Filed pursuant to Rule 424(b)(3)
Registration No. 333-115085; No 333-115085-01 to 333-115085-10
PROSPECTUS
PLAYTEX PRODUCTS, INC.
Exchange Offer for $460,000,000 of its
8% Senior Secured Notes due 2011
Terms of the exchange offer
Before participating in this exchange offer, please refer to the section in this prospectus entitled "Risk Factors" commencing on page 17.
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for initial notes where such initial notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is August 3, 2004.
| | Page | |
|---|---|---|
| Forward-Looking Statements | ii | |
| Trademarks | iii | |
| Industry Data | iii | |
| Prospectus Summary | 1 | |
| Risk Factors | 17 | |
| Use Of Proceeds | 28 | |
| Capitalization | 29 | |
| Selected Historical Consolidated Financial Data | 30 | |
| Business | 33 | |
| Management | 50 | |
| Security Ownership Of Certain Beneficial Owners And Management | 55 | |
| Certain Relationships And Related Party Transactions | 57 | |
| Description Of Other Indebtedness | 59 | |
| The Exchange Offer | 62 | |
| Description Of The Notes | 71 | |
| Book-Entry, Delivery And Form | 138 | |
| Certain United States Federal Income Tax Consequences | 142 | |
| Plan Of Distribution | 150 | |
| Legal Matters | 151 | |
| Experts | 151 | |
| Where You Can Find More Information | 151 | |
| Incorporation Of Certain Documents By Reference | 152 |
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This prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. The statements contained in this prospectus that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties.
We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will" and similar terms and phrases, including references to assumptions, in this prospectus to identify forward-looking statements. These forward-looking statements are made based on our management's expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
You should keep in mind that any forward-looking statement made by us in this prospectus or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this prospectus after the date of this prospectus, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this prospectus or elsewhere might not occur.
In addition, the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect:
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Actual results may vary from our estimates and assumptions. These estimates and assumptions are based on historical results, assumptions that we make as well as assumptions by third parties. Please see "Management's Discussion and Analysis—Application of Critical Accounting Policies" for further information.
We own rights to a number of United States, Canadian and foreign trademarks that are important to our business, including, but not limited to:BABY MAGIC®, BANANA BOAT®, BEYOND™, BIG SIPSTER®, BINACA®, BINKY®, BLASTERS®, DENTAX®, DIAPER GENIE®, DRINKUP®, DROP-INS®, FAST BLAST®, FIRST SIPSTER®, GENTLE GLIDE®, GET ON THE BOAT®, GRIPSTER®, HANDSAVER®, HEAT THERAPY®, HEAVY TRAFFIC®, INSULATOR®, INSULATOR SPORT®, LIPPOPS®, MADE STRONG TO LAST LONG®, MAKES GETTING CLEAN ALMOST AS MUCH FUN AS GETTING DIRTY®, MOST LIKE MOTHER®, MR. BUBBLE®, NATURAL ACTION®, NATURALATCH™, NATURALSHAPE™, NOBODY BABIES YOUR BABY BETTER®, OGILVIE®, OXY DEEP®, PORTABLES®, POWER SHOT®, PRECISELY RIGHT®, QUICKSTRAW®, QUIK BLOK®, SAFE'N SURE®, SILK GLIDE®, SIPEASE®, SLIMFITS®, SO COMFORTABLE YOU CAN'T EVEN FEEL THEM®, SOFT COMFORT®, SOOTH-A-CAINE®, SPARKLIN' SIPSTER™, SUNTANICALS®, TEK®, TUSSY®, TWISTAWAY®, VENTAIRE®, VITASKIN®, WE GLOVE YOUR HANDS®andWET ONES®.
In addition, we also own royalty-free licenses in perpetuity to thePLAYTEX®andLIVING™trademarks in the United States, Canada and many foreign jurisdictions related to certain of our feminine hygiene, baby care and other products, but excluding certain apparel related products. We also have exclusive rights to theWOOLITE®trademark for rug and upholstery cleaning products in the United States and Canada pursuant to a royalty-free, perpetuity. Please see "Business—Trademarks and Patents" for more information regarding these licenses.
Unless otherwise indicated, the source of all market share data in this prospectus is ACNielsen Company, or ACNielsen, and these data include data reported by food stores, drug stores and mass merchandisers. Unless otherwise indicated, all references to market share and market share data are for comparable 52-week periods and represent our percentage of the total U.S. dollar volume of products purchased by consumers in the applicable category (dollar market share or retail consumption). This information is provided to us from ACNielsen (which excludes Wal-Mart Stores Inc., or Wal-Mart) and is subject to revisions.
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The following summary highlights basic information about Playtex and this exchange offer. It may not contain all of the information that is important to you. For a more comprehensive understanding of our company and the exchange offer, you should read this entire document, including "Risk Factors" and the information incorporated by reference, including the consolidated financial statements. The term "initial notes" refers to the 8% Senior Secured Notes due 2011 that were issued on February 19, 2004 in a private offering. The term "exchange notes" refers to the 8% Senior Secured Notes due 2011 offered with this prospectus. The term "notes" refers to the initial notes and the exchange notes, collectively. Unless the context indicates or otherwise requires, references in this prospectus to "Playtex," the "company," "we," "us" or "our" are to Playtex Products, Inc. and its consolidated subsidiaries. Certain statements in this "Prospectus Summary" are forward-looking statements. See "Forward-Looking Statements."
We are a leading manufacturer and marketer of a diversified portfolio of well-recognized branded consumer and personal products. For the twelve months ended December 27, 2003, we generated approximately 97% of our net sales from products in which we held the number one or number two market share position in the U.S. Our brand name recognition, consumer-focused product innovation, acquisition strategy and well-established distribution channels have enabled us to maintain a leading market position in attractive product categories. For the twelve months ended December 27, 2003, we generated net sales of $657.7 million, net earnings of $18.2 million and EBITDA (as defined in "—Summary Historical Consolidated and Other Financial Data") of $98.9 million.
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The following table sets forth net sales and market share data for our principal product lines for the fiscal year 2003, for each of our divisions—Personal Products, Consumer Products and International/Corporate Sales (dollars in millions):
| Divisions | Principal Brand Name | Market Position | FY 2003 Market Share | Net FY 2003 Sales | Percent of Net Sales | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Personal Products Division: | ||||||||||||||
| Infant Care—Infant Feeding & Soothing | Playtex | 1 | 34.2 | % | $ | 98.9 | 15.0 | % | ||||||
| — Diaper Disposal System | Diaper Genie | 1 | 92.7 | 40.3 | 6.1 | |||||||||
| — Hands and Face Towelettes | Wet Ones | 1 | 68.1 | 37.0 | 5.6 | |||||||||
| — Bath Additives | Mr. Bubble | 1 | 30.0 | 5.9 | 0.9 | |||||||||
| — Infant Toiletries | Baby Magic | 2 | 8.0 | 29.4 | 4.5 | |||||||||
| — Other | 2.0 | 0.4 | ||||||||||||
| Total Infant Care | 213.5 | 32.5 | ||||||||||||
| Total Feminine Care | Playtex | 2 | 26.6 | 164.8 | 25.0 | |||||||||
| Total Personal Products Division | 378.3 | 57.5 | ||||||||||||
Consumer Products Division: | ||||||||||||||
Sun Care | Banana Boat | 2 | 21.4 | 84.3 | 12.8 | |||||||||
Household Products—Carpet Cleaning | Woolite | 2 | 27.9 | 30.1 | 4.6 | |||||||||
| — Household Gloves | Playtex | 1 | 27.9 | 16.2 | 2.5 | |||||||||
| Personal Grooming—At-Home Permanents | Ogilvie | 1 | 74.7 | 12.9 | 2.0 | |||||||||
| — Breath Spray & Drops | Binaca | 1 | 39.8 | 3.1 | 0.5 | |||||||||
| — Other | 9.1 | 1.3 | ||||||||||||
| Total Household and Personal Grooming Products | 71.4 | 10.9 | ||||||||||||
| Total Consumer Products Division | 155.7 | 23.7 | ||||||||||||
International/Corporate Sales Division | 123.7 | 18.8 | ||||||||||||
| Total | $ | 657.7 | 100.0 | % | ||||||||||
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We believe we are distinguished by the following competitive strengths:
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more closely mimic breast feeding. These are innovative entries in the disposable bottle and reusable hard bottle categories;
The principal features of our growth strategy are outlined below:
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significant increase in capital expenditures or loss of productivity. We believe these opportunities can result in annual savings between $12 and $14 million and can be fully realized by 2005.
The Refinancing Transactions. On February 19, 2004, we issued the initial notes, and we and the guarantors of the initial notes entered into a new credit facility, which we refer to as our new credit facility. We refer to the offering of the initial notes, the entering into the new credit facility and the application of the proceeds therefrom, collectively, as the "Refinancing Transactions." The new credit facility consists of a $142.5 million revolving credit facility (which includes a $15 million letter of credit sub-facility) and a $7.5 million term loan, for which General Electric Capital Corporation is acting as agent. The amount available under the revolving credit facility is subject to various borrowing base limitations. The new credit facility is secured by a first lien on substantially all of our and the guarantors' personal property and material owned real property, other than our and the guarantors' intellectual property, and by a second lien on our and the guarantors' intellectual property. See "Description of the Notes—Security."
We used the proceeds from the initial offering and the borrowings under the new credit facility to repay and terminate commitments under our prior credit facility, to terminate our prior accounts receivables facility, which we sometimes refer to as the Receivables Facility, and to pay fees and expenses in connection with the Refinancing Transactions. We may use future borrowings under our new credit facility for working capital and general corporate purposes.
Restructuring. We continually focus on productivity and cost reduction initiatives to improve profitability. As part of this on-going process, we are planning several initiatives to reduce operating and selling, general and administrative expenses, improve effectiveness and reduce working capital requirements. In 2003, we engaged an outside operations consultant to perform a comprehensive review of our operations and internal functions. Based on that review and with the assistance of the consultant, we have launched a comprehensive program of operational improvements that we expect will result in increased effectiveness and profitability. We believe these improvements can be implemented without a significant increase in capital expenditures or loss of productivity. This process
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continues in 2004 and is expected to be fully implemented in 2005. The major components of the restructuring include: headcount reductions and more effective manufacturing facilities; improvements in our supply chain process; and significant inventory reduction.
We estimate that the operational restructuring will result in annualized operating expense savings between $12 and $14 million by 2005. We recorded $3.9 million in restructuring costs and $0.7 million in other related costs to implement the operational restructuring in 2003 and expect to incur approximately $4 million of expenses in 2004. In 2004, the estimated partial year impact of the savings (prior to implementation costs) is approximately $6 to $7 million. In addition, we estimate that this restructuring will result in a decrease in working capital of approximately $9 million over two years as a result of improved supply chain efficiency.
Strategic Alternatives Review. In late 2002, we announced that we would explore strategic alternatives in order to enhance shareholder value, including a possible sale or merger of the entire company, a partial sale, a divestiture of assets and other potential transactions. After a thorough assessment of a number of options, it was concluded that, at this time, it is more beneficial to remain an independent, stand-alone company.
