ .36
As reported--Diluted:
Before extraordinary loss............. $ .57 $ .37 $ .36
Net earnings.......................... $ .57 $ .29 $ .36
Pro forma--Basic:
Before extraordinary loss............. $ .52 $ .34 $ .31
Net earnings.......................... $ .52 $ .25 $ .31
Pro forma--Diluted:
Before extraordinary loss............. $ .52 $ .34 $ .31
Net earnings.......................... $ .52 $ .25 $ .31
Weighted average shares outstanding:
Basic.................................... 59,486 50,923 50,883
Diluted.................................. 60,411 51,006 50,939
</TABLE>
The fair value of each stock option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: weighted average risk-free interest rates 5.28%, 6.10%, and 6.63%
for fiscal 1998, 1997, and 1996, respectively; no dividend yield; expected lives
of 5 years; and volatility of 35%. A summary of the status of the Company's 1994
Stock Option Plan for fiscal 1998, 1997 and 1996 and the changes during those
years is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year ....... 2,816,598 $ 9.27 2,315,434 $ 9.14 2,240,800 $ 9.17
Granted ................................ 1,568,000 14.09 636,000 9.59 166,000 8.76
Exercised .............................. (202,673) 8.78 (54,612) 7.88 (7,499) 7.87
Forfeited .............................. (88,665) 10.96 (80,224) 9.13 (83,867) 9.47
--------- --------- ---------
Outstanding at end of year ............. 4,093,260 11.11 2,816,598 9.27 2,315,434 9.14
========= ========= =========
Options exercisable at year-end ........ 1,912,834 9.21 1,334,087 9.26 715,452 9.37
Weighted-average fair value
of options granted during the year ... $ 6.67 $ 4.72 $ 4.40
</TABLE>
F-30
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMON STOCK (CONTINUED)
The following table summarizes information about fixed stock options
outstanding at December 26, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- ----------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 26, CONTRACTUAL EXERCISE DECEMBER 26, EXERCISE
RANGE OF EXERCISE PRICES 1998 LIFE PRICES 1998 PRICES
- ------------------------ ------------ ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
$6.750 to 7.000............. 37,500 5.97 $ 6.7500 37,500 $ 6.7500
$7.000 to 8.000............. 702,664 6.64 7.8750 702,664 7.8750
$8.000 to 9.000............. 176,500 7.47 8.6735 110,568 8.6566
$9.000 to 10.000............ 1,479,330 7.29 9.7828 922,827 9.8435
$10.000 to 13.000........... 186,766 8.87 10.1196 11,775 10.7288
$13.000 to 14.000........... 301,500 7.53 13.5240 127,500 13.0000
$14.000 to 15.000........... 1,209,000 9.67 14.6474 -- --
----------- ----------- ----------- ----------
$6.750 to 15.000............ 4,093,260 7.97 $ 11.1074 1,912,834 $ 9.2070
=========== =========== =========== ==========
</TABLE>
11. EXTRAORDINARY LOSS
In July 1997, in connection with the 1997 Refinancing, the Company
recorded an extraordinary loss of $4.1 million (net of income tax benefit of
$2.3 million) for costs and expenses related to the write-off of the unamortized
portion of deferred financing costs associated with the Company's previous
credit agreement (see Note 7).
12. LEASES
Future minimum payments under non-cancelable operating leases for fiscal
years ending after December 26, 1998 are as follows (in thousands): $7,919 in
1999, $6,995 in 2000, $5,938 in 2001, $4,251 in 2002, $3,616 in 2003 and $9,811
in later years.
Rent expense for operating leases amounted to (in thousands): $7,952,
$5,250, and $5,201 for the twelve months ended December 26, 1998, December 27,
1997, and December 28, 1996, respectively.
13. PENSION AND OTHER POSTRETIREMENT BENEFITS
Defined Benefit Pension Plans--Substantially all of the Company's U.S.
hourly and approximately 86% of all Canadian employees participate in pension
plans. At December 26, 1998, approximately 1,203 employees were covered by these
plans, of which approximately 238 retirees or beneficiaries were receiving
benefits.
Changes in pension benefits, which are allocable to previous service of
employees, and gains and losses, that occur because actual experience differs
from assumptions, will be amortized over the estimated average future service
period of employees. Actuarial assumptions for the plans include: (a) 9.0% for
the expected long-term rate of return on plan's assets, (b) 7.0% at December 26,
1998 and 7.5% at December 27, 1997, for the discount rate used in calculating
the projected benefit obligation and (c) 3.25% for the rate of average future
increases in compensation levels.
F-31
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Net pension expense for the twelve months ended December 26, 1998,
December 27, 1997, and December 28, 1996 includes the following components (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
NET PENSION EXPENSE
- -------------------
Service cost-benefits earned during the period ... $ 928 $ 875 $ 721
Interest cost on projected benefit obligation .... 2,166 2,003 1,688
Expected return on plan assets ................... (3,052) (2,722) (2,232)
Amortization of prior service cost ............... 88 84 73
Amortization of unrecognized net gain ............ (79) (29) (51)
Amortization of transition gain .................. (39) (42) (193)
------- ------- -------
Net pension expense .......................... $ 12 $ 169 $ 6
======= ======= =======
</TABLE>
Reconciliations of the change in benefit obligation, change in plan
assets, and the funded status of the plans for the twelve months ended December
26, 1998 and December 27, 1997 are as follows (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
----------- -----------
CHANGE IN BENEFIT OBLIGATION
- ----------------------------
Benefit obligation at beginning of year .......... $ 29,116 $ 24,347
Service cost ..................................... 928 875
Interest cost .................................... 2,166 2,003
Employee contributions ........................... 80 80
Plan amendments .................................. -- 246
Actuarial loss ................................... 2,252 2,690
Expected benefits paid ........................... (1,175) (994)
Foreign currency exchange rate changes ........... (212) (131)
-------- --------
Benefit obligation at end of year ............ $ 33,155 $ 29,116
======== ========
CHANGE IN PLAN ASSETS
- ---------------------
Fair value of plan assets at beginning of year ... $ 34,862 $ 31,171
Actual return on plan assets ..................... 7,890 4,632
Employee contributions ........................... 80 80
Expected benefits paid ........................... (1,175) (994)
Asset gain ....................................... -- 170
Foreign currency exchange rate changes ........... (340) (197)
-------- --------
Fair value of plan assets at end of year ..... $ 41,317 $ 34,862
======== ========
F-32
<PAGE>
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
RECONCILIATION OF THE FUNDED STATUS
- -----------------------------------
Funded status ................................ $ 8,162 $ 5,746
Unrecognized transition asset ................ (271) (335)
Unrecognized prior service cost .............. 439 527
Unrecognized actuarial gain .................. (6,202) (3,743)
------- -------
Prepaid benefit cost ..................... $ 2,128 $ 2,195
======= =======
Postretirement Benefits Other than Pensions--The Company provides
Company-sponsored postretirement health care and life insurance benefits to
certain U.S. retirees. These plans require employees to share in the costs.
Approximately 87% of all U.S. personnel would become eligible for
Company-sponsored postretirement health care and life insurance if they were to
retire from the Company.
The components of the postretirement net periodic benefit expense for the
twelve months ended December 26, 1998, December 27, 1997, and December 28, 1996
are as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
NET PERIODIC POSTRETIREMENT EXPENSE
- -----------------------------------
Service cost-benefits earned during the period ........ $ 347 $ 240 $218
Interest cost on accumulated benefit obligation ....... 813 621 534
Amortization of prior service cost .................... 217 217 97
Recognized actuarial loss ............................. 54 -- --
------ ------ ----
Net periodic postretirement expense ............... $1,431 $1,078 $849
====== ====== ====
</TABLE>
Reconciliations of the change in benefit obligation, change in plan
assets, and the funded status of the plan for the twelve months ended December
26, 1998 and December 27, 1997 are as follows (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
CHANGE IN BENEFIT OBLIGATION
- ----------------------------
Benefit obligation at beginning of year ....... $ 8,938 $ 9,733
Service cost .................................. 347 240
Interest cost ................................. 813 621
Employee contributions ........................ 131 194
Plan amendments ............................... 327 4
Actuarial loss or (gain) ...................... 2,309 (1,546)
Benefits paid ................................. (266) (308)
-------- -------
Benefit obligation at end of year ......... $ 12,599 $ 8,938
======== =======
F-33
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
CHANGE IN PLAN ASSETS
- ---------------------
Fair value of plan assets at beginning of year .... $ -- $ --
Employer contributions ............................ 135 114
Employee contributions ............................ 131 194
Expected benefits paid ............................ (266) (308)
-------- -------
Fair value of plan assets at end of year ...... $ -- $ --
======== =======
RECONCILIATION OF THE FUNDED STATUS
- -----------------------------------
Funded status ..................................... $(12,599) $(8,938)
Unrecognized prior service cost ................... 1,469 1,686
Unrecognized actuarial loss ....................... 2,306 50
-------- -------
Net amount recognized at year-end ............. $ (8,824) $(7,202)
======== =======
The assumed health care cost trend rate for 1998 was 8.5%. This rate
trends down until the final trend rate of 5.25% is reached in 2005. A one
percentage point increase in the assumed health care costs trend rate increases
the sum of the service and interest costs components of the fiscal 1998 net
periodic postretirement benefit expense by 18%, and the accumulated
postretirement benefit obligation as of December 26, 1998 by 16%. A one
percentage point decrease in the assumed health care costs trend rate decreases
the sum of the service and interest costs components of the fiscal 1998 net
periodic postretirement benefit expense by 14%, and the accumulated
postretirement benefit obligation as of December 26, 1998 by 13%. The discount
rate used to estimate the accumulated postretirement benefit obligations was
7.0% and 7.5% at December 26, 1998 and December 27, 1997, respectively.
Defined Contribution Benefit Plans--The Company also provides two
non-contributory defined contribution plans and a contributory 401(k) plan
covering various employee groups. The amounts charged to earnings for the
Company's defined contribution plans totaled $4.8 million, $4.1 million and $4.6
million for the twelve months ended December 26, 1998, December 27, 1997, and
December 28, 1996, respectively.
14. RELATED PARTY TRANSACTIONS
Two former directors and senior executive officers of the Company, are
general partners of the Apparel Partnership, holding beneficial interests of
58.5% and 13.5%, respectively, in the Apparel Partnership. Under a consulting
agreement, which commenced in the third quarter of 1995, the Company has
retained one of these former directors and senior executive officers of the
Company as a consultant for a five-year period at an annual fee of $250,000 plus
expenses and certain benefits. The consulting agreement does not require the
individual to devote any minimum amount of time to the performance of consulting
services.
15. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are dispersed throughout the United States
and Canada. No single customer accounted for more than 10% of the Company's
consolidated net sales in 1998, 1997, or 1996 with the exception of its largest
customer (approximately 23% in 1998, 20% in 1997, and 18% in 1996), which were
made primarily from the Company's two largest segments. At December 26, 1998 and
December 27, 1997, no account receivable from any customer was significant,
except for the Company's largest customer (approximately $24.8 million in 1998
and $12.6 million in 1997). Aggregate receivables from high risk customers are
not considered significant and the Company estimates, based upon past
experience, that it has sufficient reserves to cover any losses arising from any
such accounts.
F-34
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, Receivables, Accounts Payable, Income Taxes and Accrued
Expenses--The carrying amounts approximate fair value because of the short-term
maturity of these instruments.
1997 Credit Agreement--The carrying amounts approximate fair value because
the rate of interest on borrowings under the 1997 Credit Agreement is, at the
Company's option, a function of various alternative short-term borrowing rates,
as defined in the associated Credit Agreement.
Long-term Debt, Interest Rate Derivatives, and Other Financial
Instruments--The fair value of the following financial instruments was estimated
at December 26, 1998 and December 27, 1997 as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 26, 1998 DECEMBER 27, 1997
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes (a)........................ $ 360,000 $ 373,500 $ 360,000 $ 369,000
8 7/8% Senior Notes (a)................................. 150,000 157,875 150,000 153,750
15% Notes due from Playtex Apparel Partners, L.P. (b)... 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to Playtex Apparel
Partners, L.P. (b)................................... 78,386 78,386 78,386 78,386
Other noncurrent assets (c)............................. 3,112 3,082 3,626 3,520
Noncurrent liabilities (c).............................. 14,049 13,887 13,563 12,340
Interest Rate Swap (d).................................. -- (2,090) -- --
</TABLE>
- ----------
(a) At December 26, 1998 and December 27, 1997, the estimates were based on
the average range of bid/ask quotes provided by independent securities
dealers.
(b) The estimated fair value approximates the carrying amount at December 26,
1998 and December 27, 1997, based on the amount of future cash flows
associated with these instruments, discounted using an appropriate
interest rate.
(c) The fair values are based on a combination of actual cost associated with
recent purchases or the amount of future cash flows discounted using the
Company's borrowing rate for similar instruments.
(d) The fair value is based upon quoted market price (Mark to Market) at
December 26, 1998. At December 27, 1997, the Company held an interest rate
cap with no carrying value and an immaterial estimated fair value.
F-35
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. QUARTERLY DATA (UNAUDITED)
The following is a summary of the quarterly results of operations and
market price data for the Company for the twelve months ended December 26, 1998
and December 27, 1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1998 QUARTER QUARTER QUARTER QUARTER
- ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $172,689 $177,560 $162,597 $156,767
Operating earnings............................... 37,719 34,398 31,771 27,546
Net earnings..................................... 11,310 9,104 7,923 5,893
Earnings per share (a):
Net earnings--basic and diluted.............. $ .20 $ .15 $ .13 $ .10
Market price --high............................. $ 14 15/16 $ 17 $ 17 1/8 $ 16 3/4
--low.............................. $ 9 7/16 $ 13 5/16 $ 10 1/8 $ 12 1/4
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1997 QUARTER QUARTER QUARTER QUARTER
- ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $136,410 $134,872 $117,675 $111,675
Operating earnings............................... 30,679 26,287 24,130 18,606
Earnings before extraordinary loss............... 7,848 5,517 4,034 1,332
Net earnings (loss).............................. 7,848 5,517 (44) 1,332
Earnings per share--basic and diluted (a):
Before extraordinary loss.................... $ .15 $ .11 $ .08 $ .03
Net earnings................................. $ .15 $ .11 $ -- $ .03
Market price -- high............................. $ 11 3/4 $ 11 1/2 $ 10 1/4 $ 11
-- low.............................. $ 7 7/8 $ 9 $ 8 13/16 $ 9
</TABLE>
- -----------
(a) Earnings per share data are computed independently for each of the periods
presented; therefore, the sum of the earnings per share amounts for the
quarters may not equal the total for the year.
F-36
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
8 7/8% SENIOR NOTES DUE 2004
The Senior Notes are guaranteed by certain wholly-owned subsidiaries of
the Company (the "8 7/8% Guarantors"), namely Playtex Sales & Services, Inc.
("PSSI"), Playtex Manufacturing, Inc. ("PMI"), Playtex Beauty Care, Inc.
("PBCI"), Playtex Investment Corp. ("PIC"), Playtex International Corp.
("PINTL"), TH Marketing Corp. ("THMC"), SmileTote, Inc. ("STI"), Sun
Pharmaceuticals Corp. ("Sun"), Personal Care Group, Inc. ("PCG"), Personal Care
Holdings, Inc. ("PCH"), and Carewell Industries, Inc. ("Carewell"). The
remaining first tier and lower tier subsidiaries of the Company are not
guarantors of the 8 7/8% Notes (the "8 7/8% Non-Guarantors"). PSSI provides
sales solicitation, management and administrative services to the Company and
its U.S. affiliates. PMI is a contract manufacturer and contract research and
development services provider for the Company and its U.S. affiliates. PBCI is a
manufacturer and distributor of JHIRMACK hair care products. PIC is an
investment holding company which holds the Apparel Debentures (see Note 6).
PINTL is sole shareholder of Playtex Limited, a manufacturer and distributor of
Playtex products in Canada. THMC is the sole shareholder of Playtex Foreign
Sales Corporation. STI is owner of certain infant care related intangible
assets. Sun owns the Banana Boat trade name and certain other intangible assets
associated with the BANANA BOAT business. Sun distributes its products outside
the U.S. and Puerto Rico and to certain U.S. distributors excluding the Company.
Sun has entered into license agreements with the Company and other unrelated
licensors for the right to use the BANANA BOAT trade name and intangible assets
associated with the BANANA BOAT sun and skin care business and manufacture and
distribute BANANA BOAT products. PCG is owner of various personal care related
intangible assets. PCH is sole shareholder of PCG. Carewell is owner of certain
dental care related intangible assets.
The 8 7/8% Non-Guarantors include Playtex Limited, Playtex Foreign Sales
Corporation ("PFSC"), a foreign sales corporation as defined by Internal Revenue
Code Section 922 and Personal Care Group Australia PTY LTD ("PCG Aust"), a
distributor of personal care products in Australia and New Zealand.
The 8 7/8% Guarantors are joint and several guarantors of the 8 7/8%
Notes. Such guarantees are irrevocable, full and unconditional and are limited
to the largest amount that would not render such 8 7/8% Guarantors' obligations
under the guarantees subject to avoidance under any applicable federal or state
fraudulent conveyance or similar law. The guarantees are senior subordinated
obligations of the applicable 8 7/8% Guarantor, and are subordinated to all
senior obligations of such 8 7/8% Guarantor, including guarantees of the
Company's obligations under the 1997 Credit Agreement.
The 8 7/8% Notes contain certain restrictions and limitations, which,
among other things, restrict the type and/or amount of additional indebtedness
that may be incurred by the Company or its subsidiaries; payment of dividends
and other distributions; issuance of preferred stock; loans and advances;
certain transactions with the Company stockholders and affiliates; certain
mergers and consolidations; certain sales or transfers of assets; the creation
of certain liens; the transfer of assets to certain subsidiaries; and
restrictions on dividends and other distributions by subsidiaries, including the
8 7/8% Guarantors.
The information which follows presents the condensed financial position as
of December 26, 1998 and December 27, 1997 and condensed statements of earnings
and cash flows for each of the fiscal years in the three year period ended
December 26, 1998 of (a) the Company on a consolidated basis, (b) the parent
company only ("Parent Company"), (c) the combined 8 7/8% Guarantors, and (d) the
combined 8 7/8% Non-Guarantors.
F-37
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 26, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets ................................... $ 189,146 $ 8 $ 116,377 $ 61,001 $ 11,760
Investment in subsidiaries ....................... -- (297,273) 288,177 9,095 1
Intercompany receivable .......................... -- (88,942) 33,343 54,076 1,523
Net property, plant and equipment ................ 78,906 -- 1,368 76,705 833
Intangible assets ................................ 548,040 -- 312,890 235,145 5
Other noncurrent assets .......................... 83,129 (500) 3,112 80,517 --
------------ ------------ ------------ ------------ ------------
Total assets .................................. $ 899,221 $ (386,707) $ 755,267 $ 516,539 $ 14,122
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 110,598 $ 26 $ 99,582 $ 7,297 $ 3,693
Intercompany payable ............................. -- (88,942) (106,170) 193,477 1,635
Long-term debt ................................... 886,261 (500) 886,761 -- --
Other noncurrent liabilities ..................... 43,337 -- 16,069 27,588 (320)
------------ ------------ ------------ ------------ ------------
Total liabilities ............................. 1,040,196 (89,416) 896,242 228,362 5,008
Stockholders' equity ............................. (140,975) (297,291) (140,975) 288,177 9,114
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity .... $ 899,221 $ (386,707) $ 755,267 $ 516,539 $ 14,122
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets ................................... $ 125,362 $ -- $ 71,923 $ 43,820 $ 9,619
Investment in subsidiaries ....................... -- (87,940) 77,776 10,164 --
Intercompany receivable .......................... -- (158,030) 143,647 13,286 1,097
Net property, plant and equipment ................ 54,810 -- 235 53,718 857
Intangible assets ................................ 388,743 -- 322,216 66,522 5
Other noncurrent assets .......................... 83,643 (503) 3,629 80,517 --
------------ ------------ ------------ ------------ ------------
Total assets .................................. $ 652,558 $ (246,473) $ 619,426 $ 268,027 $ 11,578
------------ ------------ ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 68,960 $ 22 $ 57,590 $ 8,807 $ 2,541
Intercompany payable ............................. -- (158,029) -- 157,641 388
Long-term debt ................................... 814,686 -- 814,686 -- --
Other noncurrent liabilities ..................... 36,975 (507) 15,213 22,649 (380)
------------ ------------ ------------ ------------ ------------
Total liabilities ............................. 920,621 (158,514) 887,489 189,097 2,549
Stockholders' equity ............................. (268,063) (87,959) (268,063) 78,930 9,029
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity .... $ 652,558 $ (246,473) $ 619,426 $ 268,027 $ 11,578
============ ============ ============ ============ ============
</TABLE>
F-38
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In Thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues .................................... $ 669,613 $ (307,484) $ 595,947 $ 341,183 $ 39,967
Cost of sales ................................... 277,555 (218,942) 244,496 233,988 18,013
------------ ------------ ------------ ------------ ------------
Gross profit ................................ 392,058 (88,542) 351,451 107,195 21,954
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative ......... 243,288 (88,542) 235,355 77,159 19,316
Amortization of intangibles ..................... 17,336 -- 10,656 6,680 --
------------ ------------ ------------ ------------ ------------
Total operating expenses .................... 260,624 (88,542) 246,011 83,839 19,316
------------ ------------ ------------ ------------ ------------
Operating earnings .......................... 131,434 -- 105,440 23,356 2,638
Interest expense, net ........................... 71,518 -- 83,621 (12,004) (99)
Equity in net earnings of subsidiaries .......... -- 25,234 (23,269) (1,965) --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................ 59,916 (25,234) 45,088 37,325 2,737
Income taxes .................................... 25,686 -- 10,858 14,055 773
------------ ------------ ------------ ------------ ------------
Net earnings ................................ $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In Thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues .................................... $ 500,632 $ (226,874) $ 443,673 $ 245,797 $ 38,036
Cost of sales ................................... 195,980 (177,208) 186,482 168,411 18,295
------------ ------------ ------------ ------------ ------------
Gross profit ................................ 304,652 (49,666) 257,191 77,386 19,741
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative ......... 192,056 (49,666) 160,671 62,606 18,445
Amortization of intangibles ..................... 12,894 -- 10,618 2,276 --
------------ ------------ ------------ ------------ ------------
Total operating expenses .................... 204,950 (49,666) 171,289 64,882 18,445
------------ ------------ ------------ ------------ ------------
Operating earnings .......................... 99,702 -- 85,902 12,504 1,296
Interest expense, net ........................... 64,470 -- 76,594 (12,003) (121)
Equity in net earnings of subsidiaries .......... -- 17,216 (16,110) (1,106) --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................ 35,232 (17,216) 25,418 25,613 1,417
Income taxes .................................... 16,501 -- 6,687 9,503 311
------------ ------------ ------------ ------------ ------------
Earnings before extraordinary loss .......... 18,731 (17,216) 18,731 16,110 1,106
Extraordinary loss on early extinguishment
of debt, net ................................ (4,078) -- (4,078) -- --
------------ ------------ ------------ ------------ ------------
Net earnings ................................ $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
============ ============ ============ ============ ============
</TABLE>
F-39
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues ..................................... $ 498,742 $ (167,269) $ 438,127 $ 188,217 $ 39,667
Cost of sales .................................... 192,512 (104,374) 161,849 116,884 18,153
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 306,230 (62,895) 276,278 71,333 21,514
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 194,184 (62,895) 171,534 65,721 19,824
Amortization of intangibles ...................... 12,846 -- 10,570 2,276 --
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 207,030 (62,895) 182,104 67,997 19,824
------------ ------------ ------------ ------------ ------------
Operating earnings ........................... 99,200 -- 94,174 3,336 1,690
Interest expense, net ............................ 64,860 -- 76,864 (12,004) --
Equity in net earnings of subsidiaries ........... -- 11,339 (10,456) (883) --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 34,340 (11,339) 27,766 16,223 1,690
Income taxes ..................................... 16,141 -- 9,567 5,767 807
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 18,199 $ (11,339) $ 18,199 $ 10,456 $ 883
============ ============ ============ ============ ============
</TABLE>
F-40
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
Non-cash items included in earnings:
Amortization of intangibles ............... 17,336 -- 10,656 6,680 --
Amortization of deferred financing
costs ................................ 2,995 -- 2,995 -- --
Depreciation .............................. 9,690 -- 72 9,376 242
Deferred taxes ............................ 6,244 -- 8,318 (2,107) 33
Other, net ................................ 36 25,242 (50,682) 26,117 (641)
Increase in net working capital .............. (17,314) -- 4,330 (21,027) (617)
Increase in amounts due to Parent ............ -- -- 18,938 (19,775) 837
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ....... 53,217 8 28,857 22,534 1,818
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................. (16,405) -- (1,701) (14,421) (283)
Business or investments acquired ............. (106,581) -- (106,581) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ........................ (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations ............................... 73,950 -- 73,950 -- --
Payment of financing costs ................... (2,692) -- (2,692) -- --
Issuance of shares of common stock, net ...... 2,151 -- 2,151 -- --
Receipt (payment) of dividends ............... -- -- 8,810 (7,645) (1,165)
------------ ------------ ------------ ------------ ------------
Net cash flows provided by
(used for) financing activities ... 73,409 -- 82,219 (7,645) (1,165)
Increase in cash ................................. 3,640 8 2,794 468 370
Cash at beginning of period ...................... 3,231 -- 668 -- 2,563
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,871 $ 8 $ 3,462 $ 468 $ 2,933
============ ============ ============ ============ ============
</TABLE>
F-41
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
Non-cash items included in earnings:
Extraordinary loss ........................ 4,078 -- 4,078 -- --
Amortization of intangibles ............... 12,894 -- 10,618 2,276 --
Amortization of deferred financing
costs ................................ 2,163 -- 2,163 -- --
Depreciation .............................. 7,520 -- 94 7,191 235
Deferred taxes ............................ 5,493 -- 3,752 1,798 (57)
Other, net ................................ 249 17,216 (16,742) 42 (267)
Increase in net working capital .............. (30,182) -- (15,852) (11,173) (3,157)
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ....... 16,868 -- 2,764 16,244 (2,140)
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................. (9,004) -- (82) (8,599) (323)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ........................ (9,004) -- (82) (8,599) (323)
Cash flows used for financing activities:
Net repayments under working capital
facilities and long-term debt
obligations ............................... (1,900) -- (1,900) -- --
Payment of financing costs ................... (9,367) -- (9,367) -- --
Issuance of shares of common stock, net ...... 429 -- 429 -- --
Receipt (payment) of dividends ............... -- -- 7,645 (7,645) --
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ........................ (10,838) -- (3,193) (7,645) --
Decrease in cash ................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period ...................... 6,205 -- 1,179 -- 5,026
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
============ ============ ============ ============ ============
</TABLE>
F-42
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 18,199 $ (11,339) $ 18,199 $ 10,456 $ 883
Non-cash items included in earnings:
Amortization of intangibles .............. 12,846 -- 10,570 2,276 --
Amortization of deferred financing
costs ............................... 2,089 -- 2,089 -- --
Depreciation ............................. 8,929 -- 72 8,605 252
Deferred taxes ........................... 6,842 -- 7,963 (1,130) 9
Other, net ............................... 48 11,339 (10,279) (1,003) (9)
Decrease (increase) in net working
capital .................................. 11,351 -- 13,273 (1,976) 54
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 60,304 -- 41,887 17,228 1,189
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (9,740) -- (45) (9,426) (269)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (9,740) -- (45) (9,426) (269)
Cash flows used for financing activities:
Net repayments under working capital
facilities and long-term debt
obligations .............................. (50,350) -- (50,350) -- --
Issuance of shares of common stock, net ...... 60 -- 60 -- --
Receipt (payment) of dividends ............... -- -- 7,802 (7,802) --
Other, net ................................... (9) -- (9) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... (50,299) -- (42,497) (7,802) --
Increase (decrease) in cash ...................... 265 -- (655) -- 920
Cash at beginning of period ...................... 5,940 -- 1,834 -- 4,106
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,205 $ -- $ 1,179 $ -- $ 5,026
============ ============ ============ ============ ============
</TABLE>
F-43
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
9% SENIOR SUBORDINATED NOTES DUE 2003
The 9% Notes are guaranteed by certain wholly owned subsidiaries of the
Company (the "9% Guarantors"), PSSI, PMI, THMC, STI, Sun, PCG, PCH and Carewell.
The remaining first tier and lower tier subsidiaries of the Company are not
guarantors of the 9% Notes (the "9% Non-Guarantors"). The 9% Non-Guarantors
include PBCI, PIC, PINTL, Playtex Limited, PFSC and PCG Aust.
The 9% Guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are irrevocable, and full and unconditional and are limited to the
largest amount that would not render such 9% Guarantors' obligations under the
guarantees subject to avoidance under any applicable federal or state fraudulent
conveyance or similar law. The guarantees are senior subordinated obligations of
the applicable 9% Guarantor, and are subordinated to all senior obligations of
such 9% Guarantor, including guarantees of the Company's obligations under the
1997 Refinancing.
The 9% Notes contain certain restrictions and limitations, which, among
other things, restrict the type and/or amount of additional indebtedness that
may be incurred by the Company or its subsidiaries; payment of dividends and
other distributions; issuances of preferred stock; loans and advances; certain
transactions with the Company stockholders and affiliates; certain mergers and
consolidations; certain sales or transfers of assets; the creation of certain
liens; the transfer of assets to certain subsidiaries; and restrictions on
dividends and other distributions by subsidiaries, including the 9% Guarantors.
The information which follows presents the condensed financial position as
of December 26, 1998 and December 27, 1997 and condensed statements of earnings
and cash flows for each of the fiscal years in the three year period ended
December 26, 1998 of (a) the Company on a consolidated basis, (b) the parent
company only ("Parent Company"), (c) the combined 9% Guarantor, and (d) the
combined 9% Non-Guarantors.
F-44
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets ................................... $ 189,146 $ 8 $ 116,377 $ 59,014 $ 13,747
Investment in subsidiaries ....................... -- (290,631) 288,177 1,146 1,308
Intercompany receivable .......................... -- (88,942) 33,343 53,631 1,968
Net property, plant and equipment ................ 78,906 -- 1,368 76,312 1,226
Intangible assets ................................ 548,040 -- 312,890 233,233 1,917
Other noncurrent assets .......................... 83,129 (500) 3,112 -- 80,517
------------ ------------ ------------ ------------ ------------
Total assets ................................. $ 899,221 $ (380,065) $ 755,267 $ 423,336 $ 100,683
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 110,598 $ 26 $ 99,582 $ 6,419 $ 4,571
Intercompany payable ............................. -- (88,942) (106,170) 64,861 130,251
Long-term debt ................................... 886,261 (500) 886,761 -- --
Other noncurrent liabilities ..................... 43,337 -- 16,069 9,350 17,918
------------ ------------ ------------ ------------ ------------
Total liabilities ............................ 1,040,196 (89,416) 896,242 80,630 152,740
Stockholders' equity ............................. (140,975) (290,649) (140,975) 342,706 (52,057)
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity ... $ 899,221 $ (380,065) $ 755,267 $ 423,336 $ 100,683
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets ................................... $ 125,362 $ -- $ 71,923 $ 40,293 $ 13,146
Investment in subsidiaries ....................... -- (80,084) 77,776 1,154 1,154
Intercompany receivable .......................... -- (158,024) 143,647 13,280 1,097
Net property, plant and equipment ................ 54,810 -- 235 53,210 1,365
Intangible assets ................................ 388,743 -- 322,216 64,542 1,985
Other noncurrent assets .......................... 83,643 (503) 3,629 -- 80,517
------------ ------------ ------------ ------------ ------------
Total assets ................................. $ 652,558 $ (238,611) $ 619,426 $ 172,479 $ 99,264
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 68,960 $ 22 $ 57,590 $ 7,520 $ 3,828
Intercompany payable ............................. -- (158,023) -- 29,179 128,844
Long-term debt ................................... 814,686 -- 814,686 -- --
Other noncurrent liabilities ..................... 36,975 (507) 15,213 4,636 17,633
------------ ------------ ------------ ------------ ------------
Total liabilities ............................ 920,621 (158,508) 887,489 41,335 150,305
Stockholders' equity ............................. (268,063) (80,103) (268,063) 131,144 (51,041)
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity ... $ 652,558 $ (238,611) $ 619,426 $ 172,479 $ 99,264
============ ============ ============ ============ ============
</TABLE>
F-45
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues ..................................... $ 669,613 $ (309,131) $ 595,947 $ 333,196 $ 49,601
Cost of sales .................................... 277,555 (219,148) 244,496 228,690 23,517
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 392,058 (89,983) 351,451 104,506 26,084
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 243,288 (89,983) 235,355 72,767 25,149
Amortization of intangibles ...................... 17,336 -- 10,656 6,612 68
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 260,624 (89,983) 246,011 79,379 25,217
------------ ------------ ------------ ------------ ------------
Operating earnings ........................... 131,434 -- 105,440 25,127 867
Interest expense, net ............................ 71,518 -- 83,621 (1) (12,102)
Equity in net earnings of subsidiaries ........... -- 27,186 (23,269) (1,317) (2,600)
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 59,916 (27,186) 45,088 26,445 15,569
Income taxes ..................................... 25,686 -- 10,858 10,311 4,517
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues ..................................... $ 500,632 $ (226,538) $ 443,673 $ 230,102 $ 53,395
Cost of sales .................................... 195,980 (176,872) 186,482 160,609 25,761
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 304,652 (49,666) 257,191 69,493 27,634
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 192,056 (49,666) 160,671 51,826 29,225
Amortization of intangibles ...................... 12,894 -- 10,618 2,208 68
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 204,950 (49,666) 171,289 54,034 29,293
------------ ------------ ------------ ------------ ------------
Operating earnings (loss) .................... 99,702 -- 85,902 15,459 (1,659)
Interest expense, net ............................ 64,470 -- 76,594 -- (12,124)
Equity in net earnings of subsidiaries ........... -- 18,418 (16,110) (1,154) (1,154)
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 35,232 (18,418) 25,418 16,613 11,619
Income taxes ..................................... 16,501 -- 6,687 6,229 3,585
------------ ------------ ------------ ------------ ------------
Earnings before extraordinary loss ........... 18,731 (18,418) 18,731 10,384 8,034
Extraordinary loss on early extinguishment
of debt, net ................................. (4,078) -- (4,078) -- --
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
============ ============ ============ ============ ============
</TABLE>
F-46
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues ..................................... $ 498,742 $ (167,269) $ 438,127 $ 169,020 $ 58,864
Cost of sales .................................... 192,512 (104,374) 161,849 108,699 26,338
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 306,230 (62,895) 276,278 60,321 32,526
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 194,184 (62,895) 171,534 53,671 31,874
Amortization of intangibles ...................... 12,846 -- 10,570 2,208 68
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 207,030 (62,895) 182,104 55,879 31,942
------------ ------------ ------------ ------------ ------------
Operating earnings ........................... 99,200 -- 94,174 4,442 584
Interest expense, net ............................ 64,860 -- 76,864 -- (12,004)
Equity in net earnings of subsidiaries ........... -- 10,456 (10,456) -- --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 34,340 (10,456) 27,766 4,442 12,588
Income taxes ..................................... 16,141 -- 9,567 2,034 4,540
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 18,199 $ (10,456) $ 18,199 $ 2,408 $ 8,048
============ ============ ============ ============ ============
</TABLE>
F-47
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
Non-cash items included in earnings:
Amortization of intangibles .............. 17,336 -- 10,656 6,612 68
Amortization of deferred financing
costs ............................... 2,995 -- 2,995 -- --
Depreciation ............................. 9,690 -- 72 9,261 357
Deferred taxes ........................... 6,244 -- 8,318 (1,558) (516)
Other, net ............................... 36 27,194 (50,682) 25,860 (2,336)
(Increase) decrease in net
working capital .......................... (17,314) -- 4,330 (21,935) 291
Increase in amounts due to Parent ............ -- -- 18,938 (19,486) 548
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 53,217 8 28,857 14,888 9,464
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (16,405) -- (1,701) (14,421) (283)
Business or investments acquired ............. (106,581) -- (106,581) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations .............................. 73,950 -- 73,950 -- --
Payment of financing costs ................... (2,692) -- (2,692) -- --
Issuance of shares of common stock ........... 2,151 -- 2,151 -- --
Receipt (payment) of dividends ............... -- -- 8,810 -- (8,810)
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... 73,409 -- 82,219 -- (8,810)
Increase in cash ................................. 3,640 8 2,794 467 371
Cash at beginning of period ...................... 3,231 -- 668 -- 2,563
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,871 $ 8 $ 3,462 $ 467 $ 2,934
============ ============ ============ ============ ============
</TABLE>
F-48
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
Non-cash items included in earnings:
Extraordinary loss ....................... 4,078 -- 4,078 -- --
Amortization of intangibles .............. 12,894 -- 10,618 2,208 68
Amortization of deferred financing
costs ............................... 2,163 -- 2,163 -- --
Depreciation ............................. 7,520 -- 94 7,074 352
Deferred taxes ........................... 5,493 -- 3,752 1,823 (82)
Other, net ............................... 249 18,418 (16,742) (5) (1,422)
Increase in net working capital .............. (30,182) -- (15,852) (12,943) (1,387)
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 16,868 -- 2,764 8,541 5,563
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (9,004) -- (82) (8,541) (381)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (9,004) -- (82) (8,541) (381)
Cash flows used for financing activities:
Net payments under working capital
facilities and long-term debt
obligations .............................. (1,900) -- (1,900) -- --
Payment of financing costs ................... (9,367) -- (9,367) -- --
Issuance of shares of common stock ........... 429 -- 429 -- --
Receipt (payment) of dividends ............... -- -- 7,645 -- (7,645)
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... (10,838) -- (3,193) -- (7,645)
Decrease in cash ................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period ...................... 6,205 -- 1,179 -- 5,026
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
============ ============ ============ ============ ============
</TABLE>
F-49
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996:
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 18,199 $ (10,456) $ 18,199 $ 2,409 $ 8,047
Non-cash items included in earnings:
Amortization of intangibles .............. 12,846 -- 10,570 2,208 68
Amortization of deferred financing
costs ............................... 2,089 -- 2,089 -- --
Depreciation ............................. 8,929 -- 72 8,428 429
Deferred taxes ........................... 6,842 -- 7,963 (1,437) 316
Other, net ............................... 48 10,456 (10,279) (120) (9)
Decrease (increase) in net working
capital .................................. 11,351 -- 13,273 (2,074) 152
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 60,304 -- 41,887 9,414 9,003
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (9,740) -- (45) (9,414) (281)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (9,740) -- (45) (9,414) (281)
Cash flows used for financing activities:
Net payments under working capital
facilities and long-term debt
obligations .............................. (50,350) -- (50,350) -- --
Issuance of shares of common stock ........... 60 -- 60 -- --
Receipt (payment) of dividends ............... -- -- 7,802 -- (7,802)
Other, net ................................... (9) -- (9) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... (50,299) -- (42,497) -- (7,802)
Increase (decrease) in cash ...................... 265 -- (655) -- 920
Cash at beginning of period ...................... 5,940 -- 1,834 -- 4,106
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,205 $ -- $ 1,179 $ -- $ 5,026
============ ============ ============ ============ ============
</TABLE>
F-50
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUBSEQUENT EVENTS
On January 29, 1999, the Company completed the acquisition of the Diaper
Genie(R) business, the leading diaper disposal system in the U.S., from
privately-held Mondial Industries L.P. ("Mondial") for approximately $122
million. The purchase price consisted of $72 million in cash and the issuance to
Mondial of $50 million principal amount of convertible notes. The cash portion
of the consideration was financed through the Company's 1997 Revolving Credit
Facility. The newly issued convertible notes bear a rate of interest of 6.00%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of the Company's Common Stock. The conversion
price is approximately $19.15 per share. The notes will mature in 2004 and are
callable by the Company after January 29, 2002. The acquisition was accounted
for as an asset purchase.
