<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_______________________
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
Commission file number 1-8714
TAMBRANDS INC.
--------------
(Exact name of registrant as specified in its charter)
Delaware 13-1366500
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
777 Westchester Avenue
White Plains, New York 10604
---------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, is 914-696-6000
------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- --------------------
Common Stock, par New York Stock Exchange
value $.25 per share; and Pacific Stock Exchange
Common Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
---------- ---------
<PAGE>
FORM 10-K
(Facing Sheet Continuation)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained in this Form 10-K, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 15, 1996 was $1,804,828,704. (For this
computation, the registrant has excluded the market value of all shares of its
Common Stock reported as beneficially owned by officers and directors of the
registrant; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.)
As of March 15, 1996, 36,817,835 shares of the registrant's Common Stock
were outstanding.
Documents Incorporated by Reference
- -----------------------------------
Part III of this Form 10-K incorporates by reference portions of the
definitive Proxy Statement for the registrant's annual meeting of shareholders
to be held on April 23, 1996, filed with the Securities and Exchange Commission
pursuant to Regulation 14A.
<PAGE>
PART I
------
Item 1. Business
- ------- --------
General
- -------
Tambrands Inc. (the "Company") has been manufacturing and marketing menstrual
tampons, which are sold under the trademark TAMPAX(R), since 1936. It is the
leading manufacturer and marketer of tampons in the world. The Company operates
in one business segment, personal care products. In recent years, the Company
has focused on its core TAMPAX tampon business worldwide, has expanded its
international operations and has placed an increased emphasis on the development
and marketing of new products. The Company has manufacturing operations in
seven countries. In 1995, TAMPAX tampons were sold in over 150 countries. The
Company's eight largest markets are the United States, the United Kingdom,
France, Canada, Spain, CIS (principally Russia and Ukraine), Italy and Belgium.
The Company was incorporated under the laws of the State of Delaware in 1936.
The Company's principal executive offices are located at 777 Westchester Avenue,
White Plains, New York 10604 (telephone number 914-696-6000).
Recent Developments
- -------------------
In the fourth quarter of 1995, the Company relaunched an upgraded version of
its original product, the TAMPAX flushable applicator tampon, in the United
States, Canada, Latin America and parts of Asia/Pacific. The relaunched product
contained significant product enhancements and redesigned, contemporary
packaging. In October 1995, the Company announced the U.S. introduction in the
first quarter of 1996 of a new product, TAMPAX NATURALS(TM), the only nationally
available tampon or pad to be made of 100% cotton. This tampon is made of all
natural components and has a flushable, biodegradable applicator.
In February 1996, Tambrands Limited, the Company's principal U.K. subsidiary,
entered into an agreement with the U.K. subsidiary of Molnlycke AB for Tambrands
Limited to distribute Molnlycke's sanitary pad and panty-liner products on an
agency basis in the United Kingdom.
In February 1996, Anne M. Busquet and Janet Hill were elected to the Company's
Board of Directors. Mrs. Busquet is President of American Express Relationship
Services, a unit of American Express Travel Related Services (diversified
financial services) and Mrs. Hill is Vice President of Alexander & Associates,
Inc. (management consulting).
Effective December 31, 1995, Susan J. Riley was appointed Senior Vice
President - Chief Financial Officer. Also during 1995, Michael S. Krause was
appointed Senior Vice President - Global
<PAGE>
Operations, and Janey M. Loyd was appointed Vice President - Business
Development.
In December 1991, the Company announced a program to restructure its worldwide
manufacturing operations to improve efficiency and reduce costs. This program
has been completed and included workforce reductions and the consolidation of
facilities.
In June 1993, the Company announced that it would provide a $30 million charge
($20 million after-tax) to provide for restructuring of manufacturing and
administrative operations and the cost of management changes, including the
adoption of a consolidated international management strategy. This program has
included workforce reductions and the consolidation of facilities. This program
has been completed, with the exception of certain severance payments under
committed severance plans, which will be substantially complete by the end of
1996. See Note 6, "Restructuring and Other Charges," included in the Notes to
Consolidated Financial Statements incorporated by reference in item 8 of Part II
hereof.
The Company's 1995 capital spending programs related to investments in
equipment to improve product quality and productivity, modernize production
facilities and manufacture and launch new products. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
incorporated by reference in item 7 of Part II hereof. The Company intends to
continue its efforts to achieve productivity improvements in order to eliminate
excess cost and time from the supply chain and generate funds for reinvestment
in growth opportunities.
Products
- --------
Menstrual tampons represent all of the Company's net sales. The Company's
largest selling tampon is the TAMPAX flushable applicator tampon, which first
became commercially available in 1936 and was upgraded and relaunched in 1995.
In addition to this tampon and the new TAMPAX NATURALS tampon, which was
introduced in the United States in the first quarter of 1996, the Company
manufactures and sells several other tampon products. In 1994, the Company
introduced nationally in the United States the new TAMPAX SATIN TOUCH(R) tampon.
This tampon offers the ease and comfort of a plastic applicator but has an all-
paper applicator that is flushable and biodegradable. SATIN TOUCH is a rounded-
end product with a patented, high gloss surface. It was introduced nationally
in Canada in 1993 and in Puerto Rico and several Caribbean locations in 1995.
In 1994, the Company
-2-
<PAGE>
introduced the new TAMPAX SATIN(R) tampon in France. This tampon is similar
to the SATIN TOUCH tampon and was introduced in 1995 in Spain and Belgium and
in Denmark and Finland under the trademark TAMPAX SILKS(TM).
In 1994, the Company introduced nationally in the United Kingdom its TAMPAX
TAMPETS(R) tampon. This non-applicator tampon has been sold in Ireland since
1993 and was introduced in 1995 in Australia, Israel and Portugal. A
non-applicator tampon was also introduced in Canada under the trademark
TAMPAX SOLOS(TM) during 1995.
TAMPAX tampons with plastic applicators are sold in the United States and
Canada and, since 1995, in Brazil. TAMPAX COMPAK(R) tampons, with a compact
all-plastic applicator, are sold in France, the United Kingdom and several other
European countries, as well as in the United States, Canada and several other
smaller markets. The Company began marketing an improved COMPAK tampon in 1996
with a shorter tampon and applicator, and a perforated wrapper for applicator
disposal.
In 1994, the Company introduced nationally in the United States the new TAMPAX
LITES(R) tampon. This tampon, which was introduced in New Zealand in 1995, is
especially designed for use on days of light menstruation, when other tampons
might be too absorbent for comfortable use. The Company sells TAMPAX comfort
shaped flushable applicator tampons, with an all-paper rounded-end applicator
and a slimmer design than the Company's original flushable applicator product,
in the United States, Australia, New Zealand and Japan.
The Company continues to evaluate the possible introduction of its existing
products in additional markets, as well as additional new products and product
enhancements.
Marketing and Sales
- -------------------
Marketing operations are conducted either directly by the Company and its
subsidiaries, or by third-party brokers or sales agents and distributors. Sales
are made directly to grocery, discount and drug stores and other comparable
outlets, as well as to wholesalers and distributors in those trades. Sales to
discount stores, including mass merchandisers and club stores, have been
increasing as a percentage of total sales. For the years 1994 and 1995, Wal-
Mart, together with its affiliated stores, accounted for approximately 10.3% and
11.1%, respectively, of the Company's net sales worldwide. No single customer
(including distributors) of the Company and its subsidiaries accounted for 10%
or more of total net sales prior to 1994. The marketplace for consumer products
is becoming increasingly global and currently is characterized by growing trade
consolidation and expansion across geographic
-3-
<PAGE>
borders. A small number of significant customers are financed through highly
leveraged capital structures, making them particularly sensitive to market
interest rate changes and other economic variables. This situation has not had
a material effect on the Company's net sales or operating income in 1995 or
prior years.
Substantially all sales involve extensions of credit. Credit terms generally
are consistent with terms typically extended under local industry practices. In
the United States and Canada, the Company typically offers discounts of 2% and
1%, respectively, if payment is received within 30 or 20 days, respectively. In
the United Kingdom and most other European markets, discounts generally are not
offered and payment terms range from 30 to 90 days. In other markets, credit
terms with longer collection periods are common, and in some developing markets
discounts for prompt payment are offered. Default rates by the Company's
customers in the United States have been at or below industry averages, based on
information from the Credit Research Foundation.
In the United States, the Company's internal sales management group directly
handles sales to certain large customer accounts. These sales have been
increasing as a percentage of total sales. Other sales in the United States and
sales in Belgium, Canada, France and the Netherlands are handled through
third-party sales brokers, who also may sell other branded consumer products but
generally do not carry products that compete with the products of the Company
and its subsidiaries. Sales are conducted in the Czech Republic, Poland,
Russia, Ukraine and the United Kingdom by the Company's subsidiaries and in the
People's Republic of China by its joint venture. Sales are conducted in other
countries through third-party distributors and agents. Sales forces of the
Company's subsidiaries in the Czech Republic, Poland, Russia, Ukraine and the
United Kingdom distribute or act as broker with respect to certain household
consumer products for several other companies. Revenues from these sales are
increasing as a percentage of the Company's operating income.
The Company believes that the trend by retailers and distributors to reduce
inventories and the related adverse impact on shipments will continue in future
periods. However, the rate of inventory reduction slowed in 1995, as it had in
1994, from the rate of reduction experienced in 1993. The size of inventories
at the trade level varies from month to month, sometimes considerably, due to a
number of factors. Trade inventories of the Company's products at the end of
1995 and continuing into the beginning of 1996, as estimated by the Company,
were higher than on average during 1995, primarily as a result of bonus pack
shipments at the end of 1995 and reductions in market share discussed below
under "Competition".
-4-
<PAGE>
Media advertising is important to the overall success of the TAMPAX tampon
brand. In the United States, Canada and Europe, the Company focuses its
advertising on women aged 12-34, using a variety of media, including television
and print advertisements. In 1996, the Company intends to continue with its
aggressive support of the TAMPAX tampon franchise with heightened levels of
advertising and promotional activities. The increase in spending is intended
primarily to support the Company's new products. The Company's advertising
execution is handled on a worldwide basis by one agency, BBDO Worldwide Inc.
The Company also seeks to attract and retain customers through its teen
education program, which is designed to help female teenagers understand the
various forms of sanitary protection and promotes trial usage of TAMPAX tampons.
In developing markets, like Russia and China, the Company uses sampling with
young women and physician awareness programs. In the Company's largest markets,
the Company conducts school education programs that include videos, lecturers
and booklets.
Competition
- -----------
Highly competitive conditions prevail in the feminine protection industry for
external pads and menstrual tampons, which are directly competitive in both
performance and price, the principal methods of competition.
In the United States, there are four other manufacturers whose sales, directly
or through subsidiaries, are significant in the total sanitary protection
market: Johnson & Johnson, Kimberly-Clark Corporation, Playtex Family Products
Corporation and The Procter & Gamble Company. Each of these corporations
manufactures and sells external pads or menstrual tampons or both. Each makes
and sells products other than external pads and tampons, and the total sales of
all products by and the capitalization of each of Johnson & Johnson, Kimberly-
Clark and Procter & Gamble are substantially greater than the total sales and
capitalization of the Company. These factors may be helpful to the respective
competitive positions of these companies in the feminine protection industry.
Substantially all of the tampons manufactured by the above-mentioned four
companies are sold under these companies' brand names. In addition, there is a
small private label segment of the industry. Management believes that the
TAMPAX tampon's leading market share position in the U.S. tampon category
(approximately 50.5% in dollars and 53.7% in units for the year 1995, according
to Nielsen Marketing Research) and strong brand loyalty among consumers (as
verified by household panel data obtained by Nielsen Marketing Research), are
positive factors in the Company's ability to compete in the feminine protection
industry. (Information obtained from Nielsen represents Nielsen estimates
only.) During 1995, the level of competitive activity continued to increase
in the United States, particularly in the areas of new product introductions and
price discounting.
-5-
<PAGE>
The tampon category and TAMPAX market share softened in the United States in
the fourth quarter of 1995. Management believes that the preparation for the
launch of the new TAMPAX NATURALS product was a significant factor in this
softening, which has continued into the first quarter of 1996. The Company
reduced its fourth-quarter U.S. advertising and promotional activity while
awaiting the full distribution of the TAMPAX NATURALS product.
Highly competitive conditions prevail in virtually all foreign markets.
Competition tends to be fragmented and regional in nature in most of those
markets, but tampons produced by, or under license from, Johnson & Johnson and
Playtex, and external pads produced by, or under license from, Johnson &
Johnson, Kimberly-Clark and Procter & Gamble, are sold in many of the foreign
markets where the Company does business. During 1995, Johnson & Johnson marketed
applicator tampons manufactured by Playtex in a number of foreign markets where
the Company does business. Competitive activity remained at high levels in
Europe in 1995. This activity included the continued aggressive marketing of
several external pad products.
Management anticipates that the worldwide market for consumer products will
continue to be highly competitive and sensitive to price.
Raw Materials
- -------------
The principal raw materials used in the Company's business are cotton and
rayon for tampons, paper and plastic for tampon applicators, and paperboard for
cartons and containers. Most of these raw materials are readily available in
the market from many sources. The Company experienced an escalation in 1995 in
the cost of many of its raw and packaging materials, including cotton, pulp and
paper. Based on the current downward trend of pulp and paper prices, management
expects these costs to decline somewhat through the latter part of 1996.
Trademarks and Patents
- ----------------------
The Company, directly or through its subsidiaries, owns a number of
trademarks, trademark registrations and trademark applications in the United
States and other countries, which, in the opinion of management, are
significant. The Company's trademark registrations vary in duration and are
typically renewable by the Company. Certain features of TAMPAX tampons are the
subject of U.S. and foreign patents or patent applications owned by the
Company. In management's opinion, certain of these
-6-
<PAGE>
patents are significant. The duration of the Company's patents ranges from 3
to 18 years (i.e., the patents have expiration dates ranging from the year 1999
----
to the year 2014).
Research and Development
- ------------------------
The Company maintains a research and development laboratory at its facility in
Palmer, Massachusetts. Management believes that developing better protecting
and more comfortable and convenient products, and products which are
environmentally sound, is important to maintaining the Company's competitive
position. Research is directed toward these goals. The Company's research and
development expenditures have approximated 2% of net sales in each of the past
three years.
Employees
- ---------
Headcount reductions occurred as a result of the restructuring programs
announced in 1991 and 1993. At December 31, 1995, the Company and its
subsidiaries employed approximately 3,400 persons.
Foreign and Domestic Operations; Export Sales
- ---------------------------------------------
The information regarding foreign and domestic operations of the Company and
its subsidiaries set forth on page F-16 under the caption "Segment and
Geographic Information" in the Notes to Consolidated Financial Statements is
incorporated herein by reference.
Over the past three years, sales by the Company's foreign
operations accounted for approximately one-half of total unit sales.
In 1995, sales between geographic areas and export sales of the Company were
not significant.
Item 2. Properties
- ------ ----------
Domestic Properties
- -------------------
The Company owns and operates three manufacturing plants in the United States,
located in Auburn, Maine; Claremont, New Hampshire; and Rutland, Vermont.
Product and process research and development, and certain accounting, data
processing and sales and logistics operations are conducted at the Company's
Technical Center, located in Palmer, Massachusetts. This facility is a testing
center for the development of new products and for the application of advanced
manufacturing technology to the Company's products. The Company owns each of
these plants and the Technical
-7-
<PAGE>
Center. The Company leases headquarters office space in White Plains, New York.
The Company's production machinery and equipment and the properties owned by
it described above are held free and clear of encumbrances.
During the last fiscal year, the Company's domestic plants were suitable and
adequate for the Company's requirements. The Company's domestic plants operate
principally on a three-shift basis, and management believes that these plants
have sufficient additional capacity to satisfy the anticipated requirements of
the Company.
Foreign Properties
- ------------------
The Company's foreign subsidiaries own and operate manufacturing plants in
France, Ireland, Russia, Ukraine and the United Kingdom. The joint venture in
the People's Republic of China, in which the Company has an 80% interest, has
contractual rights to use a manufacturing plant there. The Company's subsidiary
in Brazil owns a manufacturing plant there which it has leased to another
company. The lease has expired and the Company is attempting to sell the plant.
The Company's foreign subsidiaries lease office space in Brazil, Canada, France,
Mexico, Switzerland and in several other countries. The Company's subsidiary in
the United Kingdom leases office space there for the Company's international
headquarters.