We believe that, in the near term, the most effective way to enhance shareholder value will be to build on the operational momentum experienced in the first quarter of 2004, most notably in the Feminine Care and Infant Care sectors, concentrate on such measures as aggressive cost reductions that improve profitability, and reduce working capital requirements. Further, we recently completed the refinancing of our senior debt through the issuance of $460.0 million of the initial notes and our new $150.0 million credit facility, which provide us with considerably greater financial and operational flexibility to execute our on-going strategy. Going forward in the normal course of business, we will continue to consider any strategic opportunities that increase shareholder value.
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We are offering to exchange $460,000,000 aggregate principal amount of our exchange notes for a like aggregate principal amount of our initial notes. In order to exchange your initial notes, you must properly tender them and we must accept your tender. We will exchange all outstanding initial notes that are validly tendered and not validly withdrawn.
| Exchange Offer | We will exchange our exchange notes for a like aggregate principal amount at maturity of our initial notes. | |||
| Expiration Date | This exchange offer will expire at 5:00 p.m., New York City time, on September 2, 2004, unless we decide to extend it. | |||
| Conditions to the Exchange Offer | We will complete this exchange offer only if: | |||
| • | there is no change in the laws and regulations which would impair our ability to proceed with this exchange offer, | |||
| • | there is no change in the current interpretation of the staff of the Commission which permits resales of the exchange notes, | |||
| • | there is no stop order issued by the Commission which would suspend the effectiveness of the registration statement which includes this prospectus or the qualification of the exchange notes under the Trust Indenture Act of 1939, | |||
| • | there is no litigation or threatened litigation which would impair our ability to proceed with this exchange offer, and | |||
| • | we obtain all the governmental approvals we deem necessary to complete this exchange offer. | |||
| Please refer to the section in this prospectus entitled "The Exchange Offer—Conditions to the Exchange Offer." | ||||
| Procedures for Tendering Initial Notes | To participate in this exchange offer, you must complete, sign and date the letter of transmittal or its facsimile and transmit it, together with your initial notes to be exchanged and all other documents required by the letter of transmittal, to Wells Fargo Bank, N.A., as exchange agent, at its address indicated under "The Exchange Offer—Exchange Agent." In the alternative, you can tender your initial notes by book-entry delivery following the procedures described in this prospectus. If your initial notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you should contact that person promptly to tender your initial notes in this exchange offer. For more information on tendering your notes, please refer to the section in this prospectus entitled "The Exchange Offer—Procedures for Tendering Initial Notes." | |||
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| Special Procedures for Beneficial Owners | If you are a beneficial owner of initial notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your initial notes in the exchange offer, you should contact the registered holder promptly and instruct that person to tender on your behalf. | |||
| Guaranteed Delivery Procedures | If you wish to tender your initial notes and you cannot get the required documents to the exchange agent on time, you may tender your notes by using the guaranteed delivery procedures described under the section of this prospectus entitled "The Exchange Offer—Procedures for Tendering Initial Notes—Guaranteed Delivery Procedure." | |||
| Withdrawal Rights | You may withdraw the tender of your initial notes at any time before 5:00 p.m., New York City time, on the expiration date of the exchange offer. To withdraw, you must send a written or facsimile transmission notice of withdrawal to the exchange agent at its address indicated under "The Exchange Offer—Exchange Agent" before 5:00 p.m., New York City time, on the expiration date of the exchange offer. | |||
| Acceptance of Initial Notes and Delivery of Exchange Notes | If all the conditions to the completion of this exchange offer are satisfied, we will accept any and all initial notes that are properly tendered in this exchange offer on or before 5:00 p.m., New York City time, on the expiration date. We will return any initial note that we do not accept for exchange to you without expense as promptly as practicable after the expiration date. We will deliver the exchange notes to you as promptly as practicable after the expiration date and acceptance of your initial notes for exchange. Please refer to the section in this prospectus entitled "The Exchange Offer—Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes." | |||
| Federal Income Tax Considerations Relating to the Exchange Offer | Exchanging your initial notes for exchange notes will not be a taxable event to you for United States federal income tax purposes. Please refer to the section of this prospectus entitled "Certain United States Federal Income Tax Consequences." | |||
| Exchange Agent | Wells Fargo Bank, N.A. is serving as exchange agent in the exchange offer. | |||
| Fees and Expenses | We will pay all expenses related to this exchange offer. Please refer to the section of this prospectus entitled "The Exchange Offer—Fees and Expenses." | |||
| Use of Proceeds | We will not receive any proceeds from the issuance of the exchange notes. We are making this exchange offer solely to satisfy certain of our obligations under our registration rights agreement entered into in connection with the offering of the initial notes. | |||
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| Consequences to Holders Who Do Not Participate in the Exchange Offer | If you do not participate in this exchange offer: | |||
| • | except as set forth in the next paragraph, you will not necessarily be able to require us to register your initial notes under the Securities Act, | |||
| • | you will not be able to resell, offer to resell or otherwise transfer your initial notes unless they are registered under the Securities Act or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act, and | |||
| • | the trading market for your initial notes will become more limited to the extent other holders of initial notes participate in the exchange offer. | |||
| You will not be able to require us to register your initial notes under the Securities Act unless you notify us prior to the 20th day following consummation of the exchange offer that: | ||||
| • | you are prohibited by law or commission policy from participating in the exchange offer; | |||
| • | that you may not resell the exchange notes you acquire in the exchange offer to the public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resale; or | |||
| • | that you are a broker-dealer and own notes acquired directly from us or our affiliate. | |||
| In these cases, the registration rights agreement requires us to file a registration statement for a continuous offering in accordance with Rule 415 under the Securities Act for the benefit of the holders of the initial notes described in this paragraph. We do not currently anticipate that we will register under the Securities Act any notes that remain outstanding after completion of the exchange offer. | ||||
| Please refer to the section of this prospectus entitled "Risk Factors—Your failure to participate in the exchange offer will have adverse consequences." | ||||
| Resales | It may be possible for you to resell the notes issued in the exchange offer without compliance with the registration and prospectus delivery provisions of the Securities Act, subject to the conditions set forth in the following paragraph and, in the case of broker-dealers, the conditions described under "—Obligations of Broker-Dealers" below. | |||
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| To tender your initial notes in this exchange offer and resell the exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act, you must make the following representations: | ||||
| • | you are authorized to tender the initial notes and to acquire exchange notes, and that we will acquire good and unencumbered title thereto, | |||
| • | the exchange notes acquired by you are being acquired in the ordinary course of business, | |||
| • | you have no arrangement or understanding with any person to participate in a distribution of the exchange notes and are not participating in, and do not intend to participate in, the distribution of such exchange notes, | |||
| • | you are not an "affiliate," as defined in Rule 405 under the Securities Act, of ours, or you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, | |||
| • | if you are not a broker-dealer, you are not engaging in, and do not intend to engage in, a distribution of exchange notes, and | |||
| • | if you are a broker-dealer, initial notes to be exchanged were acquired by you as a result of market-making or other trading activities and you will deliver a prospectus in connection with any resale, offer to resell or other transfer of such exchange notes. | |||
| Please refer to the sections of this prospectus entitled "The Exchange Offer—Procedure for Tendering Initial Notes—Proper Execution and Delivery of Letters of Transmittal," "Risk Factors—Risks Relating to the Exchange Offer—Some persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes" and "Plan of Distribution." | ||||
| Obligations of Broker-Dealers | If you are a broker-dealer (1) that receives exchange notes, you must acknowledge that you will deliver a prospectus in connection with any resales of the exchange notes, (2) who acquired the initial notes as a result of market making or other trading activities, you may use the exchange offer prospectus as supplemented or amended, in connection with resales of the exchange notes, or (3) who acquired the initial notes directly from the issuers in the initial offering and not as a result of market making and trading activities, you must, in the absence of an exemption, comply with the registration and prospectus delivery requirements of the Securities Act in connection with resales of the exchange notes. | |||
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Summary Terms of the Exchange Notes
| Issuer | Playtex Products, Inc. | |||
| Exchange Notes | $460.0 million in aggregate principal amount of 8% Senior Secured Notes Due 2011. The forms and terms of the exchange notes are the same as the forms and terms of the initial notes except that the issuance of the exchange notes is registered under the Securities Act, will not bear legends restricting their transfer and will not be entitled to registration rights under our registration rights agreement. The exchange notes will evidence the same debt as the initial notes, and both the initial notes and the exchange notes will be governed by the same indenture. | |||
| Maturity Date | March 1, 2011. | |||
| Interest | 8% per annum, payable semiannually in arrears on March 1 and September 1, commencing September 1, 2004. | |||
| Guarantees | On the issue date, all of our existing domestic subsidiaries that guarantee our new credit facility will jointly, severally and unconditionally guarantee our obligations under the exchange notes on a senior secured basis. If we create or acquire a new domestic subsidiary that guarantees indebtedness under our new credit facility, or if one of our existing domestic subsidiaries becomes a guarantor of indebtedness under our new credit facility, then that subsidiary will guarantee the exchange notes, on a senior secured basis, unless we designate the subsidiary as an "unrestricted subsidiary" under the indenture governing the notes. | |||
| Ranking | The exchange notes and the subsidiary guarantees are senior secured obligations and will rank: | |||
| • | pari passu in right of payment to our and the guarantors' existing and future senior indebtedness, including indebtedness under our new credit facility; and | |||
| • | Senior in right of payment to our and the guarantors' existing and future subordinated indebtedness. | |||
| Security | The exchange notes and the guarantees will be secured by a first lien on all of our and the guarantors' intellectual property, which will include, among other things, our trademarks, copyrights, patents, domain names and all registrations of our applications for any of the foregoing to the extent thereof, and all to the extent permissible by law, and by a second lien on substantially all of our and the guarantors' personal property and material owned real property, other than our and the guarantors' intellectual property, that secure the obligations under our new credit facility. See "Description of the Notes—Security." | |||
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| Our new credit facility is secured by a first lien on substantially all of our and the guarantors' personal property and material owned real property, other than intellectual property, and by a second lien on all of our and the guarantors' intellectual property. See "Description of Other Indebtedness—New Credit Facility." In the event the lenders under our new credit facility exercise their rights with respect to the collateral, other than our and the guarantors' intellectual property, the lenders will control the exercise of remedies against such collateral and will be entitled to be repaid in full from proceeds from the sale of those assets before those proceeds would be available for distribution to the holders of the exchange notes. Proceeds from the sale of our and the guarantors' intellectual property (but excluding certain inventory bearing intellectual property and license royalties) will be available for distribution to the holders of exchange notes, and the trustee under the indenture relating to the notes will control the exercise of remedies against such intellectual property. See "Description of the Notes—Security." At March 27, 2004, the aggregate amount of outstanding indebtedness of our company and the guarantors under our new credit facility was $27.5 million, and approximately $94.7 million was available for future borrowings under our new credit facility. We or any guarantor may incur additional first or second lien indebtedness subject to certain specified conditions. At March 27, 2004, we had $827.5 million of indebtedness. See "Description of the Notes—Certain Covenants—Limitation on Indebtedness." | ||||