F-51
<PAGE>
PLAYTEX PRODUCTS, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Playtex Products, Inc.:
We have audited the accompanying consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 26, 1998 and December 27, 1997,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the twelve months ended December 26, 1998, December
27, 1997 and December 28, 1996 included on pages F-15 through F-51 in the
Company's Annual Report on Form 10-K. In connection with our audits of the
consolidated financial statements, we also have audited the related consolidated
financial statement schedule, on page 20 in the Company's Annual Report on Form
10-K. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Playtex Products, Inc. and subsidiaries as of December 26, 1998 and December 27,
1997 and the results of their operations and their cash flows for the twelve
months ended December 26, 1998, December 27, 1997 and December 28, 1996, in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth herein.
/s/ KPMG LLP
February 4, 1999
Stamford, Connecticut
F-52
<PAGE>
PLAYTEX PRODUCTS, INC.
REPORT OF MANAGEMENT
The management of Playtex Products, Inc. is responsible for the financial
and operating information contained in the Annual Report, including the
financial statements covered by the independent auditors' report. These
statements were prepared in conformity with generally accepted accounting
principles and include, where necessary, informed estimates and judgments.
The Company maintains systems of accounting and internal control designed
to provide reasonable assurance that assets are safeguarded against loss, and
that transactions are executed and recorded properly so as to ensure that the
financial records are reliable for preparing financial statements.
Elements of these control systems are the establishment and communication
of accounting and administrative policies and procedures, the selection and
training of qualified personnel, and continuous programs of internal review.
The Company's financial statements are reviewed by its Audit Committee,
which is composed entirely of non-employee Directors. This Committee meets with
the independent auditors and management to review the scope and results of the
annual audit, interim reviews, internal controls, and financial reporting
matters. The independent auditors have direct access to the Audit Committee.
/s/ MICHAEL R. GALLAGHER
Chief Executive Officer
and Director
/s/ MICHAEL F. GOSS
Executive Vice President,
Chief Financial Officer,
and Director
February 4, 1999
Westport, Connecticut
F-53
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
CORPORATE INFORMATION
Shares of Playtex Products, Inc. Common Stock are traded on the New York
Stock Exchange under the symbol PYX. The Company has not paid a cash dividend
since its inception, and its present policy is to retain earnings for use in its
business. Under its debt agreements, the Company is restricted from paying
dividends unless it meets certain specified financial criteria immediately
following such payment.
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
80 Challenger Road
Ridgefield Park, New Jersey 07660
(800)851-9677
www.chasemellon.com
INDEPENDENT AUDITORS
KPMG LLP
3001 Summer Street
Stamford, CT 06905
CORPORATE OFFICES
Playtex Products, Inc.
300 Nyala Farms Road
Westport, CT 06880
F-54
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
BOARD OF DIRECTORS
Richard C. Blum President and Managing Member of Richard C. Blum
and Associates, L.P.
Michael R. Eisenson President and Chief Executive Officer of
Charlesbank Capital Partners, LLC
Timothy O. Fisher Vice President of The Hillman Group
Michael R. Gallagher Chief Executive Officer
Michael F. Goss Executive Vice President and Chief Financial
Officer
Robert B. Haas Chairman, Chairman of the Board and Chief
Executive Officer of Haas Wheat & Partners
Incorporated
C. Ann Merrifield President of Genzyme Genetics
Jeffrey W. Ubben Managing Director of Investments of Richard C.
Blum and Associates, L.P.
Wyche H. Walton Senior Vice President of Haas Wheat & Partners
Incorporated
Douglas D. Wheat President of Haas Wheat & Partners Incorporated
Kenneth F. Yontz Chairman of the Board, President and Chief
Executive Officer of Sybron International
Corporation
PRINCIPAL OFFICERS
Michael R. Gallagher Chief Executive Officer
Michael F. Goss Executive Vice President and Chief Financial
Officer
Richard G. Powers President, U.S. Personal Products Division
Max R. Recone President, U.S. Consumer Products Division
Irwin S. Butensky Senior Vice President, Biomedical and
Administrative Services
James S. Cook Senior Vice President, Operations
John D. Leahy Senior Vice President, Corporate
Sales/International
Jeffrey M. Brown Vice President, Personal Products Research and
Development
Glenn A. Forbes Vice President, Finance
Jeffrey B. Keane Vice President, International
Frank M. Sanchez Vice President, Human Resources
Uma P. Tripathi Vice President, Consumer Products Research and
Development
Vincent S. Viviani Vice President, Quality Systems
Paul E. Yestrumskas Vice President, General Counsel and Secretary
- ----------
F-55
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3(a) Restated Certificate of Incorporation, as amended through
June 6, 1995. (Incorporated herein by reference to Exhibit
3.2 of Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
3(b) By-laws of the Company, as amended through June 4, 1998.
(Incorporated herein by reference to Exhibit 3(b) of
Playtex's Form 10-Q for the period ended June 27, 1998,
dated August 11, 1998, File No. 33-25485-01.)
4(a) Indenture dated as of February 2, 1994 relating to the 9%
Senior Subordinated Notes due 2003 (the "Senior
Subordinated Notes") among Family Products, Playtex and IBJ
Schroder Bank & Trust Company, as trustee, including form
of Note. (Incorporated herein by reference to Exhibit 4(b)
of Playtex's Annual Report on Form 10-K for the fiscal year
ended December 25, 1993, File No. 33-25485-01.)
4(a)(1) First Supplemental Indenture dated as of March 8, 1994.
(Incorporated herein by reference to Exhibit 4(b)(1) of
Playtex's Annual Report on Form 10-K for the fiscal year
ended December 25, 1993, File No. 33-25485-01.)
4(a)(2) Second Supplemental Indenture, dated as of June 6, 1995
among the Company, Playtex Sales & Service, Inc. and IBJ
Schroder Bank and Trust Company, as Trustee. (Incorporated
herein by reference to Exhibit 4.1 of Playtex's Form 8-K,
dated June 6, 1995, File No. 33-25485-01.)
4(a)(3) Third Supplemental Indenture, dated as of June 6, 1995
among the Company, Playtex Manufacturing Inc. and IBJ
Schroder Bank and Trust Company, as Trustee. (Incorporated
herein by reference to Exhibit 4.2 of Playtex's Form 8-K,
dated June 6, 1995, File No. 33-25485-01.)
4(a)(4) Fourth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, BBA Acquisition, Inc., as Guarantor and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of
October 31, 1995. (Incorporated herein by reference to
Exhibit 4(b)(4) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No.
33-25485-01.)
4(a)(5) Fifth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, BBA Acquisition, Inc., as Guarantor and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of
October 31, 1995. (Incorporated herein by reference to
Exhibit 4(b)(5) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No.
33-25485-01.)
4(a)(6) Sixth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, BBA Acquisition, Inc., as Guarantor and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of
October 31, 1995. (Incorporated herein by reference to
Exhibit 4(b)(6) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No.
33-25485-01.)
4(a)(7) Seventh Supplemental Indenture among Playtex Products,
Inc., as Issuer, TH Marketing Corp., and Smile-Tote Inc.,
as Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of October 31, 1995. (Incorporated herein
by reference to Exhibit 4(b)(7) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 30, 1995,
File No. 33-25485-01.)
X-1
<PAGE>
Exhibit No. Description
- ----------- -----------
4(a)(8) Eighth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, TH Marketing Corp., and Smile-Tote Inc., as
Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of July 21, 1997. (Incorporated herein by
reference to Exhibit 4(b)(8) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 27, 1997, File
No. 33-25485-01.)
4(a)(9) Ninth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, TH Marketing Corp., and Smile-Tote Inc., as
Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of August 27, 1997. (Incorporated herein
by reference to Exhibit 4(b)(9) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 27, 1997,
File No. 33-25485-01.)
4(a)(10) Tenth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, TH Marketing Corp., and Smile-Tote Inc., as
Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of January 28, 1998. (Incorporated herein
by reference to Exhibit 4(b)(10) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 27, 1997,
File No. 33-25485-01.)
4(b) Form of Junior Subordinated Note of Playtex. (Incorporated
herein by reference to Exhibit 4(i) of Playtex's
Registration Statement on Form S-1, No. 33-25485.)
4(b)(1) Form of Junior Subordinated Note of Playtex dated December
15, 1989. (Incorporated herein by reference to Exhibit
4(f)(1) to Playtex's Annual Report on Form 10-K for the
year ended December 30, 1989, No. 33-25485.)
4(b)(2) Junior Subordinated Note of Playtex dated December 15,
1990. (Incorporated herein by reference to Exhibit 4(f)(2)
to Playtex's Annual Report on Form 10-K for the year ended
December 29, 1990, No. 33-25485.)
4(b)(3) Junior Subordinated Note of Playtex dated December 15,
1991. (Incorporated herein by reference to Exhibit 4(h)(3)
of Playtex's Registration Statement on Form S-1, No.
33-43771.)
4(b)(4) Junior Subordinated Note of Playtex dated December 15,
1992. (Incorporated herein by reference to Exhibit 4(h)(4)
of Playtex's Annual Report on Form 10-K for the year ended
December 26, 1992.)
4(b)(5) Junior Subordinated Note of Playtex dated December 15,
1993. (Incorporated herein by reference to Exhibit 4(j)(5)
of Playtex's Registration Statement on Form S-1, No.
33-71512.)
4(b)(6) Agreement between Playtex and Playtex Apparel Partners,
L.P. dated November 30, 1994 relating to Junior
Subordinated Notes. (Incorporated herein by reference to
Exhibit 4(d)(6) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, File No.
33-25485-01.)
4(c) Indenture dated as of July 21, 1997 relating to the 8 7/8
Senior Notes due 2004 (the "Senior Notes") among Playtex
Products, Inc., as Issuer, Playtex Beauty Care, Inc.,
Playtex Investment Corp., Playtex International Corp.,
Playtex Sales & Services, Inc., Playtex Manufacturing,
Inc., Smile-Tote, Inc., Sun Pharmaceuticals Corp., TH
Marketing Corp. (Collectively, the "Guarantors") and Marine
Midland Bank, as Trustee. (Incorporated herein by reference
to Exhibit 4.2 to the Company's Current Report on Form 8-K
dated July 21, 1997.)
4(c)(1) Form of Exchange Notes (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
dated July 21, 1997.)
X-2
<PAGE>
Exhibit No. Description
- ----------- -----------
4(c)(2) Registration Rights Agreement, among the Company, the
Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") (incorporated by
reference to Exhibit 4.3 to the Company's Current Report on
Form 8-K dated July 21, 1997.)
4(c)(3) Purchase Agreement, dated as of July 14, 1997 relating to
the 8 7/8 Senior Notes due 2004 (the "Senior Notes") among
Playtex Products, Inc., as Issuer, Playtex Beauty Care,
Inc., Playtex Investment Corp., Playtex International
Corp., Playtex Sales & Services, Inc., Playtex
Manufacturing, Inc., Smile-Tote, Inc., Sun Pharmaceuticals
Corp., TH Marketing Corp. (Collectively, the "Guarantors")
and Donaldson, Lufkin & Jenrette Securities Corporation.
(Incorporated herein by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated July 21, 1997.)
4(c)(4) First Supplemental Indenture, dated as of January 28, 1998
among the Company, Personal Care Holdings, Inc. ("PCH"),
Personal Care Group, Inc. ("PCG") and Carewell Industries,
Inc. ("Carewell"), (each of PCH, PCG and Carewell being
referred to as a Guarantor), and Marine Midland Bank as
trustee. (Incorporated herein by reference to Exhibit
4(e)(4) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 27, 1997, File No. 33-25485-01.)
10(a) Credit Agreement, dated as of July 21, 1997, among Playtex
Products, Inc., DLJ Funding, as the syndication agent,
Wells Fargo Bank, N.A. ("Wells Fargo"), as the
administrative agent, and the lenders named therein.
(Incorporated herein by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated July 21, 1997.)
10(a)(1) First Amendment, dated as of January 28, 1998, to the
Credit Agreement, dated as of July 21, 1997, among the
Company, DLJ Capital Funding, Inc., as the syndication
agent, Wells Fargo, as the administrative agent, and the
lenders named therein. (Incorporated herein by reference to
Exhibit 10(a)(1) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 27, 1997, File No.
33-25485-01.)
10(b) Term Loan Agreement, dated as of July 21 1997, among
Playtex Products, Inc., DLJ Funding, as the syndication
agent, Wells Fargo, as the facility manager, and the
lenders therein. (Incorporated herein by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K
dated July 21, 1997.)
10(b)(1) First Amendment, dated as of January 28, 1998, to the Term
Loan Agreement, dated as of July 21, 1997, among the
Company, DLJ Capital Funding, Inc., as the syndication
agent, Wells Fargo, as the facility manager, and the
Lenders therein. (Incorporated herein by reference to
Exhibit 10(b)(1) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 27, 1997, File No.
33-25485-01.)
10(c) Playtex Park Profit-Sharing Retirement Plan and Savings
Plan dated December 12, 1986, as amended January 1, 1989.
(Incorporated herein by reference to Exhibit 10(e) of
Playtex's Annual Report on Form 10-K for the year ended
December 30, 1989, No.33-25485.)
10(d) Deferred Benefit Equalization Plan dated August 15, 1977,
as amended April 15, 1987. (Incorporated herein by
reference to Exhibit 10(e) of Playtex Holding's Annual
Report on Form 10-K for the year ended December 28, 1987,
File No. 33-15607.)
10(e) Revised Special Severance Plan dated August 27, 1990.
(Incorporated herein by reference to Exhibit 10(g)(2) of
Playtex's Annual Report on Form 10-K for the year ended
December 29, 1990, File No. 33-25485.)
X-3
<PAGE>
Exhibit No. Description
- ----------- -----------
10(f) Termination Policy for Management Compensation Plan
Participants. (Incorporated herein by reference to Exhibit
10(h)(1) of Playtex's Annual Report on Form 10-K for the
year ended December 30, 1989, File No. 33-25485.)
10(g) Playtex Pension Plan effective January 1, 1989.
(Incorporated herein by reference to Exhibit 10(j) of
Playtex's Registration Statement on Form S-1, No.
33-71512.)
10(h) Retirement Plan for Hourly Employees of TEK effective
January 1, 1989. Incorporated herein by reference to
Exhibit 10(k) of Playtex's Registration Statement on Form
S-1, No. 33-71512.)
10(i) Playtex Management Incentive Plan for 1997. (Incorporated
herein by reference to Exhibit 10(1)(2) of Playtex's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996, File No. 33-25485-01.)
10(j) Consulting Agreement between Family Products and Joel E.
Smilow dated January 30, 1993. (Incorporated herein by
reference to Exhibit 10(m) of Playtex's Registration
Statement on Form S-1, No. 33-71512.)
10(k) Form of Management Contribution and Subscription Agreement.
(Incorporated herein by reference to Exhibit 4(d) of
Playtex's Registration Statement on Form S-1, No.
33-25485.)
10(k)(1) First Amendment to the Management Contribution and
Subscription Agreement dated February 23, 1989.
(Incorporated herein by reference to Exhibit 10(c)(1) of
Playtex's Annual Report on Form 10-K for the year ended
December 30, 1989, No. 33-25485.)
10(k)(2) Second Amendment to the Management Contribution and
Subscription Agreement dated November 15, 1989.
(Incorporated herein by reference to Exhibit 10(c)(2) of
Playtex's Annual Report on Form 10-K for the year ended
December 30, 1989, No. 33-25485.)
10(k)(3) Third Amendment to the Management Contribution and
Subscription Agreement dated August 1, 1990. (Incorporated
herein by reference to Exhibit 10(c)(3) of Playtex's Annual
Report on Form 10-K for the year ended December 29, 1990,
No. 33-25485.)
10(k)(4) Fourth Amendment to the Management and Contribution
Subscription Agreement dated January 1, 1992. (Incorporated
herein by reference to Exhibit 10(q)(4) of Playtex's
Registration Statement on Form S-1, No. 33-71512.)
10(l) Playtex 1994 Stock Option Plan for Directors and Executive
and Key Employees. (Incorporated herein by reference to
Exhibit 10(hh) of Playtex's Registration Statement on Form
S-1, No. 33-71512.)
10(l)(1) Amendment No. 1 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
10(l)(2) Amendment No. 2 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
10(l)(3) Amendment No. 3 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
X-4
<PAGE>
Exhibit No. Description
- ----------- -----------
10(l)(4) Amendment No. 4 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
*10(l)(5) Amendment No. 5 to the 1994 Stock Option Plan.
*10(l)(6) Amendment No. 6 to the 1994 Stock Option Plan.
10(m) Memorandum of Understanding, dated June 21, 1995 with
Michael R. Gallagher, Chief Executive Officer.
(Incorporated herein by reference to Exhibit 10(ab) of
Playtex's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995, File No. 33-25485-01.)
10(n) Form of Retention Agreement dated as of July 22, 1997
between Michael R. Gallagher and the Company. (Incorporated
herein by reference to Exhibit 10.1 of Playtex's
Registration Statement on Form S-4 dated August 29, 1997,
File No. 333-33915.)
10(o) Form of Retention Agreement dated as of July 22, 1997
between Michael F. Goss and the Company. (Incorporated
herein by reference to Exhibit 10.2 of Playtex's
Registration Statement on Form S-4 dated August 29, 1997,
File No. 333-33915.)
10(p) Form of Retention Agreement dated as of July 22, 1997
between each of Richard G. Powers, Max R. Recone and James
S. Cook and the Company. (Incorporated herein by reference
to Exhibit 10.3 of Playtex's Registration Statement on Form
S-4 dated August 29, 1997, File No. 333-33915.)
10(q) Amended Trademark License Agreement dated November 19, 1991
among Marketing Corporation, Apparel and Family Products.
(Incorporated herein by reference to Exhibit 10(r) of
Playtex's Registration Statement on Form S-1, No.
33-43771.)
10(r) Amended Trademark License Agreement dated November 19, 1991
by and between Apparel and Family Products. (Incorporated
herein by reference to Exhibit 10(s) of Playtex's
Registration Statement on Form S-1, No. 33-43771.)
10(s) Release Agreement, dated November 5, 1991, between Playtex
Investment Corp. and Playtex Apparel Partners, L.P.
(Incorporated herein by reference to Exhibit 10(gg) of
Playtex's Registration Statement on Form S-1, No.
33-71512.)
10(t) Stock Purchase Agreement dated as of March 17, 1995 between
Playtex and HWH Capital Partners, L.P., HWH Valentine
Partners, L.P. and HWH Surplus Valentine Partners, L.P.
(Incorporated herein by reference to Exhibit 10.1 of
Playtex's Form 8-K dated March 17, 1995.)
10(t)(1) Amendment No.1 to Stock Purchase Agreement, dated as of
June 1, 1998, by and among the Company, HWH Capital
Partners, L.P., HWH Valentine Partners, L.P., HWH Surplus
Valentine Partners, L.P. to the Stock Purchase Agreement,
dated as of March 17, 1995. (Incorporated herein by
reference to Exhibit 10(3) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(t)(2) First Amended And Restated Registration Rights Agreement,
dated as of June 1, 1998, by and among the Company, HWH
Capital Partners, L.P., HWH Valentine Partners, L.P., HWH
Surplus Valentine Partners, L.P. to the Stock Purchase
Agreement, dated as of March 17, 1995. (Incorporated herein
by reference to Exhibit 10(5) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
X-5
<PAGE>
Exhibit No. Description
- ----------- -----------
*10(t)(3) Amendment No. 1, dated as of January 29, 1999 to the First
Amended And Restated Registration Rights Agreement, dated
as of March 17, 1995, as amended and restated as of June 1,
1998 by and among the Company, HWH Capital Partners, L.P.,
HWH Valentine Partners, L.P., HWH Surplus Valentine
Partners, L.P. to the Stock Purchase Agreement.
10(u) Stock Purchase Agreement, dated as of December 19, 1997,
among Playtex Products, Inc., and the Shareholders of
Carewell Industries, Inc. (Incorporated herein by reference
to Exhibit 10(af) of Playtex's Annual Report on Form 10-K
for the year ended December 27, 1997, File No. 33-25485.)
10(v) Asset Purchase Agreement, dated as of January 26, 1998,
among Playtex Products, Inc., BINKY-Griptight, Inc., Lewis
Woolf Griptight Limited and L.W.G. Holdings Limited.
(Incorporated herein by reference to Exhibit 10(ag) of
Playtex's Annual Report on Form 10-K for the year ended
December 27, 1997, File No. 33-25485.)
10(w) Merger Agreement, dated as of December 22, 1997, among
Playtex Products, Inc., PCG Acquisition Corp., J.W. Childs
Equity Partners L.P. and Personal Care Holdings, Inc.
(Incorporated herein by reference to Exhibit 2.1 of
Playtex's Form 8-K dated February 12, 1998.)
10(x) Registration Rights Agreement, dated as of January 28, 1998
among Playtex Products, Inc. and J.W. Childs Equity
Partners, L.P. (Incorporated herein by reference to Exhibit
2.2 of Playtex's Form 8-K dated February 12, 1998.)
10(x)(1) Stockholders Agreement, dated as of January 28, 1998,
between Playtex Products, Inc. and J.W. Childs Equity
Partners, L.P. and certain other Stockholders named
therein. (Incorporated herein by reference to Exhibit 2.3
of Playtex's Form 8-K dated February 12, 1998.)
10(y) First Amended And Restated Registration Rights Agreement,
dated as of June 1, 1998, by and among the Company, J.W.
Childs Equity Partners, L.P and certain other Stockholders
named in the Stockholders Agreement dated as of January 28,
1998. (Incorporated herein by reference to Exhibit 10(6) of
Playtex's Post Effective Amendment No. 1 to Form S-3 dated
as of June 12, 1998, No. 333-50099.)
10(z) Letter Agreement, dated as of June 1, 1998, by and among
the Company, J.W. Childs Equity Partners, L.P and certain
other Stockholders named in the Stockholders Agreement
dated as of January 28, 1998. (Incorporated herein by
reference to Exhibit 10(7) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(aa) Letter of Waiver, dated as of June 1, 1998, by and among
the Company, Donaldson, Lufkin & Jenrette International,
J.W. Childs Equity Partners, L.P and certain other
Stockholders named in the Stockholders Agreement dated as
of January 28, 1998. (Incorporated herein by reference to
Exhibit 10(8) of Playtex's Post Effective Amendment No. 1
to Form S-3 dated as of June 12, 1998, No. 333-50099.)
10(ab) Stock Purchase Agreement, dated June 1, 1998 between J.W.
Childs Equity Partners, L.P. (the "seller"), RCBA Playtex,
L.P. (the "Buyer"), and Richard C. Blum & Associates, Inc.
(the "Guarantor"). (Incorporated herein by reference to
Exhibit 10(1) of Playtex's Post Effective Amendment No. 1
to Form S-3 dated as of June 12, 1998, No. 333-50099.)
X-6
<PAGE>
Exhibit No. Description
- ----------- -----------
10(ac) Stockholders Agreement, dated June 1, 1998 between RCBA
Playtex, L.P. and the Company. (Incorporated herein by
reference to Exhibit 10(2) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
*10(ac)(1) Amended and Restated Stockholders Agreement, dated
September 3, 1998 between the Company, RCBA Playtex, L.P.
and RCBA Strategic Partners.
10(ad) Registration Rights Agreement, dated June 1, 1998 between
RCBA Playtex, L.P. and the Company. (Incorporated herein by
reference to Exhibit 10(4) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
*10(ad)(1) Amendment No. 1, dated as of January 29, 1999, to the
Registration Rights Agreement, dated as of June 1, 1998
between RCBA Playtex, L.P. and the Company.
10(ae) Indenture, dated as of January 29, 1999, between Playtex
Products, Inc. and Marine Midland Bank. (Incorporated
herein by reference to Exhibit 2.2 of Playtex's Form 8-K,
dated February 12, 1999, File No. 33-25485-01.)
10(af) Registration Rights Agreement, dated as of January 29,
1999, between Playtex Products, Inc. and Mondial Industries
Limited Partnership. (Incorporated herein by reference to
Exhibit 2.3 of Playtex's Form 8-K, dated February 12, 1999,
File No. 33-25485-01.)
10(ag) Lease Agreement between Playtex and Stauffer Management
Company dated as of June 3, 1994. (Incorporated herein by
reference to Exhibit 10(y) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, File
No. 33-25485-01.)
*10(ah) Sublease Agreement between Playtex and AMBAC Capital
Management, Inc. dated as of February 20, 1998.
*10(ai) Agreement of Lease between Playtex Manufacturing, Inc. and
Trammell Crow NE, Inc.
10(aj) Lease Agreement between Playtex Manufacturing, Inc. and
Tetra Pak Plastic Packaging R&D GmbH, Hitek FSP, S.A.,
Tetra Laval Holdings & Finance S.A., and Tetra Laval Credit
Inc., dated as of April 26, 1996. (Incorporated herein by
reference to Exhibit 10(ai) of Playtex's Annual Report on
Form 10-K for the year ended December 27, 1997, File No.
33-25485.)
10(ak) Lease Agreement between Playtex Manufacturing, Inc. and BTM
Capital Corporation, dated as of June 20, 1996.
(Incorporated herein by reference to Exhibit 10(aj) of
Playtex's Annual Report on Form 10-K for the year ended
December 27, 1997, File No. 33-25485.)
10(al) Interest Protection Agreement effective November 28, 1997
between Playtex Products, Inc., and Merrill Lynch Capital
Services, Inc. (Incorporated herein by reference to Exhibit
10(ae) of Playtex's Annual Report on Form 10-K for the year
ended December 27, 1997, File No. 33-25485.)
*10(am) Interest Rate Swap Agreement effective July 23, 1998
between Playtex Products, Inc., and Toronto Dominion (New
York), Inc.
*11 Compuation of Earnings Per Share
*12(a) Statement re-computation of ratios.
X-7
<PAGE>
Exhibit No. Description
- ----------- -----------
*22(a) Subsidiaries of Playtex.
*23 Consent of KPMG LLP.
*27 Financial Data Schedule.
- -----------
* Filed herewith
X-8
Exhibit 10(l)(5)
AMENDMENT NO. 5
TO
PLAYTEX 1994 STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF PLAYTEX PRODUCTS, INC.
THIS AMENDMENT NO. 5 to the Playtex 1994 Stock Option Plan for
Directors and Executive and Key Employees of Playtex Products, Inc. (the
"Plan"), dated as of April 1, 1998, is adopted by unanimous written consent of
the Board of Directors of Playtex Products, Inc. (the "Company"), a Delaware
corporation.
The Plan is hereby amended in the following manner:
1. Section 5.1 of the Plan is hereby amended by adding at the end of the
last sentence thereof, the following:
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 company whose
<PAGE>
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.
2. In all other respects, the Plan, as amended, shall continue in full
force and effect.
I hereby certify that the foregoing Amendment was duly adopted by the
Board of Directors of Playtex Products, Inc. as of April 7, 1998.
Executed on this 7th day of April, 1998.
/s/ William Stammer
---------------------------------------
Assistant Secretary
Exhibit 10(l)(6)
AMENDMENT NO. 6
TO
PLAYTEX 1994 STOCK OPTION PLAN
FOR DIRECTORS AND EXECUTIVE AND KEY EMPLOYEES
OF
PLAYTEX PRODUCTS, INC.
THIS AMENDMENT NO. 6 to the Playtex 1994 Stock Option Plan for Directors
and Executive and Key Employees of Playtex Products, Inc. (the "Plan"), dated as
of February 12, 1998, is adopted by the Compensation and Stock Option Committee
of the Board of Directors of Playtex Products, Inc. (the "Company"), a Delaware
corporation.
The Plan is hereby amended in the following manner:
1. The text of Section 2.1 is amended and restated as follows:
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 5,047,785; 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 1,000,000 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.
2. In all other respects, the Plan, as amended, shall continue in full
force and effect.
I hereby certify that the foregoing Amendment was duly adopted by
the Compensation and Stock Option Committee of the Board of Directors of Playtex
Products, Inc. as of February 12, 1998.
Executed this 17 day of April, 1998.
/s/ William Stammer
------------------------
Assistant Secretary
Exhibit 10(t)(3)
THIS AMENDMENT NO. 1, dated as of January 29, 1999 (the "First
Amendment") to the First Amended and Restated Registration Rights Agreement,
dated as of March 17, 1995, as amended and restated as of June 1, 1998 (as such
agreement may be amended, supplemented or otherwise modified from time to time,
the "Amended and Restated Agreement"), among Playtex Products, Inc., a Delaware
corporation (the "Company"), HWH Capital Partners, L.P., a Delaware limited
partnership ("HWH"), HWH Valentine Partners, L.P., a Delaware limited
partnership ("HWHV"), and HWH Surplus Valentine Partners, L.P. ("HSVP" and,
together with HWH and HWHV, the "Purchasers").
WHEREAS, the Amended and Restated Agreement provides for
registration rights for certain shares of the Company's common stock, par value
$0.01 ("Common Stock"), issued to the Purchasers;
WHEREAS, on January 6, 1999, the Company entered into an asset
purchase agreement (the "Asset Purchase Agreement") with Mondial Industries
Limited Partnership, a Wisconsin limited partnership ("Mondial"), pursuant to
which the Company, as partial consideration for the purchase of the assets of
Mondial, has agreed to deliver to Mondial an aggregate of $50,000,000 principal
amount of its 6% Convertible Subordinated Notes Due 2004 ("Subordinated Notes")
which are convertible into shares of Common Stock and agreed to provide certain
registration rights to Mondial as set forth in a registration rights agreement
between Playtex and Mondial to be dated as of the Closing Date (as defined in
the Asset Purchase Agreement);
WHEREAS, the Company and the Purchasers are authorized to enter into
this First Amendment;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained in this First Amendment and for other good and
valuable consideration, the receipt and sufficiency of which are herein
acknowledged, the Company and the Purchasers hereby agree for the equal and the
ratable benefit of all holders of the Registrable Securities as follows:
1. Definitions. All capitalized terms used and not otherwise defined
herein have the respective meanings ascribed to such terms in the Amended and
Restated Agreement.
2. Effect. This First Amendment amends and supplements the Amended
and Restated Agreement and shall be a part and subject to all the terms thereof.
Except as amended and supplemented hereby, the Amended and Restated Agreement
shall continue in full force and effect.
<PAGE>
2
3. Amendments.
The Amended and Restated Agreement is hereby amended as
follows:
(a) Section 3 of the Amended and Restated Agreement is amended
by inserting the following text immediately after the definition of "Initiating
Holder":
"Mondial Agreement" means the Registration Rights Agreement dated as
of January 29, 1999, between the Company and Mondial Industries
Limited Partnership, as the same shall be amended, supplemented or
otherwise modified from time to time.
(b) The definition of "Other Registration Rights Agreement" in
Section 3 of the Amended and Restated Agreement is amended by deleting the
clause "and the Childs Agreement" from such definition and inserting the clause
A, the Childs Agreement and the Mondial Agreement" in place of the deleted
clause.
4. Governing Law. This First Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
5. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed and delivered by their respective representatives
hereunto duly authorized as of the date first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
--------------------------------
Name: Michael F. Goss
Title: Executive Vice President
Chief Financial Officer
HWH CAPITAL PARTNERS, L.P.