The production machinery and equipment and properties owned by the Company's
foreign subsidiaries described above are held free and clear of encumbrances.
During the last fiscal year, the foreign facilities of the Company's
subsidiaries were suitable and adequate for the Company's requirements. In
general, these foreign manufacturing facilities operate on a three-shift basis,
and management believes that these facilities have sufficient additional
capacity to satisfy the anticipated requirements of the Company.
-8-
<PAGE>
Item 3. Legal Proceedings
- ------ -----------------
The Company or a subsidiary is a defendant in a small number of product
liability lawsuits based on allegations that toxic shock syndrome ("TSS") was
contracted through the use of tampons. A small number of pre-suit claims
involving similar TSS allegations have also been asserted. The damages alleged
vary from case to case and often include claims for punitive damages. One TSS
lawsuit, filed in the United States District Court for the District of Kansas
and served on the Company in July 1994, purported to be a federal class action
on behalf of all women who had contracted TSS through the use of tampons. In
March 1996, the District Court denied plaintiffs' motion for class certification
in this lawsuit.
The Company and three of its former officers were named as defendants in
certain shareholder lawsuits filed in 1993 in the United States District Court
for the Southern District of New York and consolidated under the caption
In Re Tambrands Inc. Securities Litigation. The parties stipulated to the
- -------------------------------------------
certification of the consolidated lawsuit as a class action on behalf of all
purchasers of the Company's common stock during the period December 14, 1992
through April 28, 1993. The complaint alleged that the Company's disclosures
during the class period contained material misstatements and omissions
concerning its anticipated future earnings and thereby allegedly violated
Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. In
November 1995, the court approved a settlement of this litigation and dismissed
the action against all defendants.
The Company was a nominal defendant in three purported shareholder derivative
lawsuits filed in the Supreme Court of the State of New York for Westchester
County and consolidated in October 1993 into a single action. Named
collectively in the consolidated complaint as individual defendants were the
Company's directors (other than Mrs. Busquet, Mr. Fogarty and Mrs. Hill),
certain former directors and three of its former officers. The complaint
alleged that the officer-defendants exposed the Company to liability in the
shareholder class action described in the preceding paragraph and
misappropriated corporate opportunities by trading in the Company's stock on the
basis of nonpublic information. One of the former officers was also alleged to
have received improper reimbursements from the Company for alleged personal
expenses. The director-defendants were alleged to have acquiesced in the
aforesaid alleged violations and to have received excessive compensation. The
complaint sought to recover on behalf of the Company an unspecified amount of
damages from the individual defendants. No relief was sought against the
Company. In September 1994, the Court granted the defendants' motion to dismiss
the complaint for failure to make a demand upon the Board of Directors.
Plaintiffs have appealed the dismissal.
-9-
<PAGE>
The Company is involved, either as a named defendant or as the result of
contractual indemnities, in certain litigation arising out of the operations of
certain divested subsidiaries.
There are certain other legal proceedings pending against the Company arising
out of its normal course of business in which claims for monetary damages are
asserted.
While it is not feasible to predict the outcome of these legal proceedings and
claims with certainty, management is of the belief that any ultimate liabilities
in excess of provisions therefor will not individually or in the aggregate have
a material adverse effect on the Company's financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
Management of the Registrant
- ----------------------------
The names and ages of all executive officers of the Company, the current
office held by each, and the period during which each has served as such are
set forth in the following table:
-10-
<PAGE>
Period Served
Name Age Current Office In Current Office
---- --- -------------- -----------------
Edward T. Fogarty 59 President and 1994 to date
Chief Executive
Officer (1)
Michael S. Krause 55 Senior Vice President - 1995 to date
Global Operations (2)
Michael K. Lorelli 44 Executive Vice 1994 to date
President and President,
North America/Latin
America (3)
Thomas J. Mason 51 Group Vice President- 1994 to date
International (4)
Susan J. Riley 37 Senior Vice President - 1995 to date
Chief Financial Officer
Thomas Soper, III 46 Senior Vice President- 1994 to date
Corporate Human
Resources and
Communications (5)
Jerome B. Wainick 55 Vice President-Research 1990 to date
and Development
(1) Mr. Fogarty has served as an officer of the Company since May 1994. From
prior to March 1991 until May 1994, he was employed by Colgate-Palmolive
Company as President - USA/Canada/Puerto Rico.
(2) Mr. Krause has served as an officer of the Company since August 1995. From
January 1995 until July 1995, he was employed by the Snacks Division of The
Quaker Oats Company as Vice President - Supply Chain. From February 1994
until August 1994, he was employed by Stella Foods Inc. as Executive Vice
President - Supply Chain. From prior to March 1991 until February 1994, he
was employed by Goody Products, Inc. as Senior Vice President - Operations.
(3) Mr. Lorelli has served as an officer of the Company since October 1994.
From January 1993 until October 1994, he was employed by Pizza Hut
International, a division of PepsiCo, Inc., as President. From prior to
March 1991 until December 1992, he was employed by Pepsi-Cola East, a
division of PepsiCo, Inc., as President.
(4) Mr. Mason has served as an officer of the Company since October 1994. From
May 1992 until September 1994, he was employed
-11-
<PAGE>
by Dole Packaged Foods, a division of Dole Food Co., as President. From
prior to March 1991 until May 1992, he was employed by Kraft General Foods
as Executive Vice President and General Manager, Specialty Products.
(5) Mr. Soper has served as an officer of the Company since October 1994. From
prior to March 1991 until September 1994, he was employed by Alexander &
Alexander Services Inc. (a provider of risk management, insurance brokerage
and human resource management consulting services) as Senior Vice
President - Corporate Human Resources.
Each executive officer is appointed by the Board of Directors to serve
until the first meeting of directors following the annual meeting of
shareholders of the Company. Except as indicated in the footnotes above, the
principal occupation and employment during the past five years of each of the
above-named executive officers have been as an officer or other member of
management of the Company or one or more of its subsidiaries.
-12-
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
- ------- --------------------------------------------------
Shareholder Matters
-------------------
The Company's Common Stock is traded on the New York and Pacific Stock
Exchanges. The following table provides quarterly dividend and Common Stock
price range information for the years 1994 and 1995:
<TABLE>
<CAPTION>
Common Stock
Price Range (a)
---------------
Dividends
High Low Per Share
-------- --------------- ---------
1995
- ----------------
<S> <C> <C> <C>
First Quarter $47 $37 7/8 $0.44
Second Quarter 46 1/2 40 1/4 0.44
Third Quarter 48 1/8 42 1/2 0.44
Fourth Quarter 53 43 3/8 0.46
1994
- ----------------
First Quarter $44 1/2 $38 1/4 $0.42
Second Quarter 39 5/8 34 3/4 0.42
Third Quarter 39 1/4 35 5/8 0.42
Fourth Quarter 42 1/2 36 1/4 0.44
</TABLE>
(a) Reflects trading on the New York Stock Exchange.
As of March 15, 1996, there were 6,962 holders of record of the Company's
Common Stock.
Item 6. Selected Financial Data
- ------ -----------------------
The information required by this item is set forth in a separate section of
this Annual Report on Form 10-K under the caption "Selected Financial Data"
appearing on page F-2 and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Results of
- ------- --------------------------------------------------
Operations and Financial Condition
----------------------------------
The information required by this item is set forth in a separate section of
this Annual Report on Form 10-K under the caption "Management's Discussion and
Analysis" beginning on page F-3 and is incorporated herein by reference.
-13-
<PAGE>
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The information required by this item is set forth in a separate section of
this Annual Report on Form 10-K as indicated in the "Index to Financial
Information" appearing on page F-1 and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
- ------- ------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
The information relating to nominees for election as directors of the Company
set forth under the caption "Election of Directors" in the Company's definitive
Proxy Statement for the annual meeting of shareholders to be held on April 23,
1996 is incorporated herein by reference.
The information on executive officers set forth under the first two paragraphs
of the caption "Management of the Registrant" beginning on page 10 hereof is
incorporated herein by reference.
Item 11. Executive Compensation
- -------- ----------------------
The information regarding executive compensation set forth under the captions
"Information Regarding the Board of Directors - Compensation of Directors" and
"Executive Compensation and Other Information" in the Company's definitive Proxy
Statement for the annual meeting of shareholders to be held on April 23, 1996 is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
- -------- ----------------------------------------------------
Management
----------
The information regarding the security ownership of certain beneficial owners
and management set forth under the caption "Security Ownership by Management and
Others" in the Company's definitive Proxy Statement for the annual meeting of
shareholders to be held on April 23, 1996 is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information pertaining to certain relationships and related transactions
set forth under the captions "Information Regarding the Board of Directors -
Compensation of Directors" and "Executive Compensation and Other Information -
Compensation Committee Interlocks and Insider Participation" in the Company's
definitive Proxy Statement for the annual meeting of shareholders to be held on
April 23, 1996 is incorporated herein by reference. The services performed for
the Company by Doherty, Wallace,
-14-
<PAGE>
Pillsbury & Murphy, P.C. were on terms no less favorable to the Company than
if such services had been provided by unaffiliated parties.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules,
- ------- ----------------------------------------
and Reports on Form 8-K
-----------------------
(a) Documents filed as part of this report
1. Financial Statements
The list of financial statements set forth under the caption "Index to
Financial Information" on page F-1 is incorporated herein by
reference.
2. Financial Statement Schedules
The list of financial statement schedules set forth under the caption
"Index to Financial Information" on page F-1 is incorporated herein by
reference. All other schedules have been omitted, as the required
information is inapplicable or the information is presented in the
financial statements or related notes.
3. Exhibits
Exhibit
Number Description
------- -----------
3(1) Certificate of Incorporation of the Company, as amended through
April 28, 1987, filed April 30, 1987 as Exhibit 4(a) to the
Company's Form S-8 Registration Statement (Reg. No. 33-
13902), incorporated herein by reference.
3(2) Certificate of Amendment of Certificate of Incorporation of the
Company, dated April 24, 1990, filed May 15, 1990 as Exhibit
4(2) to the Company's Report on Form 10-Q for the quarter
ended March 31, 1990, incorporated herein by reference.
3(3) Certificate of Amendment of Certificate of Incorporation of the
Company, dated April 28, 1992, filed May 15, 1992 as Exhibit
4(2) to the Company's Report on Form 10-Q for the quarter
ended March 31, 1992, incorporated herein by reference.
3(4) By-Laws of the Company, as amended, filed as Exhibit 3(4) to the
Company's Report on Form 10-K for the year 1994,
incorporated herein by reference.
-15-
<PAGE>
4(1) Description of the rights of security holders set forth in the
Certificate of Incorporation of the Company, as amended
through April 28, 1987, filed April 30, 1987 as Exhibit 4(a) to
the Company's Form S-8 Registration Statement (Reg. No. 33-
13902), incorporated herein by reference.
4(2) Description of the rights of security holders set forth in the
Certificate of Amendment of Certificate of Incorporation of
the Company, dated April 28, 1992, filed May 15, 1992 as
Exhibit 4(2) to the Company's Report on Form 10-Q for the
quarter ended March 31, 1992, incorporated herein by
reference.
4(3) Rights Agreement, dated as of October 24, 1989, between the
Company and First Chicago Trust Company of New York, which
includes the Form of Right Certificate as Exhibit A and the
Summary of Rights to Purchase Common Shares as Exhibit B,
filed October 27, 1989 as Exhibit 1 to the Company's Form 8-
A Registration Statement, incorporated herein by reference.
4(4)(a) Indenture dated as of December 1, 1993 between the Company
and Citibank, N.A., as trustee, relating to the Company's
Medium-Term Note Program, filed March 31, 1994 as Exhibit
4(4)(a) to the Company's Form 10-K Report for the year ended
December 31, 1993, incorporated herein by reference.
4(4)(b) Form of Floating Rate Debt Security, filed December 16,
1993 as Exhibit 4-a to the Company's Report on Form 8-K,
incorporated herein by reference.
4(4)(c) Form of Fixed Rate Debt Security, filed December 16, 1993
as Exhibit 4-b to the Company's Report on Form 8-K,
incorporated herein by reference.
Management Contracts and
Compensatory Plans and Arrangements
(Exhibits 10(1) - 10(22))
------------------------
10(1)(a) 1981 Long Term Incentive Plan, as amended through
November 4, 1988, filed as Exhibit 10(1)(a) to the Company's
Report on Form 10-K for the year 1988, incorporated herein
by reference.
-16-
<PAGE>
10(1)(b) Amendment to 1981 Long Term Incentive Plan, dated as of
February 27, 1990, filed as Exhibit 10(1)(b) to the
Company's Report on Form 10-K for the year 1989,
incorporated herein by reference.
10(1)(c) Amendment to 1981 Long Term Incentive Plan, effective as
of June 25, 1991, filed as Exhibit 10(1)(c) to the Company's
Report on Form 10-K for the year 1991, incorporated herein
by reference.
10(1)(d) Amendment to 1981 Long Term Incentive Plan, effective as
of June 23, 1992, filed as Exhibit 10(1)(d) to the Company's
Report on Form 10-K for the year 1992, incorporated herein
by reference.
10(1)(e) Amendment to 1981 Long Term Incentive Plan, effective as
of February 23, 1993, filed as Exhibit 10(1)(e) to the
Company's Report on Form 10-K for the year 1992,
incorporated herein by reference.
10(1)(f) Addendum to 1981 Long Term Incentive Plan, filed April
30, 1987 as Exhibit 28(a) to the Company's Form S-8
Registration Statement (Reg. No. 33-13902), incorporated
herein by reference.
10(2)(a) 1981 Incentive Stock Option Plan, as amended
through April 30, 1987, filed April 30, 1987 as
Exhibit 28(a) to the Company's Form S-8 Registration Statement
(Reg. No. 33-13902), incorporated herein by reference.
10(2)(b) Amendment to 1981 Incentive Stock Option Plan, dated as
of February 27, 1990, filed as Exhibit 10(2)(b) to the
Company's Report on Form 10-K for the year 1989,
incorporated herein by reference.
10(2)(c) Amendment to 1981 Incentive Stock Option Plan, effective
as of June 23, 1992, filed as Exhibit 10(2)(c) to the
Company's Report on Form 10-K for the year 1992,
incorporated herein by reference.
10(2)(d) Amendment to 1981 Incentive Stock Option Plan, effective
as of February 23, 1993, filed as Exhibit 10(2)(d) to the
Company's Report on Form 10-K for the year 1992,
incorporated herein by reference.
10(3)(a) 1991 Stock Option Plan, filed as Exhibit 10(3) to the
Company's Report on Form 10-K for the year 1990,
incorporated herein by reference.
-17-
<PAGE>
10(3)(b) First Amendment to 1991 Stock Option Plan, effective as
of July 1, 1991, filed as Exhibit 10(3)(b) to the Company's
Report on Form 10-K for the year 1991, incorporated herein
by reference.
10(3)(c) Second Amendment to 1991 Stock Option Plan, effective as
of July 1, 1991, filed as Exhibit 10(3)(c) to the Company's
Report on Form 10-K for the year 1991, incorporated herein
by reference.
10(3)(d) Third Amendment to 1991 Stock Option Plan, effective as
of June 23, 1992, filed as Exhibit 10(3)(d) to the Company's
Report on Form 10-K for the year 1992, incorporated herein
by reference.
10(3)(e) Fourth Amendment to 1991 Stock Option Plan, effective as
of February 23, 1993, filed as Exhibit 10(3)(e) to the
Company's Report on Form 10-K for the year 1992,
incorporated herein by reference.
10(3)(f) Fifth Amendment to 1991 Stock Option Plan, effective as
of February 23, 1993, filed as Exhibit 10(3)(f) to the
Company's Report on Form 10-K for the year 1992,
incorporated herein by reference.
10(3)(g) Addendum to 1991 Stock Option Plan, filed as Exhibit
10(3)(g) to the Company's Report on Form 10-K for the year
1992, incorporated herein by reference.
10(3)(h) Sixth Amendment to 1991 Stock Option Plan, effective as
of February 1, 1994, filed as Exhibit 10(3)(h) to the
Company's Report on Form 10-K for the year 1993,
incorporated herein by reference.
10(4)(a) 1989 Restricted Stock Plan, as amended through December
31, 1990, filed as Exhibit 10(4) to the Company's Report on
Form 10-K for the year 1990, incorporated herein by
reference.
10(4)(b) Amendment to 1989 Restricted Stock Plan, effective as of
February 23, 1993, filed as Exhibit 10(4)(b) to the
Company's Report on Form 10-K for the year 1992,
incorporated herein by reference.