| Optional Redemption | We may redeem some or all of the exchange notes at any time on or after March 1, 2008 at the redemption prices set forth in this prospectus, plus accrued and unpaid interest to the date of redemption. | |||
| On or before March 1, 2007, we may redeem up to 35% of the aggregate principal amount of exchange notes issued with the net proceeds of certain equity offerings and certain asset sales. We may make that redemption only if, after the redemption, at least 65% of the aggregate principal amount of exchange notes issued under the indenture remains outstanding. | ||||
| In addition, at any time prior to March 1, 2007, we may redeem some or all of the exchange notes upon the occurrence of a change of control at the redemption prices set forth in this prospectus, plus accrued and unpaid interest, to the date of redemption. | ||||
| See "Description of the Notes—Optional Redemption." | ||||
| Mandatory Redemption | None. | |||
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| Change of Control | Upon certain change of control events, we will be required to make an offer to repurchase all the exchange notes at a price of 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. See "Description of the Notes—Repurchase at the Option of Holders—Change of Control." | |||
| Certain Covenants | The indenture contains covenants that will, among other things, limit our ability and the ability of our restricted subsidiaries to: | |||
| • | incur additional indebtedness; | |||
| • | create liens; | |||
| • | pay dividends or make other equity distributions; | |||
| • | purchase or redeem capital stock; | |||
| • | make investments; | |||
| • | sell assets or consolidate or merge with or into other companies; and | |||
| • | engage in transactions with affiliates. | |||
| These limitations are subject to a number of important qualifications and exceptions. See "Description of the Notes—Certain Covenants." | ||||
| Absence of a Public Market for the Exchange Notes | The exchange notes are new securities with no established market for them. We cannot assure you that a market for these exchange notes will develop or that this market will be liquid. Please refer to the section of this prospectus entitled "Risk Factors—Risks Relating to the Exchange Offer—There may be no active or liquid market for the exchange notes." | |||
| Form of the Exchange Notes | The exchange notes will be represented by one or more permanent global securities in registered form deposited on behalf of The Depository Trust Company with Wells Fargo Bank, N.A., as custodian. You will not receive exchange notes in certificated form unless one of the events described in the section of this prospectus entitled "Description of Notes—Book Entry; Delivery and Form—Exchange of Book Entry Notes for Certificated Notes" occurs. Instead, beneficial interests in the exchange notes will be shown on, and transfers of these exchange notes will be effected only through, records maintained in book-entry form by The Depository Trust Company with respect to its participants. | |||
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| Certain United States Federal Income Tax Considerations | We intend to treat the exchange notes as debt instruments subject to the United States federal income tax contingent payment debt regulations. Accordingly, each holder, regardless of its accounting method, will be required to accrue interest on a constant yield to maturity basis at a rate of 8% per year, which represents our determination of the yield on our comparable non-contingent, fixed-rate debt instrument with terms and conditions otherwise similar to the exchange note. Because we have determined that the comparable rate is the same as the stated interest rate on the exchange notes, we expect that the amount of a holder's interest income inclusions should not materially differ from the inclusions that would result if the notes were not subject to the contingent payment debt regulations, and we intend to take a position consistent with the foregoing for all relevant tax reporting purposes. However, the rules governing contingent payment debt instruments are complex and there can be no assurance that the Internal Revenue Service will agree with this result. | |||
| You will also recognize gain or loss on the sale, exchange or retirement of an exchange note in an amount equal to the difference between the amount realized and your adjusted tax basis in the exchange note. Any gain recognized by you on such sale, exchange or retirement generally will be treated as ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and thereafter, capital loss. See "Certain United States Federal Income Tax Consequences." Holders are urged to consult their own tax advisors as to the U.S. federal, state and other tax consequences of acquiring, owning and disposing of the exchange notes. | ||||
See "Risk Factors" immediately following this summary for a discussion of certain risks you should consider before participating in the exchange offer.
Playtex is a Delaware corporation. Our principal executive office is located at 300 Nyala Farms Road, Westport, Connecticut 06880 and our telephone number is (203) 341-4000. Our common stock is listed on the New York Stock Exchange under the symbol "PYX."
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SUMMARY HISTORICAL CONSOLIDATED AND OTHER FINANCIAL DATA
Set forth in the following table are certain summary historical consolidated financial data of the company as of and for each of the twelve months ended December 27, 2003, December 28, 2002 and December 29, 2001 and as of and for each of the three months ended March 27, 2004 and March 29, 2003. The consolidated statements of earnings data for each of the twelve month periods ended December 27, 2003, December 28, 2002 and December 29, 2001, and the consolidated balance sheet data as of December 27, 2003, have been derived from our consolidated financial statements, which are incorporated by reference in this prospectus, and which have been audited by KPMG LLP, independent registered public accountants. The consolidated statements of earnings data for the three months ended March 27, 2004 and March 29, 2003, and the consolidated balance sheet data as of March 27, 2004 are derived from our unaudited consolidated financial statements incorporated by reference in this prospectus. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring items, which the Company considers necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the three months ended March 27, 2004 are not necessarily indicative of the results that may be expected for the entire year ending December 25, 2004. Our fiscal year end is on the last Saturday nearest to December 31 and, as a result, a fifty-third week is added every six or seven years, with the most recent 53-week period being fiscal year 2000. The following information should be read in conjunction with "Use of Proceeds," "Capitalization," "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements, including related notes thereto, appearing elsewhere or incorporated by reference in this prospectus.
| | Twelve Months Ended | Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | December 27, 2003 | December 28, 2002 | December 29, 2001 | March 27, 2004 | March 29, 2003 | |||||||||||
| | (dollars in thousands) | |||||||||||||||
| Consolidated Statements of Earnings Data: | ||||||||||||||||
| Net sales | $ | 657,721 | $ | 719,087 | $ | 723,518 | $ | 195,985 | $ | 180,933 | ||||||
| Cost of sales | 317,301 | 328,433 | 333,807 | 91,699 | 84,183 | |||||||||||
| Gross profit | 340,420 | 390,654 | 389,711 | 104,286 | 96,750 | |||||||||||
| Selling, general and administrative(1) | 249,810 | 240,620 | 233,660 | 66,995 | 64,721 | |||||||||||
| Restructuring and asset impairment(1)(2) | 3,873 | 7,599 | — | 93 | — | |||||||||||
| Amortization of intangibles(3) | 903 | 928 | 22,060 | 226 | 226 | |||||||||||
| Operating earnings | $ | 85,834 | $ | 141,507 | $ | 133,991 | $ | 36,972 | $ | 31,803 | ||||||
Other Consolidated Financial Data: | ||||||||||||||||
| EBITDA(4)(5) | $ | 98,864 | $ | 135,488 | $ | 134,923 | $ | 34,143 | $ | 35,047 | ||||||
| Depreciation | 14,102 | 14,011 | 13,140 | 3,676 | 3,471 | |||||||||||
| Capital expenditures | 18,564 | 16,445 | 19,950 | 3,035 | 3,673 | |||||||||||
| Gross margin | 51.8 | % | 54.3 | % | 53.9 | % | 53.2 | % | 53.5 | % | ||||||
| | At March 27, 2004 | At December 27, 2003 | ||||
|---|---|---|---|---|---|---|
| Consolidated Balance Sheet Data: | ||||||
| Cash and cash equivalents | $ | 22,884 | $ | 27,453 | ||
| Working capital(6) | 162,232 | 113,950 | ||||
| Total assets(6) | 1,042,395 | 993,298 | ||||
| Total debt | 827,500 | 793,250 | ||||
| Total stockholders' equity | 36,285 | 27,788 | ||||
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comprehensive program of operational improvements (see Note 3 to our consolidated financial statements on our 2003 Form 10-K and Note 4 on our 2004 first quarter Form 10Q).
The table below reconciles EBITDA to net earnings, the most directly comparable GAAP measure (dollars in thousands).
| | Twelve Months Ended | Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | December 27, 2003 | December 28, 2002 | December 29, 2001 | March 27, 2004 | March 29, 2003 | |||||||||||
| Net earnings | $ | 18,232 | $ | 48,904 | $ | 11,545 | $ | 8,376 | $ | 11,403 | ||||||
| Income tax expense | 10,589 | 12,102 | 12,317 | 5,459 | 6,500 | |||||||||||
| Interest expense, net | 55,038 | 59,543 | 75,861 | 16,406 | 13,447 | |||||||||||
| Amortization of intangibles | 903 | 928 | 22,060 | 226 | 226 | |||||||||||
| Depreciation | 14,102 | 14,011 | 13,140 | 3,676 | 3,471 | |||||||||||
| EBITDA | $ | 98,864 | $ | 135,488 | $ | 134,923 | $ | 34,143 | $ | 35,047 | ||||||
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An investment in the exchange notes involves a significant degree of risk. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business. Any of the following risks could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your investment.
Risks Relating to our Business
We face significant competition from other consumer products companies many of which have significantly greater financial resources.
The markets for our products are highly competitive and are characterized by the frequent introduction of new products, often accompanied by major advertising and promotional programs. We believe that the market for consumer packaged goods will continue to be highly competitive and that the level of competition may intensify in the future. Our competitors consist of a large number of domestic and foreign companies, a number of which have significantly greater financial resources than we do and are not as highly leveraged as we are. If we are unable to continue to introduce new and innovative products that are attractive to consumers, or are unable to allocate sufficient resources to effectively market and advertise our products so that they achieve widespread market acceptance, we may not be able to compete effectively and our operating results and financial condition will be adversely affected.
Our infant care and feminine care businesses are particularly competitive. We have faced heavy competition as new competitors have entered the market, including our disposable feeding liners, cups, baby toiletries, pre-moistened towelettes and diaper disposal categories. In 2002, the market share leader in the tampon category introduced a new plastic applicator tampon product supported with extensive advertising and promotion. The competitive spending in the tampon category behind the launch of this product throughout 2003 has led to a decline in our net sales and market share in tampons. Although we believe that we have stabilized our existing market share in the tampon category, there can be no assurance that our market share will not deteriorate in the future.
Sales of some of our products may suffer because of unfavorable weather conditions.
Our businesses, especially Sun Care, may be negatively impacted by unfavorable weather conditions. In accordance with industry practice, we allow customers to return unsold Sun Care products at the end of the season and these product returns are usually higher in years when the weather is unseasonably cool or wet. This could adversely affect our business and operating results. In 2003, the Sun Care category declined 5.3% as a result of bad weather. We believe this impacted our ability to increase net sales in our Sun Care business in 2003. In addition, consumption of our Feminine Care andWet Ones products may be affected by unfavorable weather, although to a lesser extent than the Sun Care business, due primarily to reduced levels of outdoor activities.
We may be adversely affected by the trend toward retail trade consolidation.
With the growing trend toward retail trade consolidation, we are increasingly dependent upon key retailers whose bargaining strength is growing. We may be negatively affected by changes in the policies of our retail trade customers, such as inventory destocking, limitations on access to shelf space and other conditions.
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We rely on a few large customers for a significant portion of our sales.
A few of our customers are material to our business and operations. In fiscal 2003, Wal-Mart, our largest customer, and Target, our second largest customer, represented approximately 27% and 11%, respectively, of our consolidated net sales. Aggregate consolidated net sales to our next three largest customers represented approximately 12% of our total consolidated net sales in fiscal 2003. The loss of sales to a large customer could materially and adversely affect us, our operating results, our financial condition and our projections and beliefs as to our future performance.
Our earnings are impacted by our level of fixed operating costs.