By: HWH, L.P., its general partner
By: HWH Corporation, its general
partner
By: /s/ Douglas D. Wheat
--------------------------------
Name: Douglas D. Wheat
Title:
HWH VALENTINE PARTNERS, L.P.
By: HWH Valentine, L.P., its general
partner
By: HWH Valentine Incorporated, its
general partner
By: /s/ Douglas D. Wheat
--------------------------------
Name: Douglas D. Wheat
Title:
HWH SURPLUS VALENTINE PARTNERS, L.P.
By: HWH Valentine, L.P., its general partner
By: HWH Valentine Incorporated, its general
partner
By: /s/ Douglas D. Wheat
--------------------------------
Name: Douglas D. Wheat
Title:
Exhibit 10(AC)(1)
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the "Agreement") dated
as of September 3, 1998, between PLAYTEX PRODUCTS, INC., a Delaware corporation
(the "Company"), and RCBA PLAYTEX, L.P., a Delaware limited partnership (the
"Principal Stockholder") and RCBA Strategic Partners, L.P., a Delaware limited
partnership (the "Fund").
RECITALS
WHEREAS, J.W. Childs Equity Partners, L.P. (the "Seller") and the
Principal Stockholder are parties to a Stock Purchase Agreement, dated as of
June 1, 1998 (the "Purchase Agreement"), pursuant to which the Principal
Stockholder has purchased from the Seller, an aggregate 6,000,000 shares (the
"Purchased Shares") of common stock of the Company, par value $.01 ("Common
Stock"); and
WHEREAS, upon the Closing (as defined in the Purchase Agreement,
referred to herein as the "Effective Date"), the Principal Stockholder held, in
aggregate, 11,758,700 shares of the Common Stock (the "Shares");
WHEREAS, subsequent to the Closing, the Fund intends to acquire
shares of Common Stock (the "Fund Shares");
WHEREAS, the Company and the Principal Stockholder are parties to a
Stockholders Agreement dated June 1, 1998 (the "Original Agreement");
<PAGE>
2
WHEREAS, the Company, the Principal Stockholder and the Fund desire
that the Fund become a party to the Original Agreement and that the Original
Agreement be amended as provided in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.The following terms, whenever used herein, shall
have the following meanings for all purposes of this Agreement.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
An "Affiliate" of, or a person "affiliated" with, a specified
Person, means 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.
"By-Laws" means the by-laws of the Company.
<PAGE>
3
"By-Laws Amendment" means the proposed amendment to the By-Laws in
the form attached as Exhibit A hereto.
"Transfer" or "Transferred" means, in relation to any share of
Common Stock, any sale, assignment, transfer or disposition by gift or
otherwise, including without limitation, any distribution in liquidation or
otherwise by a corporation or partnership; provided, however, that "Transfer"
does not mean, with respect to any such share of Common Stock, any pledge,
mortgage, hypothecation or grant of a security interest therein.
"Person" means any individual, firm, corporation, partnership,
limited liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
ARTICLE II
DIRECTORS
2.1 Increase in the Size of the Board of Directors. The Company
hereby agrees that it will upon or immediately following the Effective Date (i)
increase the size of its Board of Directors (the "Board") to a number necessary
to effect clause (ii) of this Section 2.1, and (ii) cause two of the vacancies
thus created (or created by resignation) to be filled by Richard C. Blum and
Jeffrey W. Ubben.
<PAGE>
4
2.2 Nomination of Designated Directors. The Company hereby agrees
that for so long as the Principal Stockholder and the Fund own, in the
aggregate, at least 11% of the outstanding shares of Common Stock, the Company
will use its best efforts to ensure that, following any vote for the election of
directors of the Company at a stockholders' meeting or otherwise, two directors
(each a "Designated Director") (one designated by the Principal Stockholder and
the other by the Fund) are members of the Board, provided, that (i) 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, (ii) any other Designated Director shall
be approved by a majority of the members of the Board who are either Purchaser
Directors (as defined in the By-Laws) or officers of the Company (which such
consent shall not be unreasonably withheld), and (iii) that the proposed
Designated Directors are nominated in accordance with the By-Laws.
2.3 Stockholder Meeting; Proxy Material; By-Laws Amendment. The
Company shall cause proxies of its stockholders to be solicited, in accordance
with the By-Laws and the 1934 Act, for the purpose of voting for the adoption of
the By-Laws Amendment (the "Stockholder Meeting") at the annual meeting of the
Company's stockholders to be held in 1999 (the "Stockholders Meeting"). In
connection with the Stockholders Meeting, the Company: (A) shall prepare and
file with the Securities and Exchange Commission (the "SEC") in accordance with
the 1934 Act an information statement relating to the By-Laws Amendment (the
"Information Statement"), use all reasonable efforts to have the Information
Statement and/or any amendment or
<PAGE>
5
supplement thereto cleared by the SEC and thereafter mail to its stockholders,
as promptly as practicable following such clearance, the Information Statement;
(B) shall use its reasonable best efforts to obtain the necessary approvals by
its stockholders for the adoption of the By-Laws Amendment (unless the Board
shall have determined in good faith, based upon advice of outside counsel, that
taking such actions would be inconsistent with the Board's fiduciary duties
under applicable law); and (C) shall otherwise comply with all legal
requirements applicable to the Stockholders Meeting. The Company shall make
available to the Principal Stockholder prior to the filing thereof with the SEC
copies of the preliminary Information Statement and any amendments or
supplements thereto and shall make any changes therein reasonably requested by
the Principal Stockholder insofar as such changes relate to any matters relating
to the Principal Stockholder.
2.4 Voting for Directors. For so long as the Principal Stockholder
and the Fund own, in the aggregate, at least 11% of the outstanding shares of
Common Stock, each of the Principal Stockholder and the Fund agrees that it
shall vote (and shall cause each of its Affiliates owning, directly or
indirectly, any shares of Common Stock to vote) all the shares of Common Stock
owned directly or indirectly by it or such Affiliate in favor of all the persons
nominated by the Board in accordance with the Amended By-Laws; provided this
Section 2.4 shall terminate upon the tenth anniversary of the Effective Date.
<PAGE>
6
ARTICLE III
TRANSFERS OF SECURITIES
3.1 Restrictions on Transfer of Company Common Stock. The Principal
Stockholder agrees that, from the Effective Date to the date 364 days after the
Effective Date, it shall not (i) Transfer any of the Purchased Shares, by
distribution or otherwise, to any of its shareholders, partners, members or
owners (in each case other than Affiliates), (ii) sell any of the Purchased
Shares pursuant to Rule 144 under the 1933 Act.
3.2 Transfers Subject to Compliance with Securities Laws. After the
Effective Date, no Shares may be Transferred by the Principal Stockholder (other
than pursuant to an effective registration statement under the 1933 Act) unless
such Principal Stockholder first delivers to the Company an opinion of counsel,
reasonably satisfactory to the Company, to the effect that such Transfer is not
required to be registered under the 1933 Act.
3.3 Certificates for Shares To Bear Legends. (A) After the Effective
Date, so long as the Purchased Shares are not sold pursuant to an effective
registration statement under the 1933 Act or pursuant to Rule 144 under the 1933
Act, the Purchased Shares shall be subject to a stop-transfer order and the
certificates therefor shall bear the following legend by which each holder
thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE
<PAGE>
7
SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION THEREUNDER."
(B) So long as the Purchased Shares are subject to the
terms and conditions of Section 3.1, the Purchased Shares shall be subject to a
stop-transfer order and the certificates shall bear the following legend:
"UNTIL JUNE 1, 1999, THE SALE OR TRANSFER OF THE SHARES REPRESENTED
BY THIS CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS WHICH ARE
CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF JUNE [1], 1998, A
COPY OF WHICH IS ON FILE WITH THE ISSUER OF THESE SHARES AND WILL BE
FURNISHED BY THE ISSUER OF THESE SHARES TO THE STOCKHOLDER ON
REQUEST AND WITHOUT CHARGE."
(C) After the termination of the legend requirements
of either Section 3.3(A) or Section 3.3(B), the Company shall, upon the written
request of the holders of the Shares and receipt by the Company of evidence
reasonably satisfactory to it that such requirement has terminated (including,
with respect to the legend required by the Section 3.3(A), a written opinion of
counsel), issue certificates for such Shares that do not bear all or part of the
legend described in Section 3.3(A) or Section 3.3(B), as the case may be, and
release the applicable stop-transfer order.
<PAGE>
8
ARTICLE IV
RESTRICTIONS ON PURCHASE
4.1 Restricted Purchases. From the Effective Date through the fifth
anniversary of the Effective Date, the Principal Stockholder agrees that it will
not, nor will it permit any of its Affiliates to, directly or indirectly, take
any action, including, without limitation, to acquire, offer to acquire, or
agree to acquire, by purchase or otherwise, any shares of Common Stock (or any
options, warrants, convertible securities, or other rights to purchase or
subscribe for Common Stock), if immediately thereafter the number of shares of
Common Stock (including, for this purpose, shares of Common Stock issuable
pursuant to any options, warrants, convertible securities, or other rights to
purchase or subscribe for Common Stock) beneficially owned (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934) by the Principal
Stockholder and its Affiliates (including, the Fund) exceeds the sum of (i) the
number of Shares as of the Effective Date (the "Effective Date Shares") plus
(ii) 2,000,000 (in the case of each of clause (i) and (ii), as adjusted for
stock splits, combination of stock, stock dividends or similar recapitalizations
by the Company), provided however that nothing in this Section 4.1 shall
prohibit the Principal Stockholder or any of its Affiliates from acquiring any
Common Stock in accordance with the provisions of Section 4.2 below.
4.2 Preemptive Rights.
(a) From and after the Effective Date, except as provided
below, the Company shall not issue, sell or transfer or allow any of its
subsidiaries to
<PAGE>
9
issue, sell or transfer any Common Stock (or any options, warrants, convertible
securities, or other rights to purchase or subscribe for Common Stock)
(collectively, the "Offered Securities") unless the Principal Stockholder is
offered in writing the right to purchase, at the same price and on the same
terms proposed to be issued and sold, a portion of the Offered Securities (the
"Stated Percentage") equal to the product of (i) the total number of Offered
Securities multiplied by (ii) a fraction, the numerator of which is the lesser
of (x) the number of Effective Date Shares or (y) the number of shares of Common
Stock then owned by the Principal Stockholder and the denominator of which is
the total number of the then outstanding shares of Common Stock, computed on a
fully diluted basis (the "Preemptive Rights"). If the Offered Securities are
being issued in connection with the issuance of any other securities, or
incurrence of any debt, by the Company ("Other Securities or Debt"), the
Principal Stockholder shall be required to purchase its Stated Percentage of
such Other Securities or Debt in order to exercise its Preemptive Rights. The
Principal Stockholder shall have the right, during the period specified in
Section 4.2(b), to accept the offer for any or all of their portion of the
Offered Securities.
(b) If Principal Stockholder does not deliver to the Company
written notice of acceptance of any offer made pursuant to Section 4.2(a) within
10 business days after the Principal Stockholder's receipt of such offer shall
be deemed to have waived its right to purchase the Offered Securities which are
the subject of such offer (including, if the Offered Securities include
convertible securities, options, or other rights to acquire other securities,
such other securities.)
<PAGE>
10
(c) Section 4.2 (a) shall not apply to (i) the grant of
options to purchase Common Stock, or the issuance of shares of Common Stock, to
employees of the Company or any of its subsidiaries, (ii) shares of Common Stock
issuable upon exercise of any option, warrant, convertible security or other
rights to purchase or subscribe for Common Stock which, in each case, had been
issued in compliance with Section 4.2(a) or under Section 4.2(c)(i), (iii)
securities issued pursuant to any stock split, combination of stock, stock
dividend or other similar stock recapitalization, (iv) shares of Common Stock
issued pursuant to an employee stock option or similar plan, (v) shares of
Common Stock issued in connection with the acquisition of stock or assets or of
any other Person, (vi) shares of Common Stock issued pursuant to any registered
public offering under the 1933 Act, or (vii) any issuance of Offered Securities
occurring after the Principal Shareholder owns less than 11% of the outstanding
shares of Common Stock.
ARTICLE V
MISCELLANEOUS
5.1 Amendment. This Agreement may be altered or amended only with
the consent of the Company, the Principal Stockholder and the Fund.
5.2 Specific Performance. The parties recognize that the obligations
imposed on them in this Agreement are special, unique and of extraordinary
character, and that in the event of breach by any party, damages will be an
insufficient remedy; consequently, it is agreed that the parties hereto may have
specific performance (in
<PAGE>
11
addition to damages) as a remedy for the enforcement hereof, without proving
damages.
5.3 Assignment. Except as other provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors of the parties hereto; provided, however, that this
Agreement may not be assigned by any party without the prior written consent of
the Company and the Principal Stockholder except that the Company may assign its
rights herein to any successor to all or substantially all its assets (by merger
or otherwise). Any assignment of rights hereunder shall be coupled with the
assumption by the assignee of all of the obligations of the assignor hereunder
and shall thereby relieve such assignor of such obligations. Any purported
assignment made in violation of this Section 6.3 shall be void and of no force
and effect.
5.4 Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein shall be given in
writing and deemed received when delivered by overnight courier or hand
delivery, or when sent by facsimile transmission which shall be addressed, or
sent, as follows:
If to the Company, to it at:
Playtex Products, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
Attention: Michael R. Gallagher,
Chief Executive Officer
Telecopier: (203) 341-4260
<PAGE>
12
with a copy to:
Haas Wheat & Partners Incorporated
300 Crescent Court
Suite 700
Dallas, Texas 75201
Attention: Robert B. Haas
Telecopier: (214) 871-8364
and another copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert M. Hirsh, Esq.
Telecopier: (212) 373-2159
If to the Principal Stockholder or the Fund, to:
Richard C. Blum & Associates, L.P.
909 Montgomery Street, Suite 400
San Francisco, California 94133
Attention: Murray A. Indick, Esq.
Telecopier: (415) 434-3130
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Michael R. Klein, Esq.
Telecopier: (202) 663-6363
5.5 Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
<PAGE>
13
5.6 Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
5.7 Choice of Law. This Agreement shall be governed by the laws of
the State of New York, without regard to principles of conflicts of laws.
5.8 Entire Agreement. This Agreement, the Stock Purchase Agreement
and the Registration Rights Agreement contain the entire understanding of the
parties hereto respecting the subject matter hereof and thereof and supersede
all prior agreements, discussions, and understandings with respect to such
subject matters.
<PAGE>
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
-----------------------------------
Name: Michael F. Goss
Title: Executive Vice President
Chief Financial Officer
RCBA PLAYTEX, L.P.
By: /s/ Jeffrey W. Ubben
-----------------------------------
Name: Jeffrey W. Ubben
Title:
RCBA STRATEGIC PARTNERS, L.P.
By: /s/ Jeffrey W. Ubben
-----------------------------------
Name: Jeffrey W. Ubben
Title:
<PAGE>
15
FORM OF AMENDMENT TO
THE BY-LAWS OF THE COMPANY
A. The existing Section 15(b)B shall be replaced in its entirety to read
as follows:
"(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
Non-Purchaser 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."
Exhibit 10(ad)(1)
THIS AMENDMENT NO. 1, dated as of January 29, 1999 (the "First
Amendment") to the Registration Rights Agreement, dated as of June 1, 1998 (as
such agreement may be amended, supplemented or otherwise modified from time to
time, the "Agreement"), between Playtex Products, Inc., a Delaware corporation
(the "Company") and RCBA Playtex, L.P. (the "Principal Stockholder").
WHEREAS, the Agreement provides for registration rights for certain
shares of the Company's common stock, par value $0.01 ("Common Stock"), issued
to the Principal Stockholder;
WHEREAS, on January 6, 1999, the Company entered into an asset
purchase agreement (the "Asset Purchase Agreement") with Mondial Industries
Limited Partnership, a Wisconsin limited partnership ("Mondial"), pursuant to
which the Company, as partial consideration for the purchase of the assets of
Mondial, has agreed to deliver to Mondial an aggregate of $50,000,000 principal
amount of its 6% Convertible Subordinated Notes Due 2004 ("Subordinated Notes")
which are convertible into shares of Common Stock and agreed to provide certain
registration rights to Mondial as set forth in a registration rights agreement
between Playtex and Mondial to be dated as of the Closing Date (as defined in
the Asset Purchase Agreement);
WHEREAS, the Company and the Principal Stockholder are authorized to
enter into this First Amendment;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained in this First Amendment and for other good and
valuable consideration, the receipt and sufficiency of which are herein
acknowledged, the Company and the Principal Stockholder hereby agree for the
equal and the ratable benefit of all holders of the Registrable Securities as
follows:
1. Definitions. All capitalized terms used and not otherwise defined
herein have the respective meanings ascribed to such terms in the Agreement.
2. Effect. This First Amendment amends and supplements the Agreement
and shall be a part and subject to all the terms thereof. Except as amended and
supplemented hereby, the Agreement shall continue in full force and effect.
<PAGE>
2
3. Amendments.
The Agreement is hereby amended as follows:
(a) Section 3 of the Agreement is amended by inserting the
following text immediately after the definition of "Initiating Holder":
"Mondial Agreement" means the Registration Rights Agreement dated as
of January 29, 1999, between the Company and Mondial Industries
Limited Partnership, as the same shall be amended, supplemented or
otherwise modified from time to time.
(b) The definition of "Other Registration Rights Agreement" in
Section 3 of the Agreement is amended by deleting the clause "and the Childs
Agreement" from such definition and inserting the clause ", the Childs Agreement
and the Mondial Agreement" in place of the deleted clause.
4. Governing Law. This First Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
5. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed and delivered by their respective representatives
hereunto duly authorized as of the date first above written.
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
-----------------------------------
Name: Michael F. Goss
Title: Executive Vice President
Chief Financial Officer
<PAGE>
3
RCBA PLAYTEX, L.P.
By: /s/ Jeffrey W. Ubben
-----------------------------------
Name: Jeffrey W. Ubben
Title:
Exhibit 10(ah)
SUBLEASE
AGREEMENT
Between
AMBAC CAPITAL MANAGEMENT, INC.
Sublandlord,
and
PLAYTEX PRODUCTS, INC.
Tenant
<PAGE>
SUBLEASE
SUBLEASE, dated as of February 20, 1998, between AMBAC Capital
Management, Inc., a Delaware corporation, having an office at c/o Ambac
Assurance Corporation, 1 State Street Plaza, New York, New York 10004
("Sublandlord"), and Playtex Products, Inc., a Delaware corporation, having an
office at 300 Nyala Farms, Westport, Connecticut 06880 ("Tenant").
W I T N E S S E T H :
WHEREAS, by lease dated as of August 11, 1994 (the "Overlease") by
and between Stauffer Management Company, a Delaware corporation, having an
office at c/o Zeneca Inc., 1800 Concord Pike, Wilmington, Delaware 19897
("Overlandlord"), and Sublandlord, Overlandlord leased to Sublandlord, as
tenant, certain space on the first floor in the building (the "Building") known
as 300 Nyala Farms, Westport, Connecticut (the "Demised Premises");
WHEREAS, a true and complete copy of the Overlease has been
delivered to Tenant, except that certain sections pertaining solely to financial
matters between Overlandlord and Landlord have been redacted; and
WHEREAS, Tenant desires to lease from Sublandlord all of the space
leased by Sublandlord under the Overlease, which such space, as stipulated by
Tenant and Sublandlord, comprises 21,407 Rentable Square Feet (as defined in the
Overlease), upon the terms, covenants and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, for themselves, their successors
and assigns, hereby covenant and agree as follows:
1. Subleasing. Sublandlord hereby leases to Tenant, and Tenant
hereby hires from Sublandlord 21,407 Rentable Square Feet of space on the 1st
floor of the Building as shown on the floor plan annexed hereto as Exhibit A and
made a part hereof (the "Subleased Premises"), together with the right to use,
in common with Overlandlord and other tenants in the Complex (as defined in the
Overlease), their invitees and others, in the Common Areas (as defined in the
Overlease) for the term hereafter stated, for the rent hereafter reserved and
upon and subject to the covenants, agreements, terms, conditions, limitations,
exceptions and reservations of this Sublease.
2. Term. (a) The term of this Sublease shall commence on the date
(the
<PAGE>
"Commencement Date") on which the last of the following events shall have
occurred: (i) this
<PAGE>
3
Sublease shall have been executed and delivered by Sublandlord and Tenant; (ii)
the Consent, as defined in Section 14 hereof, shall have been obtained from
Overlandlord; and (iii) possession of the Subleased Premises shall have been
delivered to the Tenant. Sublandlord and Tenant shall, upon the request of
either of them, execute a statement prepared by Sublandlord setting forth such
date as the Commencement Date. Any failure of Tenant to execute such statement
shall not affect Sublandlord's determination of the Commencement Date. The term
shall end on March 30, 2005 (the "Expiration Date"), or on such earlier date
upon which said term may expire or be terminated pursuant to any of the
provisions of this Sublease or the Overlease or pursuant to law.
(b) Tenant expressly waives any right to recover any damages which
may result from Sublandlord's inability to deliver possession of the Subleased
Premises on the Commencement Date.
(c) Notwithstanding anything to the contrary in this Sublease and
provided Tenant is not in default under this Sublease beyond any applicable
notice and grace periods, Sublandlord agrees, upon the written request of Tenant
given no later than ten (10) days prior to the date upon which Sublandlord must
give notice to Overlandlord under the Overlease with respect to extending the
term of the Overlease, to exercise Sublandlord's right to renew the term of the
Overlease pursuant to Section 3.3 of the Overlease and to extend the term of
this Sublease for such term minus one day upon the terms and conditions as are
provided for in the Overlease, including, without limitation, the determination
of Fixed Rent and Additional Rent thereunder, provided, however, that
Sublandlord shall have no obligation to renew the term of this Sublease unless
Overlandlord shall have first consented in writing to discharge Sublandlord from
all of its obligations under the Overlease with respect to such extension term.
(d) Notwithstanding anything to the contrary in this Sublease, if
the Commencement Date shall not have occurred prior to the first (1st)
anniversary of the date of this Sublease, upon such first (1st) anniversary this
Sublease shall terminate and be of no further force and effect. The provisions
of this paragraph (d) shall be self-operative.
3. Fixed Rent. (a) The annual fixed rent (the "Fixed Rent") payable
by Tenant hereunder shall be Four Hundred and Seventy Eight Thousand, Four
Hundred and Forty Six Dollars and Forty Five Cents ($478,446.45) per annum for
the period commencing on the Commencement Date and ending on the Expiration
Date, payable in equal monthly installments of Thirty Nine Thousand, Eight
Hundred and Seventy Dollars and Fifty Four Cents ($39,870.54).
(b) The Fixed Rent provided for hereunder shall be payable in
advance in equal monthly installments on the first day of each and every
calendar month, except that if the Commencement Date is other than the first day
of a calendar month, or if the Expiration Date is other than the last day of a
calendar month, said monthly installments shall be prorated accordingly. The
Fixed Rent, Additional Rent and other charges herein reserved and payable
<PAGE>
4
shall be paid by Tenant to Sublandlord at the address for Sublandlord listed
above or at suchother place as Sublandlord may designate, in lawful money of the
United States of America, as and when the same shall become due and payable,
without demand therefor and without any deduction, set-off or abatement
whatsoever, except as otherwise expressly provided in this Sublease.
4. Escalation Rent. (a) In addition to the annual Fixed Rent
reserved in Article 3 hereof, Tenant covenants and agrees to pay to Sublandlord,
as additional rent ("Additional Rent"), the following:
(i) All sums which Sublandlord is required to pay to Overlandlord
pursuant to Article 5 of the Overlease with respect to the term of this
Sublease in respect of Operating Expenses (as defined in the Overlease) in
excess of the sums required to be paid by Sublandlord pursuant to Article
5 of the Overlease for the year 1998 and (y) in respect of Real Estate
Taxes (as defined in the Overlease) in excess of the average of the sums
required to be paid by Sublandlord pursuant to Article 5 of the Overlease
with respect to the fiscal tax year 1997-1998 and fiscal tax year
1998-1999. Tenant shall have no obligation to pay any Additional Rent with
respect to Real Estate Taxes for the fiscal tax year 1997-1998.
(ii) Any other sums which become due and payable by Sublandlord to
Overlandlord as Additional Rent (as defined in Section 2 of the Overlease)
or otherwise which would not have become due and payable but for the acts
and/or failures to act of Tenant under this Sublease or which are
otherwise attributable to the Subleased Premises ("Tenant Surcharges"),
including, but not limited to: (w) any increase in Overlandlord's fire,
rent or other insurance premiums as provided in Article 11 of the
Overlease resulting from any act or omission of Tenant; (x) any additional
charges to Sublandlord on account of Tenant's use of heating, ventilation
or air conditioning after hours as provided in Section 9.2 of the
Overlease; and (y) any additional charges to Sublandlord on account of
Tenant's use of cleaning services after hours or in excess of normal
usage, as provided in Section 9.4 of the Overlease. Notwithstanding the
foregoing, however, Tenant shall not be obligated to pay any Additional
Rent with respect to amounts payable by Landlord to Overlandlord pursuant
to Section 15.7 of the Overlease with respect to the profits and
consideration payable to Overlandlord by Landlord as a result of this
Sublease.
(b) The parties hereto agree that Sublandlord shall have all of the
rights and remedies with respect to the nonpayment by Tenant of the Additional
Rent provided for in this Article 4 and all other costs, charges and expenses
provided for in this Sublease as are provided for in this Sublease or by law in
case of the nonpayment of annual Fixed Rent provided for hereunder. Tenant shall
have all of the rights and remedies with respect to contesting such Additional
Rent, receiving refunds for overpayments or receiving statements from
Overlandlord
<PAGE>
5
with respect to such Additional Rent as are provided to Sublandlord under the
Overlease. The statement or statements referred to in this paragraph (b) shall
be accompanied by copies of all statements received by Sublandlord from
Overlandlord on which such statement or statements are based. In the event that
Tenant desires to exercise Sublandlord's rights pursuant to Article 5 of the
Overlease ("Article 5") and/or to contest such statement from Overlandlord,
Tenant shall submit to Sublandlord a notice requesting Sublandlord to forward to
Overlandlord Tenant's request to exercise Sublandlord's rights pursuant to
Article 5 and/or Tenant's notice contesting such statement setting forth therein
the reasons for such contest, as the case may be. Sublandlord shall promptly
forward such Tenant's notice to Overlandlord. Sublandlord shall in no event be
liable to Tenant nor shall Tenant be excused from the performance or observance
of any of its obligations to be performed or observed under this Sublease, or
entitled to terminate this Sublease or to receive any reduction in or abatement
of the annual Fixed Rent, Additional Rent and other charges provided for in this
Sublease, because of any error in any statement submitted by Overlandlord,
except as may be permitted to Sublandlord as tenant under the Overlease. If
Overlandlord shall fail to correct any such statement so contested by Tenant,
Sublandlord shall, upon notice, permit Tenant, at Tenant's sole cost and
expense, to enforce Sublandlord's rights against Overlandlord with respect to
the Subleased Premises in Sublandlord's name or in Tenant's name as agent for
Sublandlord; provided, however, that Tenant shall indemnify and hold harmless
Sublandlord from and against all liability, loss, claims, demands, penalties or
damage which Sublandlord may incur or suffer by reason of such action, except
any such liability, loss, claims, demands, penalties or damage which Sublandlord
may incur or suffer by reason of Sublandlord's acts or omissions or the acts or
omissions of any other subtenant of Sublandlord under the Overlease. Sublandlord
agrees to cooperate with Tenant in such action and shall execute any and all
documents reasonably required in furtherance of such action. In the event that
as a result of Tenant's action Sublandlord shall receive a refund relating to
such contested statement, Sublandlord shall pay to Tenant, out of such refund,
an amount equal to the reasonable costs and expenses incurred by Tenant in
connection therewith upon presentation of receipted bills therefor, and Tenant's
Proportionate Share of the balance of such refund.
(c) Tenant shall pay Sublandlord the Additional Rent set forth in
paragraph (a) of this Article 4 promptly and in no event later than five (5)
days after the presentation of a statement therefor by Sublandlord to Tenant.
Tenant covenants to pay the Additional Rent when due, and in lawful money of the
United States, notwithstanding that Tenant may have cause to protest such
statement. Any such protest may be made in accordance with paragraph (b) hereof,
but shall not relieve Tenant of its obligation to pay Additional Rent when due
hereunder, provided that Sublandlord's corresponding obligation to pay
Additional Rent under the Overlease similarly is not relieved. Any delay by
Sublandlord in billing any sum set forth in paragraph (a) of this Article 4
shall not constitute a waiver of or in any way impair Tenant's obligation to pay
the same in accordance with the terms of this Sublease.
(d) Tenant's obligation to pay the Additional Rent provided for in
this Article 4
<PAGE>
6
during the term of this Sublease, as well as Sublandlord's obligation to pay to
Tenant Tenant's Proportionate Share of the balance of any refund in accordance
with the last sentence of paragraph 4(b) hereof, shall survive the expiration or
earlier termination of this Sublease.
(e) Notwithstanding anything herein contained to the contrary, with
respect to electric current, Tenant shall pay, as Additional Rent, to
Sublandlord such amounts as Sublandlord is required to pay for electric current
consumed in the Subleased Premises pursuant to Section 9.1 of the Overlease.
5. Tenant's Construction. (a) Tenant agrees that, promptly after the
Commencement Date, Tenant shall, at Tenant's sole cost and expense (subject to
the provisions of Sections 5(b) and 5(c) as to payment of the Construction
Allowance (as hereinafter defined)), plan, design, construct and complete
appropriate alterations and installations in and to the Additional Space (as
such term is defined in the Overlease) in order to prepare for Tenant's initial
occupancy, all such work being performed in accordance with plans and
specifications approved by Sublandlord) (collectively, "Tenant's Construction").
Tenant covenants and agrees that, in connection with Tenant's Construction,
Tenant shall comply (and shall cause its architects, contractors, subcontractors
and vendors to comply) duly, timely and completely with each and all of the
duties and obligations of Tenant under this Sublease and/or of "Tenant" under
the Overlease (including, but not limited to, those duties and obligations set
forth in Article 8 of the Overlease) which are applicable to alterations and
installations which are the same as, or are similar to, Tenant's Construction.
Without limiting the foregoing provisions of this Section 5(a), Tenant further
covenants and agrees that, in connection with Tenant's Construction:
(i) Sublandlord shall have and shall be entitled to enforce in
Sublandlord's name and for Sublandlord's benefit each and all of the
rights and privileges of "Landlord" set forth in Article 8 of the
Overlease;
(ii) wherever the Overlease provides that any plan, design or other
matter is subject to the consent or approval of Overlandlord, Tenant
shall, at Tenant's own, sole cost and expense, obtain and submit such
plan, design or other matter to Overlandlord for Overlandlord's consent or
approval and shall not proceed with any action described or referred to in
(or in connection with) such plan, design or other matter unless and until
Tenant has first received Overlandlord's written consent thereto or
approval thereof as provided in the Overlease, has delivered to
Sublandlord a true copy of such written consent or approval and has
thereafter received Sublandlord's written consent thereto or approval
thereof, which consent or approval Sublandlord shall not unreasonably
withhold or delay;
(iii) prior to the commencement of Tenant's Construction, Tenant
shall furnish to Sublandlord certificates of insurance conforming to the
requirements of Articles 8 and 11
<PAGE>
7
of the Overlease showing Sublandlord and Overlandlord as "additional
insureds" on each policy described therein (other than the policies of
workers' compensation insurance and employer's liability insurance) and
shall comply with all of the other provisions of Articles 8 and 11 of the
Overlease; and
(iv) save and except for the Construction Allowance (as hereinafter
defined), Sublandlord shall have no duty or obligation to pay or cause to
be paid any sum of money or to perform or cause to be performed any work
or services, or to furnish or cause to be furnished any plans, drawings,
supplies, materials or equipment.
(b) Sublandlord shall pay directly to Tenant's contractor pursuant
to Section 5(c) hereof Construction Costs (as hereinafter defined) for the
Additional Space in an amount (the "Construction Allowance") which shall not
exceed One Hundred Thousand Dollars ($100,000.00). Tenant shall pay from its own
funds, and Sublandlord shall have no obligation with respect to, (y) any and all
costs which are not Construction Costs and/or (z) any and all Construction Costs
in excess of the Construction Allowance. As used in this Sublease, the term
"Construction Costs" means amounts actually incurred and paid by Tenant and
Tenant's contractors, subcontractors and vendors in connection with Tenant's
Construction solely for the documented, bona fide cost of (i) construction
supplies and materials which are physically installed in and made a part of the
Additional Space, including, without limitation, the documented, bona fide costs
of carpeting, wall coverings, partitions, any electric meter or submeter,
architectural and engineering fees and permit fees, and (ii) labor actually
performed within the Subleased Premises.
(c) Provided that no Event of Default shall have occurred and be
continuing under this Sublease, Sublandlord shall pay to Tenant's contractor
amounts in respect of the Construction Allowance in two (2) equal installments
(each such installment being hereinafter called individually an "Installment")
as Tenant's Construction progresses, each such Installment being payable within
a reasonable period of time after Tenant shall have submitted to Sublandlord, in
form and substance reasonably satisfactory to Sublandlord, a requisition
therefor accompanied by a notarized certificate signed by Tenant's
Connecticut-licensed architect certifying (y) with respect to the first
Installment, that one-half of Tenant's Construction has been constructed and
installed, and (z) with respect to the second Installment, that all of Tenant's
Construction has been constructed and installed, in each instance substantially
in accordance with the plans and specifications therefor approved by
Overlandlord and Sublandlord. Within twenty (20) days after the making of each
payment by Sublandlord, Tenant shall submit to Sublandlord, in form and
substance reasonably satisfactory to Sublandlord, written documentation (an
"Advice") which shall:
(i) include, as attachments, copies of paid invoices for those
Construction Costs which Tenant has incurred prior to such Advice;
<PAGE>
8
(ii) include, as an attachment, a notarized certificate signed
jointly by Tenant's Connecticut-licensed architect and by a duly
authorized officer of Tenant certifying that (a) such invoices have been
paid in full and (b) the work, supplies and materials described in such
invoices have in fact been duly, properly and completely constructed and
installed in the Additional Space or in the demising walls and common area
corridors substantially in accordance with plans and specifications
theretofore approved by Overlandlord and Sublandlord; and
(iii) include, as an attachment, notarized lien waivers with respect
to those invoices exceeding Ten Thousand Dollars ($10,000.00), in proper
form for recording and otherwise in form and substance reasonably
satisfactory to Sublandlord, signed by an officer of each contractor,
subcontractor and vendor whose paid invoice accompanies the Advice,
certifying that such contractor, subcontractor or vendor waives all liens
and rights of lien with respect to the work, services and materials
described in such invoices (and Tenant shall use reasonable efforts to
include notarized lien waivers as described above for all other invoices
unless otherwise required by Overlandlord).
6. Alterations. Following the completion of Tenant's Construction,
Tenant shall make no changes, alterations, additions or improvements (except for
nonstructural modifications with estimated costs of less than $5000.00 per
modification and $10,000.00 in the aggregate annually) in, to or about the
Subleased Premises without first obtaining Overlandlord's and Sublandlord's duly
signed prior written consent thereto, which consent of Sublandlord shall not be
unreasonably withheld or delayed, and complying with all of the provisions of
Article 8 of the Overlease. All such alterations shall be performed at Tenant's
sole cost and expense, and at such times and in such manner as Sublandlord may
from time to time reasonably designate and otherwise in accordance with the
provisions of the Overlease.