-18-
<PAGE>
10(5) Supplemental Executive Retirement Plan, effective July 1,
1986, as amended and restated effective July 1, 1994, filed
as Exhibit 10(6) to the Company's Report on Form 10-Q for
the quarter ended June 30, 1994, incorporated herein by
reference.
10(6) Trust Agreement between the Company and The Northern Trust
Company, dated as of October 31, 1988, filed as Exhibit
10(6) to the Company's Report on Form 10-K for the year 1988,
incorporated herein by reference.
10(7) Pension Plan for Non-Employee Directors, filed as Exhibit
10(10) to the Company's Report on Form 10-K for the year
1990, incorporated herein by reference.
10(8)(a) 1992 Directors Stock Incentive Plan, filed as
Exhibit 10(11) to the Company's Report on Form 10-K for the year
1991, incorporated herein by reference.
10(8)(b) First Amendment to 1992 Directors Stock
Incentive Plan, effective as of August 18, 1992, filed as Exhibit
10(8)(b) to the Company's Report on Form 10-K for the year
1992, incorporated herein by reference.
10(8)(c) Second Amendment to 1992 Directors Stock
Incentive Plan, effective as of February 23, 1993, filed as
Exhibit 10(8)(c) to the Company's Report on Form 10-K for
the year 1992, incorporated herein by reference.
10(8)(d) Third Amendment to the 1992 Directors Stock Incentive
Plan, effective as of August 24, 1993, filed as Exhibit
10(3) to the Company's Report on Form 10-Q/A for the
quarterly period ended September 30, 1993, incorporated
herein by reference.
10(8)(e) Fourth Amendment to Tambrands Inc. 1992 Directors Stock
Incentive Plan, effective as of April 28, 1994, filed as
Exhibit 10(7) to the Company's Report on Form 10-Q for the
quarter ended June 30, 1994, incorporated herein by
reference.
10(8)(f) Fifth Amendment to the Tambrands Inc. 1992 Directors
Stock Incentive Plan, effective as of September 1, 1994,
filed as Exhibit 10(4) to the Company's Report on Form 10-Q
for the
-19-
<PAGE>
quarter ended September 30, 1994, incorporated
herein by reference.
10(9)(a) Employment Protection Agreement between the Company and
Mr. Edward T. Fogarty, dated as of May 31, 1994, filed as
Exhibit 10(1) to the Company's Report on Form 10-Q for the
quarter ended June 30, 1994, incorporated herein by
reference;
10(9)(b) Employment Protection Agreement between the
Company and Mr. Michael K. Lorelli, dated as of August 31, 1994,
filed as Exhibit 10(2) to the Company's Report on Form 10-Q
for the quarter ended September 30, 1994, incorporated
herein by reference;
10(9)(c) Employment Protection Agreement between the
Company and Mr. Thomas J. Mason, dated as of
October 18, 1994, filed herewith;
10(9)(d) Employment Protection Agreement between the
Company and Mr. Thomas Soper, III, dated as of August 29, 1994,
filed herewith;
The Company has agreements similar to the agreements listed as
Exhibits 10(9)(c) and 10(9)(d) with its other executive
officers.
10(10) Resolution of the Board of Directors of the Company with respect
to the compensation of the Chairman of the Board, adopted on
April 25, 1995, filed as Exhibit 10(2) to the Company's
Report on Form 10-Q for the quarter ended June 30, 1995,
incorporated herein by reference.
10(11) Resolution of the Board of Directors of the Company with respect
to the compensation of the Board, adopted on December 13,
1994, filed as Exhibit 10(11) to the Company's Report on
Form 10-K for the year 1994, incorporated herein by
reference.
10(12) 1995 Directors Stock and Deferred Compensation Plan, effective as
of July 1, 1995, included as Exhibit A to the Company's
Proxy Statement, dated March 10, 1995, for the annual
meeting of shareholders held on April 25, 1995, incorporated
herein by reference.
10(13) Executive Severance Program of the Company, filed as Exhibit
10(15) to the Company's Report on Form 10-K for the year
1989, incorporated herein by reference.
-20-
<PAGE>
10(14) 1981 Annual Incentive Plan of the Company, as amended through
March 30, 1995, filed as Exhibit 10(1) to the Company's
Report on Form 10-Q for the quarter ended March 31, 1995,
incorporated herein by reference.
10(15) Letter Agreement between the Company and Mr. Edward T. Fogarty,
dated as of April 25, 1994, filed as Exhibit 10(1) to the
Company's Report on Form 10-Q for the quarter ended June 30,
1994, incorporated herein by reference.
10(16) Letter Agreement between the Company and Mr. Michael K. Lorelli,
dated as of August 30, 1994, filed as Exhibit 10(1) to the
Company's Report on Form 10-Q for the quarter ended
September 30, 1994, incorporated herein by reference.
10(17) Letter Agreement between the Company and Mr. Thomas Soper, III,
dated as of August 29, 1994, filed as Exhibit 10(17) to the
Company's Report on Form 10-K for the year 1994,
incorporated herein by reference.
10(18) Letter Agreement between the Company and Mr. Thomas J. Mason,
dated as of October 18, 1994, filed as Exhibit 10(18) to the
Company's Report on Form 10-K for the year 1994,
incorporated herein by reference.
10(19) Letter Agreement between the Company and Mr. Michael S.
Krause, dated as of July 5, 1995, filed as Exhibit 10(1) to the
Company's Report on Form 10-Q for the quarter ended
September 30, 1995, incorporated herein by reference.
10(20) Restricted Stock Agreement between the Company and Mr. Edward T.
Fogarty, dated May 31, 1994, filed as Exhibit 10(3) to the
Company's Report on Form 10-Q for the quarter ended June 30,
1994, incorporated herein by reference.
10(21) Stock Option Agreement between the Company and Mr. Edward T.
Fogarty, dated May 31, 1994, filed as Exhibit 10(4) to the
Company's Report on Form 10-Q for the quarter ended June 30,
1994, incorporated herein by reference.
10(22) Early Retirement Agreement between the Company and Mr. Raymond F.
Wright, dated as of August 1, 1995, filed as Exhibit 10(2)
to the Company's Report on Form 10-Q for the quarter
-21-
<PAGE>
ended September 30, 1995, incorporated herein
by reference.
10(23)(a) Commercial Paper Dealer Agreement between the Company
and Merrill Lynch Money Markets, Inc., dated November 18,
1992, filed as Exhibit 10(15) (a) to the Company's Report on
Form 10-K for the year 1992, incorporated herein by
reference.
10(23)(b) Letter Agreement between the Company and the First
National Bank of Chicago, dated as of November 18, 1992,
filed as Exhibit 10(15)(b) to the Company's Report on Form
10-K for the year 1992, incorporated herein by reference.
10(23)(c) Amended and Restated Credit Agreement by and among the
Company, Tambrands Limited, the signatory banks thereto and
The Bank of New York, as agent, dated as of September 6,
1994, filed as Exhibit 10(5) to the Company's Report on Form
10-Q for the quarter ended September 30, 1994, incorporated
herein by reference.
10(23)(d) Amendment No. 1, dated as of May 5, 1995, to the Amended
and Restated Credit Agreement, dated as of September 6,
1994, by and among the Company, Tambrands Limited, the
signatory banks thereto and The Bank of New York, as agent,
filed as Exhibit 10(3) to the Company's Report on Form 10-Q
for the quarter ended June 30, 1995, incorporated herein by
reference.
12 Computation of Ratio of Earnings to Fixed Charges,
filed herewith.
21 Subsidiaries of the Company, filed herewith.
23 Independent Auditors' Consent, filed herewith.
24 Powers of attorney, filed herewith.
27 Financial Data Schedules, filed herewith (in electronic
format only).
(b) Reports on Form 8-K
The Company filed a Report under Item 5 of Form 8-K on October 27, 1995 in
order to file a press release, issued by the Company on October 25,
1995, which contained the Company's third-quarter 1995 results.
-22-
<PAGE>
TAMPAX, COMPAK, LITES, TAMPAX NATURALS, NATURAL GLIDE, SATIN, SATIN TOUCH,
TAMPAX SILKS, SOLOS and TAMPETS are trademarks of Tambrands Inc.
-23-
<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.
TAMBRANDS INC.
Date: March 28, 1996 By /s/ EDWARD T. FOGARTY
-------------------------
Edward T. Fogarty
President and
Chief Executive Officer
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 and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ EDWARD T. FOGARTY President and Chief March 28, 1996
- --------------------------- Executive Officer
EDWARD T. FOGARTY and Director
(Principal Executive
Officer)
/s/ SUSAN J. RILEY Senior Vice March 28, 1996
- --------------------------- President-Chief
SUSAN J. RILEY Financial Officer
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ HOWARD B. WENTZ, JR. Chairman and March 28, 1996
- --------------------------- Director
HOWARD B. WENTZ, JR.
*
- --------------------------- Director March 28, 1996
LILYAN H. AFFINITO
-24-
<PAGE>
Signature Title Date
--------- ----- ----
*
- --------------------------- Director March 28, 1996
ANNE M. BUSQUET
*
- --------------------------- Director March 28, 1996
PAUL S. DOHERTY
*
- --------------------------- Director March 28, 1996
JANET HILL
*
- --------------------------- Director March 28, 1996
ROBERT P. KILEY
*
- --------------------------- Director March 28, 1996
JOHN LOUDON
*
- --------------------------- Director March 28, 1996
RUTH M. MANTON
*
- --------------------------- Director March 28, 1996
JOHN A. MEYERS
*
- --------------------------- Director March 28, 1996
H.L. TOWER
*
- --------------------------- Director March 28, 1996
ROBERT M. WILLIAMS
*By /s/ EDWARD T. FOGARTY
------------------------
Edward T. Fogarty
Attorney-in-Fact
-25-
<PAGE>
INDEX TO FINANCIAL INFORMATION
------------------------------
Page
Reference
---------
Selected Financial Data................................ F-2
Management's Discussion and Analysis of
Results of Operations and Financial Condition.......... F-3
Financial Statements:
Consolidated Statements of Earnings
for the years ended
December 31, 1995, 1994 and 1993.................... F-6
Consolidated Statements of Cash
Flows for the years ended
December 31, 1995, 1994 and 1993.................... F-7
Consolidated Balance Sheets as of
December 31, 1995 and 1994.......................... F-8
Notes to Consolidated Financial
Statements........................................... F-9
Independent Auditors' Report on
Consolidated Financial Statements.................... F-17
Financial Statement Schedule:
II Valuation and Qualifying Accounts........... F-18
Independent Auditors' Report on
Financial Statement Schedule......................... F-19
Supplementary Financial Information
and Quarterly Data for the years
ended December 31, 1995 and 1994 .................... F-20
F-1
<PAGE>
TAMBRANDS INC.
Selected Financial Data
($ In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Years Ended December 31 1995 (a) 1994 1993 (a) 1992 1991 (a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $683,092 $644,513 $611,465 $684,113 $660,722
Gross profit 451,467 438,402 409,759 456,032 418,155
Marketing, selling and distribution 238,558 233,753 202,031 193,477 194,646
Administrative and general 52,546 53,034 61,378 67,823 63,027
Restructuring and other charges --- --- 30,042 --- 30,348
Operating income 160,363 151,615 116,308 194,732 130,134
Litigation charge 11,396 --- --- --- ---
Earnings before cumulative effect
of accounting change 85,522 89,729 73,702 122,409 79,035
Earnings before cumulative effect
of accounting change per share 2.33 2.43 1.91 3.09 1.92
Average number of shares outstanding 36,671 36,992 38,632 39,640 41,216
Total assets 422,049 379,075 362,398 372,981 390,266
Medium-term obligations 80,889 59,983 30,000 --- ---
Dividends per share 1.78 1.70 1.56 1.40 1.24
</TABLE>
(a) Results and related financial data for 1995 include the Litigation charge
and for 1993 and 1991 include Restructuring and other charges.
F-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
1995 vs. 1994
Consolidated Net sales for 1995 were $683.1 million, an increase of 6% from
1994. The increase was primarily due to higher unit sales in the United States,
Russia/Ukraine, Canada, Latin America and in Europe with the exception of the
United Kingdom. The overall increase in unit sales was principally attributable
to the strengthening of the tampon category and Tampax market shares over the
prior year in our core markets, with the exception of the United Kingdom where
the category has declined but has recently shown improvement. Strong unit sales
were augmented by foreign exchange gains but somewhat offset by lower average
prices in the United States due to changes in the sales mix.
Gross profit as a percent of Net sales was 66% for 1995 vs. 68% in 1994. The
margin reduction in the current year is principally due to a change in the mix
of product and package sizes, increasing costs of raw and packaging materials,
and manufacturing start-up costs in the United States associated with the
fourth-quarter 1995 relaunch of the Tampax flushable line and the production of
Tampax Naturals, which will be launched in early 1996. This reduction is
partially offset by productivity improvements resulting from our capital
spending program.
Marketing, selling and distribution expenses were up 2% compared with the
prior year. The increase is primarily due to unfavorable foreign exchange
translations and higher marketing expenditures partially offset by lower
fourth-quarter advertising and promotional activity in anticipation of the
Tampax Naturals launch in the United States.
Administrative and general expenses were 1% lower than last year primarily a
result of management's continuing efforts to contain overhead costs. A
reduction in the United States was partially offset by higher costs in
international markets due to management changes and the growing businesses in
Russia and Ukraine.
Operating income of $160.4 million was 6% higher than the prior year. The
increased sales volume was partially mitigated by the factors reducing Gross
profit discussed above.
Interest, net and other expense decreased slightly in 1995 compared to 1994.
A reduction in realized foreign exchange losses was partially offset by higher
interest expense resulting from higher average interest rates and overall
higher borrowing levels.
F-3
<PAGE>
In the second quarter of 1995, the Company provided $11.4 million for several
legal proceedings related to previously divested non-tampon businesses and for
settlement of a securities class action filed in 1993.
The effective tax rate for 1995 was 38.6%, compared to 36.7% for 1994. The
higher effective tax rate in 1995 was due primarily to the litigation charge,
the cost of which is not fully deductible for tax purposes. Exclusive of the
litigation charge, the current effective tax rate would have been 37.5% for
1995.
1995 Earnings per share were $2.33 compared to $2.43 in 1994. The principal
reason for the decline is due to the litigation charge that the Company took in
the second quarter. Exclusive of the litigation charge, Earnings per share would
have been $2.57 compared to $2.43 in 1994.
Outlook
The Company anticipates that the worldwide market for consumer products will
continue to be highly competitive and sensitive to price. However, management
will continue to evaluate price increase opportunities as appropriate. The
Company expects the current level of advertising and promotional activities and
new product introductions by competitors to remain strong, along with continued
activity in the private label sector.
In the United States, the Company relaunched an upgraded version of its
original Tampax tampon line in the fourth quarter of 1995. On October 2, the
Company announced the U.S. introduction of a new product, Tampax Naturals, the
only nationally available tampon or pad to be made of 100% cotton. Tampax
Naturals will be launched in the first quarter of 1996. The preparation for the
launch of our new Tampax Naturals product was a significant factor in the
softening of the tampon category and Tampax market share in the fourth quarter.
The Company reduced its fourth-quarter U.S. advertising and promotional
activity while awaiting the full distribution of this new product. In 1996, the
Company intends to proceed with its aggressive support of the Tampax tampon
franchise with heightened levels of advertising and promotional activities and
product line innovations in the United States and international markets.
The cost of manufacturing will continue to be impacted by the escalation of
raw material and packaging costs that occurred in 1995. The Company intends to
continue with productivity initiatives to help mitigate the effect of these
cost increases. Based on the current downward trend of pulp and paper prices,
management expects these costs to decline somewhat through the latter part of
1996.
1994 vs. 1993
Consolidated Net sales for 1994 were $644.5 million, an increase of 5% from
1993. The increase was primarily due to higher worldwide unit sales,
principally in the United States, driven by stabilization of retail trade
inventories and the successful launch of two new products, Tampax Satin Touch
and Tampax Lites. Sales volumes were also favorable in Europe where new
products were launched in both the United Kingdom and France and in the
developing markets of Russia and Ukraine.
Gross profit as a percent of Net sales was 68% for 1994, up from 67% in
1993. The increase in margin reflected the impact of higher sales volume along
with the Company's continued support of its worldwide manufacturing efficiency
programs and its capital expenditures for productivity improvements.