Our cost structure contains a certain level of fixed operating costs. Since all of our costs are not variable in nature, the volume of product manufactured impacts our overall cost per unit of product. Since our revenue is derived solely from the sale of products to our customers, a decrease in product sales, and the related reduction in units produced, may result in a higher cost per unit and a lower gross profit margin due to the impact of these fixed operating expenses.
We may incur goodwill and other intangible asset impairment charges.
Acquisitions recorded as purchases for accounting purposes have resulted, and in the future may result, in the recognition of significant amounts of goodwill and other intangible assets. At March 27, 2004 we had $494.3 million of goodwill and $138.0 million of other intangible assets consisting primarily of trademarks, patents and other intellectual property. We review these intangible assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Changes in the fair value of our businesses caused by various factors, some of which may be out of our control, may cause us to record impairment charges in the future.
Our initiatives to reduce costs may not materialize.
We have recently begun an operational restructuring to make operational improvements to increase effectiveness and profitability. There is no assurance that we will achieve the expected results.
Our acquisition strategy is subject to risks and may not be successful.
We consider the acquisition of other companies engaged in the manufacture and sale of consumer products. At any given time, we may be in various stages of looking at these opportunities. Acquisitions are subject to the negotiation of definitive agreements and to other matters typical in acquisition transactions. There can be no assurance that we will be able to identify desirable acquisition candidates or will be successful in entering into definitive agreements relating to them. Even if definitive agreements are entered into, we cannot assure you that any future acquisition will be completed or that anticipated benefits of the acquisition will be realized. The process of integrating acquired operations into our operations may result in unforeseen operating difficulties, may absorb significant management attention and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing operations. Future acquisitions by us could result in the incurrence of additional debt and contingent liabilities, which may have a negative effect on our operating results.
Haas Wheat controls a majority of our Board of Directors and its interests, as equity holders, may conflict with yours, as debt holders.
Haas Wheat & Partners, L.P. and its affiliates ("Haas Wheat") together hold approximately 33% of the outstanding shares of our common stock and will likely continue to exercise control over our business by virtue of their voting power with respect to the election of directors. Circumstances may
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occur in which the interests of Haas Wheat could be in conflict with the interests of the holders of the exchange notes. In addition, these equity holders may have an interest in pursuing acquisitions, divestitures or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to holders of the exchange notes. See "Management," "Principal Security Ownership and Certain Beneficial Owners" and "Certain Relationships and Related Party Transactions."
We may face liability associated with the use of products for which patent ownership or other intellectual property rights are claimed.
We may be subject to claims or inquiries regarding alleged unauthorized use of a third party's intellectual property. An adverse outcome in any intellectual property litigation could subject us to significant liabilities to third parties, require us to license technology or other intellectual property rights from others, require us to comply with injunctions to cease marketing or using certain products or brands, or require us to redesign, reengineer or rebrand certain products or packaging, any of which could affect our business, financial condition and results of operations. If we are required to seek licenses under patents, trademarks or other intellectual property rights of others, we may not be able to acquire these licenses on acceptable terms, if at all. In addition, the cost of responding to an intellectual property infringement claim, in terms of legal fees and expenses and the diversion of management resources, whether or not the claim is valid, could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to adequately protect our intellectual property.
While we believe that our patents, trademarks and other intellectual property have significant value, it is uncertain that this intellectual property, or any intellectual property acquired or developed by us in the future, will provide meaningful competitive advantages. There can be no assurance that our patents or pending applications will not be challenged, invalidated or circumvented by competitors or that rights granted thereunder will provide meaningful proprietary protection. Moreover, competitors may infringe our patents or successfully avoid them through design innovation. To combat infringement or unauthorized use, we may need to commence litigation, which can be expensive and time-consuming. In addition, in an infringement proceeding a court may decide that a patent, trademark or other intellectual property right of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology or other intellectual property right at issue on the ground that it is non-infringing. Policing unauthorized use of our intellectual property is difficult and expensive, and we cannot assure you that we will be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as do the laws of the United States.
Risks Relating to Our Indebtedness
We have substantial debt, which could impair our financial condition.
We are highly leveraged and have substantial debt service obligations. At March 27, 2004, our long-term debt was $827.5 million and our stockholders' equity was $36.3 million. In addition, we had approximately $94.7 million of available borrowings under the borrowing base formula under our new credit facility, including outstanding letters of credit. Also, we may incur additional debt in the future, subject to certain limitations contained in our debt instruments.
The degree to which we are leveraged could have important consequences to us, including:
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We may not be able to generate sufficient cash flow to meet our debt service obligations, including payments on the exchange notes.
Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, including payments on the notes, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, or that additional financing could be obtained on acceptable terms, if at all. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, or at all, would have an adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations on the exchange notes.
The terms of our new credit facility and our indentures may restrict our current and future operations, particularly our ability to respond to changes or to take some actions.
Our new credit facility and our indentures contain, and any future refinancing of our new credit facility and the notes will likely contain, a number of restrictions and limitations that impose significant operating and financial restrictions on us. Our new credit facility and our indentures include limitations restricting, among other things, our ability to:
The restrictions and limitations in the new credit facility generally are more restrictive than those in our indentures.
A failure by us to comply with the covenants contained in our new credit facility or our indentures could result in an event of default which could materially and adversely affect our operating results, our financial condition and our liquidity. A failure to comply with the restrictions contained in our new credit facility could lead to an event of default, which could result in an acceleration of the
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indebtedness under our new credit facility and could cause a cross-default of other indebtedness. A failure to comply with the restrictions in our indentures could result in an event of default under our indentures and could cause a cross-default of other indebtedness. We cannot assure you that our future operating results will be sufficient to enable compliance with the covenants in our new credit facility, our indentures or other indebtedness or to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments, including those under the exchange notes. See "Description of Other Indebtedness—New Credit Facility" and "Description of the Notes."
Risks Relating to the Exchange Notes
The collateral securing the exchange notes and the guarantees, other than our and the guarantors' intellectual property, is subject to control by creditors with first liens. If there is a default, the value of the collateral may not be sufficient to repay both the first lien creditors and the holders of the exchange notes.
The rights of the holders of the exchange notes with respect to the collateral securing the exchange notes will be limited pursuant to the terms of the security documents relating to the exchange notes and the intercreditor provisions in the indenture governing the exchange notes. Under the terms of those agreements and the intercreditor provisions in the indenture, the holders of the exchange notes will have a second lien on substantially all of the collateral, other than our and the guarantors' intellectual property, that secure obligations under our new credit facility. Accordingly, any proceeds received upon a realization of the collateral, other than our and the guarantors' intellectual property (but excluding certain inventory bearing intellectual property and license royalties), securing the exchange notes and our new credit facility will be applied first to amounts due under our new credit facility, amounts due to certain other creditors that have the benefit of the first liens and certain administrative expenses before any amounts will be available to pay the holders of exchange notes. Under the terms of the indenture governing the exchange notes, we will also be permitted in the future to incur additional indebtedness which can be secured by the collateral, other than our and the guarantors' intellectual property, on a first lien basis and which will be entitled to payment out of the proceeds of any sale of such collateral before the holders of exchange notes are entitled to any recovery from such collateral.
The holders of the first liens control substantially all matters related to the collateral, other than our and the guarantors' intellectual property (but excluding certain inventory bearing intellectual property and license royalties). The holders of the first liens may dispose of, release or foreclose on, or take other actions with respect to the shared collateral with which holders of the exchange notes may disagree or that may be contrary to the interests of holders of the exchange notes. To the extent shared collateral is released from the first liens, the second liens securing the exchange notes and the guarantees will also automatically be released. In addition, the security documents will generally provide that, so long as the first liens are in effect, the holders of the first liens may change, waive, modify or vary the security documents (including by way of a waiver of past defaults under the security documents) without the consent of the holders of the exchange notes, provided that any such change, waiver or modification does not materially adversely affect the rights of the holders of the exchange notes and not the other secured creditors in a like or similar manner. The holders of the first lien can also automatically release the second lien on such collateral securing the exchange notes and the guarantees in certain circumstances where the sale of assets is permitted by the indenture governing the exchange notes. Except under limited circumstances, if at any time the first liens cease to be in effect, the second liens securing the exchange notes and the guarantees will also be released and the exchange notes and guarantees will become unsecured senior obligations. See "Description of the Notes—Security."
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The right of the collateral agent to foreclose upon and sell the collateral upon the occurrence of an event of default also would be subject to limitations under applicable bankruptcy laws if a bankruptcy proceeding were commenced against us or any of our subsidiaries. Additionally, there may not be sufficient collateral to pay all or any of the exchange notes, especially if we incur additional senior secured indebtedness under our new credit facility and these exchange notes, which will dilute the value of the collateral securing the exchange notes.
The collateral securing the exchange notes will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections as may be accepted by the lenders under our new credit facility and other creditors that have the benefit of first liens on the collateral from time to time, whether on or after the date the exchange notes are issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the collateral securing the exchange notes as well as the ability of the collateral agent to realize or foreclose on such collateral. The initial purchasers of the initial notes neither analyzed the effect of, nor participated in any negotiations relating to such exceptions, defects, encumbrances, liens and imperfections and the existence thereof could adversely affect the value of the collateral securing the exchange notes as well as the ability of the collateral agent to realize or foreclose on such collateral.
No appraisals of any collateral have been prepared in connection with this offering. The value of the collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers for the collateral. By their nature some or all of the pledged assets may be illiquid and may have no readily ascertainable market value. The value of the assets pledged as collateral for the notes could be impaired in the future as a result of changing economic conditions, our failure to implement our business strategy, competition or other future trends.
The proceeds from the sale or sales of the collateral securing the exchange notes may not be sufficient to satisfy the amounts outstanding under the notes and other obligations secured by the second liens after payment in full of all obligations secured by the first liens on such collateral. If such proceeds were not sufficient to repay amounts outstanding under the exchange notes, then holders of the exchange notes (to the extent not repaid from the proceeds of the sale of the collateral) would only have an unsecured claim against our remaining assets. At March 27, 2004, the aggregate amount of outstanding indebtedness of our company and the guarantors under our new credit facility was $27.5 million and approximately $94.7 million was available for future borrowings under our new credit facility. We or any guarantor may incur additional first or second lien indebtedness under the indenture governing the notes subject to certain specified conditions. Please see "Description of the Notes—Certain Covenants—Limitation on Indebtedness" for further information.
We will in most cases have control over the collateral, and the sale of particular assets by us or the guarantors could reduce the pool of assets securing the exchange notes and the guarantees.
The security documents allow us and the guarantors to remain in possession of, retain exclusive control over, to freely operate and to collect, invest and dispose of any income from, the collateral securing the exchange notes. To the extent we sell any assets that constitute such collateral, the proceeds from such sale will be subject to the liens securing the exchange notes only to the extent such proceeds would otherwise constitute "collateral" securing the exchange notes and the guarantees under the security documents. To the extent the proceeds from any such sale of collateral do not constitute "collateral" under the security documents, the pool of assets securing the exchange notes and the guarantees would be reduced and the exchange notes and the guarantees would not be secured by such proceeds. To the extent the proceeds from any such sale of collateral do not constitute "collateral" for which the exchange notes have a first lien under the security documents, the exchange notes may only be secured by a second lien on such collateral.
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With respect to assets securing the exchange notes, the release of the guarantees of the exchange notes or additional guarantees may be controlled under some circumstances by the lenders under our new credit facility.