7. Use. Tenant shall use and occupy the Subleased Premises for
executive and general office use and lawful uses ancillary thereto, including
any uses expressly permitted under Article 7 of the Overlease and for no other
use. Tenant's use shall be subject to the provisions of the Overlease
(including, without limitation, Article 7 thereof).
8. Assignment and Subletting. (a) Tenant shall not assign this
Sublease, sublet the Subleased Premises, or any part thereof, suffer or permit
the occupancy of the Subleased Premises, or any part thereof, by any party other
than Tenant, or in any other manner encumber this Sublease without the prior
written consent of Sublandlord and Overlandlord. The consent by Sublandlord to
any assignment or to any sublease or occupancy of the Subleased Premises, or any
part thereof, shall not be deemed to relieve or release (i) Tenant from the full
performance and observance by Tenant of all of its obligations under this
Sublease or (ii) Tenant or any assignee or sublessee of Tenant from the
obligation of obtaining the consent in writing of Sublandlord and Overlandlord
to any further assignment, sublease or occupancy. Tenant shall
<PAGE>
9
pay, upon demand, (x) any cost, expense or fee of Overlandlord which is required
to be paid in connection with any assignment, subleasing or occupancy pursuant
to this Section 8, and (y) any cost or expense of Sublandlord which is incurred
by Sublandlord in connection with any request for consent to any assignment,
subletting or occupancy pursuant to this Section 8.
(b) In the event that Tenant shall desire Sublandlord's consent to
an assignment of this Sublease or to a subletting of all or any part of the
Subleased Premises, Tenant shall request such consent by submitting to
Sublandlord an executed copy of such assignment or sublease and such other
information as Sublandlord may reasonably require. Sublandlord shall then have
the option, to be exercised by written notice to Tenant within thirty (30) days
from the receipt by Sublandlord of such assignment or sublease, as the case may
be, and such other information, to (i) terminate this Sublease, if the request
is to assign this Sublease or to sublet all of the Subleased Premises or, (ii)
terminate this Sublease with respect to such portion of the Subleased Premises
proposed to be sublet; such terminations to be effective as of the date
specified in Sublandlord's notice to Tenant, which date shall be not less than
thirty (30) days nor more than one-hundred twenty (120) days from the date of
Sublandlord's notice.
(c) In the event that Sublandlord shall exercise its option in
paragraph (b) above, Tenant shall surrender possession of that portion of the
Subleased Premises which is the subject of said option on the date set forth in
Sublandlord's notice for the termination of the Sublease or portion thereof as
the case may be. In the event that the Sublease shall be terminated as to a
portion of the Subleased Premises, the annual Fixed Rent and Tenant's
Proportionate Share shall be proportionately adjusted. In the event that
Sublandlord shall not exercise its option in paragraph (b) above, Sublandlord
shall give written notice to Tenant of its granting or denial of such consent,
which such consent shall not be unreasonably withheld or delayed, within the
thirty (30) day period specified in paragraph (b) above for the exercise of the
option contained therein.
(d) If this Sublease shall be assigned without the consent of
Sublandlord and Overlandlord, or if the Subleased Premises, or any part thereof,
shall be sublet or occupied by any person or persons other than Tenant,
Sublandlord may, after default by Tenant, collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, subletting, occupancy or collection of rent
shall be deemed a waiver of any of the covenants, terms or provisions contained
in this Section 8, nor shall it be deemed an acceptance of the assignee, Tenant
or occupant as tenant hereunder, or a release of Tenant from the full
performance and observance by Tenant of all of the covenants and obligations
contained in this Sublease on the part of Tenant to be performed or observed.
(e) Notwithstanding anything to the contrary in this Sublease and
provided that the prior written consent of Overlandlord has been obtained with
respect to Tenant's subletting or assignment of the Subleased Premises,
Sublandlord hereby consents to Tenant's subletting of an
<PAGE>
10
undivided interest in the Subleased Premises only, or Tenant's assigning of its
entire interest in this Sublease only, solely to any bona-fide parent,
subsidiary or other business entity controlled by, controlling or under common
control with Tenant (collectively, an "Affiliate"); provided, in any such event
(1) Tenant otherwise complies with (and remains bound and liable for) all of the
provisions of this Sublease on Tenant's part to be performed and (2) Tenant is
not in default of its Sublease obligations beyond any applicable notice and
grace periods under this Sublease at the time of such transfer, and (3) such
Affiliate shall engage in a business at the Subleased Premises which is
compatible with those of the tenant profile at the Complex, and (4) Tenant gives
Sublandlord and Overlandlord at least fifteen (15) days prior written notice of
such transfer and further provides Landlord and Overlandlord with any and all
transfer and related documentation executed by the parties within fifteen days
after such execution thereof (any such assignment documentation containing an
express assumption by assignee of all of Tenant's Sublease obligations, and any
such sublease documentation expressly provided that the same is subject and
subordinate to this Sublease and the Overlease).
9. Incorporation of Overlease. This Sublease is subject to, and
Tenant accepts this Sublease subject to, all of the terms, covenants,
provisions, conditions and agreements contained in the Overlease and the matters
to which the Overlease is subject and subordinate. Except as otherwise provided
in this Sublease, all of the terms, covenants, conditions and agreements of the
Overlease including, among other things, definitions and constructions therein
contained, except such as by their nature or purport do not relate to the
Subleased Premises or are inapplicable or inappropriate to the subleasing of the
Subleased Premises pursuant to this Sublease or are inconsistent with any of the
provisions of this Sublease, are hereby incorporated in and made part of this
Sublease with the same force and effect as though set forth at length herein, it
being understood that (i) references in the Overlease to the "Demised Premises"
shall be deemed to refer to the "Subleased Premises" hereunder, (ii) references
in the Overlease to the "Landlord" and to the "Tenant" shall be deemed to refer
to "Sublandlord" and "Tenant" hereunder, respectively, (iii) references in the
Overlease to the "Fixed Rent" and "Additional Rent" shall be deemed to refer to
the "Fixed Rent" and "Additional Rent" hereunder, (iv) references in the
Overlease to "Rent" shall be deemed to refer to collectively "Fixed Rent" and
"Additional Rent" hereunder, and (v) references in the Overlease to the "Term of
this Lease", "the term of this Lease", or the "Term" shall be deemed to refer to
the "Term of this Sublease" or the "term of this Sublease", as applicable. It is
further understood that where reference is made in the Overlease to "this
Lease", "the lease" or "this lease" the same shall be deemed to refer to "this
Sublease" (except when such reference in the Overlease is, by its terms, unless
modified by this Sublease, to any other section of the Overlease, in which event
such reference shall be deemed to refer to the particular section of the
Overlease).
10. Articles of Overlease. For the purposes of this Sublease, the
provisions of the Articles of the Overlease, as incorporated herein, are subject
to the following modifications or deletions:
<PAGE>
11
(a) The time limits provided in the Articles of the Overlease for
the giving of notice, making demands, performance of any act, condition or
covenant, or the exercise of any right, remedy or option, are amended for
the purposes of this Sublease by lengthening or shortening the same in
each instance by five (5) days, as appropriate, so that notices may be
given, demands made, or any act, condition or covenant performed, or any
right, remedy or option hereunder exercised, by Sublandlord or Tenant, as
the case may be, within the time limit relating thereto contained in the
Overlease. If the Overlease only allows five (5) days or less for
Sublandlord to perform any act or to undertake to perform such act, or to
correct failure relating to the Subleased Premises or this Sublease, then
Tenant shall nevertheless be allowed three (3) days to perform such act,
undertake such act and/or to correct such failure.
(b) The following Articles and provisions of the Overlease shall not
be incorporated herein by reference:
Article 1; Article 3; Section 4.1; Section 4.2; Section 4.4; Article
5; Section 6.1; Section 7.1 (as relates to "Landlord's Work");
Section 7.3(f); Article 12; Article
<PAGE>
12
13; Section 14.1(c); Section 14.1(f); Sections 14.2(a), (b), (c),
(d), (e), (f), (g), (h) and (i); Section 15.1; Section 15.2; Section
15.3; Section 15.4; Section 15.5; All references in Article 16 to
"Tenant's Guarantor"; Section 20.1; Section 20.2; Section 20.3;
Section 20.4; Section 20.5; Section 20.6; Section 20.7; Section
20.8; Article 21; Section 22.2; Section 22.4; Section 22.5; Section
22.7; Section 22.16(e); Section 22.20; Exhibit B-1; Exhibit C;
Exhibit D; Exhibit G; Exhibit I.
11. Tenant's Covenants. Tenant covenants and agrees to perform
(including to refrain from any action not permitted on the part of Sublandlord
under the Overlease) and to observe all of the covenants, agreements, terms,
provisions and conditions of the Overlease on the part of the Sublandlord to be
performed and observed, to the extent that the same apply to the Subleased
Premises or the use and occupancy by Tenant of the Subleased Premises and the
services and facilities of the Building and the Complex. Tenant further
covenants and agrees not to do or suffer or permit any act or thing to be done
or suffered which would or might cause the Overlease or the rights of
Sublandlord as tenant thereunder to be canceled, terminated or forfeited. The
covenants and obligations of this Section 11 shall survive the expiration or
earlier termination of this Sublease.
12. Services. Sublandlord agrees that Tenant shall have and enjoy
the same rights which Sublandlord, as tenant under the Overlease, has to
performance by Overlandlord of any service, repair, alteration or other similar
obligation which is the obligation of Overlandlord to perform under those
provisions of the Overlease incorporated herein, including, but not limited to,
those set forth in clauses (i), (ii) and (iii) below; provided, however, that
Tenant agrees and understands that Sublandlord shall have no obligation or
responsibility whatsoever to provide or perform any such service, repair,
alteration or other similar obligation including, but not limited to, the
obligation of Overlandlord to (i) make restorations or repairs after damage to
the Building or the Subleased Premises by fire or other casualty or after
condemnation, (ii) provide the services specified in Article 9 of the Overlease,
or (iii) make the repairs or alterations referred to in Article 8 of the
Overlease. Tenant further agrees and understands that each such obligation shall
be provided or performed by Overlandlord and not by Sublandlord.
13. Default of Overlandlord. (a) If Overlandlord does not perform or
observe any of the agreements, covenants, obligations, terms, provisions or
conditions under the Overlease on its part to be performed or observed
(collectively, "Overlandlord's Obligations") (including any obligation for the
payment of money or any failure or delay on Overlandlord's part in providing any
services or in making any repairs or alterations, or in performing or observing
any similar obligation of Overlandlord under the Overlease), Sublandlord shall
have no liability therefor to Tenant and shall be excused from performance of
the corresponding obligations which may be owed by Sublandlord to Tenant under
this Sublease unless such
<PAGE>
13
default of Overlandlord is excused due to the act or omission of Sublandlord or
a Tenant, other than Tenant, of Sublandlord under the Overlease. However,
Tenant, pursuant to the provisions of paragraph (b) hereof, may enforce
Sublandlord's rights against Overlandlord in respect of any such default insofar
as the same relate to the Subleased Premises. Any condition resulting from an
unexcused default by Overlandlord shall not constitute as between Sublandlord
and Tenant an eviction, actual or constructive, of Tenant. No such default shall
excuse Tenant from the performance or observance of any of its obligations to be
performed or observed under this Sublease, or entitle Tenant to terminate this
Sublease or to receive any reduction in or abatement of the Fixed and Additional
Rent provided for in this Sublease, except as may be permitted to Sublandlord as
tenant under the Overlease or unless such default of Overlandlord is excused due
to the act or omission of Sublandlord or a Tenant, other than Tenant, of
Sublandlord under the Overlease.
(b) If Tenant shall notify Sublandlord that Overlandlord is not
supplying services to the Subleased Premises as required under the Overlease,
Sublandlord shall promptly forward such notice to Overlandlord. If Overlandlord
does not perform or observe any of Overlandlord's Obligations with respect to
the Subleased Premises, Sublandlord shall, upon request from Tenant, give
written notice thereof to Overlandlord and demand therein that it comply with
Overlandlord's Obligations. If Overlandlord shall fail to do so, Sublandlord
shall, upon notice, permit Tenant, at Tenant's sole cost and expense, to enforce
Sublandlord's rights against Overlandlord with respect to the Subleased Premises
in Sublandlord's name or in Tenant's name as agent for Sublandlord; provided,
however, that Tenant shall indemnify and hold harmless Sublandlord from and
against all liability, loss, claims, demands, penalties or damage which
Sublandlord may incur or suffer by reason of such action, except any such
liability, loss, claims, demands, penalties or damage which Sublandlord may
incur or suffer by reason of Sublandlord's acts or omissions or the acts or
omissions of any other Tenant of Sublandlord under the Overlease which
obligation shall survive the expiration or earlier termination of this Sublease.
Sublandlord agrees to cooperate with Tenant in such action and shall execute any
and all documents required in furtherance of such action.
14. Consent of Overlandlord. Notwithstanding anything to the
contrary herein set forth, this Sublease shall not become effective unless and
until Sublandlord has obtained from Overlandlord written consent (the "Consent")
to this subletting. Sublandlord agrees to request the Consent promptly upon the
execution of this Sublease and shall forward to Tenant a copy of the same
promptly upon its receipt by Sublandlord. If the Consent is not obtained from
Overlandlord within thirty (30) days, this Sublease shall become null and void
and be of no further force or effect.
15. Notices. (a) Any notice, statement, demand or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Sublease or pursuant to any applicable law
or requirement of public authority, shall be in writing (whether
<PAGE>
14
or not so stated elsewhere in this Sublease) and shall be deemed to have been
properly given, rendered or made, if personally delivered or sent by registered
or certified mail, return receipt requested, addressed, if to Sublandlord, as
follows:
Attention: Thomas Gandolfo
AMBAC Capital Management, Inc.
c/o Ambac Assurance Corporation
1 State Street Plaza
New York, New York 10004
with a copy to:
Chris M. Smith, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
and if to Tenant, as follows:
Attention: Michael F. Goss
Playtex Products, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
with a copy to:
William B. Stammer, Esq.
Playtex Products, Inc.
300 Nyala Farms
Westport, Connecticut 06880
until Tenant takes possession of the Subleased Premises and, thereafter, to
Tenant at the Subleased Premises, and shall be deemed to have been given,
rendered or made on the day personally delivered or posted. Either party may, by
notice as aforesaid, designate a different address for notices, statements,
demands or other communication intended for it.
(b) Sublandlord agrees to promptly forward to Tenant a copy of any
and all notices received by Sublandlord under the Overlease which affect the
Subleased Premises or this Sublease, including, without limitation, any notice
of default.
<PAGE>
15
16. Condition of the Subleased Premises. Tenant represents that it
has made or caused to be made a thorough examination and inspection of the
Subleased Premises and is familiar with the condition of every part thereof.
Tenant agrees that it enters into this Sublease without any representations or
warranties by Sublandlord, its agents, representatives, employees, servants or
any other person as to the condition of the Subleased Premises. Except as
otherwise provided herein, Tenant agrees to accept the Subleased Premises "as
is" in the condition existing at the Commencement Date.
17. Consent of Sublandlord. In all provisions requiring the approval
or consent of both Sublandlord and Overlandlord, Tenant shall simultaneously
submit its request for consent or approval to Sublandlord and Overlandlord,
through Sublandlord, and Sublandlord shall forward to Overlandlord such request
without delay.
18. Entire Agreement. This Sublease contains the entire agreement
between the parties and any executory agreement hereafter made shall be
ineffective to change, modify or discharge it in whole or in part unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification or discharge is sought.
19. Broker. Insignia/ESG is the sole broker who brought about this
Sublease, and Sublandlord agrees to pay any brokerage commission or other fee
earned by said broker in accordance with a separate agreement between said
brokers and Sublandlord. Tenant shall indemnify and hold harmless Sublandlord
from and against any and all liability, claims, suits, demands, judgments,
costs, interest and expense to which Sublandlord may be subject or suffer by
reason of any claim made by any person, firm or corporation other than the
aforesaid named broker for any commission, expense or other compensation as a
result of the execution and delivery of this Sublease and based on alleged
conversations or negotiations by said person, firm or corporation with Tenant.
20. Right to Cure Tenant's Defaults. If Tenant shall at any time
fail to make any payment or perform any other obligation of Tenant hereunder,
then Sublandlord shall have the right, but not the obligation, after the lesser
of five (5) days' notice to Tenant or the time within which Overlandlord may act
on Sublandlord's behalf under the Overlease, or without notice to Tenant in the
case of any emergency, and without waiving or releasing Tenant from any
obligations of Tenant hereunder, to make such payment or perform such other
obligation of Tenant in such manner and to such extent as Sublandlord shall deem
necessary, and in exercising any such right, to pay any incidental costs and
expenses, employ attorneys and other professionals, and incur and pay reasonable
attorneys' fees and other costs reasonably required in connection therewith.
Tenant shall pay to Sublandlord upon demand all sums so paid by Sublandlord and
all incidental costs and expenses of Sublandlord in connection therewith,
together with interest thereon at the Interest Rate (as such term is defined in
Section 2.01(g) of the Overlease), or the then maximum lawful interest rate,
whichever shall
<PAGE>
16
be less, from the date of the making of any such expenditures.
21. Casualty and Eminent Domain; Insurance. (a) If the Subleased
Premises or the Building shall be partially or totally damaged by fire or other
cause, or acquired by power of eminent domain or condemned, the consequences
thereof shall be determined pursuant to Articles 12 and 13 of the Overlease and
Overlandlord shall be the sole party responsible for the repair and restoration
of the Subleased Premises to the extent required under said Articles 12 and 13.
Tenant's right to an abatement or apportionement of rents and or repairs shall
be dependent upon whether or not Sublandlord has a right of abatement or
apportionement of rents and/or repairs under said Articles 12 and 13 with
respect to the Subleased Premises. Provided that Tenant is not under default of
any of its obligations beyond any applicable notice and grace periods under the
Sublease, Sublandlord agrees that it shall allocate to Tenant any abatement or
apportionment of rents to which it may be entitled pursuant to the provisions of
the Overlease. No damage, compensation or claims shall be payable by Sublandlord
for inconvenience, loss of business or annoyance arising from any such damage by
fire or other cause or by the repair or restoration of any portion of the
Subleased Premises or of the Building.
(b) For the purposes of Section 11.1 of the Overlease, as
incorporated into this Sublease, the term "Landlord" shall be deemed to include
both Sublandlord and Overlandlord, so that all policies of insurance required to
be maintained by Tenant hereunder and thereunder shall name both Sublandlord and
Overlandlord as additional insureds, provided, however, that all references to
Landlord beginning in line 5 of Section 11.1(c) shall be deemed to refer only to
Overlandlord.
22. Parking. Subject to the terms and conditions of Section 22.16 of
the Overlease, Tenant (and Tenant's employees, agents, visitors and permitted
subtenants) shall have the right to use up to sixty (60) unreserved parking
spaces at the Complex, plus five (5) reserved parking spaces at the Complex, all
on a Rent-inclusive basis (all Tenant's visitor parking included in such total).
All said parking spaces shall be located in the Complex's garage facilities
serving the Subleased Premises.
23. Personal Property. Tenant has acquired from Sublandlord all of
Sublandlord's furniture, equiptment and other personal property located at the
Subleased Premises except for those items listed on Exhibit B attached hereto
(collectively, the "Personal Property"). Upon the Expiration Date or sooner
termination of this Sublease, Tenant shall remove, at its sole cost and expense,
all such Personal Property from the Subleased Premises. In the event that Tenant
shall fail to remove all such Personal Property, Tenant agrees that Sublandlord
shall have the right, but not the obligation, to do so and to charge Tenant
therefor as Additional Rent hereunder.
24. Termination of Overlease. If for any reason, the term of the
Overlease shall
<PAGE>
17
terminate prior to the Expiration Date, this Sublease as between Tenant and
Sublandlord shall be terminated. Notwithstanding the foregoing (but subject to
the terms of the Overlease), Tenant agrees that if for any reason the term of
the Overlease shall terminate prior to the Expiration Date or Overlandlord shall
otherwise succeed to the estate of Sublandlord in respect of the Subleased
Premises, Tenant shall and hereby does waive any right to surrender possession
of the Subleased Premises or to terminate this Sublease and, at Overlandlord's
election, Tenant agrees to be bound to Overlandlord for the balance of the term
of this Sublease and to attorn to and recognize Overlandlord as its landlord
under all of the then executory terms of this Sublease, except that Overlandlord
shall not be (a) liable for any previous act, omission or negligence of
Sublandlord under this Sublease, (b) subject to any counterclaim, defense or
offset not expressly provided for in this Sublease theretofore accruing to
Tenant against Sublandlord, (c) bound by any previous modification or by any
previous prepayment of more than one month's Fixed Rent and Additional Rent
unless paid as provided in this Sublease, or (d) obligated to perform any
repairs or other work in the Subleased Premises or the Building beyond
Overlandlord's obligations under the Overlease, and Tenant agrees to execute and
deliver such instruments as Overlandlord may reasonably request to evidence and
confirm such attornment.
25. Sublandlord's Representation and Covenants. (a) Sublandlord
represents to Tenant that the Overlease is in full force and effect, that the
Overlease has not been modified and that to the best of Sublandlord's knowledge,
neither Sublandlord nor Overlandlord is in default thereunder in any material
respect.
(b) Sublandlord covenants and agrees that if and so long as Tenant
pays the Fixed Rent and Additional Rent and all other charges herein reserved
and performs and observes all of the agreements, terms, conditions, covenants
and provisions hereof, Tenant shall quietly enjoy the Subleased Premises and
Sublandlord shall not enter into any agreement or understanding with
Overlandlord that would affect Tenant's possession of the Subleased Premises
(unless Overlandlord has consented to enter into an agreement with Tenant
whereby Tenant shall remain in possession of the Subleased Premises upon the
terms and conditions of this Sublease), subject, however, to the terms of this
Sublease and the Overlease and to the matters to which the Overlease is subject
and subordinate.
(c) Promptly after receipt by Sublandlord, Sublandlord shall deliver
to Tenant a copy of each notice of default that relates or is applicable to the
Subleased Premises. Tenant shall have the right, but not the obligation, to cure
such Sublandlord's defaults after five (5) days written notice to Sublandlord,
or without notice to Sublandlord in the case of an emergency, and, without
waiving or releasing Sublandlord from any of its obligations under this
Sublease, to make such payment or perform such other obligation of Sublandlord
as Tenant reasonably deems necessary, and, in exercising any such right, to pay
any incidental costs and expenses, employ attorneys and other professionals, and
incur and pay reasonable attorney's fees in connection therewith. Sublandlord
shall pay to Tenant upon demand all sums so paid by Tenant and all
<PAGE>
18
incidental costs and expenses of Tenant in connection therewith, together with
interest thereon at the Interest Rate (as such term is defined in Section
2.01(g) of the Overlease), or the then maximum lawful interest rate, whichever
shall be less, from the date of the making of any such expenditures.
26. Governing Law. The exercise, validity, construction, operation
and effect of the terms and provisions of this Sublease shall be determined and
enforced in accordance with the laws of the State of Connecticut applicable to
agreements made and to be performed in the State of Connecticut.
28. Successors and Assigns. The provisions of this Sublease, except
as otherwise specifically provided, shall extend to, bind and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. In the event of any assignment or transfer of the leasehold estate
under the Overlease, the transferor or assignor, as the case may be, shall be
and hereby is entirely relieved and freed of all obligations under this
Sublease, except to the extent that any such obligations accrued or were
otherwise incurred prior to the date of any such assignment or transfer.
29. No Diminishment of Overlandlord's Rights. Notwithstanding
anything to the contrary contained herein, no term or provision of this Sublease
shall be construed to diminish or impair the rights of Overlandlord under the
Overlease or with respect to Overlandlord's interest in the Subleased Premises.
This Sublease is expressly made subject to the Overlease and to the matters to
which the Overlease is or shall be subject and subordinate.
<PAGE>
19
IN WITNESS WHEREOF, Sublandlord and Tenant have executed this
Sublease as of the day and year first above written.
SUBLANDLORD:
AMBAC Capital Management, Inc.
By: /s/ Thomas Gandolfo
----------------------------------
Name: Thomas Gandolfo
Title:
TENANT:
Playtex Products, Inc.
By: /s/ William Stammer
----------------------------------
Name: William Stammer
Title: Assistant Secretary
<PAGE>
EXHIBIT A
The Subleased Premises
<PAGE>
EXHIBIT B
Personal Property
1. All conference room tables and furniture related thereto.
2. Credenza in main conference room.
3. One (1) exercise bike.
Exhibit 10(ai)
AGREEMENT OF LEASE
between
TRAMMELL CROW NE, INC.
Landlord
and
PLAYTEX MANUFACTURING, INC.
Tenant
Premises:
Suite ____
75 Commerce Drive, Allendale, New Jersey
Approximately 43,574 sq. ft.
<PAGE>
TABLE OF CONTENTS
Page
----
1. PREMISES............................................................. 3
2. TERM................................................................. 3
3. CONSTRUCTION......................................................... 4
4. INTENTIONALLY OMITTED................................................ 9
5. RENTAL............................................................... 9
6. USE.................................................................. 10
7. INSURANCE............................................................ 10
8. INCREASE OF INSURANCE RATES.......................................... 12
9. FIRE AND OTHER CASUALTY.............................................. 12
10. REPAIRS AND MAINTENANCE.............................................. 13
11. COVENANTS AGAINST LIENS.............................................. 15
12. ALTERATIONS.......................................................... 16
13. CONDEMNATION......................................................... 17
14. ACCESS AND RIGHT TO EXHIBIT.......................................... 19
15. ASSIGNMENT AND SUBLETTING............................................ 20
16. RULES AND REGULATIONS, COMPLIANCE WITH LAWS.......................... 22
17. UTILITIES............................................................ 24
18. SIGNS................................................................ 25
19. TAXES................................................................ 26
20. ADDITIONAL CHARGES................................................... 27
21. NON-LIABILITY OF LANDLORD............................................ 32
22. INDEMNITY............................................................ 32
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<PAGE>
23. RIGHT TO CURE DEFAULT................................................ 33
24. REMEDIES UPON DEFAULT................................................ 34
25. INTENTIONALLY OMITTED................................................ 37
26. MORTGAGE PRIORITY.................................................... 37
27. SURRENDER OF PREMISES................................................ 37
28. UNAVOIDABLE DELAYS................................................... 38
29. LANDLORD'S REVIEW, CONSENT OR APPROVAL............................... 39
30. SECURITY............................................................. 39
31. CERTIFICATION........................................................ 41
32. WAIVER OF TRIAL BY JURY.............................................. 42
33. QUIET ENJOYMENT...................................................... 42
34. LANDLORD............................................................. 42
35. NOTICES.............................................................. 43
36. COVENANTS, EFFECT OF WAIVER.......................................... 43
37. HOLDING OVER......................................................... 44
38. REFERENCE............................................................ 44
39. ENTIRE AGREEMENT..................................................... 44
40. ATTORNMENT........................................................... 45
41. REAL ESTATE BROKER................................................... 45
42. VALIDITY OF LEASE.................................................... 45
43. COMMON AREAS......................................................... 46
44. REPRESENTATIONS...................................................... 46
45. ENVIRONMENTAL COMPLIANCE............................................. 46
46. ACCESS LAWS.......................................................... 50
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<PAGE>
47. ERISA................................................................ 51
48. OPTION TO RENEW...................................................... 52
49. RIGHT OF FIRST OFFER TO LEASE CONTIGUOUS SPACE....................... 53
50. NON-BINDING NATURE OF SUBMITTAL...................................... 55
51. MEMORANDUM OF LEASE.................................................. 55
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<PAGE>
AGREEMENT OF LEASE
PREAMBLE
This Agreement of Lease (this "lease") consists of this Preamble and the
Terms and Conditions and includes the indicated exhibits, which are incorporated
herein by reference. The Landlord and Tenant identified below agree to the
leasing of the premises indicated on the terms and conditions specified in this
lease and agree that the following terms whenever used in this lease shall have
the meanings indicated unless the terms are otherwise expressly modified,
limited or expanded herein.
(1) LANDLORD: TRAMMELL CROW NE, INC., a Delaware corporation
ADDRESS: Commerce Center
1810 Chapel Avenue West
Suite 220
Cherry Hill, New Jersey 08002
(2) TENANT: PLAYTEX MANUFACTURING, INC., a Delaware corporation
ADDRESS: 300 Nyala Farms Road
Westport, CT 06880
(3) DATE OF LEASE: May 7, 1997
(4) PREMISES: The portion of the Building to be constructed by Landlord at
75 Commerce Drive, Allendale, NJ 07401, as shown on Exhibits
"A" and "B"
(5) TERM: Fifteen (15) years
RENEWAL OPTIONS: Two (2) five year options to renew per Paragraph 48.
(6) SIZE OF ENTIRE BUILDING: Approximately 114,206 Sq. Ft.
SIZE OF LEASED PREMISES: Approximately 43,574 Sq. Ft.
BASE RENT SQUARE FOOTAGE: 43,030 Sq. Ft.
(7) BASE RENT:
TOTAL LEASE BASE RENTAL: $9,272,965.00
ANNUAL BASE RENTAL:
<PAGE>
Years 1 - 5 $ 557,238.50
Years 6 - 10 $ 632,541.00
Years 11 - 15 $ 664,813.50
MONTHLY BASE RENTAL:
Months 1 - 60 $ 46,436.54
Months 61 - 120 $ 52,711.75
Months 121 - 180 $ 55,401.13
RENT DUE DATE: First of Month
(8) SECURITY DEPOSIT: $46,436.54
(9) TENANT'S ALLOCABLE PERCENTAGE: 38.15%
(10) ESTIMATED ADDITIONAL MONTHLY RENTAL CHARGE
(INCLUDING TAXES AND ADDITIONAL CHARGES AS
PROVIDED IN PARAGRAPHS 19 AND 20): $ 9,441.03
(11) PERMITTED USE: Office, Laboratory, Warehouse and ancillary uses thereto
(12) INSURANCE REQUIREMENTS:
LANDLORD: Per Paragraph 20
TENANT: Per Paragraph 7
(13) BROKER: Sitar Company and E.S. Gordon Company of N.J.
(14) TAX IDENTIFICATION NO.
LANDLORD: 22-2698417
TENANT:
(15) TENANT SIC NO:
(16) EXHIBITS: A. Site Plan
B. Space Plan of Premises
C. Schedule of Plans and Specifications
C-1 Schedule of Allowance Items
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<PAGE>
D. Schedule of Above Standard Improvements
E. Form of Estoppel Certificate
F. Subordination, Non-Disturbance and Attornment Agreement
G Memorandum of Lease
(17) PARKING: One Hundred Twenty Seven (127) Spaces Unreserved/in common
(18) PROJECT: Landlord's Work and Tenant's Work
TERMS AND CONDITIONS
1. PREMISES. The Landlord hereby leases to Tenant and Tenant hereby takes
from Landlord, those certain premises, consisting of a portion of a building
constructed or to be constructed by Landlord (which building and premises are
hereinafter referred to as the "Building" and the "Premises", respectively),
located at the address stated in (4) of the Preamble and more particularly
described on Schedule "A" attached hereto and made a part hereof, subject
however, to all of the terms, covenants, provisions and conditions herein set
forth and to all present and future liens, encumbrances, conditions, rights,
easements, restrictions, rights-of-way, covenants, other matters of record, and
zoning and building laws, ordinances, regulations and codes affecting or
governing the Building or which may hereafter affect or govern the Building, and
such matters as may be disclosed by inspection or survey, provided the same do
not materially impair the use and enjoyment of the Premises by Tenant for the
purpose hereinafter stated in Paragraph 6.
TO HAVE AND TO HOLD the Premises for the term and at the rents
herein set forth.
2. TERM.
(a) The term of this lease (hereinafter referred to as "Term")
shall be for the period stated in (5) of the Preamble, commencing on the
Commencement Date, as hereinafter defined, unless sooner terminated as herein
expressly provided. In the event however, that the Commencement Date is not the
first day of a month, then the Term shall end on the last day of the month in
which the anniversary of the Commencement Date shall fall.
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<PAGE>
(b) The Term, and the Tenant's obligation to pay Rental, as
hereinafter defined, shall commence on the earlier of the following dates (which
date is hereinafter referred to as the "Commencement Date"): (a) On "Delivery of
Possession" (as hereinafter defined in Paragraph 3); or (b) the date on which
Tenant shall first conduct any material business activities on the Premises.
(c) For purposes of this lease, a "Lease Year" shall be deemed
to be each consecutive period of twelve (12) full calendar months during the
Term hereof, except that the first Lease Year shall also include the fractional
portion of the month, if any, immediately following the Commencement Date, and
that the last Lease Year shall run only from the day following the termination
of the previous Lease Year to the termination date of the lease.
(d) When the Commencement Date has been determined, at the
request of either party Landlord and Tenant shall execute and deliver a letter
agreement confirming the Commencement Date and the scheduled expiration date of
this lease.
3. CONSTRUCTION.
(a) Landlord's Work. Landlord shall construct improvements to
the Premises in accordance with the terms of this Paragraph 3 ("Landlord's
Work"). Landlord's Work consists of all improvements shown on the outline plans
and specifications listed on the schedule attached hereto as Exhibit "C".
(b) Tenant Plans. Tenant's architect has commenced preparation
of the construction documents required to construct Landlord's Work (the "Plans
and Specifications"), which Plans and Specifications shall include all plans and
specifications required to obtain permits, bid and perform Landlord's Work,
including but not limited to mechanical, electrical and plumbing plans and
finish schedules. Landlord and Tenant shall fully and completely cooperate in
the preparation of the Plans and Specifications. The Plans and Specifications
remain subject to Landlord's review and approval. Tenant's architect shall
complete the Plans and Specifications and Tenant shall provide the Plans and
Specifications to Landlord within a reasonable time period after the effective
date of this lease. Tenant may forward to Landlord from time to time progress
prints for portions of Landlord's Work. Within five business days of receipt of
a progress print Landlord shall, in writing, either approve the progress print
or specify in detail any objections. Any improvements requested by Tenant and
shown on the Plans and Specifications but not contemplated by the outline plans
and specifications listed on Exhibit C (i) shall be subject to
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Landlord's consent, and (ii) shall result in extension of the Scheduled
Completion Date by the amount of additional time required to construct or
install such improvements, if any.
(c) Changes by Tenant. Any changes in Landlord's Work desired
by Tenant are subject to (i) Landlord's prior approval and (ii) Tenant's
execution of a change order confirming the change to be made and the cost, if
any, to Tenant to implement the change. The cost of a proposed change shall
include all third party costs to be incurred by Landlord as a result of such
change (including the amount charged by Landlord's contractor for the change and
any related design professional and permitting fees) ("Third Party Costs") plus
a construction management fee to Landlord equal to five percent (5%) of such
third party costs. Tenant shall direct all questions and requests for changes to
Landlord and not to any design professional or contractor retained by Landlord
in connection with the construction of Landlord's Work, it being understood that
such design professionals and contractors have no authority to bind Landlord.
Third Party Costs shall be priced in accordance with the prices provided in the
original bid for Landlord's Work. For example, if unit pricing is specified in
the original bid for Landlord's Work and a price of 10.00 for each of a
particular item is specified, then the costs incurred by Landlord for the
purposes of this Paragraph shall be based upon the same per unit price. For work
or materials not provided in the original bid for Landlord's Work, the costs
shall be based on competitive bids for such work, unless Tenant shall specify
otherwise. Tenant shall have the right to review Landlord's computation of its
Third Party Costs and Landlord shall provide to Tenant, upon Tenant's request,
with access to Landlord's records for such purpose.