Marketing, selling and distribution expenses were up 16% compared with the
prior year. The higher spending was primarily attributable to increased
advertising and promotions worldwide to support the Tampax tampon franchise.
This higher brand support was partially offset by reductions in overhead
spending. In the United States, the Company regained market share throughout
1994 in the growing tampon category. Total year market share recovered to
within 1% of 1993.
F-4
<PAGE>
A 14% savings was experienced in Administrative and general expenses,
principally due to the consolidation of international management units and on-
going overhead reduction programs.
Increased sales volume combined with overhead savings was partially offset by
increased brand support spending. This resulted in a 4% net improvement in
Operating income versus 1993, exclusive of the 1993 restructuring charge.
Interest, net and other reflected a significant increase in expense in 1994
compared to 1993. Foreign exchange transactions resulted in costs in the current
year versus gains in 1993. Additionally, interest expense was higher reflecting
an increase in the Company's debt level and higher average interest rates.
The effective tax rate for 1994 was 36.7% compared to 37.9% in 1993. The
higher effective tax rate in 1993 was primarily due to the restructuring
charge, the cost of which was not fully deductible for tax purposes. Exclusive
of the restructuring charge, the 1993 effective tax rate was 36.8%.
1994 Earnings per share were $2.43 in comparison to $1.64 in 1993. Earnings per
share were the same as the prior year before the impact of the restructuring
charge and adoption of SFAS No. 112 in 1993. The increase in Earnings per share
was greater than that of Net earnings because fewer shares were outstanding on
average in 1994 due to the Company's share repurchase program.
FINANCIAL CONDITION
Cash Flows from Operating Activities
1995 Cash flows from operating activities were $101.9 million compared to $128.9
for 1994. The principal reasons for the decline in Cash flows from operating
activities versus the prior year were lower accrued liabilities caused by timing
of promotional programs, higher accounts receivable due to strong December
shipments and the build of inventories for the Russia/Ukraine developing markets
and the U.S. launch of Naturals.
Over the past three years, Cash flows from operating activities were $359.5
million. These funds were used for the payment of dividends, capital
expenditures and the repurchase of Common Stock for treasury purposes.
Capital Expenditures
The 1995 capital spending programs related to investments in equipment to
improve product quality and productivity, modernize production facilities and
manufacture and launch new products. Over the past three years, the Company
spent $128.9 million on capital improvements. 1996 spending levels are expected
to approximate those of 1995.
Liquidity and Capital Resources
During 1995, the Company continued to utilize its strong debt rating and a
favorable financial climate to take advantage of low U.S. interest rates
through short-term bank credit lines and a commercial paper program.
Additionally, the Company maintains a $150 million medium-term note program of
which $70 million was outstanding at December 31, 1995.
Cash flows from operations and the ability to borrow from a variety of
sources will provide the Company with the liquidity to continue the investments
necessary to meet the Company's long-term strategic goals.
The Company also utilizes cash resources to enhance shareholder value
through the payment of dividends and its stock repurchase program. In 1995,
cash dividends of $65.3 million were paid. During the year, the Company spent
$4.3 million in its Common Stock repurchase program. Since 1989, 7,720,300
shares have been repurchased.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Tambrands Inc. and subsidiaries
YEARS ENDED DECEMBER 31
(in thousands, except per share amounts) 1995 1994 1993
-------- -------- --------
Net Sales $683,092 $644,513 $611,465
Cost of products sold 231,625 206,111 201,706
-------- -------- --------
Gross profit 451,467 438,402 409,759
Selling, administrative and general expenses:
Marketing, selling and distribution 238,558 233,753 202,031
Administrative and general 52,546 53,034 61,378
Restructuring and other charges - - 30,042
-------- -------- --------
291,104 286,787 293,451
-------- -------- --------
Operating Income 160,363 151,615 116,308
Interest, net and other (9,632) (9,864) 2,344
Litigation charge (11,396) - -
-------- -------- --------
Earnings before provision for income taxes
and cumulative effect of accounting change 139,335 141,751 118,652
Provision for income taxes 53,813 52,022 44,950
-------- -------- --------
Earnings Before Cumulative Effect of
Accounting Change 85,522 89,729 73,702
Cumulative effect of accounting change - - (10,252)
-------- -------- --------
Net Earnings $ 85,522 $ 89,729 $ 63,450
======== ======== ========
Average number of shares outstanding 36,671 36,992 38,632
Per Share
Earnings before cumulative effect of
accounting change $ 2.33 $ 2.43 $ 1.91
Cumulative effect of accounting change - - (0.27)
-------- -------- --------
Net earnings $ 2.33 $ 2.43 $ 1.64
======== ======== ========
Dividends $ 1.78 $ 1.70 $ 1.56
-------- -------- --------
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Tambrands Inc. and subsidiaries
YEARS ENDED DECEMBER 31 (in thousands) 1995 1994 1993
-------- -------- --------
Cash Flows from Operating Activities
Net earnings $ 85,522 $ 89,729 $ 63,450
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 25,667 24,284 18,372
Deferred income taxes 2,158 4,557 (3,400)
Cumulative effect of accounting change - - 10,252
Litigation charge 4,425 - -
Restructuring and other charges (3,587) (10,417) 14,946
Change in:
Accounts receivable (14,737) (2,224) 21,485
Inventories (8,326) 1,503 537
Prepaid expenses and other
current assets (591) (1,901) (81)
Taxes on income 8,350 5,925 3,426
Accounts payable and accrued expenses 2,974 17,415 (256)
-------- -------- --------
Net cash provided by operating activities 101,855 128,871 128,731
-------- -------- --------
Cash Flows from Investing Activities
Capital expenditures (44,778) (38,470) (45,636)
Proceeds from sales of property, plant
and equipment 108 2,093 3,686
Proceeds from sales of marketable securities - 639 1,164
-------- -------- --------
Net cash used in investing activities (44,670) (35,738) (40,786)
-------- -------- --------
Cash Flows from Financing Activities
Payment of dividends (65,274) (62,721) (60,154)
Purchase of shares for treasury (4,326) (71,118) (57,946)
Short-term debt changes (17,448) 6,149 (18,308)
Reduction of medium-term obligations (1,094) - -
Proceeds from medium-term obligations 24,091 29,983 30,000
Proceeds from exercise of stock
options and other 5,307 2,422 12,432
-------- -------- --------
Net cash used in financing activities (58,744) (95,285) (93,976)
-------- -------- --------
Effect of exchange rate changes on cash (1,182) 730 (658)
-------- -------- --------
Net decrease in cash and cash equivalents (2,741) (1,422) (6,689)
Cash and cash equivalents at beginning
of year 13,876 15,298 21,987
-------- -------- --------
Cash and cash equivalents at end of year $ 11,135 $ 13,876 $ 15,298
======== ======== ========
Supplemental Cash Flow Information
Income taxes paid $ 44,756 $ 49,500 $ 49,567
Interest paid 9,188 4,573 4,574
-------- -------- --------
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
CONSOLIDATED BALANCE SHEETS
Tambrands Inc. and subsidiaries
YEARS ENDED DECEMBER 31
(in thousands, except per share amounts) 1995 1994
-------- --------
Assets
Current assets
Cash and cash equivalents $ 11,135 $ 13,876
Accounts receivable, net 98,047 80,593
Inventories 46,736 37,957
Deferred taxes on income 17,724 18,892
Prepaid expenses 12,289 14,385
Other current assets 13,982 11,433
-------- --------
Total current assets 199,913 177,136
Property, plant and equipment, net 216,122 194,315
Intangible and other assets 6,014 7,624
-------- --------
Total assets $422,049 $379,075
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 55,063 $ 70,517
Accounts payable 48,498 31,530
Accrued expenses 73,330 80,381
Taxes on income 27,078 20,732
-------- --------
Total current liabilities 203,969 203,160
Medium-term obligations 80,889 59,983
Deferred taxes on income 22,537 21,450
Postemployment benefits 11,682 12,468
-------- --------
Total liabilities 319,077 297,061
Shareholders' equity
Common Stock, authorized 300,000,000 shares,
par value $.25 per share; issued 43,547,938
shares 10,887 10,887
Retained earnings 476,252 457,071
Cumulative foreign currency translation adjustment (14,223) (13,621)
Treasury stock (368,543) (371,016)
Unamortized value of restricted stock and pension costs (1,401) (1,307)
-------- --------
Total shareholders' equity 102,972 82,014
-------- --------
Total liabilities and shareholders' equity $422,049 $379,075
======== ========
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tambrands Inc. and subsidiaries
(dollar amounts in thousands, except per share amounts)
NOTE 1
ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States. Where alternatives exist,
the choices selected are described below.
Principles of Consolidation
The consolidated financial statements include the accounts of Tambrands Inc.
and all majority owned subsidiaries (the "Company"). All significant
intercompany accounts and transactions are eliminated.
Foreign Currency Translation
For most foreign subsidiaries, the local currency is the functional currency and
gains or losses resulting from translation are accumulated in a separate
component of Shareholders' equity. For subsidiaries operating in highly
inflationary economies, the U.S. dollar is the functional currency. In such
cases, working capital items are translated using current exchange rates and all
other balance sheet items are remeasured at historical exchange rates. Any gains
or losses from remeasurement are included in earnings.
Cash Equivalents
Highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the LIFO method for all domestic inventories. All other inventories are
stated at FIFO.
Depreciation
Depreciation is computed on the straight-line and accelerated
methods over the useful lives of the assets.
Intangibles
Intangible assets are amortized on a straight-line basis over
periods not exceeding 40 years.
Financial Instruments
The Company utilizes derivative financial instruments, principally options and
forward contracts, for the purpose of reducing its exposure to adverse
fluctuations in foreign exchange rates. These contracts hedge actual and
anticipated transactions and balances for periods consistent with the Company's
committed and expected exposures. Gains and losses on hedges of existing assets
or liabilities are included in the carrying amounts of those assets or
liabilities and are recognized in income as part of those carrying amounts.
Gains and losses on contracts that do not qualify as hedges are recognized in
earnings. Unamortized option premiums are deferred and amortized over the period
being hedged. The Company does not hold or issue financial instruments for
trading purposes.
Advertising Costs
Advertising costs are charged to earnings as incurred.
Earnings Per Share
Earnings per share of Common Stock are based on the average number of shares
outstanding during each period. Outstanding stock options do not have a
significant dilutive effect.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
New Accounting Standards
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" was issued. In October 1995, SFAS No. 123, "Accounting for
Stock-Based Compensation" was issued. Management believes that adoption of
these Statements will not have a material impact on the Company's financial
position and results of operations. These Statements are effective for fiscal
years beginning after December 15, 1995.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform to the 1995 presentation.
F-9
<PAGE>
NOTE 2
BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts at December 31 are as
follows:
1995 1994
-------- --------
Accounts receivable, net
Accounts receivable trade $ 93,603 $ 77,235
Less allowance for doubtful accounts 1,667 1,456
-------- --------
91,936 75,779
Other 6,111 4,814
-------- --------
$ 98,047 $ 80,593
======== ========
Other current assets
Spare parts inventory $ 10,460 $ 8,753
Other 3,522 2,680
-------- --------
$ 13,982 $ 11,433
======== ========
Inventories
Raw materials $ 17,952 $ 12,967
Finished goods 28,784 24,990
-------- --------
$ 46,736 $ 37,957
======== ========
Current cost of LIFO inventories $ 30,834 $ 30,617
Stated value of LIFO inventories 15,098 14,713
-------- --------
Excess of current cost over stated value $ 15,736 $ 15,904
======== ========
1995 1994
--------- ---------
Property, plant and equipment, net (at cost)
Buildings, leaseholds and improvements $ 63,972 $ 56,522
Machinery, equipment and fixtures 245,931 230,333
Land 3,802 3,808
Construction in progress 39,724 23,794
-------- --------
353,429 314,457
Less accumulated depreciation 137,307 120,142
-------- --------
$216,122 $194,315
======== ========
Intangible and other assets
Cost $ 12,983 $ 14,066
Less accumulated amortization 6,969 6,442
-------- --------
$ 6,014 $ 7,624
======== ========
Accrued expenses
Promotions $ 20,032 $ 27,723
Salaries and benefits 25,067 25,480
Litigation reserves 5,180 -
Restructuring reserves 3,916 5,205
Other liabilities 19,135 21,973
-------- --------
$ 73,330 $ 80,381
======== ========
F-10
<PAGE>
NOTE 3
STATEMENT OF EARNINGS INFORMATION
1995 1994 1993
-------- -------- --------
Interest, net and other
Net financing:
Interest income $ 1,124 $ 1,304 $ 983
Interest expense (9,206) (7,645) (4,890)
-------- -------- --------
(8,082) (6,341) (3,907)
Net realization on foreign
currency transactions (1,743) (3,449) 6,551
Other 193 (74) (300)
-------- -------- --------
$ (9,632) $ (9,864) $ 2,344
======== ======== ========
Depreciation $ 25,127 $ 23,545 $ 17,570
Advertising 63,272 66,484 48,309
Research and development 12,204 10,735 9,881
NOTE 4
BENEFIT PLANS
The Company maintains several non-contributory pension plans covering domestic
and foreign employees who meet certain minimum service and age requirements and
provides supplemental non-qualified retirement benefits to non-employee
directors, certain officers and key employees. Pensions are based upon earnings
of covered employees during their periods of credited service. The Company's
funding policy for its pensions is to make the annual contributions required by
applicable regulations.
The following table sets forth the funded status of the plans and the
amounts recognized in the accompanying financial statements.
1995 1994
-------- --------
Plan assets at fair value, primarily stocks and bonds $107,897 $ 86,950
Actuarial present value of benefit obligations:
Vested benefits 101,510 87,645
Nonvested benefits 6,510 4,749
-------- --------
Accumulated benefit obligation 108,020 92,394
Effect of projected future salary increases 9,883 7,949
-------- --------
Projected benefit obligation 117,903 100,343
-------- --------
Projected benefit obligation in excess of plan assets 10,006 13,393
Deferred actuarial adjustments (203) 412
Deferred prior service cost (2,913) (3,527)
-------- --------
Accrued pension cost included in accrued expenses $ 6,890 $ 10,278
======== ========
At December 31, 1995 and 1994, the accumulated benefit obligation of the
domestic plans exceeded plan assets by $8,460 and $9,962, respectively.
F-11
<PAGE>
The net cost of pensions included in the Statements of earnings
consists of:
1995 1994 1993
-------- -------- --------
Service cost: benefits earned during
the period $ 3,940 $ 5,045 $ 4,940
Interest cost on projected
benefit obligation 8,389 8,093 7,288
Actual return on plan assets (19,493) 3,375 (12,703)
Net amortization and deferral 11,900 (10,289) 6,697
-------- -------- --------
$ 4,736 $ 6,224 $ 6,222
======== ======== ========
In 1995 and 1994, the discount rates used to determine the projected benefit
obligation for the domestic plans were 7.25% and 8.5%, respectively, and the
rates of increase in future compensation were 4.5% and 5%, respectively. For the
international plans, the discount rates used to determine the projected benefit
obligation ranged from 7.5% to 8% in 1995 and was 9% in 1994, and the rates of
increase in future compensation ranged from 5% to 6% and 5.5% to 6% in 1995 and
1994, respectively. Expected long-term rates of return on plan assets ranged
from 8.5% to 10% in 1995 and 8.5% to 9.25% in 1994. Prior service costs arising
from plan amendments are amortized on a straight-line basis over the average
remaining service period of employees expected to receive benefits under each
plan.
As of January 1, 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," recognizing a charge to earnings of
$16,000, amounting to $10,252 after tax or $0.27 per share. In 1992, the Company
recognized the full amount of its estimated accumulated postretirement benefit
obligation in accordance with the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The incremental
annual cost of accounting for postretirement and postemployment benefits under
the new accounting methods is not material. The actuarial assumptions used to
measure the cost of postretirement benefits are consistent with those used to
measure the cost of the pension plans.
The Company also sponsors a defined contribution 401(k) savings plan available
to domestic employees who meet certain minimum age and service requirements. The
plan, which is funded principally with the Company's Common Stock, includes
provision for a discretionary contribution by the Company of up to 2% of each
employee's covered earnings based on Company performance.