The exchange notes will be fully and unconditionally guaranteed on a senior secured basis by each of our future and existing domestic subsidiaries that guarantee our new credit facility. Releases of the guarantees of the exchange notes are permitted under some circumstances. See "Description of the Notes—Subsidiary Guarantees." If a guarantee is released, you will not have a claim against that guarantor and will only be a creditor of our company or any guarantor whose obligation was not released.
It may be difficult to realize the value of the collateral pledged to secure the exchange notes.
The security interest of the trustee may be subject to practical problems generally associated with the realization of security interests in the collateral. For example, the trustee may need to obtain the consent of a third party to obtain or enforce a security interest in a contract. We cannot assure you that the trustee will be able to obtain any such consent. If the trustee exercises its rights to foreclose on certain assets, transferring required government approvals to, or obtaining new approvals by, a purchaser of assets may require governmental proceedings with consequent delays.
Bankruptcy may limit the collateral agent's ability to foreclose on the collateral securing the exchange notes, and this may cause such collateral to be an insufficient source from which to pay amounts due on the exchange notes.
The right of the collateral agent to repossess and dispose of, or otherwise exercise remedies in respect of, the collateral securing the exchange notes upon the occurrence of an event of default may be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against us or a guarantor prior to the collateral agent having repossessed and disposed of, or otherwise exercised remedies in respect of, the collateral. Under applicable federal bankruptcy laws, a secured creditor such as the collateral agent is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, applicable federal bankruptcy laws generally permit the debtor to continue to retain and to use collateral even though the debtor is in default under the applicable debt instruments if the secured creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to circumstances, but it is intended in general to protect the value of the secured creditor's interest in the collateral and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments with respect to the exchange notes could be delayed following commencement of a bankruptcy case, whether or when the collateral agent could repossess or dispose of the collateral or whether or to what extent holders of the exchange notes would be compensated for any delay in payment or loss of value of the collateral through the requirement of "adequate protection." Furthermore, in the event the bankruptcy court determines the value of the collateral is not sufficient to repay all amounts due on the exchange notes, the holders of the exchange notes would hold "undersecured claims." Applicable federal bankruptcy laws do not permit the payment and/or accrual of interest, costs and attorney's fees for "undersecured claims" during the debtor's bankruptcy case.
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Any future pledge of collateral might be avoidable by a trustee in bankruptcy.
Any future pledge of collateral in favor of the trustee might be avoidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including, among others, if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge, or, in certain circumstances a longer period.
Your right to receive payments on the exchange notes could be adversely affected if any of our non-guarantor subsidiaries declares bankruptcy, liquidates or reorganizes.
Although all of our domestic subsidiaries on the issue date will guarantee the exchange notes, our existing and future foreign subsidiaries will not be required to guarantee the exchange notes. In the event that any of our non-guarantor subsidiaries becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of their indebtedness and their trade creditors will generally be entitled to payment on their claims from the assets of those subsidiaries before any of those assets are made available to us. Consequently, your claims in respect of the exchange notes will be structurally subordinated to all of the liabilities of our non-guarantor subsidiaries. As of December 27, 2003, our non-guarantor subsidiaries had approximately $8.6 million of liabilities (including trade payables). The non-guarantor subsidiaries generated $48.1 million of our net revenue in the fiscal year ended December 27, 2003, and held $30.4 million of our assets as of December 27, 2003.
Rights of holders of exchange notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral.
The security interests in the collateral securing the exchange notes include domestic assets, both tangible and intangible, whether now owned or acquired or arising in the future. Applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that the trustee will monitor, or that we will inform the trustee of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after acquired collateral. The trustee does not have any duty to monitor the acquisition of additional property or rights that constitute collateral or perfection of the security interests therein. Such failure may result in the loss of the security interest therein or the priority of the security interest in favor of the holders of exchange notes against third parties.
The guarantees and the liens securing the guarantees may not be enforceable because of fraudulent conveyance laws.
The incurrence of the guarantees and the grant of liens by the guarantors (including any future guarantees and future liens) may be subject to review under U.S. federal bankruptcy law or relevant state fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of the guarantors' unpaid creditors. Under these laws, if in such a case or lawsuit a court were to find that, at the time such guarantor incurred a guarantee of the notes or granted the lien, such guarantor:
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then such court could avoid the guarantee or lien of such guarantor or subordinate the amounts owing under such guarantee or such lien to such guarantor's presently existing or future debt or take other actions detrimental to you.
It may be asserted that the guarantors incurred their guarantees for our benefit and they incurred the obligations under the guarantees or granted the liens for less than reasonably equivalent value or fair consideration.
The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in any such proceeding. Generally, a company would be considered insolvent if, at the time it incurred the debt or issued the guarantee, either:
If a guarantee or a lien is avoided as a fraudulent conveyance or found to be unenforceable for any reason, you will not have a claim against that obligor and will only be a creditor of our company or any guarantor whose obligation was not set aside or found to be unenforceable.
We believe that each guarantor will receive, directly and indirectly, reasonably equivalent value for the incurrence of its respective guarantee and granting its respective lien. In addition, on the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its respective guarantee and respective lien, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making such determinations or that a court would agree with our conclusions in this regard.
The capital stock securing the exchange notes will automatically be released from the second lien and no longer be deemed to be collateral to the extent the pledge of the capital stock would require the filing of separate financial statements for any of our subsidiaries with the SEC.
The indenture governing the notes and the security documents will provide that, to the extent that any rule is adopted, amended or interpreted that would require the filing with the SEC (or any other governmental agency) of separate financial statements of any of our subsidiaries due to the fact that the subsidiary's capital stock or other securities secure the notes, then such capital stock or other securities will automatically be deemed not to be part of the collateral securing the notes to the extent necessary to not be subject to such requirement. As a result, holders of the exchange notes could lose all or a portion of their security interest in the capital stock or other securities if any such rule comes in effect.
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We may be unable to purchase your exchange notes upon a change of control.
Upon the occurrence of specified "change of control" events, we will be required to offer to purchase each holder's exchange notes at a price of 101% of their principal amount plus accrued and unpaid interest, unless all exchange notes have been previously called for redemption. The holders of our initial notes and 93/8% Senior Subordinated Notes also have this right. We may not have sufficient financial resources to purchase all of the exchange notes, our initial notes and our 93/8% Senior Subordinated Notes that holders tender to us upon a change of control offer. The occurrence of a change of control also could constitute an event of default under our new credit facility and/or any of our future credit agreements, in which case our lenders may terminate their commitments under our credit agreements and accelerate all amounts outstanding under the credit agreements. Our bank lenders may also have the right to prohibit any such purchase or redemption, in which event we would be in default on the exchange notes. See "Description of the Notes—Events of Defaults and Remedies."
An active trading market may not develop for the exchange notes.
Before the offering of the exchange notes, there has been no established trading market for the exchange notes. We do not intend to list the exchange notes on any national securities exchange or to seek the admission of the exchange notes for quotation through the National Association of Securities Dealers Automated Quotation System. Although the initial purchasers of the initial notes have advised us that they currently intend to make a market in the exchange notes, they are not obligated to do so and may discontinue such market making activity at any time without notice. In addition, market making activity will be subject to the limits imposed by the Securities Act and Exchange Act, and may be limited during the pendency of any self registration statement. There can be no assurance as to the development or liquidity of any market for the exchange notes, the ability of the holders of the exchange notes to sell their exchange notes or the price at which the holders would be able to sell their exchange notes. Any exchange notes traded after they are initially issued may trade at a discount from their price at the time of the exchange offer. The trading price of the exchange notes depends on prevailing interest rates, the market for similar securities and other factors, including economic conditions and our financial condition, performance and prospects. Historically, the market for noninvestment grade debt has been subject to disruptions that have caused substantial fluctuations in the prices of the securities.
The liquidity of, and trading market for the exchange notes, may also be adversely affected by, among other things:
You should consider the United States federal income tax consequences of owning the exchange notes.
We intend to treat the exchange notes as contingent payment debt instruments for United States federal income tax purposes. Under these regulations, a holder, regardless of its accounting method, will be required to include amounts in income, as original issue discount, on a constant yield to maturity basis at a rate comparable to the rate on our non-contingent, fixed-rate debt instrument with
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terms and conditions otherwise similar to the exchange note. Because we have determined that the comparable rate is the same as the stated interest rate on the exchange notes, we expect that the amount of a holder's interest income inclusions should not materially differ from the inclusions that would result if the exchange notes were not subject to the contingent payment debt regulations, and we intend to take a position consistent with the foregoing for all relevant tax reporting purposes. However, the rules governing contingent payment debt instruments are complex and there can be no assurance that the Internal Revenue Service will agree with this result. In addition, any gain recognized by you on a sale, exchange or retirement of an exchange note generally will be treated as ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and thereafter, capital loss. For more information, see "Certain United States Federal Income Tax Consequences." Holders are urged to consult their own tax advisors as to the U.S. federal, state and other tax consequences of acquiring, owning and disposing of the exchange notes.
Risks Related to the Exchange Offer
The issuance of the exchange notes may adversely affect the market for the initial notes.
To the extent the initial notes are tendered and accepted in the exchange offer, the trading market for the untendered and tendered but unaccepted initial notes could be adversely affected. Because we anticipate that most holders of the initial notes will elect to exchange their initial notes for exchange notes due to the absence of restrictions on the resale of exchange notes under the Securities Act, we anticipate that the liquidity of the market for any initial notes remaining after the completion of this exchange offer may be substantially limited. Please refer to the section in this prospectus entitled "The Exchange Offer—Your Failure to Participate in the Exchange Offer Will Have Adverse Consequences."
Some persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes.
Based on interpretations of the staff of the Commission contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983), we believe that you may offer for resale, resell or otherwise transfer the exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act. However, in some instances described in this prospectus under "Plan of Distribution," you will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer your exchange notes. In these cases, if you transfer any exchange note without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from registration of your exchange notes under the Securities Act, you may incur liability under this act. We do not and will not assume, or indemnify you against, this liability.
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We will not receive any cash proceeds from the issuance of the exchange notes in exchange for the outstanding initial notes. We are making this exchange solely to satisfy our obligations under the registration rights agreements entered into in connection with the offering of the initial notes. In consideration for issuing the exchange notes, we will receive initial notes in like aggregate principal amount.
On February 19, 2004, we issued and sold the initial notes in a private placement and made borrowings under our new credit facility. We used the net proceeds received from that offering and the borrowings to repay $467.5 million of borrowings and accrued interest under our previous credit facility, repay $30.1 million outstanding under our Receivables Facility and pay approximately $12.7 million of fees and expenses associated with the offering and the borrowings. As of December 27, 2003, the interest rate on our previous credit facility was 4.73%, the cost of our previous Receivables Facility was 5.5%, the maturity of our previous credit facility was May 2007 and the maturity of our Receivables Facility was January 2004.