(d) Schedule. Landlord shall use diligent efforts to
substantially complete Landlord's Work by the nine (9) month anniversary of the
date the Plans and Specifications have been approved by Landlord (the "Scheduled
Completion Date"), subject to extension for Permitted Delays (defined below). If
substantial completion of Landlord's Work is delayed by more than thirty (30)
days beyond said nine (9) month period due to Permitted Delays that are within
Tenant's control (including but not limited to Tenant's failure to timely
approve plans and other submissions, changes in Landlord's Work requested by
Tenant, or delays caused by Tenant's performance of Tenant's Work) ("Tenant
Delays"), then on the Commencement Date Tenant shall pay to Landlord, as
additional rent, one day's Base Rent for each day by which substantial
completion of Landlord's Work is delayed more than thirty (30) days due
exclusively to Tenant Delays. Notwithstanding the foregoing, Landlord shall
substantially complete Landlord's Work by the fifteen (15) month anniversary of
the date the Plans and Specifications have been approved by Landlord, subject
only to Tenant Delays, but expressly not
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subject to Permitted Delays that are not Tenant Delays.
"Delivery of Possession" shall be deemed to have occurred when
Landlord has procured a Certificate of Occupancy for the Premises, whether
Temporary or Permanent, authorizing occupancy of the Premises for the Permitted
Uses and tenders possession of the Premises to Tenant substantially completed in
accordance with the Plans and Specification and in broom clean condition.
Landlord shall not, however, have any responsibility for obtaining a Certificate
of Occupancy for any improvements installed or to be installed in the Premises
by Tenant; if issuance of a Certificate of Occupancy is delayed by more than
thirty (30) days due to any work to be performed by Tenant in the Premises,
Delivery of Possession shall be deemed to occur thirty (30) days after the date
when the Certificate of Occupancy would have been issued but for the work to be
performed by Tenant. Landlord shall notify Tenant in writing at least ten (10)
business days prior to the date Landlord expects the Premises to be
substantially completed and ready for Delivery of Possession as aforesaid.
Subject to Tenant's rights and Landlord's obligations under this lease and
Tenant's warranty rights, relating to Landlord's Work, the taking of possession
by Tenant in a material manner shall be deemed presumptive to establish that
Tenant has accepted the Premises, that said improvements have been completed in
accordance with the Plans and Specifications and that the Premises are in good
and satisfactory condition, as of when possession was so taken, subject to
Landlord's completion of punchlist items as provided in Paragraph 3(f) hereof.
The Scheduled Completion Date shall be extended by the
duration of any delay (as reasonably determined by the Project's architect)
which is caused by: (i) changes in Landlord's Work which have been requested by
Tenant; (ii) force majeure delays, including but not limited to delays caused by
labor disputes, fire or other casualty, or availability of materials through
regular sources of supply; (iii) any failure by Tenant, without regard to any
grace period that may be applicable thereto, to furnish any required plan,
information, approval or consent in a timely manner upon reasonable request
therefor (including without limitation the Plans and Specifications) and within
the required period of time; or (iv) the performance of any work or activity in
the Premises by Tenant or any of its employees, agents or contractors, including
without limitation the installation of furniture or trade fixtures. Delays in
the completion of construction due to any of the foregoing are referred to
herein as "Permitted Delays."
(e) Construction. Landlord shall, in a good and workmanlike
manner, cause the Premises to be improved and completed in accordance with the
Plans and Specifications. Landlord reserves the right, at its sole cost and
expense, to the
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extent that such substitutions or changes increase the cost of the Project: (i)
to make substitutions of material of equivalent grade and quality when and if
any specified material shall not be readily and reasonably available, and (ii)
to make changes necessitated by conditions met in the course of construction,
provided that Tenant's approval of any material change shall first be obtained
(which approval shall not be unreasonably withheld or delayed so long as there
shall be general conformity with the Plans and Specifications). As of the
Commencement Date of the Term, the Building and the Premises shall comply with
all federal, state and local laws and ordinances applicable thereto, other than
to the extent such compliance is dependent on work performed or to be performed
by Tenant.
As soon as Landlord deems construction of the Premises
sufficiently completed to allow Tenant to do so, Landlord shall allow Tenant
access to the Premises prior to the Commencement Date for the construction and
installation of Tenant's furniture, fixtures and equipment ("Tenant's Work").
Such access shall in any event be given in sufficient time as to permit Tenant
to complete Tenant's Work before the Commencement Date if Tenant's Work is
performed in the ordinary course. Prior to commencing such work, Tenant shall
(i) obtain Landlord's written approval of professionally prepared plans and
specifications, prepared at Tenant's expense, for Tenant's Work, and (ii)
deliver to Landlord certificates of insurance confirming that Tenant has in
force the insurance required by this Lease and that Tenant's contractor
maintains commercial general liability insurance written on an occurrence basis,
with a combined single limit of not less than $1,000,000, naming Landlord as an
additional insured, workers' compensation insurance in statutory amounts and
employer liability insurance with a limit of not less than $100,000. Tenant's
entry into the Premises prior to the Commencement Date shall be at Tenant's
risk, except for the negligence of Landlord, its employees, agents and
contractors, and subject to all of the terms of this Lease (other than the
obligation to pay rent). Any work or installation performed by Tenant shall be
subject to coordination by Landlord's contractor and must be performed using
workers compatible with Landlord's contractors and subcontractors in order to
avoid labor disputes and delays in completion. Landlord shall not be responsible
for any delays in completion of the Premises attributable to installations or
work performed by or on behalf of Tenant if such delay is in excess of thirty
(30) days after the time necessary to complete such work in the ordinary course.
(f) Punchlist. After Landlord gives Tenant notice of the
projected substantial completion of Landlord's Work as contemplated by Paragraph
3(d), representatives of Landlord, Tenant and the general contractor shall
inspect the Premises for the purpose of developing a comprehensive list of
punchlist items that require completion or repair. The punchlist items shall not
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suspend or delay the commencement of the lease Term, but Landlord shall, as soon
as reasonably possible following the Commencement Date, complete the punchlist
items.
(g) Construction Costs; Above Standard Improvements. Landlord
shall pay the cost of designing, constructing and installing Landlord's Work,
subject to the following limitations: (i) the amount payable by Landlord to
Tenant's architect in connection with the design of Landlord's Work, Tenant's
Work, administrative expenses in connection with the Project and preparation of
the Plans and Specifications (including, without limitation,
programming/schematics, preliminary design, design development, construction
documents, bidding and negotiation and construction administration) shall not
exceed $104,000.00 (the "Architectural Cap"); (ii) the amount payable by
Landlord for construction and installation of the HVAC system in the Premises
shall not exceed $465,000.00 (the "HVAC Cap"); (iii) the amount payable by
Landlord for construction and installation of the other allowance items noted on
Exhibit C-1 shall not exceed $150,000.00 (the "Exhibit C-1 Cap"); and (iv)
Tenant shall pay, as hereinafter set forth, the sum of Nine Hundred Fifty
Thousand Dollars ($950,000) to reimburse Landlord for the cost of designing,
constructing and installing that portion of Landlord's Work described in Exhibit
"D" attached hereto (the "Above Standard Improvements"). Any fees and expenses
of Tenant's architect in excess of the Architectural Cap shall be paid directly
by Tenant when due. All costs incurred by Landlord for the construction and
installation of the HVAC system above the HVAC Cap and the other allowance items
in excess of the Exhibit C-1 Cap (collectively, any amounts incurred by Landlord
for the HVAC and the items set forth on Exhibit C-1 in excess of the HVAC Cap or
the Exhibit C-1 Cap, as applicable, the "Excess Allowance Costs") shall be paid
by Tenant. In calculating any Excess Allowance Costs, the cost of the HVAC
system and the items set forth on Exhibit C-1 shall include all actual hard and
actual and reasonable soft costs incurred by Landlord in connection with the
construction of items to which the Excess Allowance Costs relate, including but
not limited to architectural and engineering fees, the cost of labor and
materials, including the general contractor's overhead and profit, and a
construction management fee to Landlord equal to five percent (5%) of all such
hard and soft costs. The Excess Allowance Costs and the cost of the Above
Standard Improvements shall be paid by Tenant as provided herein.
Landlord shall require its general contractor to breakout in
its bid the cost of the allowance items noted on Exhibit C-1. After Landlord's
acceptance of the bid from its general contractor Landlord shall give Tenant
written notice, in reasonable detail, of the estimated Excess Allowance Costs.
As Landlord makes each payment to a contractor on an invoice including a portion
of the items or items to which estimated Excess Allowance Costs relate, Tenant
shall pay to Landlord to
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portion of such payment bearing the same relationship to such payment as the
estimated Excess Allowance Costs bear to the full estimated cost of the item or
items to which such Excess Allowance Costs relate. Tenant shall retain 10% of
each such payment until Landlord's Work is complete and all punch-list items are
completed to Tenant's reasonable satisfaction. Promptly after substantial
completion of the Premises Landlord shall provide Tenant with a statement in
reasonable detail of the Excess Allowance Costs along with all supporting
documentation. The amount by which the actual Excess Allowance Costs exceed the
estimated amount paid by Tenant as set forth above, less the retainage if any
punch-list items remain outstanding, shall be paid by Tenant within fifteen (15)
days after receipt of such statement. Tenant shall have the right to review, at
its request, all invoices, receipts and related records from design consultants
and contractors included within the Excess Allowance Costs.
Within thirty (30) days after notice to Tenant that the
Building is fifty percent complete, Tenant shall pay to Landlord forty percent
of the charge for the Above Standard Improvements (i.e., $380,000), subject to a
retainage of 10% to be held by Tenant as hereinafter described. Thereafter, no
more often then once in any thirty (30) day period, Tenant shall, upon written
request by Landlord, pay to Landlord progress payments reflecting the percentage
above fifty percent (50%) by which the Above Standard Improvements (and not the
Building) have been completed by such date, subject in each case to 10%
retainage to be held by Tenant until the Above Standard Improvements are
complete and all punch-list items relating thereto are completed to Tenant's
reasonable satisfaction. Any request for a payment relating to the Above
Standard Improvements shall contain a signed statement by the Project's
architect as to the percentage of the Building, as to the initial payment, and
the Above Standard Improvements, as to other payments, that has been completed.
The 10% retainage shall be paid by Tenant to Landlord within fifteen (15) days
after the later of the Delivery of Possession or the completion by Landlord of
the punchlist items to the reasonable satisfaction of Tenant. The Above Standard
Improvements shall be deemed the property of Tenant and, to the extent readily
removable by Tenant without material damage to the Premises shall be removed by
Tenant upon the expiration or sooner termination of this lease. The remaining
Above Standard Improvements shall be left in place, provided, however, that
Tenant shall cap or seal any open plumbing, sewer and electrical outlets or
inlets. All damage caused by such removal repaired, unless prior to such
expiration or sooner termination Landlord gives Tenant written notice requiring
that the Above Standard Improvements remain as part of the Premises upon such
expiration or sooner termination.
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(h) Landlord shall appoint at least two (2) construction
representatives who shall have authority to bind Landlord with respect to any
consent or approval required in connection with Landlord's Work or Tenant's
Work, at least on of whom shall be available at all times.
(i) Except as expressly set forth herein, Tenant shall have no
responsibility to pay for any of Landlord's Work and Landlord shall bear the
full risk of Landlord's Work exceeding any anticipated cost for any reason
whatsoever.
4. INTENTIONALLY OMITTED. NOTE: AS PREVIOUSLY STATED, TENANT WILL
NOT EXECUTE THIS LEASE UNTIL THE USE APPROVAL HAS BEEN OBTAINED AND LANDLORD HAS
CLOSED (OR IS CLOSING) ON THE PROPERTY.
5. RENTAL.
(a) Tenant covenants and agrees to pay to the Landlord the
following Rental:
(i) a base rent during the Term of this lease or any
extension as may be provided for herein (hereinafter called the "Base Rent") in
the sum stated in the Preamble payable by Tenant in equal monthly installments
as stated on or before the first day of each month, in advance, to Landlord at
the office of Landlord above designated or to such other place as shall be
designated by Landlord, without any prior notice or demand therefor and without
any deduction, abatement or set off for any reason whatsoever, except as may be
specifically provided in this Lease;
(ii) All charges payable pursuant to this lease as
additional rental (hereinafter referred to as "Additional Rental");
(iii) In the event that the Commencement Date shall be
other than the first day of a month, then the Tenant shall pay, on the
Commencement Date, the Base Rent and Additional Rental for the fractional
portion of the month on a per diem basis (calculated on the basis of a
thirty-day month) until the first day of the next succeeding month.
Such Base Rent and Additional Rental are herein referred to
collectively as "Rental".
(b) It is intended that the Rental provided for in this lease
shall be a net return to Landlord throughout the Term hereof, free of any
expense, charge or other deduction whatsoever with respect to the Premises, the
Building and/or the operation, management, maintenance, repair, use or
occupation
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thereof, except only as otherwise expressly provided in this lease.
(c) In the event that any payment of Rental due hereunder is
not paid within ten (10) days of the due date thereof, a late charge of 5% for
each dollar so overdue may be charged by the Landlord to defray Landlord's
administrative expenses for processing late payments, provided that with respect
to the first two (2) times in any twelve (12) month period that Rental is
overdue, a late charge shall not be imposed unless such Rental remains unpaid
for ten (10) days after written notice from or on behalf of Landlord. In
addition, any Rental not paid within thirty (30) days of its due date shall bear
interest at a rate equal to two percent (2%) per annum in excess of the prime
rate in effect from time to time as reported in the "Money Rates" column of The
Wall Street Journal (the "Prime Rate", and as increased by two percent, the
"Overdue Interest Rate") from the date which is thirty (30) days after the date
such Rental was due until the date paid. These late charges and interest shall
be in addition to and not in lieu of any other remedy the Landlord may have
under the circumstances and is in addition to any reasonable fees and charges of
any agents or attorneys Landlord may employ as a result of any default in the
payment of Rental hereunder, whether authorized herein or by law. Any such late
charges and interest if not previously paid shall, at the option of the
Landlord, be added to and become part of the succeeding rental payment to be
made hereunder and shall be deemed to constitute additional Rental.
6. USE. The Premises are to be used by Tenant solely for the
Permitted Use and uses reasonably ancillary thereto, subject to and in
accordance with the provisions of this lease and for no other purpose.
7. INSURANCE.
(a) Tenant shall provide, on or before the earlier of Tenant's
entry in the Premises or the Commencement Date, and keep in force, at all times
during the Term, at its sole cost and expense, a commercial general liability
insurance policy, insuring against any claim or liability for personal injury to
or death of any persons, and/or damage to property occurring in, on or about the
Premises, or any appurtenances thereto. Such policy shall provide for limits of
liability thereunder of not less than Three Million ($3,000,000.00) Dollars in
respect to personal injury or death to any person(s) and One Million
($1,000,000) Dollars in respect to property damage. The limit of any such
insurance shall not limit the liability of the Tenant hereunder. This liability
policy shall name as additional insureds Landlord and any managing agent and
mortgagee of the Building. Although this subsection refers to a "liability
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policy," Tenant may carry the insurance required by this subsection through a
combination of a commercial general liability policy (in an amount not less than
$1,000,000 per person/per occurrence) and an umbrella liability policy, and/or
through a blanket policy.
(b) Landlord agrees to obtain and keep in full force and
effect, at all times during the construction period and the Term policies of
insurance covering the Building and base building improvements made by the
Landlord to the Premises, against all risks of physical damage, in an amount
equal to the full replacement value of such improvements, without any
co-insurance; rental insurance sufficient to include both Base and Additional
Rental; commercial general liability insurance with a combined single limit of
not less than $3,000,000.00; and such other insurance coverage as is necessary
or proper, all of which insurance coverage shall be in such amounts and with
such companies as is reasonable and proper. Tenant's Allocable Share of the cost
of any such insurance shall be paid by Tenant as Additional Rental pursuant to
Paragraph 20 hereof. Any or all insurance carried by Landlord may be carried
through blanket policies and liability insurance may be carried through a
combination of a commercial general liability policy (in an amount not less than
$1,000,000 per person/per occurrence) and an umbrella liability policy.
(c) Landlord shall not provide any insurance covering the
Tenant's possessions, business operations or betterments and improvements
installed by Tenant in the Premises. Tenant agrees to obtain, at its sole cost
and expense, an insurance policy covering its contents and a liability policy
covering its business operations which shall include contractual liability.
(d) Tenant and Landlord, respectively, hereby release each
other from any and all liability or responsibility to the other for all claims
of anyone claiming by, through or under them by way of subrogation or otherwise
for any loss or damage to property owned by Landlord and Tenant respectively in
the Premises whether or not covered by insurance maintained by the releasing
party. In the case of any conflict between this subparagraph 7(d) and any other
provision of this lease, the provisions of this subparagraph 7(d) shall govern.
(e) Each party agrees to deliver to the other party, at least
fifteen (15) days prior to the time such insurance is first required to be
carried by such party, and thereafter at least fifteen (15) days prior to the
expiration of any such policy, either a duplicate original or a certificate of
insurance and a true copy of all policies procured by such party in compliance
with its obligations hereunder. All such policies shall provide for notice of
cancellation to be provided thirty
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(30) days prior to any cancellation. Promptly following written demand by either
party, the other party shall provide evidence of the payment of all premiums
then due for such party's insurance.
8. INCREASE OF INSURANCE RATES. Tenant agrees, at its sole cost and
expense, to promptly comply with all of the rules and regulations of the
Insurance Service Organization of New Jersey having jurisdiction, or any similar
body with respect to its operations at the premises. If, at any time, as a
result of or in connection with any failure by Tenant to comply with the
foregoing provision, or as a result of any act or omission or commission by
Tenant, its employees, agents, contractors, invitees, licensees or subtenants,
or as a result of or in connection with the use to which the Premises are put,
notwithstanding that such use may be for the purpose herein permitted or that
such use may have been consented to by Landlord, any insurance rate applicable
to the Building and/or to the contents thereof, shall be higher than that which
would be applicable for the reasonable least hazardous types of occupancy
legally permitted therein, then and in any of such events, Tenant shall pay such
additional premiums for all insurance policies in force with respect to the
Building. Tenant shall not use nor install any electrical equipment that
overloads the electric capacity provided to the Premises as part of Landlord's
Work. Tenant, at its sole cost and expense, shall promptly make whatever changes
are necessary to prevent or remedy such condition and to comply with all
requirements of the Board of Fire Insurance Underwriters or any similar body and
any governmental authority having jurisdiction thereof. For the purposes of this
Paragraph, any finding or schedule of the Fire Insurance Rating Organization or
any similar organization having jurisdiction shall be deemed to be conclusively
binding on the parties hereto.
9. FIRE AND OTHER CASUALTY. In case of fire or other casualty,
Tenant shall give immediate written notice to Landlord. In the event the
Premises shall be partially damaged by fire, the elements or other casualty,
then unless Landlord or Tenant exercises any right to terminate this lease
expressly provided in this Paragraph 9, this lease shall remain in full force
and effect and Landlord shall, at Landlord's expense, repair the same as
speedily as practicable to the extent of the original Landlord's Work, exclusive
of the Above Standard Improvements, and if any portion of the Premises shall be
rendered untenantable, then the Tenant's obligation to pay Rental hereunder
shall abate in the same proportion which the square footage of the portion
rendered untenantable bears to the total square footage of the Premises until
such time as the Landlord shall have substantially repaired the Premises, except
that Tenant shall not be obligated to pay any Rental hereunder except to the
extent that Tenant is actually using any part of the Premises for its business
use, if its laboratory operations cannot be carried
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on in the Premises substantially as they were before the casualty. Landlord
shall be obligated to repair any damage to Above Standard Improvements provided
the proceeds of insurance carried by Tenant or other funds provided by Tenant
are made available to Landlord to pay the cost thereof, it being understood that
Tenant is responsible for insuring the Above Standard Improvements. In the event
that at least seventy five (75%) percent of the Premises shall be damaged, then
the Landlord or Tenant shall have the right to terminate the lease on thirty
(30) days' written notice delivered to the other party, given within thirty (30)
days of the occurrence of such damage, in which event the Rental as abated, if
applicable, shall be paid up to the time of such termination and then and from
thenceforth this lease shall come to an end. In the event that less than seventy
five percent (75%) of the Premises is damaged, Landlord shall have One Hundred
Eighty (180) days from the date of casualty to substantially restore the
Premises to the same scope of work as Landlord had provided Tenant at the
commencement of this lease as Landlord's Work and, if Tenant makes funds
available as above provided, including the Above Standard Improvements. If
Landlord has not substantially restored the Premises in the manner provided
herein within such One Hundred Eighty (180) day period, subject to extension for
reasons beyond Landlord's control as provided in Paragraph 28(a), which
extension shall in no event exceed six (6) months, then Tenant shall have the
right to terminate this Lease within thirty (30) days following the expiration
of then aforesaid One Hundred Eighty (180) day period, as extended as aforesaid,
by giving written notice to that effect to Landlord. As used herein, the
determination of the space which is untenantable or damaged shall mean that such
space which is not reasonably usable by Tenant for the business purposes carried
on by Tenant in such space prior to such casualty.
10. REPAIRS AND MAINTENANCE.
(a) Tenant, at its sole cost and expense, shall take good care
of the Premises and shall keep, repair, replace and maintain the Premises in
good order, condition and repair, and each and every part thereof (including,
without limitation, painting and decorating, and the repair, maintenance and
replacement of any heating, ventilating and air conditioning units or systems),
except only such matters that are expressly stated herein to be within the
Landlord's obligation to maintain, or, subject to the provisions of Paragraph 11
hereof, caused solely by the negligence or willful misconduct of Landlord, its
contractors, employees, agents or other tenants (but only to the extent not
covered by Tenant's insurance), and shall not cause nor permit any dirt, debris
or rubbish to be put, placed or maintained on the sidewalks, driveways, parking
lots, yards, entrances and curbs, in, on or adjacent to the Building. Tenant
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further agrees not to cause nor permit waste of or damage or nuisance to, in, or
about the Premises or the Building. To the extent assignable, Landlord shall
assign to Tenant all warranties applicable to the Premises, including, but not
limited to, warranties of manufacturers and contractors, and any warranties with
respect to equipment, fixtures, materials, service or operability with respect
to anything contained in the Premises. Landlord shall assist Tenant, at Tenant's
expense, in making any such warranty claims. In the event any such warranty is
not assignable, Landlord shall be responsible for the materials or services
covered by such warranty. Without in any way limiting the foregoing or any other
provision of this lease, Landlord shall be responsible for any and all latent
defects at the Premises for a period of two (2) years following the Commencement
Date.
(b) Landlord, upon reasonable written notice from Tenant,
shall, at Landlord's sole cost and expense, make necessary structural repairs to
the exterior walls and shall keep in good order, condition and repair the
exterior foundations, downspouts, gutters and roof of the Building, excluding,
however, all windows, doors, signs and all repairs required by any casualty
except as otherwise provided in Paragraphs 9 and 13 hereof. For the purpose of
this lease, a structural repair shall be defined as any structural repair to the
structural steel, footings, foundations, masonry walls, and roof of the demised
Premises. Any repairs, whether structural or otherwise, resulting from damage
caused by any act, omission or negligence of Tenant, any subtenant or
concessionaire, or their respective employees, agents, invitees, licensees or
contractors shall be performed by the Landlord and, except as provided in
Paragraph 7 of this lease, the reasonable cost thereof, to the extent not
reimbursed through the insurance maintained by Landlord, shall be paid by Tenant
as additional rent.
(c) Landlord further agrees to maintain, repair and keep in
good order and condition, as part of the operating expenses to be paid by Tenant
as provided in Paragraph 20(a), all public or common areas surrounding the
Building which are the property of the Landlord, except as otherwise herein
provided, and agrees to furnish all necessary utilities to such public or common
areas. The reasonable costs and expenses incurred by Landlord for maintenance,
repairs, utilities, janitorial service, refuse and snow removal and security of
the public or common areas shall be determined in the reasonable discretion of
Landlord, to ensure the proper quality and the preservation of the reputation of
the Building. Tenant shall pay its proportionate share of all reasonable costs
and expenses so incurred by Landlord, as Additional Rental, in accordance with
the provisions of Paragraph 20 hereof.
(d) All common areas are for the general use, in common, of
all tenants of the Building, their employees and
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guests, and at all times are subject to the sole and exclusive control of the
Landlord. Pursuant thereto Landlord shall have the right, from time to time, to
establish, modify and enforce rules and regulations regarding the common areas,
to alter, modify or otherwise change the common areas, to restrict parking and
temporarily close all or any portion of any common parking area as will be
legally sufficient to prevent a dedication or the accrual of any rights to any
person or to the public and to do such other acts, in and to all common areas as
in Landlord's reasonable judgment shall be desirable or advisable to improve or
maintain such areas. In the exercise of Landlord's rights under this Paragraph
10(d) to modify common areas, Landlord shall not materially interfere with
Tenant's access to the Premises, including the availability of parking in
reasonable proximity to the Premises. Any rules and regulations established by
Landlord pursuant to this Paragraph 10(d) shall be reasonable and in writing,
with copies thereof provided to Tenant. Landlord shall not discriminate against
Tenant in the enforcement of any such rules and regulations. Anywhere in this
lease that access to the Premises is mentioned it shall be construed as
including access to the doors, loading docks and other entrances in
substantially the same manner and to substantially the same extent as provided
in the original Plans and Specifications.
(e) Tenant shall have no right of access to the roof of the
Premises or the Building and shall not install, repair, place or replace any
aerial, fan, air conditioner or other device on the roof of the Premises or the
Building without the prior written consent of Landlord. Landlord shall not
unreasonably withhold its consent to the installation by Tenant of a satellite
dish or antenna on the roof of the Building, provided that such consent may be
subject to such conditions as Landlord may reasonably require, including but not
limited to such screening as Landlord may require and the furnishing of
appropriate insurance coverage, all at Tenant's expense. Any aerial, fan, air
conditioner or other device installed without such written consent shall be
subject to removal, at Tenant's expense, without notice,at any time. Landlord
shall repair at Tenant's expense, any damage to the Building or roof resulting
from the installation, repair, use, or replacement of any such air conditioner
or other device.
11. COVENANTS AGAINST LIENS.
(a) Tenant shall not do any act, nor make any contract which
may create any lien or other encumbrance upon the Building or Premises, nor
permit nor suffer same to remain, as a result of any labor, work, services or
materials performed, supplied or furnished for or to the Tenant or the Premises.
If, because of any act or omission (or alleged act or omission) of Tenant, any
mechanic's or other lien or encumbrance shall be
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filed against the Building or Premises, whether or not such lien or encumbrance
is valid or enforceable as such, Tenant, at its sole cost and expense, shall
cause same to be discharged of record or bonded, within twenty (20) days after
notice to Tenant of the filing thereof; and Tenant shall indemnify and save
harmless Landlord against and from all damages, costs, liabilities, suits,
penalties, claims and demands, including reasonable counsel fees, resulting from
the creation of such lien or encumbrance. In the event Tenant fails to so
comply, Landlord shall have the option of discharging or bonding any such lien
or encumbrance, and Tenant agrees to reimburse Landlord for all costs, legal and
other expenses incurred in connection therewith, together with interest at the
Overdue Interest Rate, promptly upon demand, which sums shall be deemed to
constitute Additional Rental. All materialmen, contractors, artisans, mechanics,
laborers and any other persons now or hereafter contracted by Tenant for the
furnishing of any labor, services, materials, supplies or equipment, at any time
from the date hereof until the end of the Term, are hereby charged with notice
that they must look exclusively to Tenant to obtain payment for same.
(b) Nothing in this lease shall be deemed to be, or construed
in any way as constituting, the consent or request of Landlord, expressed or
implied, by inference or otherwise, to any person, firm or corporation for the
performance of any labor or the furnishing of any materials for any
construction, rebuilding, alteration, addition or repair of or to the Premises
or any part thereof, nor as giving Tenant any right, power or authority to
contract for or permit the rendering of any services or the furnishing of any
materials which might in any way give rise to the right to file any lien against
Landlord's interest in the Building. Landlord shall have the right to post and
keep posted at all reasonable times on the Premises any notice which Landlord
shall deem necessary so to post for the protection of Landlord and the Building
from any such lien.
12. ALTERATIONS.
(a) Tenant shall not make, or cause, or permit the making of
any repairs, alterations, additions, or improvements in or to the Premises that
exceed $25,000 in cost, affect any of the Building systems (other than portions
of such Building systems solely serving the Premises) or are visible from the
outside of the Building without obtaining Landlord's prior written consent
thereto in each instance, which consent, except as set forth below, may be
granted or withheld in Landlord's sole discretion. In the event any such work
shall cost in excess of Twenty-Five Thousand ($25,000.00) Dollars, such work
shall not be commenced until Tenant shall submit to the Landlord plans and
specifications relating to any such repairs, alterations, additions or
improvements, and all such work shall be performed
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in accordance with the provisions of this lease. Landlord shall not unreasonably
withhold, condition or delay its consent to any non-structural alteration,
addition or improvement to the interior of the Premises that does not affect any
of the Building systems (other than portions of such Building systems solely
serving the Premises, such as interior ductwork). Any approval by Landlord as
aforesaid may be upon condition that Tenant furnish the Landlord such evidence
of Tenant's financial ability to assure completion thereof and payment therefor,
as Landlord may reasonably require. All such repairs, alterations, additions or
improvements to Landlord's property , when installed or attached to the
Premises, shall belong to and become the property of the Landlord. All such
repairs, alterations, additions or improvements to Tenant's property (including,
but not limited to the Above Standard Improvements), when installed or attached
to the Premises, shall belong to Tenant. Notwithstanding whether any
alterations, additions or improvements are Landlord's property or Tenant's
property during the Term, except to the extent otherwise provided herein, such
alterations, additions and improvements shall be surrendered with the Premises
and as part thereof, upon the expiration or sooner termination of this lease,
without compensation to Tenant at which point, if same are Tenant's property,
they shall automatically become Landlord's property. Notwithstanding the above,
Landlord shall have the right to indicate in a written notice to Tenant
delivered together with its consent (assuming that Landlord otherwise consents
thereto), or, if Landlord's consent is not required, in response to any inquiry
from Tenant, that, if Tenant proceeds to make the consented to alteration,
addition, or improvements, Landlord will require the removal of such alteration,
addition or improvement upon the expiration or termination of this Lease. If
Landlord shall deliver such notice and Tenant shall proceed to make such
alteration, addition or improvement, Tenant shall, at Tenant's sole cost and
expense, remove same at the end of the Term. If Landlord's consent shall not be
required or shall not be obtained for any alteration, addition or improvement
and Tenant does not request a determination by Landlord of whether any
alteration, addition or improvement will have to be removed at the end of the
Term, Landlord shall have the right to request the removal of such alteration,
addition, or improvement no less than 90 days before the end of the Term, in
which event Tenant shall remove same, at Tenant's sole cost and expense, by the
end of the Term.
(b) Any work performed by Tenant, irrespective of cost, shall
be subject to the Landlord's inspection after completion to determine whether
all such repairs, alterations, improvements and/or additions are constructed and
performed in a first-class good and workmanlike manner and in accordance with
all applicable governmental and fire underwriting requirements. The approval or
consent of the Landlord shall not relieve Tenant of its obligation that all such
repairs, alterations,
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improvements and/or additions be constructed and performed in a first-class good
and workmanlike manner and in accordance with all applicable governmental and
fire underwriting requirements, nor constitute a waiver of any rights of
Landlord if Tenant fails to perform its obligations. Tenant, at its sole cost
and expense, shall procure all necessary governmental approvals, permits or
certificates in connection with all work performed by Tenant in, on or at the
Premises and shall deliver copies of all such approvals, permits or certificates
to the Landlord. All work performed by Tenant must be performed by reputable
contractors compatible with Landlord's contractors. With respect solely to any
structural work or work which affects the Buildings systems, all contractors
shall be approved in advance by Landlord.
(c) During the course of any and all repairs, alterations,
additions or improvements which the Tenant shall either be required to perform
or which the Tenant shall elect to perform Tenant, at its sole cost and expense,
shall at all times obtain and maintain or cause to be obtained and maintained,
workmen's compensation insurance and any other insurance which shall then be
required by law, together with public liability insurance as set forth in
Paragraph 7 hereof, to insure against any additional hazards created in
connection with the performance of any of the aforesaid work. Prior to the
commencement of any such work, Tenant shall deliver to Landlord copies of all
policies or certificates of insurance with respect to all policies required
pursuant to this Paragraph 12(c).
13. CONDEMNATION.
(a) Landlord shall give Tenant a copy of any notice of
condemnation affecting the Premises promptly following the receipt thereof by
Landlord. In the event that the whole of the Premises shall be taken for any
public or quasi-public use under any statute or by right of eminent domain, or
by private purchase in lieu thereof, then this lease shall automatically
terminate as of the date that title shall be taken. In the event that a part of
the Premises shall be so taken as to render the laboratory portion thereof
unusable for laboratory purposes, then Landlord and Tenant shall each have the
right to terminate this lease on thirty (30) days' written notice to the other,
given within sixty (60) days following the date of such taking. In the event
that this lease shall terminate or be terminated, the Rental hereunder shall be
equitably adjusted as of the date of termination.
(b) In the event that a part of the Premises shall be so taken
and this lease shall not terminate or be terminated pursuant to the provisions
of subparagraph (a) above, then the Rental shall be equitably apportioned
according to the square footage of the Premises so taken and this lease, in all
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other respects, shall remain in full force and effect, and Landlord, at its own
cost and expense, shall restore the remaining portion of the Premises to the
extent necessary to render it reasonably suitable for the purpose for which the
Premises were leased, provided that such work shall not exceed the scope of the
work required to be done by Landlord in originally constructing the Premises. In
the event access to the Premises is taken or materially adversely affected by
such taking, Landlord shall provide reasonable substitute access. If Landlord is
unable to do so, this lease shall be terminable as provided in subparagraph (a)
above.
(c) All compensation awarded or paid upon such a total or
partial taking of the Building or the Premises shall be apportioned between
Landlord and Tenant, with Tenant receiving the value of the Above Standard
Improvements and the proportion of the value of the HVAC system and Exhibit C-1
allowance items that bears the same ratio to such value as the Excess Allowance
Costs allocable to such items bore to their total cost, in each case determined
by an independent appraiser acceptable to Landlord and Tenant, or as may
otherwise be determined by agreement of the parties. Tenant shall have the right
to seek and prosecute any claim directly against the condemning authority in
such condemnation proceedings for moving expenses, inventory and/or movable
trade fixtures, furniture and other personal property belonging to Tenant, so
long as such claim shall not diminish or otherwise adversely affect Landlord's
award.
(d) Provided same does not waive any right which Tenant may
have to any award, Tenant agrees to execute and deliver such instruments as may
be deemed necessary or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the
Premises or any portion thereof. On or before the effective date of such taking,
Tenant covenants and agrees to vacate the Premises, remove all of its personal
property therefrom and deliver up peaceable possession thereof to Landlord or to
such other party designated by Landlord. Failure by Tenant to comply with any
provision hereof shall subject Tenant to such reasonable costs, expenses,
damages and losses as Landlord may incur by reason of Tenant's breach hereof.
14. ACCESS AND RIGHT TO EXHIBIT.
(a) Landlord and its designees shall have the right to place
and maintain all utility equipment of any kind, in and on the Premises as may be
necessary or desirable to serve the Building or any portion thereof, provided
that except for portions of such equipment serving the Premises, such utility
equipment must be located in pipe chases, utility closets or
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otherwise above ceilings or within walls, so as to minimize interference with
Tenant's use of the Premises. Landlord and its designees shall have the right to
enter upon the Premises at all reasonable hours upon reasonable prior notice
(and in emergencies at all times):
(i) to inspect the same;
(ii) to make repairs, additions or alterations to and/or
to complete initial construction of, the Premises and/or to the Building or to
prevent waste or depreciation thereof; or
(iii) to exhibit the Premises to any prospective
purchaser or mortgagee; or
(iv) for the period commencing one hundred eighty (180)
days prior to the end of the Term, to exhibit the Premises to prospective
tenants.