NOTE 5
INCOME TAXES
Provision for income taxes for the years ended December 31 has been made as
follows:
1995 1994 1993
-------- -------- --------
Current tax expense
United States $ 45,597 $ 47,866 $ 44,558
Foreign 6,058 (401) 3,792
-------- -------- --------
51,655 47,465 48,350
Deferred tax expense
United States 754 6,699 (3,915)
Foreign 1,404 (2,142) 515
-------- -------- --------
2,158 4,557 (3,400)
-------- -------- --------
$ 53,813 $ 52,022 $ 44,950
======== ======== ========
Provision has not been made for income taxes on foreign subsidiaries' unremitted
earnings to the extent that such earnings have been reinvested in the business;
any U.S. income taxes payable on the distribution of available earnings should
generally be offset by credits for foreign taxes paid.
Reconciliation of the statutory federal income tax rates to the Company's
effective tax rates for the years ended December 31 are as follows:
1995 1994 1993
---- ---- ----
Statutory federal tax rate 35.0% 35.0% 35.0%
State taxes-net of federal benefit 3.5 4.3 3.9
Rate differential on foreign income (3.7) (2.3) (2.3)
Effect of litigation charge 1.1 - -
Effect of restructuring charge - - 1.1
Other differences 2.7 (0.3) 0.2
---- ---- ----
Effective tax rate 38.6% 36.7% 37.9%
==== ==== ====
During 1995 and 1994, Shareholders' equity was credited for $343 and $76,
respectively, for tax benefits relating to compensation expense for tax
purposes in excess of the amounts recognized for financial reporting purposes.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
F-12
<PAGE>
The components of the net deferred tax assets (liabilities) for the years
ended December 31 are as follows:
1995 1994
-------- --------
Deferred tax assets:
Employee benefits $ 5,620 $ 5,320
Postemployment benefits 4,098 4,208
Intercompany transactions 4,588 4,785
Accrued liabilities 4,446 5,579
Other 4,271 4,830
-------- --------
23,023 24,722
-------- --------
Deferred tax liabilities:
Property, plant and equipment 21,351 19,307
Safe harbor leases 5,973 6,816
Other 512 1,157
-------- --------
27,836 27,280
-------- --------
$ (4,813) $ (2,558)
======== ========
NOTE 6
RESTRUCTURING AND OTHER CHARGES
In 1993, the Company announced a program to restructure its worldwide operations
to improve efficiency and reduce costs. Its previous investments in technology
enabled it to operate with reduced manufacturing and administrative overhead and
fewer employees. As a result, the Company provided $30,042, or $20,273 after
tax, for this restructuring and the cost of management changes caused by the
adoption of a consolidated international management strategy. During 1995, the
reserve was reduced by $1,289 comprised primarily of international severance
payments. At December 31, 1995, the remaining accrual of $3,916 related
primarily to committed severance plans which will be substantially complete by
December 31, 1996.
NOTE 7
COMMITMENTS AND CONTINGENCIES
The Company's lease of its headquarters in White Plains, New York and European
headquarters in the United Kingdom are non-cancelable operating leases. Future
minimum lease payments under operating leases with terms in excess of one year
amount to $4,407 in 1996, $3,752 in 1997, $3,087 in 1998, $2,164 in 1999 and
$1,890 in 2000. Rent expense in 1995, 1994 and 1993 amounted to $5,029, $4,270
and $5,027, respectively.
The Company has been named in product liability litigation and claims arising
from the alleged association of tampons with Toxic Shock Syndrome. The cases
seek compensatory and punitive damages in various amounts.
The Company and certain of its former officers were named as defendants in a
securities class action filed in 1993. In November 1995, the court approved a
settlement of this litigation and dismissed the action against all defendants.
The Company is involved, either as a named defendant or as the result of
contractual indemnities, in several legal proceedings related to previously
divested non-tampon businesses. Included in these are a patent infringement
action and an environmental matter. In the second quarter of 1995, the Company
provided for $11,396 ($8,686 after tax) for expenses related to the class action
and other legal proceedings described in this paragraph.
There are certain other legal proceedings pending against the Company arising
out of its normal course of business in which claims for monetary damages are
asserted.
While it is not feasible to predict the outcome of these legal proceedings
and claims with certainty, management is of the belief that any ultimate
liabilities in excess of provisions therefor will not individually or in the
aggregate have a material adverse effect on the Company's financial position or
results of operations.
F-13
<PAGE>
NOTE 8
OBLIGATIONS
The Company's Short-term borrowings consist of commercial paper and notes
payable bearing interest at prevailing market rates and supported by bank lines
of credit amounting to $120,000 and $150,000 at December 31, 1995 and 1994,
respectively. Commercial paper borrowings at December 31, 1995 and 1994 were
$42,672 and $57,201, with average annual year-end interest rates of 5.6% and
maturities through the second quarter of the subsequent year. Notes payable at
December 31, 1995 and 1994 totaled $10,419 and $13,316 at average annual rates
outstanding throughout the year of 7% and 5.7%, respectively. Commitment fees to
secure the lines of credit are not material.
During 1995, the Company entered into $14,104 of medium-term obligations. At
December 31, 1995, there were $12,869 outstanding of which $1,972 was payable
within the next year. These obligations carry interest rates ranging from 7% to
7.9% and have various maturities through June 2003.
At December 31, 1995 and 1994, there were $70,000 and $60,000 of unsecured
notes outstanding, respectively. At the end of both years, the notes carried
interest rates ranging from 4.7% to 7.4% and had maturities ranging from
January 1997 to May 2004.
The annual maturities on all medium-term obligations through the next five
years amount to $1,972 in 1996, $12,147 in 1997, $2,319 in 1998, $32,501 in
1999 and $11,737 in 2000.
The terms of the Company's financing arrangements include various covenants
which provide, among other things, for limitations on liens and the maintenance
of a minimum debt service ratio. The Company was in compliance with such
covenants at December 31, 1995.
NOTE 9
FINANCIAL INSTRUMENTS
As part of its risk management program, the Company minimized its exposure
to foreign currency fluctuation through the use of forward exchange and option
contracts. The Company does not enter into financial instruments for trading or
speculative purposes. The agreements entered into are short-term in nature with
maturities less than one year and the Company primarily acts as a buyer. The
counterparties to these contracts are major financial institutions and the
Company does not have significant exposure to any specific one. Management
believes that credit risk of loss is remote and in any event would be
immaterial.
The Company had forward exchange contracts with notional values of $7,846 and
$18,883 at December 31, 1995 and 1994, respectively. The carrying value of these
contracts approximated market. At December 31, 1995, the Company had foreign
currency options with notional values of $30,373 and an estimated fair value of
$322. At December 31, 1994, the Company had foreign currency options with
notional values of $31,958 and an estimated fair value of $915. The unamortized
premiums are amortized to income over the option periods and amounted to $432
and $520 at December 31, 1995 and 1994, respectively.
The Company only enters into forward exchange contracts which match the periods
of the underlying transactions being hedged. The maximum loss on foreign
currency options is the amount of premiums paid for those options. Therefore,
the Company has no material exposure through the use of any of these financial
instruments.
At December 31, 1995, medium-term notes were carried at the discounted value of
$69,992 and medium-term obligations were carried at $12,869; both carrying
values approximated market. At December 31, 1994, medium-term notes were carried
at the discounted value of $59,983 and had an estimated fair value of $54,500.
F-14
<PAGE>
NOTE 10
SHAREHOLDERS' EQUITY
The changes in Shareholders' equity for the years ended December 31, 1995, 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
Common Treasury Retained Currency
Stock Stock Earnings Translation Other Total
------ -------- -------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1992 $ 10,887 $ (264,555) $ 433,851 $ (10,586) $ (1,391) $ 168,206
Compensation plans 18,553 (6,325) 12,228
Share repurchase (57,946) (57,946)
Net income 63,450 63,450
Dividends declared (60,154) (60,154)
Translation adjustment (10,073) (10,073)
Other (686) (686)
-------- ---------- --------- --------- -------- ---------
December 31, 1993 $ 10,887 $ (303,948) $ 430,822 $ (20,659) $ (2,077) $ 115,025
Compensation plans 4,050 (759) 3,291
Share repurchase (71,118) (71,118)
Net income 89,729 89,729
Dividends declared (62,721) (62,721)
Translation adjustment 7,038 7,038
Other 770 770
-------- ---------- --------- --------- -------- ---------
December 31, 1994 $ 10,887 $ (371,016) $ 457,071 $ (13,621) $ (1,307) $ 82,014
Compensation plans 6,799 (1,067) 5,732
Share repurchase (4,326) (4,326)
Net income 85,522 85,522
Dividends declared (65,274) (65,274)
Translation adjustment (602) (602)
Other (94) (94)
-------- ---------- --------- --------- -------- ---------
December 31, 1995 $ 10,887 $ (368,543) $ 476,252 $ (14,223) $ (1,401) $ 102,972
======== ========== ========= ========= ======== =========
</TABLE>
Common Stock
The Company has 300 million authorized shares of Common Stock.
Changes in outstanding shares for the years ended December 31 are
as follows:
1995 1994 1993
---------- ---------- ----------
Shares outstanding at
beginning of year 36,674,030 38,292,952 39,162,634
Purchased for treasury (99,700) (1,718,700) (1,187,100)
Issued for stock option
and other employee
plans from treasury 147,989 99,778 317,418
---------- ---------- ----------
Shares outstanding
at end of year 36,722,319 36,674,030 38,292,952
---------- ---------- ----------
Shares held in treasury
at end of year 6,825,619 6,873,908 5,254,986
---------- ---------- ----------
F-15
<PAGE>
Stock Option Plans
The Company has stock option plans which provide for the granting of options
to directors, officers and key employees to purchase shares of its Common Stock
within ten years, at prices equal to or greater than the fair market value on
the date of grant.
Activity for the years 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ------------------------- -----------------------
Average Average Average
Shares Price Shares Price Shares Price
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options for Common Stock:
Outstanding at beginning of year 2,845,634 $ 47.80 2,524,886 $ 51.36 2,755,451 $ 51.22
Granted 308,834 47.78 866,074 38.78 452,272 43.96
Canceled (219,872) 53.44 (508,672) 51.94 (446,546) 54.04
Exercised (97,134) 34.48 (36,654) 27.57 (236,291) 30.42
--------- --------- --------- --------- --------- ---------
Outstanding at end of year 2,837,462 $ 47.95 2,845,634 $ 47.80 2,524,886 $ 51.36
========= ========= ========= ========= ========= =========
</TABLE>
At December 31, 1995 and 1994, respectively, there were options for
1,823,593 and 1,290,051 shares exercisable at exercise prices of $48.95 and
$52.73 and there were 2,442,356 and 2,299,071 shares available for granting
options.
NOTE 11
SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment, personal care products. The
Company markets these products around the world. Sales are made and credit is
granted to drug, grocery, variety and discount stores and other comparable
outlets, as well as to wholesalers and distributors in those trades. A small
number of significant customers are financed through highly leveraged capital
structures, making them particularly sensitive to market interest rate changes
and other economic variables.
For the years ended December 31, 1995 and 1994, the Company had a
significant customer that accounted for 11.1% and 10.3%, respectively, of the
Company's Net sales. No single customer accounted for 10% or more of Net sales
in prior years.
In the geographic summary that follows, certain overhead costs are allocated
to the geographic areas based on the anticipated benefit to be derived by the
area. Restructuring and other charges of $30,042 reduced 1993 Operating income
of the United States, Europe, Other international and Unallocated items, net by
$2,237, $16,921, $1,781 and $9,103, respectively.
Information for the years ended December 31 are as follows:
1995 1994 1993
-------- -------- --------
Net sales
United States $391,011 $381,975 $363,337
Europe 210,567 195,748 182,854
Other international 81,514 66,790 65,274
-------- -------- --------
$683,092 $644,513 $611,465
======== ======== ========
Operating income
United States $134,194 $142,931 $142,399
Europe 43,530 27,112 31,347
Other international 14,135 10,314 2,114
Unallocated items, net (31,496) (28,742) (29,510)
Restructuring and other charges - - (30,042)
-------- -------- --------
$160,363 $151,615 $116,308
======== ======== ========
Identifiable assets at December 31
United States $237,054 $212,346 $197,546
Europe 169,665 152,295 153,016
Other international 15,330 14,434 11,836
-------- -------- --------
$422,049 $379,075 $362,398
======== ======== ========
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Tambrands Inc.:
We have audited the accompanying consolidated balance sheets of Tambrands Inc.
and subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of earnings and cash flows for each of the years in the three-year
period ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tambrands
Inc. and subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and cash flows for each of the years in the three-year period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, the
Company changed its method for accounting for postemployment benefits in 1993.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
January 23, 1996
F-17
<PAGE>
SCHEDULE II
TAMBRANDS INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
($ in thousands)
1995 1994 1993
--------- --------- --------
Reserve deducted in the balance sheet
from the asset to which it applies
Allowance for doubtful accounts:
Balance at beginning of period $1,456 $1,453 $1,560
Additions charged to cost and expenses 353 93 556
Reclassification of unrecoverable promotional 53 11 (144)
allowance & other
Write-off of bad debts (195) (101) (519)
------- ------ ------
Balance at end of period $1,667 $1,456 $1,453
======= ====== ======
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Shareholders
Tambrands Inc.:
Under date of January 23, 1996, we reported on the consolidated balance sheets
of Tambrands Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of earnings and cash flows for each of the years
in the three-year period ended December 31, 1995, as contained in the annual
report on Form 10-K for the year 1995. Our report refers to a change in
accounting for postemployment benefits in 1993. In connection with our audits
of the aforementioned consolidated financial statements, we also have audited
the related financial statement schedule as listed in Item 14(a)2 of the annual
report on Form 10-K for the year 1995. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, the financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
January 23, 1996
F-19
<PAGE>
SUPPLEMENTARY FINANCIAL INFORMATION AND QUARTERLY DATA
(unaudited)
<TABLE>
<CAPTION>
First Second (a) Third Fourth
(in millions, except -------------------- -------------------- ------------------- --------------------
per share amounts) 1995 1994 1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 166.9 $ 139.2 $ 176.3 $ 165.6 $ 178.1 $ 175.3 $ 161.8 $ 164.4
Gross profit 111.6 95.3 117.9 113.0 116.8 117.6 105.2 112.5
Net earnings 22.8 22.0 13.0 20.0 26.7 25.0 23.0 22.7
Per share 0.62 0.58 0.36 0.54 0.73 0.68 0.63 0.62
</TABLE>
(a) Includes the 1995 Litigation charge as described in the notes to the
consolidated financial statements.
F-20
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- ------- -----------
10(9)(c) Employment Protection Agreement between the
Company and Mr. Thomas J. Mason, dated as of
October 18, 1994.
10(9)(d) Employment Protection Agreement between the
Company and Mr. Thomas Soper, III, dated as
of August 29, 1994.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Company.
23 Independent Auditors' Consent.
24 Powers of attorney.
27 Financial Data Schedules (in electronic format only).
The Company will furnish a copy of any exhibit to a shareholder
requesting such exhibit in writing upon payment by the shareholder of a fee
representing the Company's reasonable expenses in furnishing such exhibit.
<PAGE>
EXHIBIT 10(9)(c)
EMPLOYMENT PROTECTION AGREEMENT
-------------------------------
THIS AGREEMENT between Tambrands Inc., a Delaware corporation (the
"Corporation"), and Thomas J. Mason (the "Executive"), dated as of this 18th day
of October, 1994.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Corporation and the Executive have agreed to enter into an
agreement providing the Corporation and the Executive with certain rights upon
the occurrence of a Change of Control (as defined below) to assure the
Corporation of continuity of management in the event of any Change of Control;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Corporation and the
Executive as follows:
1. Operation of Agreement. The effective date of this Agreement shall
----------------------
be the date on which a Change of Control occurs (the "Effective Date"), provided
that if the Executive is not employed by the Corporation on the Effective Date
this Agreement shall be void and without effect. This Agreement shall terminate
on October 31, 1997, provided that the termination date of this Agreement shall
be extended for one additional year on November 1, 1995 and each subsequent
November 1, unless the Executive shall have received written notice from the
Corporation prior to the August 1 immediately preceding such November 1 that the
Board of Directors of the Corporation (the "Board") has determined that the
termination date of this Agreement shall not be so extended. Notwithstanding
the foregoing, this Agreement shall not terminate on the date determined in
accordance with the preceding sentence if a Change of Control shall have
occurred prior to such date.