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The following table sets forth our cash and cash equivalents and consolidated capitalization as of March 27, 2004. This table should be read in conjunction with "Prospectus Summary—The Refinancing Transactions," "Use of Proceeds," "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements, including the notes thereto, appearing elsewhere or incorporated herein by reference in this prospectus. The consolidated financial data at March 27, 2004 in the following table are derived from our unaudited consolidated balance sheet as of March 27, 2004.
| | At March 27, 2004 | |||
|---|---|---|---|---|
| | (dollars in thousands) | |||
| Cash and Cash Equivalents | $ | 22,884 | ||
| Long-term Debt: | ||||
| New Credit Facility: | ||||
| Revolving Credit Facility(1) | 20,000 | |||
| Term Loan | 7,500 | |||
| 8% Senior Secured Notes due 2011 | 460,000 | |||
| 93/8% Senior Subordinated Notes due 2011 | 340,000 | |||
| Total Long-Term Debt | 827,500 | |||
| Total Stockholders' Equity | 36,285 | |||
| Total Capitalization | $ | 863,785 | ||
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth in the following table are selected historical consolidated financial data of the company as of and for each of the periods specified. The consolidated balance sheet and consolidated statements of earnings data as of and for each of the twelve month periods ended December 27, 2003, December 28, 2002, December 29, 2001, December 30, 2000 and December 25, 1999 and have been derived from our consolidated financial statements, which have been audited by KPMG LLP, independent registered public accountants. The consolidated statements of earnings data for the three months ended March 27, 2004 and March 29, 2003, and the consolidated balance sheet data as of March 27, 2004 are derived from our unaudited consolidated financial statements incorporated by reference in this prospectus. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring items, which the Company considers necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the three months ended March 27, 2004 are not necessarily indicative of the results that may be expected for the entire year ending December 25, 2004. The consolidated statements of earnings data for the twelve month periods ended December 30, 2000 and December 25, 1999 and the consolidated balance sheet data as of December 29, 2001, December 30, 2000 and December 25, 1999, are derived from our audited consolidated financial statements not included in this prospectus. Our fiscal year end is on the last Saturday nearest to December 31 and, as a result, a fifty-third week is added every six or seven years, with the most recent 53-week period being fiscal year 2000. The following table should be read in conjunction with "Use of Proceeds," "Capitalization," "Management's Discussion and Analysis of
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Financial Condition and Results of Operations" and our consolidated financial statements, including the related notes thereto, appearing elsewhere or incorporated by reference in this prospectus.
| | Twelve Months Ended | Three Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | December 27, 2003 | December 28, 2002 | December 29, 2001 | December 30, 2000 | December 25, 1999 | March 27, 2004 | March 29, 2003 | |||||||||||||||
| | (dollars in thousands) | |||||||||||||||||||||
| Consolidated Statements of Earnings Data: | ||||||||||||||||||||||
| Net sales | $ | 657,721 | $ | 719,087 | $ | 723,518 | $ | 733,363 | $ | 695,536 | $ | 195,985 | $ | 180,933 | ||||||||
| Gross profit | 340,420 | 390,654 | 389,711 | 398,380 | 385,615 | 104,286 | 96,750 | |||||||||||||||
| Selling, general and administrative(1) | 249,810 | 240,620 | 233,660 | 228,093 | 209,322 | 66,995 | 64,721 | |||||||||||||||
| Restructuring and asset impairment(1)(2) | 3,873 | 7,599 | — | — | — | 93 | — | |||||||||||||||
| Amortization of intangibles(3) | 903 | 928 | 22,060 | 22,350 | 21,064 | 226 | 226 | |||||||||||||||
| Operating earnings | 85,834 | 141,507 | 133,991 | 147,937 | 155,229 | 36,972 | 31,803 | |||||||||||||||
| Interest expense, net | 55,038 | 59,543 | 75,861 | 84,884 | 78,961 | 16,406 | 13,447 | |||||||||||||||
| Expenses related to retirement of debt(4) | — | 5,882 | 32,165 | — | — | 6,432 | — | |||||||||||||||
| Other expenses | 1,975 | 2,653 | 2,103 | — | — | 299 | 453 | |||||||||||||||
| Cumulative effect of change in accounting principle, net of tax benefit(5) | — | 12,423 | — | — | — | — | — | |||||||||||||||
| Net earnings | $ | 18,232 | $ | 48,904 | $ | 11,545 | $ | 35,544 | $ | 44,071 | $ | 8,376 | $ | 11,403 | ||||||||
Other Financial Data: | ||||||||||||||||||||||
| EBITDA(6)(7) | $ | 98,864 | $ | 135,488 | $ | 134,923 | $ | 181,834 | $ | 186,140 | $ | 34,143 | $ | 35,047 | ||||||||
| Depreciation | 14,102 | 14,011 | 13,140 | 11,547 | 9,847 | 3,676 | 3,471 | |||||||||||||||
| Capital expenditures | 18,564 | 16,445 | 19,950 | 22,724 | 20,802 | 3,035 | 3,673 | |||||||||||||||
| Gross margin | 51.8 | % | 54.3 | % | 53.9 | % | 54.3 | % | 55.4 | % | 53.2 | % | 53.5 | % | ||||||||
| Ratio of earnings to fixed charges(8) | 1.48x | 2.15x | 1.30x | 1.71x | 1.93x | 1.79x | 2.22x | |||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||
| Working capital | $ | 113,950 | $ | 114,926 | $ | 107,780 | $ | 74,233 | $ | 92,006 | $ | 162,232 | $ | 126,412 | ||||||||
| Total assets | 993,298 | 1,078,187 | 1,105,172 | 1,139,384 | 1,148,652 | 1,042,395 | 1,111,330 | |||||||||||||||
| Total long-term debt(9) | 793,250 | 827,750 | 888,800 | 931,563 | 987,876 | 827,500 | 821,250 | |||||||||||||||
| Stockholders' equity (deficit) | $ | 27,788 | $ | 5,533 | $ | (44,570 | ) | $ | (56,063 | ) | $ | (94,868 | ) | $ | 36,285 | $ | 17,774 | |||||
As a result of the February 19, 2004 refinancing, we recorded a loss of $6.4 million associated with the write-off of related
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unamortized deferred financing costs, net of $0.5 million gain from the repurchase on the open market of $10.0 million principal amount of our 93/8% Senior Subordinated Notes.
We believe issuers of "high yield" securities also present EBITDA because investors, analysts and rating agencies consider it useful in measuring the ability of those issuers to meet debt service obligations. We believe EBITDA is an appropriate supplemental measure of debt service capacity because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation and amortization are non-cash charges.
EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only supplementally. See the statements of cash flows included in our consolidated financial statements on our fiscal 2003 Form 10-K, incorporated herein by reference.
The table below reconciles EBITDA to net earnings, the most directly comparable GAAP measure.
| | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Twelve Months Ended | Three Months Ended | ||||||||||||||||||||
| | December 27, 2003 | December 28, 2002 | December 29, 2001 | December 30, 2000 | December 25, 1999 | March 27, 2004 | March 29, 2003 | |||||||||||||||
| | (dollars in thousands) | |||||||||||||||||||||
| Net earnings | $ | 18,232 | $ | 48,904 | $ | 11,545 | $ | 35,544 | $ | 44,071 | $ | 8,376 | $ | 11,403 | ||||||||
| Income tax expense | 10,589 | 12,102 | 12,317 | 27,509 | 32,197 | 5,459 | 6,500 | |||||||||||||||
| Interest expense, net | 55,038 | 59,543 | 75,861 | 84,884 | 78,961 | 16,406 | 13,447 | |||||||||||||||
| Amortization of intangibles | 903 | 928 | 22,060 | 22,350 | 21,064 | 226 | 226 | |||||||||||||||
| Depreciation | 14,102 | 14,011 | 13,140 | 11,547 | 9,847 | 3,676 | 3,471 | |||||||||||||||
| EBITDA | $ | 98,864 | $ | 135,488 | $ | 134,923 | $ | 181,834 | $ | 186,140 | $ | 34,143 | $ | 35,047 | ||||||||
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We are a leading manufacturer and marketer of a diversified portfolio of well-recognized branded consumer and personal products, including:
| •Playtex Infant Care products, | •Banana Boat Sun Care products, | |
| •Playtex Diaper Genie, | •Woolite rug and upholstery cleaning products, | |
| •Wet Ones pre-moistened towelettes, | •Playtex gloves, | |
| •Baby Magic baby toiletries, | •Ogilvie home permanent products, and | |
| •Playtex Feminine Care products, | •Binaca breath freshener products. |
In fiscal 2003, approximately 97% of our net sales came from products in which we held the number one or two market share position in the United States. Products in which we held the number one U.S. market share position for fiscal 2003 and their market share in their respective categories were:
| •Diaper Genie diaper pails (93%), | •Playtex cups and mealtime products (45%), | |
| •Playtex disposable liners (83%), | •Binaca liquid breath freshener products (40%), | |
| •Ogilvie home permanent products (75%), | •Mr. Bubble children's bubble bath (30%), and | |
| •Wet Ones pre-moistened towelettes (68%), | •Playtex gloves (28%). |
Products in which we held the number two U.S. market share position for fiscal 2003 and their market share in their respective categories were:
| •Woolite rug and upholstery cleaning | •Banana Boat Sun Care products (21%), and | |
| products (28%), | •Playtex reusable bottles (21%), and | |
| •Playtex tampons (27%), | •Baby Magic baby toiletries (8%). |
History
Our company was founded in 1932 as The International Latex Company (later International Playtex) as a manufacturer using latex based technology. We introduced our first latex gloves in 1954 and acquired a tampon manufacturer in the mid-1960's, in addition to introducing our first disposable baby bottles and nipples. As such, we were an early manufacturer and marketer of infant feeding products, tampon and latex glove products and we developed strong leadership positions in each category. In 1988, our women's apparel operations were spun off and are currently owned by Sara Lee Corporation. During the mid/late 1990's, we made a series of strategic acquisitions, which have diversified and strengthened our product portfolio, includingBanana Boat andWoolite in 1995;Wet Ones,Ogilvie,Binaca,Mr. Bubble and others in 1998; as well asDiaper Genie andBaby Magic in 1999. Throughout our history, Playtex has grown through industry leading product innovation and portfolio enhancing acquisitions of leading North American brands.
The Company
We are a leading manufacturer and marketer of a diversified portfolio of well-recognized branded consumer and personal products. For the twelve months ended December 27, 2003, we generated approximately 97% of our sales from products in which we held the number one or number two market share position in the U.S. Our brand name recognition, consumer-focused product innovation, acquisition strategy and well-established distribution channels have enabled us to maintain a leading market position in attractive product categories. For the twelve months ended December 27, 2003, we generated net sales of $657.7 million, net earnings of $18.2 million and EBITDA of $98.9 million.