The access rights reserved by Landlord under this Paragraph
shall be subject to such reasonable security measures as Tenant may from time to
time institute, provided that such security measures shall not have the
practical effect of denying Landlord reasonable access to the Premises for the
purposes set forth above. This Paragraph shall not be deemed to be a covenant by
Landlord nor be construed to create an obligation or duty on the part of
Landlord to make such inspection, repairs, additions or alterations except as
otherwise herein provided. Any performance by Landlord hereunder shall not be
deemed a waiver of Tenant's default in failing to perform any repair or other
obligations for which Tenant is responsible under this lease, nor shall Landlord
be liable for any inconvenience, disturbance, loss of business, loss of use of
the Premises or any other damage suffered by Tenant, due to said performance by
Landlord, and the obligations of Tenant pursuant to this lease shall not thereby
be affected in any manner whatsoever. Landlord agrees to exercise due care to
cause the least reasonably possible interference with Tenant's business, but
Landlord shall not be required to employ labor on weekends or on an overtime
basis to avoid or reduce any such interference unless (i) the need for such work
being performed is due to Landlord's negligence, (ii) such work is not required,
but rather is being done solely for the benefit of Landlord or another tenant,
or (iii) Tenant agrees to pay for any reasonable additional cost to Landlord for
such work to be conducted on weekend or on an overtime basis.
(b) Landlord shall have the right, upon reasonable notice and
at reasonable times, to carry material in and on the Premises and to perform
work in or on the Premises as may be required pursuant to the provisions of this
lease, without the same constituting an actual or constructive eviction to
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Tenant, in whole or in part, without the same permitting any rent reduction or
abatement and, subject to Paragraph 7 hereof, without the Tenant having the
right to assert any claim for damages other than damage to the Tenant's tangible
property caused directly by the negligence of the Landlord, its employees,
contractors or agents. In no event shall the Landlord be liable for any
inconvenience, disturbance, loss of business, loss of use of the Premises or any
consequential damages which Tenant may suffer. Landlord agrees to exercise due
care to cause the least reasonably possible interference with Tenant's business,
but Landlord shall not be required to employ labor on weekends or on an overtime
basis to avoid or reduce any such interference unless (i) the need for such work
being performed is due to Landlord's negligence, (ii) such work is not required,
but rather is being done solely for the benefit of Landlord or another tenant,
or (iii) Tenant agrees to pay for any reasonable additional cost to Landlord for
such work to be conducted on weekend or on an overtime basis.
15. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not either voluntarily, or by operation of
law, assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or
any interest therein, and shall not sublet the Premises or any part thereof, or
any right or privilege appurtenant thereto, or allow any other person (the
employees, agents, servants and invitees of Tenant excepted) to occupy or use
the Premises, or any portion thereof, without first obtaining the written
consent of Landlord. When Tenant requests Landlord's consent to such assignment
or subletting, it shall notify Landlord in writing of the name and address of
the proposed assignee or subtenant and the nature and character of the business
of the proposed assignee or subtenant and shall provide CPA prepared (and
audited, if available) financial statements for the proposed assignee or
subtenant. Except in the case of a Permitted Transferee, Landlord shall have the
option (to be exercised within twenty (20) days from the submission of Tenant's
request) to cancel this Lease as of the commencement date stated in the proposed
sublease or assignment. If Landlord shall not exercise its option within the
time set forth above, its consent to any proposed assignment or subletting shall
not be unreasonably withheld, conditioned or delayed, provided that: (i) the
proposed user shall be of a character, and shall be engaged in a business, in
keeping with the commercial standards generally applied by Landlord for new
tenants in Allendale Corporate Center, (ii) the proposed user shall have a
financial condition in keeping with the commercial standards generally applied
by Landlord for new tenants in Allendale Corporate Center; (iii) the proposed
assignee or subtenant shall not then be occupying other space in the Building,
and as a result would cease to occupy such space, nor shall it be a prospective
tenant
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then negotiating with Landlord for comparable sized space; (iv) the proposed
user shall not have parking requirements in excess of the parking made available
to Tenant under this Lease; (v) Tenant shall not publicly advertise (whether
through mail solicitation of brokers or otherwise) Tenant's net offered rent if
such rent is less than the net effective rent then being offered by Landlord for
new leases of space in Allendale Corporate Center; (vi) any sublease shall be
for the entire Premises; and (vii) the documents creating the sublease or
assignment, and the nature of the fixtures and improvements to be performed or
installed, shall be subject to Landlord's approval.
(b) Anything contained in this Paragraph to the contrary
notwithstanding: (i) Tenant may mortgage, pledge or encumber its leasehold
interest without the need for Landlord's consent, but upon prior written notice
to Landlord, to an institutional lender, but only as part of a pledge by Tenant
of all or substantially all of its assets to such institutional lender as
security for corporate financing provided by such lender to Tenant; and (ii)
Tenant may assign this Lease or sublet the Premises without the need for
Landlord's consent, but upon prior written notice to Landlord, to a corporation
that is the parent or subsidiary corporation of Tenant, a subsidiary of Tenant's
parent, or the successor to substantially all of Tenant's business, or to an
entity into which or with which Tenant is merging or consolidating (a "Permitted
Transferee"). Landlord shall not have the right to recapture the premises or
cancel this lease by virtue of any event covered by this subparagraph 15(b).
(c) If Landlord approves an assignment or subletting as herein
provided, Tenant shall pay to Landlord, as Additional Rent, 50% of the amount,
if any, by which the Base Rent plus Additional Rent allocable to that part of
the Premises affected by such assignment or sublease pursuant to the provisions
of this Lease, is less than the net rent payable by the assignee or sublessee to
Tenant (i.e., the rental or other consideration payable by the assignee or
sublessee, reduced by the reasonable costs incurred by Tenant in connection with
such assignment or sublease, including commissions and improvements costs). A
consent to one assignment, subletting, occupation or use shall not be deemed to
be a consent to any other or subsequent assignment, subletting, occupation or
use. Consent to any assignment or subletting shall in no way relieve Tenant of
any liability under this Lease. Any assignment or subletting without Landlord's
consent shall be void, and shall, at the option of the Landlord, constitute a
default under this Lease. In the event that Landlord shall consent to a sublease
or assignment hereunder, Tenant shall pay any brokerage fees related the
subletting or assignment of the Premises to any broker utilized by Tenant or its
subtenant, but not Landlord. Upon any assignment permitted under this lease, the
assignee shall be
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entitled to all of Tenant's rights under this lease without the need for any
additional consent or approval by Landlord.
(d) Upon the occurrence of an "event of default" as
hereinafter defined, if the Premises or any part thereof are then assigned or
sublet, Landlord, in addition to any other remedies herein provided, or provided
by law, may at its option collect directly from such assignee or subtenant all
rents becoming due to Tenant under such assignment or sublease and apply such
rent against any sums due to Landlord from Tenant hereunder, and no such
collection shall be construed to constitute a novation or a release of Tenant
from the further performance of Tenant's obligations hereunder.
16. RULES AND REGULATIONS, COMPLIANCE WITH LAWS.
(a) Tenant agrees, at all times during the Term hereof, and at
its sole cost and expense:
(i) to take reasonable steps (including but not limited
to, when required pursuant to Paragraph 12(b) of this lease, obtaining
Landlord's prior approval of contractors proposed to be used by Tenant) to avoid
any action which would violate Landlord's union contracts, if any, affecting the
Building or the Premises, or which would create any work stoppage, picketing,
labor disruption or dispute, or which would damage, delay or interfere with any
work performed or to be performed by Landlord or by any other persons in or
about the Building, or which hinder the activities or operations of the Landlord
in bringing about the cessation of any work stoppage, picketing or other labor
disruption or dispute affecting the Building or any work being performed or to
be performed in or about the Building;
(ii) to pay promptly and when due, all taxes, licenses,
fees, assessments or other charges levied or imposed upon the business of Tenant
or upon any fixtures, furnishings or equipment in, on or at the Premises;
(iii) not to commit any waste or nuisance, nor use the
plumbing facilities for any purpose injurious to same or dispose of any garbage
or any other foreign substance therein, nor place a load on any floor in the
Premises exceeding the floor load per square foot which such floor was designed
to carry, nor install, operate and/or maintain in the Premises any heavy
equipment except in a location approved by Landlord, nor install, operate and/or
maintain in the Premises any electrical equipment which will overload the
electrical system therein, or any part thereof, beyond its capacity for proper
and safe operation as determined by Landlord or which does not have
Underwriter's approval.
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(iv) to keep the Premises in a reasonably neat, clean,
orderly and sanitary condition, free of all insects, rodents, vermin and pests
of every type and kind;
(v) not to use the Premises for any purpose of business
which is illegal, noxious, offensive because of the emission of noise, smoke,
dust or odors or which could damage the Building or be a nuisance or menace to
or interfere with, any other tenants or the public other than the Permitted Use;
(vi) to comply with all requirements of all suppliers of
public utility services to the Building and not to suffer or permit any act or
omission the consequence of which could be to cause the interruption,
curtailment, limitation or cessation of any utility service to the Building;
(vii) to retain trash, rubbish and garbage created by
the Tenant, its representatives, guests, licensees, or invitees within the
demised Premises (or within dumpsters maintained by Tenant within its loading
dock area, adjacent to the Building and under the roof overhang) until removed
from the site at Tenant's expense.
(b) Tenant further agrees, at its sole cost and expense, to
promptly comply, or cause compliance, with all laws, ordinances, orders, rules,
regulations and requirements of all federal, state, county and municipal
governments, and appropriate departments, commissions, boards and offices
thereof, foreseen or unforeseen, ordinary as well as extraordinary, and whether
or not the same shall presently be within the contemplation of the parties
hereto or shall involve any change of governmental policy. Notwithstanding the
foregoing, Tenant shall not be obligated to make any alteration or addition to
the Building structure or systems in order to comply with such laws and other
requirements unless such alteration or addition is required because of Tenant's
particular use of the Premises (and not, by contrast, required for general
office or warehouse use). Any alterations or additions to the Building structure
or systems required to comply with laws and other requirements of general
application to office and warehouse use shall be made by Landlord and the cost
thereof, together with interest thereon at the Prime Rate, shall be amortized
over the expected useful life of such alteration or addition, with Tenant
responsible for its proportionate share of such amortized sums as part of the
additional charges payable by Tenant pursuant to Paragraph 20 hereof.
(c) No abatement, diminution or reduction of the Rental or
other charges required to be paid by Tenant pursuant to the terms of this lease,
shall be claimed by, or allowed to, the Tenant for any inconvenience,
interruption, cessation or loss of
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business or otherwise caused directly or indirectly by any present or future
laws, rules, requirements, orders, directions, ordinances or regulations of the
federal, state, county or municipal government, or of any other governmental or
lawful authority whatsoever, or as a result of any diminution of the amount of
space used by Tenant caused by legally required changes in the construction,
equipment, operation or use of the Premises.
(d) Tenant, following notice to Landlord, shall have the right
to contest by appropriate legal proceedings, at its sole cost and expense, the
validity of any law, ordinance, order, rule, regulation or requirement of the
nature herein referred to, provided, however, that:
(i) any noncompliance shall not constitute a crime on
the part of the Landlord or otherwise adversely affect, jeopardize or threaten
the interest of Landlord;
(ii) Tenant shall diligently prosecute any such contest
to a final determination by a court, department or governmental authority having
final jurisdiction and keep Landlord advised in writing as to all changes in
status and determinations in connection with any such proceedings, or otherwise
comply with such legal requirements; and
(iii) Tenant shall indemnify and save harmless Landlord
against any and all losses, costs, expenses, claims, penalties, actions,
demands, liabilities, judgments or other damages which Landlord may sustain by
reason of such contest or as a result of Tenant's failure or delay in
compliance. It is agreed however that Landlord has the right to require from
Tenant reasonable security to ensure Tenant's ability to perform its indemnity
obligations hereunder, which security if so requested, shall be furnished to
Landlord prior to the Tenant commencing or continuing with such contest, as the
case may be. Landlord agrees to cooperate reasonably with Tenant, and to execute
any documents or pleadings reasonably required for the purpose of any such
contest, provided that the same shall be without cost or expense to Landlord.
Landlord shall have the right, but not the obligation to contest by appropriate
legal proceedings, at Landlord's expense, any such law, ordinance, rule,
regulation or requirement.
17. UTILITIES. Tenant agrees to pay as and when the same become due
and payable, directly to the providing utility, all water rents, rates and
charges, all sewer rents and all similar charges assessed or charged to the
Premises during the Term, if any, all charges for electricity, gas, heat, steam,
hot water, and other utilities supplied to the Premises during the Term,
together with cost of repair, maintenance and replacement of all meters
measuring Tenant's use or consumption thereof. As
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part of Landlord's Work, Landlord shall install the utility meters required by
the Plans and Specifications. In the event that the charges for any of the
aforesaid services are not paid as the same become due and payable, Landlord
shall have the right, but not the obligation, to make such payments, in which
event a sum equal to any such payments shall be paid on the first day of the
following month, as Additional Rental, and shall be collectible as such,
together with interest at the Overdue Interest Rate from the date advanced by
Landlord until repaid. Landlord shall not be responsible or liable for the
failure to supply Tenant or for the failure of the Tenant to receive, any
utility service, nor shall Tenant be entitled to any cessation, abatement,
reduction or other offset of Rental in the event of any failure to receive any
utility service, unless such failure is due to the negligence or willful
misconduct of Landlord, its employees, agents or contractors, in which event
Tenant shall be entitled to abate Rental for each day that Tenant is unable to
use the Premises due to such unavailability of utilities.
18. SIGNS. Tenant may not provide, install or maintain any exterior
signs on the roof or in the windows; nor shall the Tenant provide, install or
maintain any exterior signs on the facade or walls of the Building or on any
grounds adjacent thereto, unless:
(i) such installation be made in such manner as will not
affect any guarantee which shall then be in force and effect;
(ii) all such signs shall have been approved by Landlord
in writing before installation, which approval shall not be unreasonably
withheld, delayed or conditioned so long as such sign is consistent with the
signage program in effect for Allendale Corporate Center; and
(iii) all such signs must at all times conform to all
applicable rules, regulations, codes and ordinances of any governmental agencies
having jurisdiction thereover, and must comply with Landlord's rules and
regulations governing such signs. All such signs shall be provided, installed,
maintained and removed at the termination of the lease, at Tenant's sole cost
and expense. Tenant further agrees that it will not place any advertisements or
other type of structure or obstruction on the roof facade or walls of the
Building and that it shall not operate any loudspeaker or other device which can
be heard outside of the Premises. In the event that Landlord or its agents deem
it necessary to remove any such signs in order to paint or make any repairs,
alterations or improvements in or upon the Building or any part thereof, they
may be so removed, but shall be replaced at Landlord's expense when the said
repairs, alterations or improvements shall have been completed. Nothing
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contained in this Paragraph shall create any obligation on the part of the
Landlord to make any repairs, alterations or improvements.
19. TAXES.
(a) Tenant covenants and agrees that it shall pay to Landlord,
as Additional Rental, its proportionate share of all real estate taxes,
assessments, added assessments and other governmental charges or substitutes
therefor levied, imposed, assessed or fixed on or against the Building and land
constituting the entire tax lot on which the Building is constructed (the
"Land") or arising from the use, occupancy or possession thereof, during the
Term hereof (hereinafter collectively referred to as the "Taxes"). The
proportionate share of Taxes to be paid by Tenant is set forth in Paragraph 20
of this lease.
(b) Landlord shall have the right to contest in good faith any
such tax, assessment or added assessment and all costs and expenses, including,
but not limited to, all legal fees, shall be deemed to constitute additional
charges for which Tenant shall pay its proportionate share, as set forth in
Paragraph 20 hereof. Tenant shall pay its share of all such costs and expenses,
as Additional Rental, on the first day of the month following demand therefor.
Provided that the Tenant shall have paid its proportionate share of all costs
and expenses in accordance with the provisions of this Paragraph 19(b), Tenant
shall be entitled to the same proportionate share of the proceeds of any refund
received by the Landlord as a result of such contest.
(c) In the event that Landlord shall fail to contest any tax
as set forth in subparagraph (b) above, despite Tenant's written request to do
so, then and in such event, Tenant shall have the right to contest in good faith
any such tax, assessment or added assessment, at its own cost and expense,
provided, however, that notwithstanding such contest, Tenant at all times: shall
when due, pay its proportionate share thereof; shall comply with all applicable
laws, rules and regulations regarding the payment of taxes; shall not take any
action which would adversely affect, threaten or jeopardize the interest of the
Landlord in the Building or land; if Tenant requests and Landlord agrees to
defer payment of such tax, assessment or added assessment during the pendency of
such contest, shall promptly pay, indemnify and save Landlord harmless from, all
penalties and interest which may be charged or imposed as a result of or during
the pendency of, any such contest. In the event of any such contest by the
Tenant, Landlord agrees to reasonably cooperate and to execute any necessary
papers, provided however, that the same shall be without any cost or expense to
the Landlord. However, nothing herein shall require the Landlord to withhold
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the payment of any tax, interest or penalty otherwise due and owing to, or
charged by, the taxing authority. The net proceeds of any refund shall be
distributed as provided in subparagraph (b) above.
(d) It is further agreed that for the first and last Lease
Years of the Term hereof, the portion of all Taxes, other than such as result
from added assessments, to be paid by the Tenant shall be pro rated, depending
on the proportion which each such Lease Year shall bear to the tax year in which
it falls. The portion of Taxes resulting from added assessments to be paid by
Tenant during the first and last Lease Years of the Term shall be pro rated
depending on the proportion which such Lease Year shall bear to the portion of
the tax year for which the added assessment is charged.
(e) If, due to a change in the method of taxation or
assessment, any franchise, income, profit or other tax, however designated,
shall be substituted by the applicable taxing authority for the real estate
taxes imposed on the Building or the Land, such franchise, income, profit or
other tax shall be deemed to be included in the term real estate taxes to the
extent of such substitution.
(f) Except as otherwise provided in subparagraph (e), Tenant
shall not be obligated or required hereunder to pay any franchise, excise,
corporate, estate, inheritance, succession, capital levy or transfer tax of
Landlord, or any income, profit or revenue tax upon the income or receipts of
Landlord.
(g) Tenant shall be responsible for and shall pay prior to the
time when such payment shall be deemed delinquent, all taxes assessed during the
Term against any leasehold interest, or any improvements, alterations,
additions, fixtures or personal property of any nature placed in, on or about
the Premises by the Tenant, whether such tax shall have been levied or assessed
against the Landlord or the Tenant. Any such tax paid by Tenant pursuant to this
subparagraph shall not be included in the taxes payable by Tenant as set forth
in subparagraph (a) above.
20. ADDITIONAL CHARGES.
(a) In addition to all other rental charges provided for in
this lease, the Tenant agrees to pay as "Additional Rental," its proportionate
share of:
(i) all reasonable insurance premium costs, incurred by
Landlord in connection with its obtaining and maintaining of fire, extended
coverage and all risk insurance;
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rental insurance sufficient to include both Base Rent and Additional Rental;
sprinkler damage insurance; and public liability insurance, all of which
insurance coverage, if maintained, shall be in such amounts and with such
companies as Landlord may deem reasonable or proper;
(ii) all reasonable costs and expenses reasonably
incurred by Landlord in connection with the Landlord's maintenance and repair of
the entire premises of which the Premises are a part, in accordance with the
provisions of this lease, including, but not limited to, the building grounds,
parking area, utilities, as well as all other reasonable costs, fees and
expenses incurred by the Landlord in performing its obligations hereunder,
subject to the exclusions set forth below; and
(iii) management fees for the operation of the Building,
at an annual sum equal to four (4%) percent of the Modified Annual Base Rent.
The Modified Annual Base Rent for a year is equal to the Annual Base Rent for
such year less $90,470.58.
The following items are not to be included in the calculation
of Additional Rental payable by Tenant on account of operating expenses pursuant
to this Paragraph 20:
(1) wages, salaries, fees, and fringe benefits paid to
administrative or executive personnel above the grade of
manager and officers and/or partners of Landlord;
(2) any charge for depreciation of the Building or
equipment or any interest or other financing charge;
(3) all costs relating to activities for the marketing and
execution of leases, sublease, assignments and sales of
other space in the Building;
(4) the cost of electric current and other utilities
furnished to any other leasable area in the Building;
(5) the cost of: (i) repairs, alterations, additions, and
improvements, to the extent required by the lease to be
performed by Landlord at its cost and expense, and (ii)
correcting defects in the original construction of the
Building;
(6) the cost of any alterations, additions,
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changes, replacements or other items which under
generally accepted accounting principles are classified
as capital expenditures (including amortization and
depreciation of any type); provided that the cost of
capital expenditures which are (i) made for the primary
purpose of reducing operating costs, but only to the
extent that such expenditures do actually reduce
operating costs, or (ii) which may be required by
governmental authority under any law or regulation first
enacted after the Commencement Date shall be included in
operating expenses, amortized over the expected useful
life of such improvement as reasonably determined by
Landlord, together with interest on the unamortized
balance at the Prime Rate;
(7) Rental for items which, if purchased, would constitute a
capital improvement or equipment.
(8) interest, fines, penalties or late payment charges
incurred as a result of Landlord's violation of the law
or failure to pay Taxes or operating expenses in a
timely fashion;
(9) expenses related to Landlord's general corporate
overhead and management office;
(10) reserves of any kind, including, but not limited to,
replacement reserves, and reserves for bad debts or lost
rent or any similar charge not involving the payment of
money to third parties;
(11) fees and expenses for attorneys, with respect to
eviction proceedings or any other cause of action
against any other tenants in the Building;
(12) costs, including permit, license and inspection costs,
incurred with respect to the installation of any other
tenants' or occupants' improvements made for other
tenants or occupants in the Building or incurred in
renovating or otherwise improving, decorating, painting,
or redecorating space for other tenants or occupants of
the Building;
(13) any items otherwise reimbursed (or required
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to be reimbursed) under another tenant's lease other
than as part of such tenant's share of operating
expenses;
(14) all costs related to Landlord's financing or refinancing
in whole or in part of the Building (e.g., points,
closing fees, attorneys' fees, environmental
investigations);
(15) costs arising from (i) Landlord's charitable and
political contributions and association dues and
expenses and (ii) costs for sculpture, paintings, or
other objects of art or the insuring, repair, or
maintenance thereof;
(16) costs incurred by Landlord due to any violation of the
terms and conditions of any lease of space, occupancy
agreement or other agreement with respect to the
Building;
(17) costs which Landlord is obligated to pay to Tenant
pursuant to this lease or otherwise;
(18) the cost of any parties, ceremonies, or other events for
tenants or third parties which are not tenants of the
Building, whether conduced in the Building, or in any
other location;
(19) the cost of any labor, service, materials, supplies, or
equipment, which is not comparable to the prevailing
market rate for such labor, service, materials,
supplies, or equipment at the time in comparable
buildings;
(20) the entertainment expenses and travel expenses of
Landlord, its employees, agents, partners, or
affiliates; and
(21) costs, repairs and maintenance for items to the extent
covered, or required to be covered, by insurance
proceeds, guarantees or service contracts or which are
otherwise reimbursed (or required to be reimbursed) to
Landlord.
(b) It is acknowledged that the total annual Additional Rental
to be paid by the Tenant pursuant to the provisions of Paragraph 19 and 20 of
this lease cannot be determined except on an annual basis. It is therefore
agreed that, in addition to the payments of Additional Rental as may be provided
for elsewhere in this lease, the Tenant shall pay the estimated
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monthly sum set forth in (10) of the Preamble on account of its Additional
Rental obligations pursuant to the provisions of Paragraphs 19 and 20 of this
lease. Said estimated payments shall be paid in advance, on the first day of
each month, and shall be based on an annual period from January l through
December 31 during each year of the Term hereof and shall be subject to
adjustment from time to time by Landlord upon not less than thirty (30) days
prior written notice to Tenant, provided that Landlord shall not adjust its
estimate of Additional Rental more than two times in any twelve month period
unless due to an unusual, unanticipated increase in operating expenses.
On or about April 15 of each calendar year during Tenant's
occupancy and the calendar year following termination of this lease, or as soon
thereafter as is practical, Landlord shall furnish to Tenant a statement in
reasonable detail of the actual taxes and operating expenses for the previous
year. If for any calendar year Tenant's payments on account for taxes and
operating expenses exceeds Tenant's proportionate share of the actual taxes and
operating expenses, Landlord shall either credit the overpayment against the
next installment of Rental due from Tenant or promptly refund to Tenant the
overpayment. Conversely, if the payments made by Tenant on account of the prior
year's taxes and operating expenses are less than Tenant's proportionate share
of the actual taxes and operating expenses, Tenant shall pay to Landlord, within
thirty (30) days after receipt of such statement, as Additional Rent, the
underpayment with respect to Tenant's proportionate share of the taxes and
operating expenses for the prior year.
(c) At Tenant's written request, Landlord shall provide
reasonable back up information supporting any annual statement delivered by
Landlord pursuant to subparagraph (b) above. Each statement furnished by
Landlord to Tenant pursuant to subparagraph (b) shall be conclusive and binding
upon Tenant subject to Tenant's right to audit same within the two (2) years
after Tenant has received such statement. Tenant shall pay the full amount of
the Additional Rental shown to be due on the statement without delay, but by
doing so shall not waive its audit rights nor its right to dispute the accuracy
or appropriateness of any such statement or any item thereon. Tenant, or its
authorized agent, shall have the right, upon reasonable advance notice and
during business hours, to inspect the books and records of Landlord applicable
to the determination of such annual statement for the purpose of verifying in
good faith the information contained in such statement for a period of up to two
(2) years after the receipt of such statement by Tenant. Landlord shall maintain
at its office or the office of its managing agent full, complete and accurate
books and records prepared in accordance with prudent building management
practices with respect to the taxes and operating expenses included in
Additional Rental, and shall retain such records with respect to
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each calendar year for a period not less than three (3) years following delivery
of the annual statement for such year, provided, however, in the case of any
dispute, Landlord shall keep such records until such dispute is completely and
finally resolved. If as a result of any review by Tenant it is determined that
an annual statement is in error, Landlord shall repay to Tenant any excess
payment made by Tenant to Landlord within 30 days, with interest thereon at the
Prime Rate from the time such payment was made to Landlord. In the event that
the error caused the statement to overstate Tenant's proportionate share of
taxes and operating expenses by two percent (2%) or more, Landlord shall
reimburse Tenant within thirty (30) days following such determination for any
overpayment of Additional Rent on account of such Operating Costs together with
interest at the Overdue Interest Rate plus the reasonable costs of Tenant's
audit.
(d) For the first and last Lease Years of the Term hereof, the
portion of Additional Rental to be paid by the Tenant, other than for real
estate taxes, shall be pro rated depending on the proportion which each such
Lease Year shall bear to the aforesaid annual period in which it falls.
21. NON-LIABILITY OF LANDLORD. Landlord shall not be liable for any
damage or injury which may be sustained by Tenant or by any other person, as a
consequence of the failure, breakage, leakage or obstruction of the street or
sub-surface; or of the water, plumbing, steam, sewer, waste or soil pipes; or of
the roof, walls, drains, leaders, gutters, valleys, downspouts or the like; or
of the electrical, gas, power, conveyor, refrigeration, sprinkler, air
conditioning or heating systems; or of the elevators or hoisting equipment; or
of any other structural failure; or by reason of the elements; or resulting from
theft or pilferage; or resulting from fire, explosion or other casualty; or
resulting from the carelessness, negligence or improper conduct on the part of
the Tenant, any other tenant, or of Landlord, their agents, employees, guests,
licensees, invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of Landlord,
of any services to be furnished or supplied by Landlord. All property kept,
maintained or stored in, on or at the Premises shall be so kept, maintained or
stored at the sole risk of the Tenant.
22. INDEMNITY.
(a) Tenant agrees, at its sole cost and expense, to indemnify
and save Landlord harmless from and against any and all claims, actions, demands
and suits, for, in connection with, or resulting from, any accident, injury or
damage whatsoever caused to any person or property to the extent arising out of
the
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business conducted in or the use of the Premises, or occurring in, on or about
the Premises or any part thereof, or to the extent arising from any act or
omission of Tenant or any concessionaire or subtenant or their respective
licensees, agents, employees or contractors, or to the extent arising out of any
breach or default by Tenant of any term, provision, covenant or condition herein
contained, and from and against any and all losses, costs, expenses, judgments
and liabilities incurred in connection with any claim, action, demand, suit or
other proceeding brought thereon. Said indemnity shall not include any claims,
actions, demands, suits or other proceedings or any losses, costs, expenses,
judgments or liabilities incurred in connection with same to the extent that
they arise from the negligence or willful misconduct of Landlord, its employees,
contractors or agents. Said indemnity shall include defending or resisting any
proceeding by attorneys reasonably satisfactory to Landlord. It is agreed that
attorneys designated by Tenant's insurance carrier shall be deemed to be
satisfactory.
(b) Landlord agrees, at its sole cost and expense, to
indemnify and save Tenant harmless from and against any and all claims, actions,
demands and suits, for, in connection with, or resulting from, any accident,
injury or damage whatsoever caused to any person or property to the extent
arising out of any act or omission of Landlord, its employees, its contractors
or agents occurring in, on or about the Premises or any part thereof, or to the
extent arising out of any breach or default by Landlord of any term, provision,
covenant or condition herein contained, and from and against any and all losses,
costs, expenses, judgments and liabilities incurred in connection with any
claim, action, demand, suit or other proceeding brought thereon. Said indemnity
shall not include any claims, actions, demands, suits or other proceedings or
any losses, costs, expenses, judgments or liabilities incurred in connection
with same to the extent that they arise from the negligence or willful
misconduct of Tenant, its employees, contractors or agents. Said indemnity shall
include defending or resisting any proceeding by attorneys reasonably
satisfactory to Tenant. It is agreed that attorneys designated by Landlord's
insurance carrier shall be deemed to be satisfactory.
23. RIGHT TO CURE DEFAULT.
(a) In the event Tenant shall fail to comply fully with any of
its obligations hereunder, then Landlord shall have the right, at its option to
cure such breach, at Tenant's expense, upon ten (10) days' prior written notice
to Tenant, except in cases of emergency (in which event no notice need be
given), and if Tenant shall fail to cure said default within such period,
provided however, that if said default cannot be cured within said period, then
Tenant shall have commenced in good
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faith to cure such default within said ten (10) day period and shall continue
the curing thereof diligently thereafter. Tenant agrees to reimburse Landlord
promptly (as Additional Rental) for all costs and expenses incurred as a result
thereof or in connection therewith, together with interest at the Overdue
Interest Rate from the date incurred until repaid. Any action so taken by
Landlord pursuant to this lease shall not serve to waive or release Tenant from
its performance of any obligation hereunder.
(b) In the event Landlord shall fail to comply fully with any
of its obligations hereunder, then Tenant shall have the right, at its option to
cure such breach, at Landlord's expense, upon ten (10) days' prior written
notice to Landlord, except in cases of emergency (in which event no notice need
be given), and if Landlord shall fail to cure said default within such period,
provided however, that if said default cannot be cured within said period, then
Landlord shall have commenced in good faith to cure such default within said ten
(10) day period and shall continue the curing thereof diligently thereafter.
Landlord agrees to reimburse Tenant promptly (as a reduction in or set-off
against Rental) for all costs and expenses incurred as a result thereof or in
connection therewith, together with interest at the Overdue Interest Rate from
the date incurred until repaid. Any action so taken by Tenant pursuant to this
lease shall not serve to waive or release Landlord from its performance of any
obligation hereunder.
24. REMEDIES UPON DEFAULT.
(a) In the event Tenant shall:
(i) fail to pay, when due, any installment of Rental or
any other sum required to be paid by Tenant under this Lease, where such failure
continues for more than ten (10) days after Tenant has received written notice
of the delinquent payment from or on behalf of Landlord; provided, however,
Landlord need not give any such written notice more than twice in any twelve
(12) month period for the balance of such twelve (12) month period an event of
default shall have occurred if a payment of any Rental or other sum is more than
ten (10) days past due, with or without notice from Landlord;
(ii) fail to observe and perform any other provision or
covenant of this Lease to be observed or performed by Tenant, where such failure
continues for fifteen (15) days after Tenant receives written notice thereof
from or on behalf of Landlord; provided, however, that if the nature of the
default is such that the same cannot reasonably be cured within such fifteen
(15) day period, Tenant shall not be deemed to be in default if Tenant shall
commence the cure of the default within such fifteen
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(15) day period and thereafter diligently prosecute the same to completion; or
(iii) assign, sublet or permit the Premises to be
occupied by someone other than Tenant, except as herein provided; or
(iv) make any assignment for the benefit of creditors,
file a voluntary petition in bankruptcy, be by any court adjudicated a bankrupt,
take the benefit of any insolvency act or be dissolved or liquidated,
voluntarily or involuntarily, or if a receiver or trustee of Tenant and/or its
property shall be appointed in any proceedings or if any Guarantor hereunder
shall cause or suffer any of such events to occur with respect to itself.
then, upon the happening of any of the events set forth in this Paragraph,
Landlord shall have the right to terminate this lease and the Term hereof upon
not less than ten (10) days' written notice to Tenant, with the same force and
effect as though the date so specified were the date hereinabove first set forth
as the date of the expiration of the Term (but Tenant shall remain liable to
Landlord as hereinafter provided), and at the expiration of the period provided
in said notice, the Term hereof and all of the Tenant's right, title and
interest hereunder shall cease and terminate, and Landlord without further
notice, may reenter the Premises, remove the Tenant and its property therefrom,
and have possession and enjoyment of the same, and/or may recover possession
thereof as prescribed by law relating to summary proceedings or otherwise.
(b) In the event of any such default, reentry, expiration
and/or dispossess:
(i) the Rental shall become due and be paid up to the
time of such reentry, dispossess and/or expiration, together with such
reasonable costs and expenses as Landlord may incur in reacquiring possession of
the Premises, for reasonable legal expenses, attorneys' and brokerage fees,
putting or restoring the Premises in or to good order and altering or preparing
the same for re-rental;
(ii) Landlord shall use commercially reasonable efforts
to relet the Premises (or in Landlord's reasonable discretion, a part thereof)
for the account of Tenant for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the Term)
and on such conditions (which may include concessions or free rent) and for such
uses as Landlord, in its reasonable discretion, may determine, and Landlord may
collect and receive any rents payable by reason of such reletting. For purposes
of such mitigation, Landlord need not attempt to lease the Premises prior to the
lease of other vacant space in the Building, shall not be
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required to accept a tenant for less than the entire space, and shall not be
required to accept any tenant offered by Tenant or observe any instruction given
by Tenant about such reletting, but shall at all times act reasonably. For the
purpose of such reletting, Landlord may decorate or make reasonable repairs,
changes, alterations or additions in or to the Premises to the extent deemed by
Landlord desirable or convenient and the reasonable cost of such repairs,
changes, alterations or additions shall be charged to and be payable by Tenant
as Additional Rent hereunder, as well as any reasonable brokerage and legal fees
expended by Landlord. Any sums collected by Landlord from any new tenant
obtained for the Premises shall be credited against the balance of Base Rent and
Additional Rent due hereunder as aforesaid. In the event of any dispute over
whether Landlord exercised commercially reasonable efforts to mitigate damages,
or if the costs incurred by Landlord in connection with such reletting were
reasonable, the burden of proof shall be on Tenant.