2. Definitions. (a) Change of Control. For purposes of this
----------- -----------------
Agreement, a "Change of Control" shall be deemed to have occurred if: (i) any
---
person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), and as used in Sections 13(d)
and 14(d) thereof)), excluding the Corporation, any majority owned subsidiary of
the Corporation (a "Subsidiary") and any employee benefit plan sponsored or
maintained by the Corporation or any Subsidiary (including any trustee of such
plan acting as trustee), but including a "group" as defined in Section 13(d)(3)
of the Exchange Act (a "Person"), becomes the beneficial owner of shares of the
Corporation having at least 20% of the total number of votes that may be cast
for the election of directors of the Corporation (the "Voting Shares") provided,
however, that such an event shall not constitute a Change of Control if the
acquiring Person has entered into an agreement with the Corporation approved by
the Board which materially restricts the right of such Person to direct or
influence the management or policies of the Corporation; (ii) the shareholders
----
<PAGE>
of the Corporation shall approve any merger or other business combination of the
Corporation, sale of the Corporation's assets or combination of the foregoing
transactions (a "Transaction") other than a Transaction involving only the
Corporation and one or more of its Subsidiaries, or a Transaction immediately
following which the shareholders of the Corporation immediately prior to the
Transaction continue to have a majority of the voting power in the resulting
entity excluding for this purpose any shareholder owning directly or indirectly
more than 10% of the shares of the other company involved in the Transaction, or
(iii) within any 24-month period beginning on or after October 31, 1994, the
- -----
persons who were directors of the Corporation immediately before the beginning
of such period (the "Incumbent Directors") shall cease (for any reason other
than death) to constitute at least a majority of the Board or the board of
directors of any successor to the Corporation, provided that any director who
was not a director as of October 31, 1994 shall be deemed to be an Incumbent
Director if such director was elected to the Board by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually or by prior operation of this
Section 2(a)(iii).
(b) Participation by Executive. Notwithstanding the foregoing, no
--------------------------
Change of Control shall be deemed to have occurred for purposes of this
Agreement by reason of any actions or events in which the Executive participates
in a capacity other than in his capacity as the Executive (or as a director of
the Corporation or a Subsidiary, where applicable).
3. Employment Period. If the Executive is employed on the Effective
-----------------
Date, the Corporation agrees to continue the Executive in its employ, and the
Executive agrees to remain in the employ of the Corporation, for the period (the
"Employment Period") commencing on the Effective Date and ending on the earliest
to occur of (i) the second anniversary of the Effective Date, (ii) the
--- ----
Executive's normal retirement date under the Corporation's retirement plans as
in effect from time to time and (iii) the date of any termination of the
-----
Executive's employment in accordance with Section 6 of this Agreement.
4. Position and Duties. (a) No Reduction in Position. During the
------------------- ------------------------
Employment Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date.
(b) Business Time. From and after the Effective Date, the Executive
-------------
agrees to devote his full business time during normal business hours to the
business and affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder, to
the extent necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or charitable
boards or committees approved by the Board, in each case only if and
to the extent not substantially
- 2 -
<PAGE>
interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is entitled.
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated with the consent or approval of the Corporation immediately
preceding the Effective Date shall not be deemed to interfere with the
performance of the Executive's services to the Corporation.
5. Compensation. (a) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive a base salary ("Base Salary") at a monthly rate at least
equal to the monthly salary paid to the Executive by the Corporation and any of
its affiliated companies immediately prior to the Effective Date. The Base
Salary shall be reviewed at least once each year after the Effective Date, and
may be increased (but not decreased) at any time and from time to time by action
of the Board or any committee thereof or any individual having authority to take
such action in accordance with the Corporation's regular practices. Neither
payment of the Base Salary nor payment of any increased Base Salary after the
Effective Date shall serve to limit or reduce any other obligation of the
Corporation hereunder. For purposes of the remaining provisions of this
Agreement, the term "Base Salary" shall mean Base Salary as defined in this
Section 5(a) or, if increased after the Effective Date, the Base Salary as so
increased.
(b) Annual Bonus. In addition to the Base Salary, the Executive shall
------------
be awarded for each fiscal year of the Corporation ending during the Employment
Period an annual bonus (either pursuant to a bonus plan or program of the
Corporation or otherwise) in cash at least equal to the last annual bonus
(annualized, if awarded in respect of a partial year) awarded to the Executive
under the Annual Incentive Plan of the Corporation prior to the Effective Date
("Annual Bonus"). If a fiscal year of the Corporation begins, but does not end,
during the Employment Period, the Executive shall receive an amount with respect
to such fiscal year at least equal to the amount of the Annual Bonus multiplied
by a fraction, the numerator of which is the number of days in such fiscal year
occurring during the Employment Period and the denominator of which is 365.
Each amount payable in respect of the Executive's Annual Bonus shall be paid not
later than the last day of March of the year next following the year for which
the Annual Bonus (or pro-rated portion) is earned or awarded, unless electively
deferred by the Executive pursuant to any deferral programs or arrangements that
the Corporation may make available to the Executive, in which event such
deferred amount shall be payable in accordance with the terms of such deferral
program or arrangement. Neither the Annual Bonus nor any bonus amount paid in
excess thereof after the Effective Date shall serve to limit or reduce any other
obligation of the Corporation hereunder.
(c) Incentive and Savings Plans and Retirement Programs. In addition
---------------------------------------------------
to the Base Salary and Annual Bonus payable as hereinabove provided, during the
Employment Period, the Executive shall be entitled to
- 3 -
<PAGE>
participate in all incentive and savings plans and programs, including stock
option plans and other equity based compensation plans, and in all retirement
plans, on a basis providing him with the opportunity to receive compensation
(without duplication of the amount payable as an Annual Bonus) and benefits
equal to those provided by the Corporation to the Executive on an annualized
basis under such plans and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date.
(d) Benefit Plans. During the Employment Period, the Executive and his
-------------
family shall be entitled to participate in or be covered under all welfare
benefit plans and programs of the Corporation and its affiliated companies,
including all medical, dental, disability, group life, accidental death and
travel accident insurance plans and programs, as in effect at any time during
the 90-day period immediately preceding the Effective Date.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and procedures of the Corporation
as in effect at any time during the 90-day period immediately preceding the
Effective Date.
(f) Vacation and Fringe Benefits. During the Employment Period, the
----------------------------
Executive shall be entitled to paid vacation and fringe benefits in accordance
with the policies of the Corporation as in effect at any time during the 90-day
period immediately preceding the Effective Date.
(g) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive at
any time during the 90-day period immediately preceding the Effective Date.
6. Termination. (a) Death, Disability or Retirement. Subject to the
----------- -------------------------------
provisions of Section 1 hereof, this Agreement shall terminate automatically
upon the Executive's death or attainment of normal retirement age under the
Corporation's retirement plans as in effect from time to time, provided that,
after the Effective Date, the normal retirement age may not be lowered for
purposes of this Agreement without the Executive's consent. The Corporation may
terminate this Agreement, after having established the Executive's Disability,
by giving the Executive written notice of its intention to terminate his
employment, and his employment with the Corporation shall terminate effective on
the 90th day after receipt of such notice if, within 90 days after such receipt,
the Executive shall fail to return to full-time performance of his duties. For
purposes of this Agreement, "Disability" means disability which, after the
expiration of more than 26 weeks after its commencement, is determined to be
total and permanent by a physician selected by the Corporation or its insurers
and acceptable to the Executive or his legal representatives (such agreement to
acceptability not to be withheld unreasonably).
- 4 -
<PAGE>
(b) Voluntary Termination. Notwithstanding anything in this Agreement
---------------------
to the contrary, the Executive may, upon not less than 30 days' written notice
to the Corporation, voluntarily terminate employment during the Employment
Period for any reason (including early retirement under the terms of the
Corporation's retirement plan as in effect from time to time), provided that any
termination by the Executive pursuant to Section 6(d) of this Agreement on
account of Good Reason (as defined therein) shall not be treated as a voluntary
termination under this Section 6(b).
(c) Cause. The Corporation may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
means (i) an act or acts of dishonesty or gross misconduct on the Executive's
---
part which result or are intended to result in material damage to the
Corporation's business or reputation or (ii) repeated material violations by the
----
Executive of his obligations under Section 4 of this Agreement which violations
are demonstrably willful and deliberate on the Executive's part.
(d) Good Reason. The Executive may terminate his employment during the
-----------
Employment Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without his prior
written consent, the Corporation or any of its officers has taken or failed
to take any action (including, without limitation, (A) exclusion of the
---
Executive from consideration of material matters within his area of
responsibility, (B) statements or actions which undermine the Executive's
---
authority with respect to persons under his supervision or reduce his
standing with his peers, (C) a pattern of discrimination against or
---
harassment of the Executive or persons under his supervision and (D) the
---
subjection of the Executive to procedures not generally applicable to other
similarly situated executives) which changes the Executive's position
(including titles), authority or responsibilities under Section 4 of this
Agreement or reduces the Executive's ability to carry out his duties and
responsibilities under Section 4 of this Agreement;
(ii) any failure by the Corporation to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Corporation promptly after receipt of
notice thereof from the Executive;
(iii) the Corporation's requiring the Executive to be employed at any
location more than 50 miles further from his principal residence than the
location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Corporation to obtain the assumption of and
agreement to perform this Agreement by a successor as contemplated by
Section 14(b) of this Agreement, provided that the successor has had actual
written notice of the existence of this Agreement and its terms and an
opportunity to assume the Corporation's responsibilities under this
Agreement during a period of 10 business days after receipt of such notice.
- 5 -
<PAGE>
(e) Notice of Termination. Any termination by the Corporation for
---------------------
Cause or by the Executive for Good Reason during the Employment Period shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 15(c) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice given, in the case
of a termination for Cause, within 10 business days of the Corporation's having
actual knowledge of all of the events giving rise to such termination, and in
the case of a termination for Good Reason, within 180 days of the Executive's
having actual knowledge of the events giving rise to such termination, and which
(i) indicates the specific termination provision in this Agreement relied upon,
- ---
(ii) sets forth in reasonable detail the facts and circumstances claimed to
- ----
provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the termination date is other than the date
-----
of receipt of such notice, specifies the termination date of this Agreement
(which date shall be not more than 15 days after the giving of such notice).
The failure by the Executive to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(f) Date of Termination. For purposes of this Agreement, the term
-------------------
"Date of Termination" means (i) in the case of a termination for which a Notice
---
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Employment
Period.
7. Obligations of the Corporation upon Termination. (a) Death. If
----------------------------------------------- ------
the Executive's employment is terminated during the Employment Period by reason
of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (i) the Executive's full Base Salary through the Date of
---
Termination, (ii) the product of the Annual Bonus and a fraction, the numerator
----
of which is the number of days in the current fiscal year of the Corporation
through the Date of Termination, and the denominator of which is 365 (the "Pro-
rated Bonus Obligation"), (iii) any compensation previously deferred by the
-----
Executive (together with any accrued earnings thereon) and not yet paid by the
Corporation and (iv) any other amounts or benefits owing to the Executive under
----
the then applicable employee benefit plans or policies of the Corporation (such
amounts specified in clauses (i), (ii), (iii) and (iv) are hereinafter referred
to as "Accrued Obligations"). Unless otherwise directed by the Executive (or,
in the case of any employee benefit plan qualified (a "Qualified Plan") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), as
may be required by such plan), all such Accrued Obligations shall be paid to the
Executive's legal representatives in a lump sum in cash within 30 days of the
Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive's family
- 6 -
<PAGE>
shall be entitled to receive benefits at least equal to the most favorable level
of benefits available to surviving families of executives of the Corporation
and its affiliates under such plans, programs and policies relating to family
death benefits, if any, of the Corporation and its affiliates in effect at any
time during the 90-day period immediately preceding the Effective Date.
(b) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability, the Executive shall be entitled, after the Date
of Termination until the date when the Employment Period would otherwise have
terminated, to continue to participate in or be covered under the benefit plans
and programs referred to in Section 5(d) of this Agreement or, at the
Corporation's option, to receive equivalent benefits by alternate means at least
equal to those provided in accordance with Section 5(d) of this Agreement.
Unless otherwise directed by the Executive (or, in the case of any Qualified
Plan, as may be required by such plan), the Executive shall also be paid all
Accrued Obligations in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled to receive disability and other benefits at least
equal to the most favorable level of benefits available to disabled employees
and/or their families in accordance with the plans, programs and policies
maintained by the Corporation or its affiliates relating to disability at any
time during the 90-day period immediately preceding the Effective Date.
(c) Cause and Voluntary Termination. If, during the Employment Period,
-------------------------------
the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Corporation shall pay the Executive the Accrued Obligations other than the Pro-
rated Bonus Obligation. Unless otherwise directed by the Executive (or, in the
case of any Qualified Plan, as may be required by such plan), the Executive
shall be paid all such Accrued Obligations in a lump sum in cash within 30 days
of the Date of Termination and the Corporation shall have no further obligations
to the Executive under this Agreement.
(d) Termination by Corporation other than for Cause or Disability and
-----------------------------------------------------------------
Termination by Executive for Good Reason. (i) Lump Sum Payment. If, during
- ---------------------------------------- ----------------
the Employment Period, the Corporation terminates the Executive's employment
other than for Cause or Disability, or the Executive terminates his employment
for Good Reason, the Corporation shall pay to the Executive in a lump sum in
cash within 15 days after the Date of Termination the aggregate of the following
amounts:
(A) if not theretofore paid, the Executive's Base Salary through the
Date of Termination at the rate specified in Section 5(a) of this Agreement;
(B) a cash amount equal to two times the sum of
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
- 7 -
<PAGE>
(2) the Annual Bonus; and
(3) the present value, calculated using the annual federal short-
term rate as determined under Section 1274(d) of the Code, of (without
duplication) (x) the annual cost to the Corporation (based on the
---
premium rates or other costs to it) of obtaining coverage equivalent to
the coverage under the plans and programs described in Section 5(d) of
this Agreement, and (y) the annualized value of the fringe benefits
---
described under Section 5(f) of this Agreement;
provided, however, that in no event shall the Executive be entitled to
receive under this clause (B) more than the product obtained by multiplying
the amount determined under this clause by a fraction whose numerator shall
be the number of months (including fractions of a month) which at the Date
of Termination remain until the Executive's normal retirement date under the
Corporation's retirement plan or any successor plan as in effect from time
to time and whose denominator shall be 24, and provided further that, with
respect to the life and medical insurance coverage referred to in Section
5(d) of this Agreement, at the Executive's election made prior to the Date
of Termination, the Corporation shall use its best efforts to secure
conversion coverage and shall pay the cost of such coverage in lieu of
paying the lump sum amount attributable to such life or medical insurance
coverage; and
(C) a cash amount equal to any amounts (other than amounts payable to
the Executive under any Qualified Plans) described in Sections 7(a)(iii) and
(iv) of this Agreement.
(ii) Discharge of Corporation's Obligations. Subject to the performance
--------------------------------------
of its obligations under this Section 7(d), the Corporation shall have no
further obligations to the Executive in respect of any termination by the
Executive for Good Reason or by the Corporation other than for Cause or
Disability, except to the extent expressly provided under any of the plans
referred to in Section 5(c) or 5(d) of this Agreement.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Corporation or any of
its affiliated companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as the Executive may
have under any stock option or other plans or agreements with the Corporation or
any of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Corporation or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
9. Certain Additional Payments by the Corporation.
----------------------------------------------
- 8 -
<PAGE>
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Corporation
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision) or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes with respect to the Gross-Up Payment (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or other firm then auditing the accounts of the Corporation (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Corporation and the Executive within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as
is requested by the Corporation. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, or is unwilling or unable to perform its obligations
pursuant to this Section 9, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Corporation. Any Gross-Up Payment, determined pursuant to this Section 9, shall
be paid by the Corporation to the Executive within five days of the receipt of
the Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Corporation and the Executive. As a result of the
potential uncertainty in the application of Section 4999 of the Code (or any
successor provision) at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Corporation should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Corporation exhausts its remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or for the benefit of
the Executive.
- 9 -
<PAGE>
(c) The Executive shall notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Corporation of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Corporation of the
nature of such claim and the date on which such claim is requested to be paid.
the Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the Corporation (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Corporation any information reasonably requested by the
Corporation relating to such claim,
(ii) take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Corporation,
(iii) cooperate with the Corporation in good faith in order effectively
to contest such claim, and
(iv) permit the Corporation to participate in any proceedings relating
to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on a after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 9(c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the Corporation directs
the Executive to pay such claim and sue for a refund, the Corporation shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statue of
- 10 -
<PAGE>
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Corporation's complying with the requirements of Section 9(c)) promptly pay to
the Corporation the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Corporation pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Full Settlement. The Corporation's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Corporation may have against the Executive or others whether by reason of
the subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and no amount payable under this Agreement shall be reduced on account of any
compensation received by the Executive from other employment. In the event that
the Executive shall in good faith give a Notice of Termination for Good Reason
and it shall thereafter be determined by mutual consent of the Executive and the
Corporation or by a tribunal having jurisdiction over the matter that Good
Reason did not exist, the employment of the Executive shall, unless the
Corporation and the Executive shall otherwise mutually agree, be deemed to have
terminated, at the date of giving such purported Notice of Termination, by
mutual consent of the Corporation and the Executive and, except as provided in
the last preceding sentence, the Executive shall be entitled to receive only
those payments and benefits which he would have been entitled to receive at such
date otherwise than under this Agreement.