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The following table sets forth net sales and market share data for our principal product lines for the fiscal year 2003, for each of our divisions—Personal Products, Consumer Products and International/Corporate Sales (dollars in millions):
| Divisions | Principal Brand Name | Market Position | FY 2003 Market Share | FY 2003 Net Sales | Percent of Net Sales | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Personal Products Division: | |||||||||||||||
| Infant Care—Infant Feeding & Soothing | Playtex | 1 | 34.2 | % | $ | 98.9 | 15.0 | % | |||||||
| —Diaper Disposal System | Diaper Genie | 1 | 92.7 | 40.3 | 6.1 | ||||||||||
| —Hands and Face Towelettes | Wet Ones | 1 | 68.1 | 37.0 | 5.6 | ||||||||||
| —Bath Additives | Mr. Bubble | 1 | 30.0 | 5.9 | 0.9 | ||||||||||
| —Infant Toiletries | Baby Magic | 2 | 8.0 | 29.4 | 4.5 | ||||||||||
| —Other | 2.0 | 0.4 | |||||||||||||
| Total Infant Care | 213.5 | 32.5 | |||||||||||||
| Total Feminine Care | Playtex | 2 | 26.6 | 164.8 | 25.0 | ||||||||||
| Total Personal Products Division | 378.3 | 57.5 | |||||||||||||
Consumer Products Division: | |||||||||||||||
Sun Care | Banana Boat | 2 | 21.4 | 84.3 | 12.8 | ||||||||||
Household Products—Carpet Cleaning | Woolite | 2 | 27.9 | 30.1 | 4.6 | ||||||||||
| —Household Gloves | Playtex | 1 | 27.9 | 16.2 | 2.5 | ||||||||||
| Personal Grooming—At-Home Permanents | Ogilvie | 1 | 74.7 | 12.9 | 2.0 | ||||||||||
| —Breath Spray & Drops | Binaca | 1 | 39.8 | 3.1 | 0.5 | ||||||||||
| —Other | 9.1 | 1.3 | |||||||||||||
| Total Household and Personal Grooming Products | 71.4 | 10.9 | |||||||||||||
| Total Consumer Products Division | 155.7 | 23.7 | |||||||||||||
International/Corporate Sales Division: | 123.7 | 18.8 | |||||||||||||
| Total | $ | 657.7 | 100.0 | % | |||||||||||
Competitive Strengths
We believe we are distinguished by the following competitive strengths:
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tampon market is characterized by steady growth, a high degree of customer brand loyalty and a relatively low sensitivity to economic cycles. By comparison, the Infant Care and Sun Care markets have historically grown more rapidly. The growth in the Infant Care market is principally due to the receptiveness of consumers to new products, and the growth in the Sun Care market is principally due to increased consumer awareness of sun care issues coupled with more active lifestyles.
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The chamomile and lavender scents calm and soothe and have helped reinvigorate this line;
Business Strategy
The principal features of our growth strategy are outlined below:
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in increased effectiveness and profitability. We believe these improvements can be implemented without a significant increase in capital expenditures or loss of productivity. We believe these opportunities can result in annual savings between $12 and $14 million and can be fully realized by 2005.
Products
We are organized in three divisions, which allows us to focus more effectively on individual product lines, category management initiatives and certain specialty classes of trade. Our two largest divisions, the Personal Products Division and the Consumer Products Division, constituted approximately 81% of our consolidated net sales in fiscal 2003 and fiscal 2002 and 82% in fiscal 2001.
Personal Products Division—The Personal Products Division accounted for approximately 58% of our consolidated net sales in fiscal 2003 compared to 59% in fiscal 2002 and 58% in fiscal 2001. This Division includes Infant Care and Feminine Care products sold in the United States primarily to mass merchandisers, grocery and drug classes of trade. The Infant Care product category includes:
| Infant Feeding Products | Other Infant Care Products | |
|---|---|---|
| •Playtex disposable Nurser System, | •Diaper Genie diaper disposal system, | |
| •Playtex cups and mealtime products, | •Wet Ones towelettes, | |
| •Playtex reusable hard bottles, and | •Baby Magic infant toiletries, | |
| •Playtex pacifiers. | •Baby Magic baby wipes, and | |
| •Mr. Bubble children's bubble bath. |
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The Feminine Care product category includes a wide range of plastic and cardboard applicator tampons, as well as complementary products, marketed under such brand names as:
| Tampons | Complementary Products | |
|---|---|---|
| •Playtex Gentle Glide, | •Playtex Personal Cleansing Cloths for use in | |
| •Playtex Portables, | feminine hygiene, and | |
| •Playtex Slimfits, | •Playtex Heat Therapy patch to alleviate | |
| •Playtex Silk Glide; and | discomfort associated with menstrual pain. | |
| •Playtex Beyond. |
Infant Care—Infant Care accounted for approximately 56% of Personal Products net sales in fiscal 2003 compared to 54% in fiscal 2002 and 55% in fiscal 2001.
Our largest Infant Care business is infant feeding products, in which we held a market leading 34% market share in 2003. We are particularly strong in both the disposable feeding and the infant cup categories with 2003 market shares of 83% and 45%, respectively. We are also strong in the diaper pail category with our 93% market share leadingDiaper Genie brand. In pre-moistened towelettes, ourWet Ones brand held a 68% market share of the hand and face segment. OurMr. Bubble brand held a 30% market share of the bath additives category and became the market share leader in this category during fiscal 2002.Baby Magic held an 8% market share of the infant toiletries category and is strong in the lotions and bath segments with 15% market shares of each of those segments.
Our strategy for maintaining market leadership positions is centered on:
Disposable Feeding & Reusable Bottles—We offer both disposable feeding systems and reusable bottles in addition to nipples and other complementary products marketed under thePlaytex brand. Historically, we have focused on the disposable segment, as we believe that disposable bottle liners are healthier and more convenient than traditional reusable bottles. The disposable collapsible liner placed inside the holder limits the amount of air in-take by the baby and reduces painful spit-ups and burping.
OurDrop-Ins, patented, ready-formed disposable liners, made disposable liners much easier for parents to use and since its introduction have driven improved market share. Our disposable feeding systems currently account for 83% of the disposable feeding category.
In an effort to broaden our product offerings in the reusable bottle segment, we developedVentAire in 1998. TheVentAire bottle, has a patented air venting system that allows air to escape as the baby sucks on the nipple, much like the benefits of a disposable bottle. In 2004, we will introduce several new products that better align us with the needs of breast feeding mothers. These new products will help augment beast feeding, such as theVentAire NaturalShape nipple, aNaturaLatch nipple and the One Step Breast Milk Storage Kit, which allows the consumer to go from breast pump to storage to feeding using ourDrop-Ins disposable liner technology.
Cups—In 1994, we introduced the spill-proof cup, an innovation that changed the infant cup category. Prior to this introduction, there was no distinct market segment for children's cups. With the launch of the spill-proof line, the category has expanded from $34 million of retail sales to more than $140 million in 2003. We held a market leading 45% dollar market share in 2003. Over the past few years, we have introduced new products to expand our offerings in the cups segment, including theQuickStraw cup, theBig Sipster, a cup targeted at older children, and theGripster, made to fit small hands. In 2002, we introduced theInsulator cup line, representing the next generation in cup
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technology. TheInsulator cup is designed to maintain the temperature and freshness of liquids for a longer period of time. In 2003, we introduced theInsulator Sport, a new insulated leak-proof cup with a flip top straw lid for growing kids and a new trainer cup for toddlers,The First Sipster. In 2004, we added to our cup offerings with the introduction of theSparklin' Sipster, a clear cup with a distinctive "sparkling" look.
Diaper Disposal Systems—Diaper Genie, which we acquired in 1999, leads the diaper disposal market with a 93% market share in 2003. TheDiaper Genie business is comprised of two segments:
The diaper pail unit individually seals diapers in an odor-proof, germ-proof chain. The unit uses our proprietary refill liners, which typically lasts approximately one month. In 2001, we improved the diaper pail unit and introduced a new liner. We improved the cutter cap system, which makes the unit easier to use and we introduced a toddler film refill to the market for older age children, targeted to extend the usage period. A large percentage of the diaper pail units are given to expectant mothers as gifts. This provides a unique opportunity to begin cross-marketing our entire line of Infant Care products before the baby arrives.
Baby Toiletries—Baby Magic, which we acquired in 1999, occupies the number two position among the branded products in the U.S. baby toiletries category (defined as lotions, shampoos, powders, bath products, oils and gift packs), with an 8% dollar market share in 2003. Baby Magic is strongest in the lotions and bath segments with 15% dollar market share of each of those segments. The U.S. baby toiletries category has been extremely competitive since our acquisition of theBaby Magic brand in 1999. In the second quarter of 2002, we introduced a new line ofBaby Magic Calming Milk products including a foaming bath, bath lotion and massage lotion. We added a shampoo to the Calming Milk line in the fourth quarter of 2003. Our full year 2003 market share is down slightly compared to 2002 and 2001 due to the continued competitive environment.
Pre-moistened towelettes—Early in 1998 we acquiredWet Ones, the market share leader in the hands and face segment of the market with a 68% dollar market share in 2003.Wet Ones are used by parents and others in applications other than diaper changing, such as cleaning up after meals or traveling away from home. The pre-moistened towelette category experienced rapid growth over the last few years as competitors entered the category and invested heavily in advertising and promotion to generate trial of their product. Our retail consumption increased 7.3% and our dollar market share increased 5.0 percentage points in 2003 compared to 2002.
Other Infant Care Brands—OurMr. Bubble children's bubble bath brand is a widely recognized brand name among consumers and became the market share leader in the bath additives category in 2002.Mr. Bubble had a 30% dollar market share in 2003. In fiscal 2000, we decided to market our domestic baby wipes under theBaby Magic name and we continue to marketChubs internationally.
Our Infant Care marketing is focused on a specific group of people: new and expectant mothers. These consumers undertake an immense amount of research and education, both before the child is born and after, to enhance their ability to make informed decisions concerning the health and welfare of their new infants. As such, we utilize various techniques to communicate with parents in addition to traditional media advertising. Programs directed at new mothers include the distribution of millions of samples and coupons prenatally via childbirth instructors and postnatally in hospitals. We also provide educational materials to pediatricians, lactation consultants and hospitals such that new parents receive professional recommendations to use our Infant Care products. In addition, we have developed the website www.playtexbaby.com to provide information to new and expectant mothers as well as to introduce and market our entire line of Infant Care products. Across our entire line of Infant Care products, we communicate an image of quality, health, innovation and convenience to attract and retain users.
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Feminine Care—Playtex Feminine Care accounted for approximately 44% of Personal Products net sales in fiscal 2003 compared to 46% in fiscal 2002 and 45% in fiscal 2001. In the tampon category, consumer purchases are driven primarily by comfort, quality, protection and value, leading to intensely strong brand loyalties. For over 20 years,Playtex has been the second largest selling tampon brand overall in the U.S. and currently holds the largest position in the higher growth plastic applicator and deodorant segments. We have been able to grow our share of the tampon category since 1996 through a strategy of:
For fiscal 2003, we had a 27% dollar market share of the tampon category. Our overall share of the tampon category grew by 4.0 percentage points from 1996 through 2002 and the share differential between Playtex and the category share leader has narrowed from approximately 23 percentage points in 1996 to approximately 18 percentage points in 2003.
Late in the third quarter of 2002, the market share leader in the tampon category introduced a new plastic applicator tampon product supported with extensive advertising and promotional spending. While our dollar market share in the tampon category decreased three share points in 2003 due, in part, to the heavily promoted new competitive product our dollar market share for the month of December 2003 was essentially flat versus the same month in 2002. We have aggressively defended our market share in the tampon category with advertising support and the introduction of two product improvements including an improved soft pearlized plastic applicator and an improved deodorant fragrance, each of which enhances consumer benefits. The improved product was introduced in the first quarter of 2003 and reached retail shelves in the second quarter.
Plastic applicator tampons—Historically, our core strength has resided in plastic applicator tampons wherePlaytex is the clear leader with a 47% 2003 dollar market share and 59% 2002 market share of the plastic applicator segment. Though dollar market share declined in 2003 given the entry of a competitive plastic product,Gentle Glide remains the number one plastic brand in the market.