(iii) Tenant shall pay Landlord any deficiency between
the Rental hereby covenanted to be paid and the net amount, if any, of the rents
collected on account of any reletting of the Premises for each month of the
period which would otherwise have constituted the balance of the Term. In
computing such sum, there shall be added to the Rental hereby covenanted to be
paid, such expenses of Landlord as are referred to in subparagraph (b)(i) of
this Paragraph. Any such deficiency shall be paid in monthly installments by
Tenant on the first day of each month, in advance, and any suit brought to
collect the amount of the deficiency for any month shall not prejudice in any
way the rights of Landlord to collect the deficiency for any subsequent month by
a similar proceeding or by joining, consolidating or otherwise including in one
action, any and all claims for subsequent periods;
(iv) notwithstanding any other provisions of this lease,
Landlord shall be entitled, at its option, in addition and without prejudice to
any other rights and remedies it may have hereunder or at law or in equity, to
recover from Tenant as damages, in addition to any Rental unpaid or accrued to
the date of such reentry, expiration and/or dispossess, together with all of the
additional costs and expenses actually incurred by Landlord, an amount equal to
the difference between the Rental covenanted to be paid hereunder for what would
otherwise have been the unexpired portion of the Term had such reentry,
expiration and/or dispossess not occurred, and the then fair and reasonable
rental value of the Premises for such unexpired portion of the Term, both
discounted to present worth at a rate of seven percent (7%). Landlord shall be
entitled to recover and receive the full amount of such damages at whatever time
after such reentry, expiration and/or dispossess it seeks to recover the same,
without limiting or prejudicing the right of Landlord
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to seek as damages an amount equal to the maximum amount allowed by applicable
law at the time when such damages are sought. In determining the then fair and
reasonable rental value of the Premises, the rental realization upon any
reletting, if such reletting shall be accomplished within a reasonable time
after such reentry, expiration and/or dispossess, shall be deemed prima facie to
be such fair and reasonable rental value. Landlord shall be entitled, in
addition to the amount of such difference, to also recover such expenses as are
referred to in subparagraph (b)(i) of this Paragraph.
(c) Landlord may make such alterations, repairs, replacements
and/or decorations in or on the Premises as it, in its sole judgment, considers
advisable or necessary for the purpose of reletting the Premises; and the making
of such alterations, repairs, replacements and/or decorations shall not operate
or be construed to relieve Tenant from its liability hereunder. Landlord shall
in no event be liable in any way whatever for any failure to relet the Premises,
or in the event that the Premises are relet, for the reasonableness of the
rental or for the failure to collect any rent under such reletting.
(d) In the event of a breach or threatened breach or violation
by a party of any of the covenants, conditions, terms or provisions of this
lease, the other party shall have the right to seek an injunction or to invoke
any remedy allowed at law or in equity, without limitation and in addition to,
all rights and remedies herein provided for.
(e) The rights and remedies of the parties specified in this
lease, as well as the rights and remedies to which a party is entitled by law or
in equity, are cumulative and are not intended to be exclusive of or preclude
the exercise of any other rights or remedies which may be available to such
party in the event of a breach by the other party of any provision of this
lease.
(f) In no event shall the Tenant be entitled to receive all or
any portion of any net surplus monies obtained or received by Landlord either in
connection with any reletting or as a result of the exercise of any other right
or remedy to which Landlord may be entitled.
25. INTENTIONALLY OMITTED.
26. MORTGAGE PRIORITY. Tenant agrees to subordinate this lease to
the lien of all ground and underlying leases and to all mortgages and all
advances made thereon which may now or hereafter affect the Building, and to all
increases, renewals, modifications, consolidations, participations, replacements
and extensions thereof, irrespective of the time of recording such
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lien pursuant to a subordination, non-disturbance and attornment agreement in
the form attached hereto as Exhibit F (an "SNDA"). As a condition to the
effectiveness of this lease, Landlord shall deliver an SNDA at the time of
execution of this Lease from each mortgagee or ground or underlying lessor which
affects the Building on the effective date of this lease or which may otherwise
be prior in time to this lease.
27. SURRENDER OF PREMISES. On the expiration date or sooner
termination of the Term, Tenant shall quit and surrender the Premises to
Landlord, in broom-clean good condition and repair, reasonable wear and tear and
damage by fire or casualty excepted, as well as all keys to the Premises,
together with all alterations, additions and improvements which may have been
made in, on or to the Premises, except (i) alterations, repairs, improvements
and additions to the extent Landlord has required removal as provided in
Paragraph 12, (ii) for the Above Standard Improvements to the extent removable
by Tenant pursuant to Paragraph 3 of this lease, and (iii) movable furniture and
equipment, or unattached movable trade fixtures put in at the sole expense of
Tenant. Landlord further agrees that Tenant shall not be required to remove
ordinary office partition walls or carpeting that may have been installed by
Tenant in the Premises.
In the event Landlord shall have so notified Tenant pursuant to
Paragraph 12 hereof that it will require the removal of alterations, additions
or improvements as set forth above, then Tenant, prior to the end of the Term,
at its sole cost and expense, shall so restore the Premises, remove therefrom
all of its movable property together with such alterations, additions and
improvements, and fix and repair any and all damage or defacement to the
Building and/or lands caused by the installation and/or removal of such
alterations, additions, improvements, furniture, equipment, trade fixtures or
any other property. Any or all of such property, alterations, additions or
improvements requested by Landlord to be removed at the time of consent thereto
(or, if no consent was required or obtained, as otherwise provided in Paragraph
12) and not so removed, at Landlord's option, shall become the exclusive
property of Landlord or be disposed of by Landlord at Tenant's cost and expense,
without further notice or demand. If the Premises be not surrendered as and when
aforesaid, Tenant shall indemnify Landlord against any damages, loss or
liability resulting therefrom, including, without limitation, any claims made by
any succeeding occupant founded on such delay. Tenant's obligation under this
Paragraph shall survive the expiration or sooner termination of the Term.
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28. UNAVOIDABLE DELAYS.
(a) If, as a result of strikes, lockouts, labor disputes,
inability to obtain labor, materials or reasonable substitutes therefor, acts of
God, governmental restrictions, regulations or controls, enemy or hostile
governmental action, civil commotion, insurrection, revolution, sabotage, fire
or other casualty, acts or failure to act by the other party hereto or any other
tenant or other conditions beyond the control of a party, whether prior to or
during the Term, either party hereto shall fail punctually to perform any lease
obligation (other than the payment of Rental), then and in any of such events,
such obligation shall be punctually performed as soon as practicable after such
condition shall abate. The failure of a party to perform any lease obligation
for the reasons set forth herein shall not affect, curtail, impair or excuse
this lease or the obligations of the other party hereunder.
(b) No diminution or abatement of rent, or other compensation,
shall be claimed or allowed for inconvenience or discomfort arising from the
making of repairs or improvements to the Building or to its appliances, or
arising from the construction of or repairs or improvements to, other buildings,
structures, lands or appliances, whether or not the same shall be owned by
Landlord. In respect to the various "utility services", if any, to be furnished
by the Landlord to the Tenant, it is agreed that there shall be no diminution or
abatement of the rent, or any other compensation, for interruption or
curtailment of such utility service, when such interruption or curtailment shall
be due to accident, alterations or repairs necessary to be made or to inability
or difficulty in securing supplies or labor for the maintenance of such utility
service or to some other cause, other than the negligence or willful misconduct
of the Landlord. No such interruption or curtailment of any such utility service
nor any non-performance by Landlord pursuant to subparagraph (a) of this
Paragraph, shall be deemed a constructive eviction, nor shall there be any
abatement or diminution of rent because of making of repairs, improvements or
decorations to the Premises after the date above fixed for the commencement of
the Term, it being understood that the Rental shall in any event, commence to
run at such date so above fixed. Notwithstanding the foregoing, in the event
utility services are interrupted or curtailed due to the negligence of Landlord,
Tenant shall be entitled to abate Rental for each day that Tenant is unable to
use the Premises due to such interruption or curtailment of utility services.
29. LANDLORD'S REVIEW, CONSENT OR APPROVAL.
(a) With respect to any provision hereof which provides for
the review, consent or approval of Landlord, except
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as otherwise expressly provided in this Lease, said review, consent or approval
shall be in writing and shall not be unreasonably withheld, delayed or
conditioned. Tenant in no event, shall be entitled to make any claim, and Tenant
hereby waives any claim for money damages, whether by way of set off,
counterclaim, defense or otherwise, based upon any claim or assertion by Tenant
that Landlord has unreasonably withheld, delayed or conditioned any consent or
approval relating to subletting or assignment rights of Tenant. Tenant's sole
remedies for a claim or assertion that Landlord has unreasonably withheld,
delayed or conditioned its consent or approval to any subletting or assignment
by Tenant shall be an action or proceeding to enforce any such provision, or for
any injunction or declaratory judgment. Tenant shall also be entitled to recover
its reasonable out-of-pocket attorneys' and experts' fees and other litigation
costs relating to any such action. All expenses reasonably incurred by Landlord
in reviewing and acting upon any request for consent hereunder, including but
not limited to, reasonable out-of-pocket attorneys' and architects' fees, shall
be reimbursed by Tenant to Landlord, shall be deemed to constitute Additional
Rental and shall be paid over to Landlord on the first day of the month
following demand therefor.
(b) In any provision of this Lease in which Tenant is required
to obtain Landlord's consent or approval, such consent or approval is not at the
sole discretion of Landlord, and such provision does not otherwise provide for
an outcome in the event Landlord fails to so consent or approve within any
stated time period, then, in such event, Landlord shall be deemed to have
consented or approved to such Tenant's request if Landlord fails to consent or
approve within such stated time period. In the event of a consent or approval
requirement in this Lease as described in the preceding sentence without a
stated time period, then, in such event, Landlord shall be deemed to have
consented to such Tenant's request or granted such approved if Landlord fails to
consent or grant approval within five (5) business days of Tenant's written
request for consent or approval.
30. SECURITY.
(a) Tenant, simultaneously herewith, has deposited with
Landlord the sum set forth in (8) of the Preamble to be held by Landlord as
security for the faithful performance by Tenant of all of the terms, covenants,
provisions and conditions of this lease to be performed by Tenant. In the event
Tenant defaults with respect to any of the terms, covenants, provisions or
conditions of this lease, including, but not limited to, the payment of Rental,
then in addition to any other remedies to which Landlord may be entitled by
virtue of the provisions of this lease, or pursuant to law or equity, Landlord
shall have the
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right to use, apply or retain the whole or any part of the security so deposited
to the extent required for the payment of any Rental or any other sum as to
which Tenant is in default or any sum which Landlord may expend or may be
required to expend by reason of Tenant's default, including, but not limited to,
damages or deficiencies resulting from the reletting of the Premises, whether
such damages or deficiencies accrued before or after summary proceedings or
other reentry by Landlord. Landlord shall give Tenant notice of such application
of all or a portion of such security promptly following such application.
(b) In the event the entire security or any portion thereof is
appropriated or applied by Landlord for the payment of Rental or any other sums
due and payable to Landlord by Tenant hereunder, or for the payment or
reimbursement of any cost or expense incurred by Landlord as a result of any
default or failure of performance by Tenant hereunder, then Tenant, upon the
written demand of Landlord, shall forthwith remit to Landlord a sufficient
amount in cash to restore said security to the original sum deposited, which sum
is hereby deemed to be Additional Rental, and Tenant's failure to do so within
ten (10) days after the forwarding of such demand shall constitute a breach of
this lease. If Tenant disputes any application by Landlord of the security, it
may make any payment required of Tenant under this subparagraph "under protest,"
thus fully preserving its right to obtain repayment of said sum if same is
determined not to have been due.
(c) In the event that Tenant shall fully and faithfully comply
with all the terms, provisions, covenants and conditions of this lease, then the
security shall be returned to the Tenant within thirty (30) days following the
expiration of the Term hereof.
(d) Landlord shall maintain the security deposit in a money
market account at a United States financial institution, and so long as no
default has occurred and is continuing hereunder, Landlord shall pay over to
Tenant the interest accrued on the security deposit no less than annually, less
an annual administrative charge not to exceed one percent (1%) of the amount of
the security deposit. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the security deposited herein except
as permitted under the provisions of Paragraph 15 hereof, and that neither
Landlord nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
(e) In the event of a sale or ground leasing of the Premises,
Landlord shall have the right to transfer the security to the purchaser of
lessee, shall furnish Tenant with written notice thereof and upon
acknowledgement by the transferee
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of the receipt thereof and responsibility therefor shall be released by Tenant
from all liability for the return of such security, and Tenant agrees to look to
the transferee solely for the application of said security. It is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
security to a new transferee.
(f) It is expressly understood and agreed that the exercise of
any remedy by Landlord for any default on the part of Tenant shall not be deemed
such a termination of this lease as to entitle Tenant to the recovery of the
said security, and said security shall be retained and remain in the possession
of Landlord as hereinbefore stated until all sums due from Tenant to Landlord
hereunder have been paid.
31. CERTIFICATION. Each party agrees, without charge and at any
time, within ten (10) days after written request of the other party, to certify
by a written instrument duly executed, acknowledged and delivered to such other
party or any other person, firm or corporation specified in such request:
(a) as to whether this lease has been modified or amended, and
if so the substance and manner of such modification or amendment;
(b) as to the validity and force and effect of this lease;
(c) as to the existence of any default thereunder;
(d) with respect to Tenant, as to the existence of any
offsets, counterclaims or defenses thereto on the part of Tenant;
(e) as to the commencement and expiration dates of the Term;
(f) as to the dates to which Rental payments have been made;
(g) as to any other matters as may reasonably be so requested.
Any such certificate may be relied upon by the addressee, and the
party making the same shall be bound by the contents of such certificate. A
party shall not be obligated to deliver any such certificate more than three
times in any twelve month period.
Tenant further agrees to furnish to Landlord at any
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time, but not more frequently than once per year, within ten (10) days after
written request of Landlord, its most recent annual financial statement,
certified by a corporate officer and prepared by independent Certified Public
Accountants. For so long as Tenant's stock is publicly traded, Tenant may
satisfy this requirement by delivery to Landlord of copies of Tenant's financial
statements as filed with the Securities and Exchange Commission.
32. WAIVER OF TRIAL BY JURY. It is further agreed by and between the
parties hereto that they shall and do hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
Premises, and/or any claim or injury or damage.
33. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that
upon Tenant's paying the Rental and observing and performing all of the terms,
provisions, covenants and conditions on its part to be observed and performed,
Tenant may peaceably and quietly enjoy the Premises during the Term hereof,
subject however, to all of the terms, conditions, covenants and provisions of
this lease. In the event of any breach by Landlord of this covenant, provided
the same would in law or equity entitle Tenant to cancel, Tenant may, by not
less than thirty (30) days' written notice given to Landlord, cancel this lease,
unless within such thirty (30) day period, Landlord shall have cured such
breach.
34. LANDLORD.
(a) The term "Landlord" as used in this lease means only the
owner, the holder of a lease or the mortgage in possession for the time being of
the Premises, so that in the event of any sale of the land and Building of an
assignment of this lease or any underlying lease, Landlord herein shall be and
hereby is entirely freed and relieved of all obligations of Landlord accruing
hereunder from and after such sale, assignment or lease without the necessity of
further agreement between the parties and such purchaser, assignee or lessee,
provided that the purchaser, assignee or lessee has assumed and agreed to
observe and perform all obligations of Landlord hereunder accruing form and
after the effective date of such sale, assignment or lease. In the event of any
such sale, assignment or lease, Landlord's liability with respect to its
obligations accruing prior thereto shall be limited to the proceeds of such
sale, assignment or lease received by Landlord.
(b) Notwithstanding any provision to the
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contrary contained in this Lease, Tenant shall look solely to the estate and
interest of Landlord in and to the land and the Building, and Landlord shall
have no personal liability, in the even of any claim against Landlord arising
out of or in connection with this Lease, the relationship of Landlord and
Tenant, or Tenant's use of the Premises, and Tenant agrees that the liability of
Landlord arising out of or in connection with this lease, the relationship of
Landlord and Tenant, or Tenant's use of the Premises shall be limited solely to
such estate or interest of Landlord in and to the land and the Building and that
Landlord shall have no personal liability as provided above in this sentence. No
properties or assets of Landlord other than the estate and interest of Landlord
in and to the land and the Building, and no property owned by any partners,
officer, member, director or trustee in or of Landlord, shall be subject to
levy, execution or other enforcement procedures for the satisfaction of any
judgment (or other judicial process) or for the satisfaction of any other remedy
of Tenant arising out of or in connection with this lease, the relationship of
Landlord and Tenant or Tenant's use of the Premises. Further, in no event
whatsoever shall any partner, officer, member, director or trustee in or of
Landlord have any liability or responsibility whatsoever arising out of or in
connection with this lease, the relationship of Landlord and Tenant or Tenant's
use of the Premises.
35. NOTICES. All notices, demands or requests required under the
terms of this lease shall be given in writing by either party to the other and
shall be complete by personal delivery or by mailing such notices by certified
or registered mail, return receipt requested, to the recipient at its address
set forth in the Preamble or to such other address as either party may designate
in writing, which notice of change of address shall be given in the same manner.
36. COVENANTS, EFFECT OF WAIVER.
(a) Every term, condition, agreement or provision set forth in
this lease shall be deemed to also constitute a covenant.
(b) The waiver of any term, provisions, covenant or condition
by a party hereto shall not be construed as a waiver of a subsequent breach of
the same or any other term, provision, covenant or condition, and the consent or
approval by a party to or of any act by the other party requiring the first
party's consent or approval shall not be construed to waiver or render
unnecessary such first party's consent or approval to or of any subsequent
similar act by the other party. The failure of a party to insist in any one or
more instances upon the strict performance of any term, condition, provision,
covenant or agreement or to exercise any option or any right hereunder, shall
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not be construed as a waiver or relinquishment of the same for the future. The
receipt by Landlord of any Rental payment or the acceptance by Landlord of the
performance of anything required to be performed by this lease, with knowledge
of a breach of any term, condition, provision or covenant of this lease shall
not be deemed a waiver of such breach. No term, condition, provision or covenant
of this lease shall be deemed to have been waived unless such waiver is in
writing and signed by the party entitled to enforce the same. No payment by
Tenant or receipt and/or acceptance by Landlord of a lesser sum than the agreed
upon Rental shall operate or be deemed or construed to be other than on account
of the earliest Rental then unpaid, nor shall any endorsement or statement on
any check or any letter or writing accompanying any check nor the acceptance of
any check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to its right to recover the
balance of any Rental or to pursue any other remedy to which it may be entitled.
37. HOLDING OVER. In the event that Tenant shall not vacate and
redeliver the Demised Premises on or before the end of the Term as required by
this Lease, Tenant shall be deemed a month-to-month holdover tenant. During the
period of holdover tenancy, the Tenant shall be liable for a monthly holdover
rental charge for the Demised Premises which charge shall be equal to One and
One Half (1 1/2) times the Base Rent payable by Tenant hereunder during the last
full month of the Term, together with Additional Rent calculated in accordance
with this lease. In addition, Tenant further agrees that if it fails to
surrender the Demised Premises within sixty (60) day's after Landlord's notice
to Tenant of negotiations with a tenant for all or any portion of the Demised
Premises, Tenant (i) shall be liable to Landlord for any and all damages which
Landlord shall suffer by reason thereof, and (ii) shall indemnify Landlord
against all claims and demands made by any succeeding tenants against Landlord
founded upon delay by Landlord in delivering possession of the Demised Premises
to such succeeding tenant. The holdover rentals set forth in this Subparagraph
(f) are in lieu of the holdover rentals provided for in N.J.S.A. 2A:42-6 et seq.
38. REFERENCE. Wherever herein the singular number is used, the same
shall include the plural, and the masculine gender shall include the feminine
and neuter genders, if applicable. The paragraph headings and captions used
herein are for reference and convenience only. the words "reenter" and "reentry"
as used herein are not restricted to their technical legal meaning.
39. ENTIRE AGREEMENT. This lease contains the entire agreement
between the parties. No oral statement or prior written matter shall have any
force or effect nor shall the waiver of any provision of this agreement be
effective unless in
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writing, signed by the waiving party. Tenant agrees that it is not relying on
any representations or agreements other than those contained in this lease. This
agreement shall not be modified except by a writing executed by both parties.
The covenants, provisions, terms, conditions and agreements contained in this
lease shall bind the Landlord and Tenant and their respective successors and
assigns and shall inure to the benefit of the Landlord, the Tenant, their
respective successors, the assigns of Landlord and the assigns of Tenant who
shall have obtained an assignment of lease in accordance with the provisions of
this lease.
40. INTENTIONALLY OMITTED.
41. REAL ESTATE BROKER. Landlord and Tenant each represent to the
other that it has dealt with no real estate broker in connection with this lease
unless so stated in the Preamble. Tenant agrees that if any claims should be
made for commissions by any other broker by reason of any acts of Tenant or its
representatives, Tenant will indemnify and save harmless the Landlord from any
and all claims, demands, losses, liabilities, judgments, costs, expenses,
reasonable attorneys' fees or other damages resulting from, arising out of, or
in connection therewith. Landlord agrees to pay brokerage commission due in
connection with this lease, if any, to the broker named in the Preamble in
accordance with the terms and conditions of a separate agreement entered into or
to be entered into between the Landlord and said broker. Landlord agrees that if
any claims should be made by any other broker by reason of any acts of Landlord
or its representatives, Landlord will indemnify and save Tenant harmless from
any and all claims, demands, losses, liabilities, judgments, costs, expenses,
reasonable attorneys' fees or other damages resulting from, arising out of, or
in connection therewith.
42. VALIDITY OF LEASE. The terms, conditions, covenants and
provisions of this lease shall be deemed to be severable. If any clause or
provision herein contained shall be adjudged to be invalid or unenforceable by a
court of competent jurisdiction or by operation of any applicable law, the same
shall be deemed to be severable and shall not affect the validity of any other
clause or provision herein, but such other clauses or provisions shall remain in
full force and effect.
43. COMMON AREAS. Notwithstanding anything herein contained to the
contrary, all common areas and facilities which Tenant is allowed or permitted
to use, are to be used by virtue of a revocable license and if such license
shall be revoked or if the common areas shall be diminished or the locations
changed, none of such events shall subject Landlord to any liability nor permit
any adjustment or abatement of any Rental payments nor be
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deemed to constitute an actual or constructive eviction, provided that (i)
Tenant is provided reasonably equivalent access to the Premises and parking
within reasonably similar proximity to the Premises, (ii) such common areas and
facilities provide the same services at the same level of service as previously
provided to Tenant, and (iii) the prestige of the Building and Premises is not
diminished thereby.
44. REPRESENTATIONS. Each party represents that it is a corporation
in good standing with full power and authority to execute this lease and perform
its obligations hereunder. Each party agrees to deliver to the other party
simultaneously with the execution hereof, a certified copy of a resolution of
its Board of Directors authorizing the execution of this lease.
45. ENVIRONMENTAL COMPLIANCE.
(a) Tenant acknowledges that the use to which Tenant shall put
the Premises has a Standard Industrial Classification ("SIC") number which is
subject to the requirements of the Industrial Site Recovery Act, N.J.S.A.
13:1K-6 et seq. and the regulations promulgated thereunder ("ISRA"). Tenant
further acknowledges that its operations will involve the use, storage, handling
and disposal of hazardous materials, substances or wastes ("Hazardous
Substances"), as those terms are defined in any and all Environmental Laws, and
Tenant shall comply with all Environmental Laws applicable to Tenant's use,
storage, handling and disposal of Hazardous Substances. Environmental Laws shall
include any and all federal, state and local statutes and ordinances, as
amended, and any regulations, policies or directives based upon them, related to
the protection of human health and the environment. By way of example and
without limitation, the following shall be deemed to be Environmental Laws: The
Comprehensive Environmental Responsibility Compensation and Liability Act, 42
U.S.C. ' 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. '
6901 et seq.; the Clean Air Act 42 U.S.C. ' 7401 et seq.; the New Jersey Solid
Waste Management Act, N.J.S.A. 13:1E-136, et seq.; the New Jersey Worker and
Community Right to Know Act, N.J.S.A. 34:5A-1 et seq.; the New Jersey Spill
Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq.; the New Jersey
Underground Storage of Hazardous Substances Act, N.J.S.A. 58:10A-21 et seq. and
ISRA.
(b) If required by law, Tenant shall, at Tenant's own expense,
comply with ISRA in the event that ISRA becomes applicable to the Premises as a
result of any transaction, including any "closing of operations," "transfer of
ownership or operations," or "change in ownership" (collectively, the
"Triggering Events") of Tenant's operations at the Premises. In this regard,
Tenant shall, at Tenant's own expense, pay all
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filing fees (which do not include NJDEP oversight fees) and, to the extent
possible, make all filings required by NJDEP at least one month prior to such
Triggering Event except that the filing to be made regarding the expiration of
the Lease term shall be made three (3) months prior thereto. Tenant shall
proceed to obtain from NJDEP a Negative Declaration, De Minimis Quantity
Exemption, a No Further Action Letter, or other ISRA approval as may be issued
by NJDEP. Should remediation be necessary as a result of contamination by
hazardous substances that results from Tenant's operations at the Premises
during the term of this Lease or prior thereto, Tenant shall make all
submissions to, provide all information to, and comply with all requirements,
including any remediation, of NJDEP, but only as those submissions and
requirements relate to conditions at the Premises that are a result of the use
or occupancy of the Premises by Tenant or its licensees, employees, agents,
contractors, invitees or anyone else acting on behalf of the Tenant
(hereinafter, "Tenant's Activities"). Landlord is obligated to provide
information and execute documents as reasonably may be requested by Tenant or
NJDEP. Tenant shall promptly provide Landlord with true and complete copies of
all submissions made to NJDEP in order to comply with this subparagraph (b).
Tenant shall notify Landlord in advance of all meetings between Tenant or
Tenant's representatives and NJDEP or any other environmental authority with
respect to the Premises, and Landlord or Landlord's representatives shall have
the right, without the obligation, at Landlord's sole cost and expense, to
attend and participate in all such meetings.
(c) If ISRA compliance becomes necessary at the Premises as a
result of any Triggering Event on the part of Landlord or another tenant, then
Landlord shall comply with ISRA. In this regard Landlord shall, at Landlord's
own expense, pay all filing fees (which fees do not include NJDEP oversight
fees) and make all Initial Filings. Should further submissions, beyond the
Initial Filings, and/or remediation be necessary as a result of contamination by
hazardous substances that results from operations other than Tenant's
Activities, Landlord shall make all submissions to, provide all information to,
and comply with all requirements, including remediation, of NJDEP. In this
regard, Tenant shall provide all information within Tenant's control and execute
all documents reasonably requested by Landlord or NJDEP. Landlord shall promptly
provide Tenant with true and complete copies of all submissions made to NJDEP in
order to comply with this subparagraph (c).
(d) Landlord and Tenant each agree to execute any Remediation
Agreement Application and Remediation Agreement, as necessary, to comply with
ISRA.
(e) In the event that the Initial Filings are conclusive as to
whether any contamination by hazardous
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substances at the Premises results from Tenant's Activities, Landlord or another
tenant, the party responsible for causing the contamination shall be responsible
for any further investigation or remediation of contamination by hazardous
substances ("Environmental Remediation") required by NJDEP. For purposes of this
Paragraph 45, Landlord shall be responsible for undertaking all Environmental
Remediation that results from its operations or the operations of a tenant other
than Tenant. In the event that the Initial Filings are inconclusive as to
whether any contamination by hazardous substances at the Premises results from
Tenant's Activities, Landlord, or another tenant ("Contamination of Unknown
Origin") then the party who is required to make the initial ISRA filing pursuant
to subparagraphs (b) and (c) hereof (the "Triggering Party") will continue to be
responsible for the Environmental Remediation of the Contamination of Unknown
Origin until such time as it can be determined which operations resulted in the
Contamination of Unknown Origin. In the event that the Initial Filings are
inconclusive as to the cause of the Contamination of Unknown Origin, the party
who is not the Triggering Party (the "Non-Triggering Party") shall provide a
letter of credit, bond or other financial assurance in a form reasonably
satisfactory to the Triggering Party ("Financial Assurance") to the benefit of
the Triggering Party in an amount equal to the cost of completing the
Environmental Remediation of the Contamination of Unknown Origin, as such cost
is estimated by an environmental consultant retained by the Triggering Party. In
no event shall Financial Assurance be required if the estimated cost of the
Environmental Remediation of the Contamination of Unknown Origin is less than
Fifty Thousand Dollars ($50,000). The amount of Financial Assurance required to
be posted will be adjusted from time to time as the Environmental Remediation of
the Contamination of Unknown Origin progresses and the estimated cost of
completing the Environmental Remediation of the Contamination of Unknown Origin
increases or decreases. If it is later determined that the Non-Triggering Party
is responsible under this paragraph for undertaking the Environmental
Remediation of the Contamination of Unknown Origin, the Non-Triggering Party
will continue with, and complete, the remediation and will reimburse, indemnify
and hold the Triggering Party harmless for any costs, fees, damages or losses,
including NJDEP oversight fees, and counsel, engineering and other professional
fees which the Triggering Party has incurred or will incur as a result of the
Contamination of Unknown Origin. Notwithstanding anything in this paragraph to
the contrary, if the Contamination of Unknown Origin is located, or originates,
in or under the Demised Premises, the Contamination of Unknown Origin will be
presumed to have arisen as a result of Tenant's operations unless the evidence
indicates otherwise. If the Contamination of Unknown Origin is located, or
originates, in or under a Common Area or outside of the Premises, the
Contamination of Unknown Origin will be presumed to result from the operations
of Landlord or another tenant unless the
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evidence indicates otherwise.
(f) Landlord shall be responsible for undertaking all
Environmental Remediation activities that may be necessary to address
environmental problems which do not result from Tenant's Activities before,
during or after the term of this Lease. In the event Environmental Remediation
of Contamination of Unknown Origin is required pursuant to a statute other than
ISRA, the presumptions and method of determining responsibility set forth in
subparagraph (e) shall govern.
(g) In the event Environmental Remediation by Tenant is
required under this paragraph, Landlord agrees to allow Tenant to remediate,
with NJDEP approval, to the least stringent standard allowable for industrial
properties, including but not limited to any applicable non-residential
standards. Landlord hereby agrees that such remediation may include the use of
engineering or institutional controls or capping as an engineering control (the
"Controls"). No other engineering controls shall be permitted without the
written consent of Landlord, which consent shall not be unreasonably withheld.
In the event that Controls are imposed at the Premises as a result of
environmental problems that result from Tenant's Activities at the Premises,
either before, during or after the term of this Lease, Tenant will pay Landlord
prior to execution of any Declaration of Restrictions, an amount representing
any diminution in value of the Premises and any other direct damages suffered as
a result of imposition of such Controls. The amount of damages suffered shall be
calculated as the difference between an appraisal of the Premises absent the
Controls and an appraisal of the Premises, by an appraiser acceptable to both
Landlord and Tenant, with the Controls in place plus any costs likely to be
incurred by Landlord to maintain the Controls ("Damages"). In no event shall
Tenant be liable to Landlord for Damages unless the Controls are imposed as a
result of contamination that results from Tenant's Activities before, during or
after the term of this Lease.
(h) Reasonably promptly following completion of required
investigatory or remedial activities at the Premises, Tenant shall restore the
affected areas of the Premises or its environs from any damage or condition
caused by Tenant's investigatory or remedial work, including without limitation
closing, pursuant to law, and wells installed at or about the Premises by
Tenant.
(i) During the term of this Lease and thereafter, promptly
upon receipt by Tenant or Tenant's representatives, Tenant shall deliver to
Landlord copies of all documents which concern environmental conditions or
activities, or Environmental Remediation, at the Premises. Such documents shall
include, without limitation, all sampling plans, cleanup plans,
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preliminary assessment plans and reports, site investigation plans and reports,
remedial investigation plans and reports, remedial action plans and reports or
the equivalent, sampling results, sampling result reports, data, diagrams,
charts, maps, quality assurance/quality control documentation, and
correspondence, directives, orders, approvals, and disapprovals, sent to or
received from NJDEP or any other governmental authority, concerning
environmental conditions at the Premises and/or Tenants' compliance with
Environmental Laws, including ISRA as discussed in this Paragraph 45, generated
by or on behalf of Tenant.
During the term of this Lease and subsequently, Landlord shall
promptly deliver to Tenant copies of all documents which concern environmental
conditions or activities, or Environmental Remediation at the Premises. Such
documents shall include, without limitation, all sampling plans, cleanup plans,
preliminary assessment plans and reports, site investigation plans and reports,
remedial investigation plans and reports, remedial action plans and reports or
the equivalent, sampling results, sampling result reports, data, diagrams,
charts, maps, quality assurance/quality control documentation, and
correspondence, directives, orders, approvals, and disapprovals, sent to or
received from NJDEP or any other governmental authority, concerning
environmental conditions at the Premises and/or Landlord's compliance with
Environmental Laws, including ISRA as discussed in this Paragraph 45, generated
by or on behalf of Landlord.
(j) Tenant covenants and agrees to comply with all
Environmental Laws applicable to the Premises and/or Tenant's Activities at the
Premises during or after the term of this Lease, including but not limited to
the use, storage, handling and disposal of all Hazardous Substances, provided
however, that in no event shall Tenant be required to perform Environmental
Remediation except to the extent Tenant is responsible for such Environmental
Remediation under this Paragraph 45.
(k) Landlord covenants and agrees to comply with all
Environmental Laws, applicable to the Premises and/or operations of Landlord or
any third party at the Premises that could affect the Premises, including but
not limited to the use, storage, handling and disposal of all Hazardous
Substances, provided however, that in no event shall Landlord be required to
perform Environmental Remediation except to the extent Landlord is responsible
for such Environmental Remediation under this Paragraph 45.
(l) Subsequent to the term of this Lease, Landlord shall allow
Tenant, its agents, employees or independent contractors and/or representatives
of NJDEP or any other governmental authority, agency or other body to enter the
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Premises at reasonable times upon reasonable notice (except that government
representatives need only give notice if they are required to do so by law) for
the purpose of conducting Environmental Remediation required to be conducted by
Tenant under this Lease.
(m) Tenant covenants that it will not use or install an
underground storage tank ("UST") at the Premises.
(n) Landlord represents that as of the execution date of this
Lease (i) Landlord has no actual knowledge of the existence of any Hazardous
Substances at unlawful levels located at the Premises or upon or under the Land,
or the existence or of any conditions thereat which would give rise to a
violation of any applicable law or regulation and (ii) Landlord has not been
served with, and has no knowledge of, any notices, summons, orders or directives
with respect to the Premises or Land, nor are any such proceedings pending, or
to the knowledge of Landlord, threatened. Prior to the execution hereof Tenant
was given the opportunity to obtain an environmental assessment of the property
on which the building is to be constructed.
(o) Landlord shall indemnify, defend and hold Tenant harmless
from and against all fines, suits, procedures, claims, and actions of any kind
which Tenant may incur and which result directly or indirectly, wholly or in
part, from Landlord's action or non-action with regard to Landlord's obligations
and/or warranties under this Paragraph 45.
Tenant shall indemnify, defend and hold Landlord harmless from and against
all fines, suits, procedures, claims, and actions of any kind which Landlord may
incur and which result directly or indirectly, wholly or in part, from Tenant's
action or non-action with regard to Tenant's obligations, representations and/or
warranties under this Paragraph 45.
(p) This Paragraph 45 shall survive the expiration or earlier
termination of this lease.