11. Legal Fees and Expenses. In the event that a claim for payment of
-----------------------
benefits under this Agreement is disputed, the Corporation shall pay all
reasonable legal fees and expenses incurred by the Executive in pursuing such
claim, provided that the Executive is successful as to at least part of the
disputed claim by reason of litigation, arbitration or settlement.
- 11 -
<PAGE>
12. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any of its
affiliated companies, and their respective businesses, (i) obtained by the
---
Executive during his employment by the Corporation or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
----
unauthorized act by the Executive). After termination of the Executive's
employment with the Corporation, the Executive shall not, without the prior
written consent of the Corporation, unless compelled pursuant to an order of a
court or other body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the Corporation and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 12 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
13. Employment Contract or Severance Benefits. Notwithstanding
-----------------------------------------
anything else in this Agreement to the contrary, any amount payable to the
Executive hereunder on account of his termination of employment shall be reduced
on a dollar for dollar basis by each dollar actually paid to the Executive with
respect to such termination under the terms of any employment contract between
the Executive and the Corporation or under any severance program or policy
applicable to the Executive. Nothing in this Agreement shall be construed to
require duplication of any compensation, benefits or other entitlements provided
to the Executive by the Corporation under the terms of any employment contract
which may address similar matters.
14. Successors. (a) This Agreement is personal to the Executive and,
----------
without the prior written consent of the Corporation, shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Corporation and its successors. The Corporation shall require any successor
to all or substantially all of the business and/or assets of the Corporation,
whether direct or indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Corporation would be required to perform if
no such succession had taken place.
15. Miscellaneous. (a) Applicable Law. This Agreement shall be
------------- --------------
governed by and construed in accordance with the laws of the State of Delaware,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or modified
----------
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
- 12 -
<PAGE>
(c) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the address listed below
If to the Corporation: Tambrands Inc.
777 Westchester Avenue
White Plains, New York 10604
Attention: Secretary
(with a copy to the
attention of the
General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) Tax Withholding. The Corporation may withhold from any amounts
---------------
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) Captions. The captions of this Agreement are not part of the
--------
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Corporation has caused this Agreement to be executed in its name on its behalf,
and its corporate seal to be hereunto affixed and attested by its Treasurer, all
as of the day and year first above written.
- 13 -
<PAGE>
ATTEST: TAMBRANDS INC.
/s/ JONATHAN W. EMERY By /s/ EDWARD T. FOGARTY
- --------------------- ------------------------------
Corporate Counsel Title: President and
Chief Executive Officer
(Seal)
EXECUTIVE: Thomas J. Mason
/s/ THOMAS J. MASON
---------------------------------
Address:
Tambrands Inc.
777 Westchester Avenue
White Plains, New York 10604
MASON.EPA
- 14 -
<PAGE>
EXHIBIT 10(9)(d)
EMPLOYMENT PROTECTION AGREEMENT
-------------------------------
THIS AGREEMENT between Tambrands Inc., a Delaware corporation (the
"Corporation"), and Thomas Soper, III (the "Executive"), dated as of this 29th
day of August 1994.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Corporation and the Executive have agreed to enter into an
agreement providing the Corporation and the Executive with certain rights upon
the occurrence of a Change of Control (as defined below) to assure the
Corporation of continuity of management in the event of any Change of Control;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Corporation and the
Executive as follows:
1. Operation of Agreement. The effective date of this Agreement shall
----------------------
be the date on which a Change of Control occurs (the "Effective Date"), provided
that if the Executive is not employed by the Corporation on the Effective Date
this Agreement shall be void and without effect. This Agreement shall terminate
on August 31, 1997, provided that the termination date of this Agreement shall
be extended for one additional year on September 1, 1995 and each subsequent
September 1, unless the Executive shall have received written notice from the
Corporation prior to the June 1 immediately preceding such September 1 that the
Board of Directors of the Corporation (the "Board") has determined that the
termination date of this Agreement shall not be so extended. Notwithstanding
the foregoing, this Agreement shall not terminate on the date determined in
accordance with the preceding sentence if a Change of Control shall have
occurred prior to such date.
2. Definitions. (a) Change of Control. For purposes of this
----------- -----------------
Agreement, a "Change of Control" shall be deemed to have occurred if: (i) any
---
person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), and as used in Sections 13(d)
and 14(d) thereof)), excluding the Corporation, any majority owned subsidiary of
the Corporation (a "Subsidiary") and any employee benefit plan sponsored or
maintained by the Corporation or any Subsidiary (including any trustee of such
plan acting as trustee), but including a "group" as defined in Section 13(d)(3)
of the Exchange Act (a "Person"), becomes the beneficial owner of shares of the
Corporation having at least 20% of the total number of votes that may be cast
for the election of directors of the Corporation (the "Voting Shares") provided,
however, that such an event shall not constitute a Change of Control if the
acquiring Person has entered into an agreement with the Corporation approved by
the Board which materially restricts the right of such Person to direct or
influence the management or policies of the Corporation; (ii) the shareholders
----
<PAGE>
of the Corporation shall approve any merger or other business combination of the
Corporation, sale of the Corporation's assets or combination of the foregoing
transactions (a "Transaction") other than a Transaction involving only the
Corporation and one or more of its Subsidiaries, or a Transaction immediately
following which the shareholders of the Corporation immediately prior to the
Transaction continue to have a majority of the voting power in the resulting
entity excluding for this purpose any shareholder owning directly or indirectly
more than 10% of the shares of the other company involved in the Transaction, or
(iii) within any 24-month period beginning on or after August 31, 1994, the
- -----
persons who were directors of the Corporation immediately before the beginning
of such period (the "Incumbent Directors") shall cease (for any reason other
than death) to constitute at least a majority of the Board or the board of
directors of any successor to the Corporation, provided that any director who
was not a director as of August 31, 1994 shall be deemed to be an Incumbent
Director if such director was elected to the Board by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually or by prior operation of this
Section 2(a)(iii).
(b) Participation by Executive. Notwithstanding the foregoing, no
--------------------------
Change of Control shall be deemed to have occurred for purposes of this
Agreement by reason of any actions or events in which the Executive participates
in a capacity other than in his capacity as the Executive (or as a director of
the Corporation or a Subsidiary, where applicable).
3. Employment Period. If the Executive is employed on the Effective
-----------------
Date, the Corporation agrees to continue the Executive in its employ, and the
Executive agrees to remain in the employ of the Corporation, for the period (the
"Employment Period") commencing on the Effective Date and ending on the earliest
to occur of (i) the second anniversary of the Effective Date, (ii) the
--- ----
Executive's normal retirement date under the Corporation's retirement plans as
in effect from time to time and (iii) the date of any termination of the
-----
Executive's employment in accordance with Section 6 of this Agreement.
4. Position and Duties. (a) No Reduction in Position. During the
------------------- ------------------------
Employment Period, the Executive's position (including titles), authority and
responsibilities shall be at least commensurate with the highest of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date.
(b) Business Time. From and after the Effective Date, the Executive
-------------
agrees to devote his full business time during normal business hours to the
business and affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder, to
the extent necessary to discharge such responsibilities, except for
(i) reasonable time spent in serving on corporate, civic or charitable
boards or committees approved by the Board, in each case only if and
to the extent not substantially
- 2 -
<PAGE>
interfering with the performance of such responsibilities, and
(ii) periods of vacation and sick leave to which he is entitled.
It is expressly understood and agreed that the Executive's continuing to serve
on any boards and committees on which he is serving or with which he is
otherwise associated with the consent or approval of the Corporation immediately
preceding the Effective Date shall not be deemed to interfere with the
performance of the Executive's services to the Corporation.
5. Compensation. (a) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive a base salary ("Base Salary") at a monthly rate at least
equal to the monthly salary paid to the Executive by the Corporation and any of
its affiliated companies immediately prior to the Effective Date. The Base
Salary shall be reviewed at least once each year after the Effective Date, and
may be increased (but not decreased) at any time and from time to time by action
of the Board or any committee thereof or any individual having authority to take
such action in accordance with the Corporation's regular practices. Neither
payment of the Base Salary nor payment of any increased Base Salary after the
Effective Date shall serve to limit or reduce any other obligation of the
Corporation hereunder. For purposes of the remaining provisions of this
Agreement, the term "Base Salary" shall mean Base Salary as defined in this
Section 5(a) or, if increased after the Effective Date, the Base Salary as so
increased.
(b) Annual Bonus. In addition to the Base Salary, the Executive shall
------------
be awarded for each fiscal year of the Corporation ending during the Employment
Period an annual bonus (either pursuant to a bonus plan or program of the
Corporation or otherwise) in cash at least equal to the last annual bonus
(annualized, if awarded in respect of a partial year) awarded to the Executive
under the Annual Incentive Plan of the Corporation prior to the Effective Date
("Annual Bonus"). If a fiscal year of the Corporation begins, but does not end,
during the Employment Period, the Executive shall receive an amount with respect
to such fiscal year at least equal to the amount of the Annual Bonus multiplied
by a fraction, the numerator of which is the number of days in such fiscal year
occurring during the Employment Period and the denominator of which is 365.
Each amount payable in respect of the Executive's Annual Bonus shall be paid not
later than the last day of March of the year next following the year for which
the Annual Bonus (or pro-rated portion) is earned or awarded, unless electively
deferred by the Executive pursuant to any deferral programs or arrangements that
the Corporation may make available to the Executive, in which event such
deferred amount shall be payable in accordance with the terms of such deferral
program or arrangement. Neither the Annual Bonus nor any bonus amount paid in
excess thereof after the Effective Date shall serve to limit or reduce any other
obligation of the Corporation hereunder.
(c) Incentive and Savings Plans and Retirement Programs. In addition
---------------------------------------------------
to the Base Salary and Annual Bonus payable as hereinabove provided, during the
Employment Period, the Executive shall be entitled to
- 3 -
<PAGE>
participate in all incentive and savings plans and programs, including stock
option plans and other equity based compensation plans, and in all retirement
plans, on a basis providing him with the opportunity to receive compensation
(without duplication of the amount payable as an Annual Bonus) and benefits
equal to those provided by the Corporation to the Executive on an annualized
basis under such plans and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date.
(d) Benefit Plans. During the Employment Period, the Executive and his
-------------
family shall be entitled to participate in or be covered under all welfare
benefit plans and programs of the Corporation and its affiliated companies,
including all medical, dental, disability, group life, accidental death and
travel accident insurance plans and programs, as in effect at any time during
the 90-day period immediately preceding the Effective Date.
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and procedures of the Corporation
as in effect at any time during the 90-day period immediately preceding the
Effective Date.
(f) Vacation and Fringe Benefits. During the Employment Period, the
----------------------------
Executive shall be entitled to paid vacation and fringe benefits in accordance
with the policies of the Corporation as in effect at any time during the 90-day
period immediately preceding the Effective Date.
(g) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive at
any time during the 90-day period immediately preceding the Effective Date.
6. Termination. (a) Death, Disability or Retirement. Subject to the
----------- -------------------------------
provisions of Section 1 hereof, this Agreement shall terminate automatically
upon the Executive's death or attainment of normal retirement age under the
Corporation's retirement plans as in effect from time to time, provided that,
after the Effective Date, the normal retirement age may not be lowered for
purposes of this Agreement without the Executive's consent. The Corporation may
terminate this Agreement, after having established the Executive's Disability,
by giving the Executive written notice of its intention to terminate his
employment, and his employment with the Corporation shall terminate effective on
the 90th day after receipt of such notice if, within 90 days after such receipt,
the Executive shall fail to return to full-time performance of his duties. For
purposes of this Agreement, "Disability" means disability which, after the
expiration of more than 26 weeks after its commencement, is determined to be
total and permanent by a physician selected by the Corporation or its insurers
and acceptable to the Executive or his legal representatives (such agreement to
acceptability not to be withheld unreasonably).
- 4 -
<PAGE>
(b) Voluntary Termination. Notwithstanding anything in this Agreement
---------------------
to the contrary, the Executive may, upon not less than 30 days' written notice
to the Corporation, voluntarily terminate employment during the Employment
Period for any reason (including early retirement under the terms of the
Corporation's retirement plan as in effect from time to time), provided that any
termination by the Executive pursuant to Section 6(d) of this Agreement on
account of Good Reason (as defined therein) shall not be treated as a voluntary
termination under this Section 6(b).
(c) Cause. The Corporation may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
means (i) an act or acts of dishonesty or gross misconduct on the Executive's
---
part which result or are intended to result in material damage to the
Corporation's business or reputation or (ii) repeated material violations by the
----
Executive of his obligations under Section 4 of this Agreement which violations
are demonstrably willful and deliberate on the Executive's part.
(d) Good Reason. The Executive may terminate his employment during the
-----------
Employment Period for Good Reason. For purposes of this Agreement, "Good
Reason" means
(i) a good faith determination by the Executive that, without his prior
written consent, the Corporation or any of its officers has taken or failed
to take any action (including, without limitation, (A) exclusion of the
---
Executive from consideration of material matters within his area of
responsibility, (B) statements or actions which undermine the Executive's
---
authority with respect to persons under his supervision or reduce his
standing with his peers, (C) a pattern of discrimination against or
---
harassment of the Executive or persons under his supervision and (D) the
---
subjection of the Executive to procedures not generally applicable to other
similarly situated executives) which changes the Executive's position
(including titles), authority or responsibilities under Section 4 of this
Agreement or reduces the Executive's ability to carry out his duties and
responsibilities under Section 4 of this Agreement;
(ii) any failure by the Corporation to comply with any of the
provisions of Section 5 of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Corporation promptly after receipt of
notice thereof from the Executive;
(iii) the Corporation's requiring the Executive to be employed at any
location more than 50 miles further from his principal residence than the
location at which the Executive was employed immediately preceding the
Effective Date; or
(iv) any failure by the Corporation to obtain the assumption of and
agreement to perform this Agreement by a successor as contemplated by
Section 14(b) of this Agreement, provided that the successor has had actual
written notice of the existence of this Agreement and its terms and an
opportunity to assume the Corporation's responsibilities under this
Agreement during a period of 10 business days after receipt of such notice.
- 5 -
<PAGE>
(e) Notice of Termination. Any termination by the Corporation for
---------------------
Cause or by the Executive for Good Reason during the Employment Period shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 15(c) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice given, in the case
of a termination for Cause, within 10 business days of the Corporation's having
actual knowledge of all of the events giving rise to such termination, and in
the case of a termination for Good Reason, within 180 days of the Executive's
having actual knowledge of the events giving rise to such termination, and which
(i) indicates the specific termination provision in this Agreement relied upon,
- ---
(ii) sets forth in reasonable detail the facts and circumstances claimed to
- ----
provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the termination date is other than the date
-----
of receipt of such notice, specifies the termination date of this Agreement
(which date shall be not more than 15 days after the giving of such notice).
The failure by the Executive to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(f) Date of Termination. For purposes of this Agreement, the term
-------------------
"Date of Termination" means (i) in the case of a termination for which a Notice
---
of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein and (ii) in all other cases, the actual
date on which the Executive's employment terminates during the Employment
Period.
7. Obligations of the Corporation upon Termination. (a) Death. If
----------------------------------------------- ------
the Executive's employment is terminated during the Employment Period by reason
of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the date of his death, including,
for this purpose (i) the Executive's full Base Salary through the Date of
---
Termination, (ii) the product of the Annual Bonus and a fraction, the numerator
----
of which is the number of days in the current fiscal year of the Corporation
through the Date of Termination, and the denominator of which is 365 (the "Pro-
rated Bonus Obligation"), (iii) any compensation previously deferred by the
-----
Executive (together with any accrued earnings thereon) and not yet paid by the
Corporation and (iv) any other amounts or benefits owing to the Executive under
----
the then applicable employee benefit plans or policies of the Corporation (such
amounts specified in clauses (i), (ii), (iii) and (iv) are hereinafter referred
to as "Accrued Obligations"). Unless otherwise directed by the Executive (or,
in the case of any employee benefit plan qualified (a "Qualified Plan") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), as
may be required by such plan), all such Accrued Obligations shall be paid to the
Executive's legal representatives in a lump sum in cash within 30 days of the
Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive's family
- 6 -
<PAGE>
shall be entitled to receive benefits at least equal to the most favorable
level of benefits available to surviving families of executives of the
Corporation and its affiliates under such plans, programs and policies relating
to family death benefits, if any, of the Corporation and its affiliates in
effect at any time during the 90-day period immediately preceding the Effective
Date.