46. ACCESS LAWS.
(a) As used in this paragraph, the term "Access Laws" shall
mean the Americans with Disabilities Act of 1990, the Fair Housing Amendments
Act of 1988, all state and local laws or ordinances related to handicapped
access, or any statute, rule, regulation, ordinance, order of governmental
bodies or regulatory agencies, or order or decree of any court adopted or
enacted with respect to any of the foregoing. The term Access Laws shall include
all Access Laws now in existence or hereafter enacted, adopted or applicable.
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(b) Landlord makes no representations regarding the compliance
of the Premises or Building with Access Laws; provided that, if any improvements
or alterations constructed by Landlord to the exterior of the Building do not
comply with Access Laws, Landlord shall be responsible for correcting such
defects if and to the extent required by law.
(c) Tenant agrees to notify Landlord immediately if Tenant
becomes aware of (i) any condition or situation in or on the Premises which
would constitute a violation of any Access Laws, or (ii) any threatened or
actual lien, action or notice of the Premises not being in compliance with any
Access Laws. Tenant shall inform Landlord of the nature of any such condition,
situation, lien, action or notice and of the action Tenant proposes to take in
response thereto.
(d) Tenant shall be solely responsible for all costs and
expenses relating to or incurred in connection with bringing the Premises, the
Building and the common areas into compliance with the Access Laws if and to the
extent such costs and expenses arise out of or relate to Tenant's use of the
Premises or Tenant's modifications, improvements or alterations to the Premises
after the date of this Lease.
(e) Tenant agrees to indemnify, defend and hold Landlord
harmless from and against any and all claims, demands, damages, losses, liens,
liabilities, penalties, fines, lawsuits, and other proceedings and costs and
expenses (including attorneys fees), arising directly or indirectly from or out
of, or in any way connected with, any activity on or use of the Premises, the
Building or the Project by Tenant, its agents, employees, contractors, invitees,
or any subtenant or concessionaire put into possession of all or any part of the
Premises by Tenant, which activity or use results in the Premises violating any
applicable Access Laws.
(f) The provisions in this Paragraph 46 shall supersede any
other provisions in this Lease regarding Access Laws to the extent inconsistent
with the provisions of this paragraph. The provisions in this Paragraph 46 shall
survive the expiration of the term or the termination of this Lease for any
other reason whatsoever.
47. ERISA. Neither the Tenant nor any affiliate of the Tenant is a
tenant under a lease or any other tenancy arrangement (i) with (a) Riggs Bank,
N.A., formerly known as The Riggs National Bank of Washington, D.C., as Trustee
of the Multi-Employer Property Trust; (b) the Multi-Employer Property Trust; (c)
The National Bank of Washington Multi-Employer Property Trust, the previous name
of the Multi-Employer Property Trust; (d) Alameda Industrial Properties Joint
Venture; (e) Harman
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International Business Campus Joint Venture; (f) Beaverton-Redmond Tech
Properties; (g) Corporate Drive Corporation as trustee of the Corporate Drive
Nominee Realty Trust; (h) Goldbelt Place Joint Venture; (i) Boca 1515, a joint
venture; (j) Arboretum Lakes I, L.L.C., a Delaware limited liability company;
(k) Village Green of Rochester Hills Associates L.L.C.; or (l) Pine Street
Development, L.L.C.; or (ii) involving any property in which the entities named
in clauses (a) through (l) are known by the Tenant to have an ownership
interest.
Tenant shall at any time upon not less than twenty (20) days
written notice execute and deliver to Landlord, lender or assignee or subtenant
of Tenant, an estoppel certificate as reasonably requested by Landlord in the
form attached as Exhibit "E" with any modifications thereto required by the then
applicable state of facts.
48. OPTION TO RENEW. The Tenant shall have an option to renew this
Lease for two five (5) year terms, by giving the Landlord written notice of its
intent to exercise its option to renew this Lease for each such five (5) year
term no later than twelve (12) months prior to the expiration of the original
term or the first renewal term, as the case may be. However, this option shall
be available to Tenant if and only if the Tenant is not in breach of any
condition or term of this Lease after notice and expiration of the applicable
period to cure such breach. The terms and conditions of the Lease shall remain
the same and the Premises accepted in its "as-is" condition, except for the
payment of Base Rent which shall increase according to the following formula for
each renewal period:
(a) Promptly following Tenant's notice exercising a renewal
option, Landlord and Tenant shall commence negotiations to determine the fair
market value of the Premises for each renewal term of the lease (the "FMV"). The
Base Rent for the renewal term at issue shall be the greater of (i) the Base
Rent payable hereunder immediately prior to the commencement of the renewal term
for which this determination is being made, or (ii) the FMV, which is defined as
the base rent obtainable for space of similar size and similar finish (excluding
the Above Standard Improvements and all alterations, additions and improvements
which Tenant is required to remove at the expiration or termination of this
lease) at Allendale Corporate Center for the highest and best Permitted Use of
the Premises. If the parties have not agreed upon the FMV within thirty (30)
days after the date Tenant gives Landlord its renewal notice, Landlord and
Tenant shall each appoint an appraiser within thirty (30) days of the end of the
first 30-day period to determine the FMV. Each appraiser shall be a real estate
broker having the SIOR designation and actively involved in the Bergen County
leasing market for light industrial space. If either party fails to
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timely appoint its appraiser, the appraisal of the more timely appointed
appraiser shall determine the FMV.
(b) As soon as practical after appointment, but within thirty
(30) days, each appraiser shall submit an appraisal of the FMV to Landlord and
Tenant. Each shall deliver a copy of the appraisal to the other within three (3)
days of receipt, with a copy to the other appraiser. If the appraisals submitted
are within ten (10%) percent of each other, the average of the two appraisals
shall be the FMV. If the appraisals submitted are not within ten (10%) percent
of each other, within ten (10) days after the submission of the original
appraisals, both appraisers shall jointly select a third appraiser qualified as
stated above, whose appraisal shall be restricted to a determination of the FMV
in an amount neither greater than the higher of the two other appraisals, nor
less than the lower of the two other appraisals. If the two appraisers do not
timely select the third appraiser, Tenant and/or Landlord may seek an order of a
court of competent jurisdiction for the appointment of a third appraiser. The
third appraiser's appraisal shall be averaged with the results of the other two
appraisals, and such average shall be the FMV. The FMV so determined shall be
converted to an Annual Base Rent. In no event will the Annual Base Rent be less
than the Annual Base Rent paid for the preceding year. The new Annual Base Rent
shall be paid in twelve (12) installments on the first day of each month
commencing on the first day of the first month of each renewal term. If the
foregoing appraisal procedure shall not result in a determination of the FMV
within 90 days after the end of the first 30-day period referred to above,
either party may seek a determination by a court of competent jurisdiction as to
the FMV.
(c) Anything contained herein to the contrary notwithstanding,
Tenant shall have the right to rescind its exercise of a renewal option by
giving written notice to that effect to Landlord no later than the date ten (10)
days following the delivery of the last appraisal obtained pursuant to
subparagraph (b). If Tenant does not exercise this right to rescind, Tenant
shall be deemed to have confirmed its intention to renew this lease. If Tenant
does exercise this right, Tenant shall be responsible for the fees and expenses
of all appraisers retained to determine FMV, and the Term shall expire as if
Tenant had never exercised such renewal option pursuant to subparagraph (a).
49. RIGHT OF FIRST OFFER TO LEASE CONTIGUOUS SPACE.
(a) Provided Tenant is not in default of any of the terms and
conditions of this Lease, Landlord agrees to extend a right of first offer to
Tenant on any contiguous space (the "Contiguous Space") in the Building which
may become vacant and available after its initial leasing to a third party
tenant, but only if the remaining term of this Lease at the time the
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Contiguous Space becomes available (including any renewal option exercisable by
Tenant) is not less than five (5) years. This right of first offer to lease the
Contiguous Space shall be subordinate to any extensions, renewals, or other
terms and conditions granted to the third party tenant in connection with the
initial leasing of the Contiguous Space. In the event the Contiguous Space or a
part thereof becomes available to Tenant, Tenant shall have the right to lease
the entire space that is available, but shall specifically not have the right to
lease only part of said available space under this provision.
(b) When and if such Contiguous Space should become available
during the term of this Lease, or at Landlord's option, up to six (6) months
prior to the date that the Contiguous Space is scheduled to become available,
Landlord shall first offer in writing to lease such Contiguous Space to Tenant
and Tenant shall accept such offer, if at all, in writing within fifteen (15)
days after receipt by Tenant of all First Offer Costs from Landlord. If Tenant
shall not exercise this right of first offer within the time period specified
herein, this right of first offer shall no longer apply to the Contiguous Space
so offered to Tenant, except as provided in the following sentence. If Landlord
exercises its right to offer the Contiguous Space to Tenant up to six (6) months
prior to the date the Contiguous Space is scheduled to become available, but at
the time of such offer Landlord does not have a proposal outstanding to or a
request for proposal from a prospective tenant for such Contiguous Space, then
at such time as Landlord receives a request for proposal from a prospective
tenant with respect to space in the Building Landlord shall re-offer the
Contiguous Space to Tenant on the same terms as contained in such proposal and
Tenant shall have fifteen (15) days after Landlord has provided to Tenant all
First Offer Costs, to accept such offer as provided above. In no event shall
this right of first offer to lease Contiguous Space be in effect if this Lease
is available for assignment or if the Premises are available for sublease to
other than a Permitted Transferee. First Offer Costs include all costs
associated with Tenant's accepting and occupying the Contiguous Space,
including, but not limited to, base and additional rent associated with such
space, build-out costs, the square footage of the space and the allocable
percentage associated with such space and any other costs and expenses
associated with the delivery, build-out and rental of the space offered.
(c) If this right of first offer is exercised, the annual Base
Rent for the Contiguous Space shall be equal to the FMV of the Contiguous Space,
determined as provided in Paragraph 48, except that the rescission option
granted in subparagraph 48(c) shall not apply to the lease of Contiguous Space.
The lease term of the Contiguous Space shall be co-terminus with the lease term
for the Premises. In no event shall
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the lease term for the Contiguous Space be for a period of less than five (5)
years. If necessary to assure a term of not less than five years, Tenant must
exercise any available renewal option in conjunction with its exercise of this
right of first offer.
(d) The Contiguous Space shall be delivered to Tenant in its
then "as-is" condition, with no obligation on Landlord's part to construct
tenant improvements. The lease of the Contiguous Space shall otherwise be on the
same terms and conditions as set forth in this Lease.
50. NON-BINDING NATURE OF SUBMITTAL. It is understood by the Tenant
that the submission of this Lease to the Tenant for execution in no way binds
the Landlord to any of the terms or contents therein unless or until this Lease
has been executed by a duly authorized officer of the Landlord.
51. MEMORANDUM OF LEASE. Contemporaneously with the execution of
this Lease, the parties shall execute and file a memorandum of lease (the
"Memorandum of Lease") with respect to this Lease in the form of Exhibit G
attached hereto and made a part hereof, and shall record same with the
clerk/registrar of the county of Bergen, New Jersey. Neither party may record
this Lease or any memorandum of lease with respect to this Lease other than the
Memorandum of Lease.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals or caused these presents to be signed and sealed by their proper
corporate officers the day and year first above written.
ATTEST: DATE: TRAMMELL CROW NE, INC.
May 16, 1997 By: /s/ Robert C. Sklow
- -------------- ------------ ------------------------------------
Robert C. Sklow
Senior Vice President
ATTEST: DATE: PLAYTEX MANUFACTURING, INC.
May 7, 1997 By: /s/ Michael F. Goss
- -------------- ----------- ----------------------------------
Michael F. Goss
Exective Vice President
Chief Financial Officer
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EXHIBIT F
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS__________ AGREEMENT is made and entered into this the day of ______,
19__ by and between PLAYTEX MANUFACTURING, INC. ("Tenant") and
_______________________ ("Lender") and TRAMMELL CROW NE, INC. ("Landlord").
R E C I T A L S:
WHEREAS, Landlord has executed a lease dated as of , 1997 in favor of
Tenant (the "Lease"), a memorandum of which may be recorded simultaneously
herewith, covering a certain Premises (the "Premises") therein described located
on a parcel of real estate, a legal description of which is attached hereto and
incorporated herein by this reference as Exhibit "A" (said parcel of real estate
and the Premises being sometimes collectively referred to herein as the
"Property"); and
WHEREAS, Landlord has executed a _____________________________________
(the "Mortgage") dated ____________________, 19__ and recorded on ___________,
19__ at Volume____________________, Page__________, of the _____________________
________________ Records of _____________ County, _____________________ in favor
of Lender, payable upon the terms and conditions described therein; and
WHEREAS, it is a condition to the loan secured by the mortgage that said
Mortgage shall unconditionally be and remain at all times a lien or charge upon
the Property, prior and superior to the Lease and to the leasehold estate
created thereby; and
WHEREAS, the parties hereto desire to assure Tenant's possession and
control of the Property under the Lease upon the terms and conditions therein
contained;
NOW, THEREFORE, for and in consideration of the mutual covenants and
premises herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed by the parties hereto,
the parties hereto do hereby agree as follows:
A G R E E M E N T:
1. The Lease is and shall be subject and subordinate to the Mortgage, and
to all renewals, modifications, consolidations,
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replacements and extensions thereof, to the full extent of the principal sum
secured thereby and interest accrued and from time to time unpaid thereon,
subject to this Agreement.
2. So long as Tenant is not in default as defined in the Lease in the
payment of rent, additional rent or other charges or conditions of the Lease
after applicable notice and the expiration of applicable grace periods, Tenant
shall not be disturbed by Lender in Tenant's possession, enjoyment, use and
occupancy of the Premises during the original or any renewal term of the Lease
or any extension or modification thereof, and Lender agrees to be bound by the
Lease and all of the terms and conditions thereof. In the event of a conflict
between the provisions of the Lease and the Mortgage, the terms of the Lease
shall prevail.
3. Should Lender become the owner of the Property, or should the Property
be sold by reason of foreclosure or other proceedings brought to enforce the
Mortgage which encumbers the Property, or should the Property be transferred by
deed in lieu of foreclosure, or should any portion of the Property be sold under
a trustee's sale, this Lease shall continue in full force and effect as a direct
lease between the then owner of the Property covered by the Mortgage and Tenant,
upon, and subject to, all of the terms, covenants and conditions of the Lease
for the balance of the term thereof remaining, including any extensions therein
provided. Tenant does hereby agree to attorn to Lender or to any such owner as
its landlord, and Lender hereby agrees that it will accept such attornment.
4. Notwithstanding any other provision of this Agreement, Lender shall not
be (a) liable for any default of any landlord under the Lease (including
Landlord), except that Lender agrees to cure any default of Landlord that is
continuing as of the date Lender forecloses the Property within thirty (30) days
from the date Tenant delivers written notice to Lender of such continuing
default, unless such default is of such a nature to reasonably require more than
thirty (30) days to cure and then Lender shall be permitted such additional time
as is reasonably necessary to effect such cure, provided Landlord diligently and
continuously proceeds to cure such default; (b) subject to any offsets or
defenses which have accrued prior to the date of foreclosure, unless Tenant
shall have delivered to Lender written notice of the default which gave rise to
such offset or defense and permitted Lender the same right to cure such default
as permitted Landlord under the Lease; (c) bound by any Rent that Tenant may
have paid under the Lease more than one month in advance; (d) bound by any
amendment or modification of the Lease hereafter made without Lender's prior
written consent, which Lender agrees not to unreasonably withhold or delay; (e)
responsible for the return of any security deposit delivered to Landlord under
the Lease and not subsequently received by Lender.
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5. Tenant agrees that upon receipt of written notice from Lender of an
uncured default by Landlord under the Mortgage or the note secured by the
Mortgage specifying that from and after such date payments under the Lease are
to be made to Lender, all checks for all or any part of rentals and other sums
payable by Tenant under this Lease shall be delivered to and drawn to the
exclusive order of Lender unless Lender or a court of competent jurisdiction
directs otherwise in writing. Such an assignment of rents shall not relieve
Landlord of any of its obligations under the Lease and shall not modify or
diminish any rights granted to Tenant by the Lease or this Agreement, including
but not limited to, Tenant's rights of offset or deduction. Landlord
specifically consents to this paragraph 5 and agrees that any amounts paid to
Lender pursuant to this paragraph 5 shall be fully credited against Tenant's
obligations under the Lease. Landlord relieves Tenant of all liability for the
payment of any sums as required under this paragraph 5. Tenant shall have no
liability nor obligation to verify the existence of any default so alleged by
Lender.
6. All notices and other communications hereunder shall be in writing and
shall be deemed given when received, whether personally, by telegram, telex,
facsimile transmission (followed by written confirmation of receipt and subject
to a simultaneous copy of such notice being sent by regular mail), registered or
certified mail (return receipt requested) or Federal Express or similar
reputable nationally recognized overnight carrier providing proof of delivery,
to the parties at the following addresses (or at such other address for a party
as shall be specified by like note):
If to Tenant:
_____________________
_____________________
_____________________
_____________________
_____________________
If to Lender:
_____________________
_____________________
_____________________
_____________________
_____________________
If to Landlord:
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_____________________
_____________________
_____________________
_____________________
_____________________
7. Said Mortgage shall not cover or encumber and shall not be construed as
subjecting in any manner to the lien thereof any of Tenant's improvements
(including the Above Standard Improvements, as defined in the Lease) or trade
fixtures, furniture, equipment or other personal property at any time placed or
installed in the Premises (defined as ________________ under the Lease). In the
event the Property or any part thereof shall be taken for public purposes by
condemnation or transfer in lieu thereof or the same are damaged or destroyed,
the rights of the parties to any condemnation award or insurance proceeds shall
be determined and controlled by the applicable provisions of the Lease.
8. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors in interest, heirs and assigns and any
subsequent owner of the Property secured by the Mortgage.
9. Should any action or proceeding be commenced to enforce any of the
provisions of this Agreement or in connection with is meaning, the prevailing
party in such action shall be awarded, in addition to any other relief it may
obtain, its reasonable costs and expenses, not limited to taxable costs, and
reasonable attorneys' fees.
10. Tenant shall not be enjoined as a party/defendant in any action or
proceeding which may be instituted or taken by reason or under any default by
Landlord in the performance of the terms, covenants, conditions and agreements
set forth in the Mortgage.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
TENANT: PLAYTEX MANUFACTURING, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LENDER:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LANDLORD: TRAMMEL CROW NE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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STATE OF )
) SS
COUNTY OF_________)
[Acknowledgement of Lender]
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________ known personally by me and acknowledged
by me to be on the date of execution, ______________________________________ of
_________________________________________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____________ day of
____________________, 19_____.
________________________________________
Notary Public in and for the
State and County aforesaid
________________________________________
(Printed Name of Notary)
My Commission Expires:
____________________________________
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STATE OF )
) SS
COUNTY OF_________)
[Acknowledgement of Tenant]
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________ known personally by me and acknowledged
by me to be on the date of execution, ______________________________________ of
_________________________________________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Officers.
Witnessed by hand and this notarial seal, this ____________ day of
____________________, 19_____.
________________________________________
Notary Public in and for the
State and County aforesaid
________________________________________
(Printed Name of Notary)
My Commission Expires:
____________________________________
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STATE OF )
) SS
COUNTY OF_________)
[Acknowledgement of Landlord]
Personally appeared before me, a Notary Public in and for the above
County and State,______________________________________ known personally by
me and acknowledged by me to be on the date of execution, ___________________ of
________________________________________________________________________________
and he/she executed the foregoing for and on behalf of said Corporation by
authority of its Board of Directors.
Witnessed by hand and this notarial seal, this__________day of
__________________________________________ , 19______ .
________________________________________
Notary Public in and for the
State and County aforesaid
________________________________________
(Printed Name of Notary)
My Commission Expires:
____________________________________
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EXHIBIT G
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (the "Memorandum") is made as of _____________,
199__, by and between, PLAYTEX MANUFACTURING, INC., a Delaware corporation,
having an office at ____________________________________________ ("Tenant") and
TRAMMELL CROW NE, INC., a Delaware corporation, having an office at
__________________________________________________ ("Landlord").
WITNESSETH:
WHEREAS, Landlord and Tenant have entered into that certain Lease
Agreement dated as of __________, 1997 (the "Lease"), pursuant to which Landlord
has leased to Tenant and Tenant has leased from Landlord a portion of certain
real property depicted on Exhibit A attached hereto and made a part hereof (the
"Premises");
WHEREAS, Landlord and Tenant wish to place of record the existence of the
Lease together with certain of its terms;
NOT THEREFORE, Landlord and Tenant hereby agree as follows:
1. The term of the Lease commenced on ___________, 1997, and the terms of
this Lease shall be for a period of fifteen (15) years from the date of the
Lease, with two five (5) year renewal options, unless sooner terminated pursuant
to the terms and conditions of the Lease;
2. Tenant is the owner of certain improvements located at the Premises and
valued at $950,000.00. Such improvements shall remain the sole property of
Tenant during the term of the Lease (including renewal options), but shall
become the property of Landlord to the extent Tenant does not remove same at the
end of the term.
3. THIS MEMORANDUM OF LEASE HAS BEEN ENTERED INTO FOR THE PURPOSE OF
PLACING THE LEASE OF RECORD AND PLACING THE PUBLIC ON NOTICE OF THE NEED TO
INQUIRE OF ALL OF THE TERMS OF THE LEASE AND SHALL NOT BE DEEMED TO AMEND,
MODIFY, SUPPLEMENT OR CHANGE THE TERMS OF THE LEASE IN ANY RESPECT WHATSOEVER.
THE TERMS AND CONDITIONS CONTAINED IN THE LEASE SHALL, AT ALL TIMES AND IN ALL
RESPECTS, GOVERN AND CONTROL.
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Memorandum of
Lease to be executed as of the day and year first above written.
TENANT: LANDLORD:
PLAYTEX PRODUCTS, INC. TRAMMELL CROW NE, INC.
By: By:
------------------------ ------------------------
Name: Name:
---------------------- ----------------------
Title: Title:
--------------------- ---------------------
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STATE OF NEW JERSEY :
SS:
COUNTY OF :
BE IT REMEMBERED, that on this ____ day of ___________, 199___, before me,
the subscriber, personally appeared ________________ who acknowledged under
oath, to my satisfaction, that this person: (a) is the __________ President of
__________________, the corporation named as Landlord in the within instrument;
and (b) in such capacity, signed, sealed and delivered this instrument as the
voluntary act and deed of the corporation.
----------------------------
STATE OF NEW JERSEY :
SS:
COUNTY OF :
BE IT REMEMBERED, that on this ____ day of _________, 199___, before me,
the subscriber, personally appeared ________________ who acknowledged under
oath, to my satisfaction, that this person: (a) is the ____________ president of
_________________________, the corporation named as Tenant in the within
instrument; and (b) in such capacity, signed, sealed and delivered this
instrument as the voluntary act and deed of the company, made by virtue of the
authority of its Board of Directors.
----------------------------
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Exhibit 10(am)
July 21, 1998
Playtex Products, Inc. Toronto Dominion (New York), Inc
Attention: Michael Goss Attention: Lorraine D'Costa
Facsimile: (203) 341-4260 Facsimile: (416) 983-1553
Telephone: (203 341-4000 Telephone: (416) 983-0774
Dear Mr. Goss:
Reference: Swap Transaction Confirmation (Reference:# 269526T-CSG)
The purpose of this facsimile is to set forth the terms and conditions of the
Swap Transaction entered into between Playtex Products, Inc.and Toronto Dominion
(New York), Inc. on the Trade Date specified below (the "Transaction"). This
facsimile constitutes a "Confirmation" as referred to in the ISDA Master
Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions published
by the International Swaps and Derivatives Association, Inc. (the "Definitions")
are incorporated by reference into this Confirmation and the Transaction is
subject to the terms and conditions of the 1992 ISDA Master Agreement published
by the International Swaps and Derivatives Association, Inc.(the "ISDA
Agreement"). In the event of any inconsistency among or between the ISDA
Agreement, the Definitions and this confirmation, this Confirmation will govern.
This Confirmation and its acknowledgement evidence a complete and binding
agreement between you and us. In addition, you and we agree to negotiate in good
faith and enter into a master agreement without delay and in no event later than
60 days from the Trade Date in the form of the ISDA Agreement with such
modifications as you and we shall in good faith agree including without
limitation the Conditions listed below (the "Agreement").
This Confirmation will supplement , form part of and be subject to the Agreement
between you and us. All provisions contained in the Agreement will govern this
Confirmation except as may be expressly modified below.
Each party represents to the other party that the terms and conditions of this
Transaction do not violate or conflict with any policies, procedures, by-laws or
management directives of such party whether in force by resolution or otherwise.
For greater certainty, the other party has no responsibility whatsoever to
confirm compliance by such party with respect to any such policy, procedure,
by-law or management directive whether it has knowledge of same or not.
<PAGE>
Transaction Reference:# 269526T-CSG
The terms of the particular Transaction to which this Confirmation relates are
as follows:
1. General Terms
Notional Amount: USD 100,000,000.00
Party A: Toronto Dominion (New York), Inc.
Party B: Playtex Products, Inc.
Trade Date: July 21, 1998
Effective Date: July 23, 1998
Termination Date: The earlier of (i) Iuly 23, 2002 and (ii)
the Cancellation Date subject to adjustment
in accordance with the Modified Following
Business Day Convention.
Calculation Agent: Party A.
Business Days New York & London
2. Fixed Payment:
Fixed Rate Payer: Party B
Fixed Rate: 5.455%
Fixed Rate Day Count Fraction: Actual/360
Fixed Rate Payer Payment Dates: The 23rd day of each month, commencing
August 24th, 1998 up to and including the
Termination Date subject to adjustment in
accordance with the Modified Following
Business Day Convention
3. Floating Payments:
Floating Rate Payer: Party A
Floating Rate Option: "USD-LIBOR-BBA"
<PAGE>
Transaction Reference:# 269526T-CSG
Designated Maturity: 1 month
Floating Rate Day Count Fraction: Actual/360
Floating Rate Payer Payment Dates: The 23rd day of each month, commencing
August 24th, 1998 up to and including the
Termination Date subject to adjustment in
accordance with the Modified Following
Business Day Convention
Reset Dates: The first day of each Calculation Period
4. Cancellable Feature:
Party A, at its sole discretion, may cancel this Transaction on any Reset Date
occurring on or after July 23, 2000 (the "Cancellation Date") upon two (2)
Business Days' prior written notice to Party B.
Upon such termination, no further payments shall be due by either party , other
than amounts due on the Termination Date as provided for herein.
5. Account Details
Payments to Party A in USD: Bank of America, New York
A/C: # 0360-6550-1-13535
A/C: The Toronto-Dominion Bank, New York
Branch
ATTN: CSG
Payments to Party B in USD: To be provided by Party B as necessary
6. Expenses:
Each party agrees to be solely responsible for expenses incurred by it in
documenting this Transaction including without limitation, its own legal
fees and disbursements.
7. Conditions
The parties agree that the ISDA Agreement will contain, without limitation, the
following terms and conditions:
(i) The Cross Default provisions of Section 5(a)(vi) if the ISDA Agreement
will apply to both parties.
(ii) Details of any Credit Support Document:
With respect to Party A, the guarantee of Party A's Credit Support
Provider.
<PAGE>
Transaction Reference:# 269526T-CSG
With respect to Party B:
o the Credit Agreement dated as of July 21, 1997, as supplemented or
amended from time to time, between Party B as borrower, DLJ Capital
Funding, Inc. as syndication agent, and Party A and various other
entities as lenders (the "Credit Agreement");
o The Security Documents (as such term is defined in the Credit
Agreement), as supplemented or amended from time to time; and
o The Intercreditor Agreement (as such term is defined in the Credit
Agreement) as supplemented or amended from time to time.
(iii) All obligations of Party B pursuant to this Agreement whether now existing
or incurred hereafter shall rank pari passu with all senior secured
indebtedness of Party B, whether now existing or incurred hereafter.
(iv) Each party will be deemed to represent to the other party on the date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations to the
contrary for that Transaction):-
(a) Non-Reliance. It is acting for its own account, and it has made its
own independent decisions to enter into that Transaction and as to whether
that Transaction is appropriate or proper for it based upon its own
judgment and upon advice from such advisors as it has deemed necessary. It
is not relying on any communication (written or oral) of the other party
as investment advice or as a recommendation to enter into that
Transaction; it being understood that information and explanations related
to the terms and condition of a Transaction shall not be considered
investment advice or a recommendation to enter into that Transaction. It
has not received from the other party any assurance or guarantee as to the
expected results of that Transaction.
(b) Evaluation and Understanding. It is capable of evaluating and
understanding (on its own behalf or through independent professional
advice), and understands and accepts, the terms, conditions and risks of
that Transaction. It is also capable of assuming, and assumes, the
financial and other risks of that Transaction.
(c) Status of Parties. The other party is not acting as a fiduciary or an
advisor for it in respect of that Transaction.
The Conditions indicated above shall cease to apply and have no force and effect
upon execution by the parties of an ISDA Master Agreement which will then govern
this Transaction.
<PAGE>
Transaction Reference:# 269526T-CSG
Please confirm that the foregoing correctly sets forth the terms of our
agreement by a return facsimile to The Toronto-Dominion Bank, Finance & Risk
Management, Attention: Derivative Products, facsimile #(416) 983-1553
substantially to the following effect:
"RE: Playtex Products, Swap Transaction USD 100,000,000.00 (Reference #
269526T-CSG)
We acknowledge receipt of your facsimile dated August 7, 1998, in respect of
above referenced Transaction between Toronto Dominion (New York), Inc. and
Playtex Products, Inc. with Trade Date of July 21,1998 and Termination Date as
specified herein and confirm that this facsimile correctly sets forth terms of
our agreement relating to the Transaction described therein.
Very sincerely,
Toronto Dominion (New York), Inc.
By: /s/ Chriss Regan
----------------------------------
Name: Chriss Regan
Title: Senior Manager
Finance & Risk Management
Agreed and Accepted:
Playtex Products, Inc.
By:/s/ Glenn A. Forbes
----------------------------
Name: Glenn A. Forbes
Title: Vice President, Finance
EXHIBIT 11
PLAYTEX PRODUCTS, INC.
Computation of Earnings Per Share
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended
-----------------------------------------------
December 26, December 27, December 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Basic Earnings Per Share
- ------------------------
Net Earnings Available to
Common Stockholders ............ $34,230 $14,653 $18,199
Weighted Average Common
Shares Outstanding ............. 59,486 50,923 50,883
Net Earnings Per
Common share ................... $ 0.58 $ 0.29 $ 0.36
======= ======= =======
Diluted Earnings Per Share
- --------------------------
Net Earnings Available to
Common Stockholders ............ $34,230 $14,653 $18,199
Weighted Average Common
Shares Outstanding ............. 59,486 50,923 50,883
Assumed Dilutive Effect of
Stock Options (1) .............. 925 83 56
------- ------- -------
Weighted Average Common
Shares Outstanding - Diluted ... 60,411 51,006 50,939
Net Earnings Per
Common Share ................... $ 0.57 $ 0.29 $ 0.36
======= ======= =======
</TABLE>
(1) Based on the Treasury Stock Method
EXHIBIT 12(A)
PLAYTEX PRODUCTS, INC.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges and Preferred Dividends
(Dollars in Thousands)
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------------------------------------------------------
December 26, December 27, December 28, December 30, December 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings before extraordinary
loss and preferred stock dividends............. $ 34,230 $ 18,731 $ 18,199 $ 2,774 $ 29,547
Income taxes...................................... 25,686 16,501 16,141 8,151 23,994
---------- --------- ---------- -------- ---------
Earnings before income
taxes and extraordinary loss................... 59,916 35,232 34,340 10,925 53,541
Fixed charges:
Interest....................................... 71,518 64,470 64,860 71,361 76,153
One-third of rental............................ 2,650 1,750 1,734 1,697 1,413
---------- --------- ---------- -------- ---------
Total fixed charges......................... 74,168 66,220 66,594 73,058 77,566
---------- --------- ---------- -------- ---------
Earnings before fixed
charges, income taxes and
extraordinary loss.......................... $ 134,084 $ 101,452 $ 100,934 $ 83,983 $ 131,107
========== ========= ========== ======== =========
Ratio of earnings to fixed
charges........................................ 1.81X 1.53X 1.52X 1.15X 1.69X
========== ========= ========== ======== =========
Pre-tax earnings required for
preferred stock dividends(1)................... N/A N/A N/A N/A 2,107
========== ========= ========== ======== =========
Ratio of earnings to fixed
charges and preferred
dividends................................... 1.81X 1.53X 1.52X 1.15X 1.65X
========== ========= ========== ======== =========
Coverage of earnings to
fixed charges.................................. $ 59,916 $ 35,232 $ 34,340 $ 10,925 $ 53,541
========== ========= ========== ======== =========
Coverage of earnings to
fixed charges and preferred
dividends.................................... $ 59,916 $ 35,232 $ 34,340 $ 10,925 $ 51,434
========== ========= ========== ======== =========
</TABLE>
(1) Gross-up of earnings for preferred stock dividends have been computed at
the applicable effective tax rates.
Exhibit 22(a)
SUBSIDIARIES OF PLAYTEX PRODUCTS, INC.
PERCENT JURISDICTION OF
CORPORATION OWNERSHIP INCORPORATION
----------- --------- -------------
Playtex Products, Inc. Delaware
Playtex Marketing Corp. 50% Delaware
Playtex Manufacturing, Inc. 100% Delaware
Playtex Sales & Services, Inc. 100% Delaware
Playtex Beauty Care, Inc. 100% Delaware
Playtex Investment Corp. 100% Delaware
TH Marketing Corp. 100% Delaware
Playtex International Corp. 100% Delaware
Sun Pharmaceuticals Corp. 100% Delaware
Smile-Tote, Inc. 100% California
Playtex Limited 100% Canada
Playtex Foreign Sales Corporation 100% Barbados
Carewell Industries, Inc. 100% New York
Personal Care Holdings, Inc. 100% Delaware
Personal Care Group, Inc. 100% Delaware
Personal Care Group Australia PTY Ltd. 100% Australia
Exhibit 23
The Board of Directors
Playtex Products, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-88806 and 333-31703) on Form S-8 of Playtex Products, Inc. of our
report dated February 4, 1999, relating to the consolidated balance sheets of
Playtex Products, Inc. and subsidiaries as of December 26, 1998 and December 27,
1997, and the related consolidated statements of earnings, changes in
stockholders' equity, and cash flows for the twelve months ended December 26,
1998, December 27, 1997 and December 28, 1996 and related schedule, which report
appears in the December 26, 1998 annual report on Form 10-K of Playtex Products,
Inc.
/s/ KPMG LLP
Stamford, Connecticut
March 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> DEC-26-1998
<CASH> 6,871
<SECURITIES> 0
<RECEIVABLES> 105,280
<ALLOWANCES> 2,095
<INVENTORY> 58,790
<CURRENT-ASSETS> 189,146
<PP&E> 161,435
<DEPRECIATION> 82,529
<TOTAL-ASSETS> 899,221
<CURRENT-LIABILITIES> 110,598
<BONDS> 811,750
0
0
<COMMON> 604
<OTHER-SE> (141,579)
<TOTAL-LIABILITY-AND-EQUITY> 899,221
<SALES> 669,613
<TOTAL-REVENUES> 669,613
<CGS> 277,555
<TOTAL-COSTS> 277,555
<OTHER-EXPENSES> 260,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,518
<INCOME-PRETAX> 59,916
<INCOME-TAX> 25,686
<INCOME-CONTINUING> 34,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,230
<EPS-PRIMARY> .58
<EPS-DILUTED> .57
</TABLE>