(b) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability, the Executive shall be entitled, after the Date
of Termination until the date when the Employment Period would otherwise have
terminated, to continue to participate in or be covered under the benefit plans
and programs referred to in Section 5(d) of this Agreement or, at the
Corporation's option, to receive equivalent benefits by alternate means at least
equal to those provided in accordance with Section 5(d) of this Agreement.
Unless otherwise directed by the Executive (or, in the case of any Qualified
Plan, as may be required by such plan), the Executive shall also be paid all
Accrued Obligations in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled to receive disability and other benefits at least
equal to the most favorable level of benefits available to disabled employees
and/or their families in accordance with the plans, programs and policies
maintained by the Corporation or its affiliates relating to disability at any
time during the 90-day period immediately preceding the Effective Date.
(c) Cause and Voluntary Termination. If, during the Employment Period,
-------------------------------
the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Good Reason), the
Corporation shall pay the Executive the Accrued Obligations other than the Pro-
rated Bonus Obligation. Unless otherwise directed by the Executive (or, in the
case of any Qualified Plan, as may be required by such plan), the Executive
shall be paid all such Accrued Obligations in a lump sum in cash within 30 days
of the Date of Termination and the Corporation shall have no further obligations
to the Executive under this Agreement.
(d) Termination by Corporation other than for Cause or Disability and
-----------------------------------------------------------------
Termination by Executive for Good Reason. (i) Lump Sum Payment. If, during
- ---------------------------------------- ----------------
the Employment Period, the Corporation terminates the Executive's employment
other than for Cause or Disability, or the Executive terminates his employment
for Good Reason, the Corporation shall pay to the Executive in a lump sum in
cash within 15 days after the Date of Termination the aggregate of the following
amounts:
(A) if not theretofore paid, the Executive's Base Salary through the
Date of Termination at the rate specified in Section 5(a) of this Agreement;
(B) a cash amount equal to two times the sum of
(1) the Executive's annual Base Salary at the rate specified in
Section 5(a) of this Agreement;
- 7 -
<PAGE>
(2) the Annual Bonus; and
(3) the present value, calculated using the annual federal short-
term rate as determined under Section 1274(d) of the Code, of (without
duplication) (x) the annual cost to the Corporation (based on the
---
premium rates or other costs to it) of obtaining coverage equivalent to
the coverage under the plans and programs described in Section 5(d) of
this Agreement, and (y) the annualized value of the fringe benefits
---
described under Section 5(f) of this Agreement;
provided, however, that in no event shall the Executive be entitled to
receive under this clause (B) more than the product obtained by multiplying
the amount determined under this clause by a fraction whose numerator shall
be the number of months (including fractions of a month) which at the Date
of Termination remain until the Executive's normal retirement date under the
Corporation's retirement plan or any successor plan as in effect from time
to time and whose denominator shall be 24, and provided further that, with
respect to the life and medical insurance coverage referred to in Section
5(d) of this Agreement, at the Executive's election made prior to the Date
of Termination, the Corporation shall use its best efforts to secure
conversion coverage and shall pay the cost of such coverage in lieu of
paying the lump sum amount attributable to such life or medical insurance
coverage; and
(C) a cash amount equal to any amounts (other than amounts payable to
the Executive under any Qualified Plans) described in Sections 7(a)(iii) and
(iv) of this Agreement.
(ii) Discharge of Corporation's Obligations. Subject to the performance
--------------------------------------
of its obligations under this Section 7(d), the Corporation shall have no
further obligations to the Executive in respect of any termination by the
Executive for Good Reason or by the Corporation other than for Cause or
Disability, except to the extent expressly provided under any of the plans
referred to in Section 5(c) or 5(d) of this Agreement.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Corporation or any of
its affiliated companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as the Executive may
have under any stock option or other plans or agreements with the Corporation or
any of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Corporation or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
9. Certain Additional Payments by the Corporation.
----------------------------------------------
- 8 -
<PAGE>
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Corporation
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision) or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes with respect to the Gross-Up Payment (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or other firm then auditing the accounts of the Corporation (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Corporation and the Executive within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as
is requested by the Corporation. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, or is unwilling or unable to perform its obligations
pursuant to this Section 9, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Corporation. Any Gross-Up Payment, determined pursuant to this Section 9, shall
be paid by the Corporation to the Executive within five days of the receipt of
the Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Corporation and the Executive. As a result of the
potential uncertainty in the application of Section 4999 of the Code (or any
successor provision) at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Corporation should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Corporation exhausts its remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or for the benefit of
the Executive.
- 9 -
<PAGE>
(c) The Executive shall notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Corporation of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Corporation of the
nature of such claim and the date on which such claim is requested to be paid.
the Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the Corporation (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Corporation any information reasonably requested by the
Corporation relating to such claim,
(ii) take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Corporation,
(iii) cooperate with the Corporation in good faith in order effectively
to contest such claim, and
(iv) permit the Corporation to participate in any proceedings relating
to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on a after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 9(c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the Corporation directs
the Executive to pay such claim and sue for a refund, the Corporation shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statue of
- 10 -
<PAGE>
limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Corporation's complying with the requirements of Section 9(c)) promptly pay to
the Corporation the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Corporation pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Full Settlement. The Corporation's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Corporation may have against the Executive or others whether by reason of
the subsequent employment of the Executive or otherwise. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and no amount payable under this Agreement shall be reduced on account of any
compensation received by the Executive from other employment. In the event that
the Executive shall in good faith give a Notice of Termination for Good Reason
and it shall thereafter be determined by mutual consent of the Executive and the
Corporation or by a tribunal having jurisdiction over the matter that Good
Reason did not exist, the employment of the Executive shall, unless the
Corporation and the Executive shall otherwise mutually agree, be deemed to have
terminated, at the date of giving such purported Notice of Termination, by
mutual consent of the Corporation and the Executive and, except as provided in
the last preceding sentence, the Executive shall be entitled to receive only
those payments and benefits which he would have been entitled to receive at such
date otherwise than under this Agreement.
11. Legal Fees and Expenses. In the event that a claim for payment of
-----------------------
benefits under this Agreement is disputed, the Corporation shall pay all
reasonable legal fees and expenses incurred by the Executive in pursuing such
claim, provided that the Executive is successful as to at least part of the
disputed claim by reason of litigation, arbitration or settlement.
- 11 -
<PAGE>
12. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any of its
affiliated companies, and their respective businesses, (i) obtained by the
---
Executive during his employment by the Corporation or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
----
unauthorized act by the Executive). After termination of the Executive's
employment with the Corporation, the Executive shall not, without the prior
written consent of the Corporation, unless compelled pursuant to an order of a
court or other body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the Corporation and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 12 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
13. Employment Contract or Severance Benefits. Notwithstanding
-----------------------------------------
anything else in this Agreement to the contrary, any amount payable to the
Executive hereunder on account of his termination of employment shall be reduced
on a dollar for dollar basis by each dollar actually paid to the Executive with
respect to such termination under the terms of any employment contract between
the Executive and the Corporation or under any severance program or policy
applicable to the Executive. Nothing in this Agreement shall be construed to
require duplication of any compensation, benefits or other entitlements provided
to the Executive by the Corporation under the terms of any employment contract
which may address similar matters.
14. Successors. (a) This Agreement is personal to the Executive and,
----------
without the prior written consent of the Corporation, shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Corporation and its successors. The Corporation shall require any successor
to all or substantially all of the business and/or assets of the Corporation,
whether direct or indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Corporation would be required to perform if
no such succession had taken place.
15. Miscellaneous. (a) Applicable Law. This Agreement shall be
------------- --------------
governed by and construed in accordance with the laws of the State of Delaware,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or modified
----------
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
- 12 -
<PAGE>
(c) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the address listed below
If to the Corporation: Tambrands Inc.
777 Westchester Avenue
White Plains, New York 10604
Attention: Secretary
(with a copy to the
attention of the
General Counsel)
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) Tax Withholding. The Corporation may withhold from any amounts
---------------
payable under this Agreement such Federal, State or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) Captions. The captions of this Agreement are not part of the
--------
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Corporation has caused this Agreement to be executed in its name on its behalf,
and its corporate seal to be hereunto affixed and attested by its Corporate
Counsel, all as of the day and year first above written.
- 13 -
<PAGE>
ATTEST: TAMBRANDS INC.
/s/ JONATHAN W. EMERY By /s/ EDWARD T. FOGARTY
- --------------------- ------------------------------
Corporate Counsel Title: President and
Chief Executive Officer
(Seal)
EXECUTIVE: Thomas Soper, III
/s/ THOMAS SOPER, III
---------------------------------
Address:
Tambrands Inc.
777 Westchester Avenue
White Plains, New York 10604
SOPER.EPA
- 14 -
<PAGE>
TAMBRANDS INC.
FORM 10-K
PART IV, ITEM 14., EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table sets forth the Company's ratio of earnings to fixed charges
for the periods indicated.
<TABLE>
<CAPTION>
Year Ended
(in thousands, except ratios) December 31,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes $139,335 $141,751 $118,652 $191,863 $131,825
Fixed charges 10,866 9,054 6,549 6,470 4,929
------------------------------------------------
EARNINGS $150,201 $150,805 $125,201 $198,333 $136,754
================================================
Fixed charges:
Interest portion of operating
lease expense:
Operating lease expense $5,029 $4,270 $5,027 $4,031 $4,204
Assumed interest factor 0.33 0.33 0.33 0.33 0.33
------------------------------------------------
Interest portion of operating
lease expense 1,660 1,409 1,659 1,330 1,387
Interest expense 9,206 7,645 4,890 5,140 3,542
------------------------------------------------
FIXED CHARGES $10,866 $9,054 $6,549 $6,470 $4,929
================================================
RATIO OF EARNINGS TO FIXED CHARGES 13.8 16.7 19.1 30.7 27.7
================================================
</TABLE>
<PAGE>
EXHIBIT 21
----------
TAMBRANDS INC.
<TABLE>
<CAPTION>
Subsidiaries of the registrant.
- ------------------------------
(1) (2) (3)
Percentage of Voting
Securities Owned
--------------------------
State or Country By the By Other
Name of Subsidiary of Organization Company Subsidiaries
- ------------------ ---------------- ------- ------------
<S> <C> <C> <C>
Tambrands Europe Ltd. Delaware 100%
Industrial Catenation South Africa 100% (a)
Services (Pty) Ltd.
TIM International Delaware 100%
Investments Incorporated
Tambrands Dosmil, S.A. de C.V. Mexico 100% (b)
Tambrands Brasil Ltd. Delaware 100%
Shenyang Tambrands People's Republic 80%
Company Limited of China
Tambrands AG Switzerland 100% (a)
Tambrands Canada Inc. Canada 100%
Tambrands PACE, Inc. Delaware 100%
Tambrands spol. s.r.o. Czech Republic 100% (c)
Tambrands France S.A. France 100% (a)
Tambrands Industria e Brazil 99% (d)
Comercio Limitada
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3)
Percentage of Voting
Securities Owned
--------------------------
State or Country By the By Other
Name of Subsidiary of Organization Company Subsidiaries
- ------------------ ---------------- ------- ------------
<S> <C> <C> <C>
Tambrands Limited United Kingdom 100% (a)
Tambrands Ireland Limited Ireland 100% (e)
Tambrands Polska Sp. Z o.o. Poland 100% (c)
Tambrands South Africa South Africa 100% (f)
(Pty) Ltd.
Tambrands - St. Petersburg Russia 100% (g)
Tambrands Ukraine Ukraine 100% (g)
Tambrands de Venezuela, C.A. Venezuela 100% (c)
ZAO Tambrands Russia 100% (a)
</TABLE>
Notes: (a) Owned by Tambrands Europe Ltd.
(b) Owned by TIM International Investments Incorporated.
(c) Owned by Tambrands PACE, Inc.
(d) Owned by the Company in part directly and in part indirectly
through Tambrands Brasil Ltd.
(e) Owned by Tambrands Limited.
(f) Owned by Industrial Catenation Services (Pty) Ltd.
(g) Owned by Tambrands Limited and Tambrands PACE, Inc.
2
<PAGE>
EXHIBIT 23
Independent Auditors' Consent
-----------------------------
The Board of Directors
Tambrands Inc.:
We consent to incorporation by reference in the Registration Statement No.
33-50961 on Form S-3 and Nos. 2-77947, 33-13902, 33-36746, 33-40161, 33-43713,
33-50398 and 33-64269 on Form S-8 of Tambrands Inc. of our reports dated
January 23, 1996, relating to the consolidated balance sheets of Tambrands
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, and cash flows for each of the years in
the three-year period ended December 31, 1995, and the related schedule, which
reports appear in the December 31, 1995 annual report on Form 10-K of Tambrands
Inc. Our reports refer to a change in accounting for postemployment benefits
in 1993.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 29, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/LILYAN H. AFFINITO
_________________________
Lilyan H. Affinito
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/ANNE M. BUSQUET
_________________________
Anne M. Busquet
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/ PAUL S. DOHERTY
_________________________
Paul S. Doherty
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/JANET HILL
_________________________
Janet Hill
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/ROBERT P. KILEY
_________________________
Robert P. Kiley
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/JOHN LOUDON
_________________________
John Loudon
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/RUTH M. MANTON
________________________
Ruth M. Manton
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/JOHN A. MEYERS
_______________________
John A. Meyers
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/H.L. TOWER
____________________
H.L. Tower
Dated: March 12, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Howard B. Wentz, Jr. and Edward T. Fogarty, and each of
them, with full power to act without the other, the true and lawful attorney of
the undersigned, in the name, place and stead of the undersigned to execute on
behalf of the undersigned, as Director of Tambrands Inc., the Annual Report on
Form 10-K for the year ended December 31, 1995 of Tambrands Inc., and any and
all amendments thereto, to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended ("Act"), and
any and all other instruments which either of said attorneys deems necessary or
advisable to enable Tambrands Inc. to comply with the Act, the rules,
regulations and requirements of the SEC in respect thereof, and the securities
or Blue Sky laws of any State or other governmental subdivision, giving and
granting to each of said attorneys full power and authority to do and perform
each and every act and thing whatsoever necessary or appropriate to be done in
and about the premises as fully to all intents as the undersigned might or would
do if personally present at the doing thereof, with full power of substitution
and revocation, thereby ratifying and confirming all that said attorneys or
substitutes may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto executed this power
of attorney on the date indicated below.
/s/ROBERT M. WILLIAMS
__________________________
Robert M. Williams
Dated: March 12, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> OCT-01-1995 JAN-01-1995
<PERIOD-END> DEC-31-1995 DEC-31-1995
<CASH> 11,135 11,135
<SECURITIES> 0 0
<RECEIVABLES> 99,714 99,714
<ALLOWANCES> (1,667) (1,667)
<INVENTORY> 46,736 46,736
<CURRENT-ASSETS> 199,913 199,913
<PP&E> 353,429 353,429
<DEPRECIATION> (137,307) (137,307)
<TOTAL-ASSETS> 422,049 422,049
<CURRENT-LIABILITIES> 203,969 203,969
<BONDS> 80,889 80,889
0 0
0 0
<COMMON> 10,887 10,887
<OTHER-SE> 92,085 92,085
<TOTAL-LIABILITY-AND-EQUITY> 422,049 422,049
<SALES> 161,691 683,092
<TOTAL-REVENUES> 161,691 683,092
<CGS> 56,605 231,625
<TOTAL-COSTS> 56,605 231,625
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 256 353
<INTEREST-EXPENSE> 2,126 9,206
<INCOME-PRETAX> 36,182 139,335
<INCOME-TAX> 13,225 53,813
<INCOME-CONTINUING> 22,957 85,522
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,957 85,522
<EPS-PRIMARY> 0.63 2.33
<EPS-DILUTED> 0.63 2.33
</TABLE>