Gentle Glide is our most significant plastic applicator tampon. These soft plastic applicator tampons were designed with a smooth rounded tip and a unique double-layer construction, allowing for ease of insertion and comfortable fit as well as reliable leakage protection. OurGentle Glide line has provided a platform to launch new product enhancements. In 2003, we launched an improved, softer pearlescent applicator and improved deodorant fragrance.
Portables were developed to provide maximum convenience and portability. To meet consumer demand for smaller products,Portables have a compact construction with a two-piece applicator that allows the user to discreetly transport and easily assemble the product to a full-sized applicator. Additionally,Portables are associated with the same level of quality and protection asGentle Glide products.
Slimfits are designed to appeal to a key niche segment of the tampon category: young teenagers. The introduction ofSlimfitswas a direct result of our strategy to focus on first-time, feminine care product users. To promoteSlimfits, we utilized focused teen awareness campaigns and targeted product
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sampling.Slimfits have a narrower applicator and pledget providing for greater comfort and ease of insertion. We believeSlimfits will continue to build our business over the long-term by encouraging young women to use tampons rather than pads at an earlier age and by developing brand loyalty for our tampons at a time when lifelong preferences are forming. We believe these teenagers will develop a loyalty to thePlaytex brand and they will naturally transition to theGentle Glide line.
Flushable applicator tampons—Flushable applicator tampons represented approximately 5% of Feminine Care net sales for the Personal Products Division in fiscal 2003. We have a full line of flushable applicator tampons to provide a complete portfolio of product offerings to consumers and to best match a broader array of consumer preferences. Users tend to be loyal to one form of applicator over another; thus, the introduction of a flushable applicator to the tampon product portfolio has allowed us to leverage thePlaytex brand name to capture a share of the flushable applicator segment.
Beyond tampons are an innovative new flushable applicator tampon, which began shipping in January 2004. This tampon is targeted to women who want the convenience and flushability of a cardboard applicator tampon with the comfort of a plastic applicator tampon. The flushable applicator segment remains a significant portion (37%) of the tampon market with many women desiring a more comfortable flushable applicator tampon. We believe this new product provides us with an opportunity to capture a greater share of the flushable applicator market and help us regain lost market in the overall tampon category.
Silk Glide is our original line of flushable applicator tampons. With the introduction ofBeyond in the flushable segment, the distribution ofSilk Glide will be limited to the value segment of the marketplace, primarily in dollar store retailers.
Complementary feminine care products—We introduced two new complementary feminine care products leveraging the consumer trust and strong brand awareness of our tampon franchise. We have been successful in working with retailers to merchandise these products in the feminine care aisle alongside our tampons to best leverage thePlaytex brand name. These products demonstrate our ability to expand the category beyond tampons.
In 2001, we introduced Personal Cleansing Cloths, pre-moistened towelettes for feminine hygiene. It has become the number one brand in this small niche category. Our Personal Cleansing Cloths are formulated with vitamin E and aloe and offer antibacterial efficacy.
We introduced thePlaytex Heat Therapy patch in July 2002. Designed to be discrete and alleviate the discomfort associated with menstrual cramps for up to 12 hours, thePlaytex patch is differentiated from other heat patches marketed to alleviate other types of discomfort.
Consistent with our overall marketing strategy, our marketing efforts in Feminine Care have leveraged the strength of thePlaytex brand that caters to the active, young female. Employing a "pull" strategy, we focus on advertising and selective consumer promotional activity to build our brand equity. Our Feminine Care marketing strategy centers on attracting first-time users and converting feminine protection pad users to tampon users by communicating the advantages of tampon usage. To that end, several recent advertising campaigns have highlighted the "diaper-like", "bulky" nature of the feminine protection pad while promoting the comfort and convenience of tampons. Given our singular focus on tampons, we believe that we are well positioned among our competitors to endorse tampons over pads and we hope to capture a disproportionately high number of new users.
Consumer Products Division—The Consumer Products Division accounted for approximately 23% of our consolidated net sales in fiscal 2003 compared to 22% in fiscal 2002 and 24% in fiscal 2001. This division includes Sun Care, Household Products and Personal Grooming products sold in the United States, primarily to mass merchandisers, grocery and drug classes of trade.
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Sun Care—We continue to provide innovative ways to deliver sun protection. For the 2004 season, we are launching Surf, an eight hour waterproof instant protection brand. In 2003, we launchedBaby Magic byBanana Boat, the mildest instant sun protection available targeting the baby sun care market. We are extending the successfulSuntanicals line, which we introduced in 2003, by adding a higher sun protection factor ("SPF") and aftersun products to the line. Also for 2004, we have restaged and repackaged much of our line to improve the look and better communicate product benefits. Our Sun Care products are a strong number two in the U.S. sun care category with a 21% dollar market share in 2003.
Since 1995,Banana Boat has been able to consistently grow its share of the sun care category through a strategy of:
Our Sun Care marketing strategies are directed at the family demographic, whereBanana Boat communicates a "fun-in-the-sun for the active wholesome family" image. In addition, the marketing and sales plan forBanana Boat utilizes a variety of specialized programs such as: sweepstakes, sampling at outdoor events, radio tie-ins and promotions at new store openings to provide additional visibility for the brand. Our interactive website, www.bananaboat.com, conveys educational information in a fun, casual manner.
To supplement our distribution network, we have a direct store delivery ("DSD") distribution team focused in high consumption areas of the U.S. (east and gulf coasts). With a fleet of more than thirty vans and operators with an in-depth knowledge of our sun care products, the DSD network allows us to build strong retailer relationships, gather marketing intelligence and ensure that our products are properly stocked on retailer shelves.
Industry convention and the seasonal nature of the sun care business require that manufacturers of sun care products provide retailers with the opportunity to return unsold products at the end of the sun care season. To reflect the impact of potential returns, we provide for estimated returns in our reported operating results as sales are made throughout the year. The level of returns may fluctuate from our estimates due to several factors including weather conditions, customer inventory levels, and competitive conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies."
In 2002, we initiated a more proactive approach to managing late season shipments to retailers. The initiative is to better align our shipment patterns to retail consumption patterns during the Sun Care season. We have continued this proactive process in 2003 with the objective of reducing costs associated with returns. After our first full season of managing shipments and monitoring returns, we see reductions in the amount of returns and their associated handling costs.
Household Products/Personal Grooming—Our Household Products/Personal Grooming business consists of a number of leading and well-recognized brands including our:Woolite rug and upholstery cleaning products,Playtex household gloves,Ogilvieat-home permanents andBinaca breath spray and drops. We also compete in the value-priced end of the toothbrush business with ourTekandDentax brands of toothbrushes, and in deodorants with ourTussy brand.
Woolite holds the second branded position in the U.S. rug and upholstery cleaning products category with a 28% market share in 2003. Driving net sales and market share growth in 2002 and 2003 were two new products:Woolite Instant Power Shot (non-foaming aerosol cleaner designed for quick
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removal of stains), introduced late in 2001 andWoolite Oxy Deep (a spray oxygen based carpet cleaner designed to remove tough set-in stains) introduced in the third quarter of 2002.
With a long-standing reputation for superior quality, durability and value,Playtex gloves have enjoyed market share leadership since we introduced reusable household latex gloves in the U.S. in 1954. ThePlaytex brand name is virtually the only well known name in the segment and ourLiving andHandsaver brands are recognized as the highest quality reusable household gloves in the industry. As demand for disposable household gloves grew, we introduced a line of disposable gloves to leverage thePlaytex brand in this category. In 2002, we lost dollar two market share points, and in 2003, we lost an additional two market share points due to competitive activities and an increase in private label distribution.
OurOgilvie brand is the market leader of the at-home permanents and straighteners category, with a 75% dollar market share in 2003. Retail consumption of at-home permanent products has been declining due to the tendency of consumers to get their hair permed in professional beauty salons. Our strategy is to grow our market leadership position by repositioning the brand to younger consumers and, as category leader, to positively impact the growth of the category as a whole. Since our acquisition of theOgilvie brand we have successfully launchedOgilvie Straightener, which removes the curl from permed hair, controls the curl from naturally curly hair, and delivers smooth texture to hair. This product is targeted to younger consumers.
International/Corporate Sales Division—The International/Corporate Sales Division constituted approximately 19% of our consolidated net sales in fiscal 2003 and fiscal 2002 and 18% in fiscal 2001. The International/Corporate Sales Division includes:
| • sales to specialty classes of trade in the United States including wholesale clubs, military, convenience stores, specialty stores, and telemarketing, |
| • export sales, |
| • sales in Puerto Rico, |
| • results from our Canadian and Australian subsidiaries, and |
| • sales of private label tampons. |
The International/Corporate Sales Division sells the same products as are available to our U.S. customers. Sales to specialty classes of trade represented 43% of the total division's net sales in fiscal 2003 compared to 54% in fiscal 2002, and 52% in fiscal 2001. The decrease in sales in the specialty class of trade in 2003 was due to the competitive environment in tampons and lower Sun Care net sales due to unfavorable weather and lower pallet deals to warehouse clubs.
Marketing
Our advertising and promotion expenditures for the past three years were (in thousands):
| | Twelve Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | December 27, 2003 | December 28, 2002 | December 29, 2001 | ||||||||
| Total advertising and promotion | $ | 85,326 | $ | 83,322 | $ | 82,832 | |||||
| As a percentage of net sales | 13.0 | % | 11.6 | % | 11.4 | % | |||||
These expenditures are primarily for television, radio and print advertising and production as well as consumer promotions and market research. We believe these expenditures support our brand-building activities and are an investment in the long-term longevity of our brands. The increase in
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advertising and promotion as a percentage of net sales was due to our continued defense of our tampon franchise.
In addition to the advertising, consumer promotions and market research costs noted above, we routinely enter into other marketing efforts such as customer trade promotions and consumer coupons. Customer trade promotions include introductory marketing funds (slotting fees), cooperative marketing programs, shelf price reductions on our products, advantageous end of aisle or in-store displays, graphics and other trade promotion activities conducted by the customer. Costs for these trade promotions and consumer coupons are recorded as a reduction of sales and are not included as a component of advertising and promotion.
Competition
The markets for our products are highly competitive and they are characterized by the frequent introduction of new products, often accompanied by major advertising and promotional programs. We compete primarily on the basis of product quality, product differentiation and brand name recognition supported by advertising and promotional programs.
Our competitors consist of a large number of domestic and foreign companies, many of which have significantly greater financial resources and less debt than we do. We believe that the market for consumer-packaged goods is very competitive and may intensify further in the future. Competitive pressures on our products may result from:
| • new competitors, |
| • new product initiatives by competitors, |
| • higher spending for advertising and promotion, and |
| • continued activity in the private label sector. |
Our Infant Care and Feminine Care businesses are particularly competitive. We have faced heavy competition as new entrants have entered the market, including our cups, baby toiletries, pre-moistened towelettes and diaper disposal categories. In 2002, the market share leader in the tampon category introduced a new plastic applicator tampon product supported with extensive advertising and promotion. The competitive spending in the tampon category behind the launch of this new product throughout 2003 has led to a decline in our net sales and market share in tampons. In each case, we are aggressively defending our market share positions through marketing programs and introducing innovative new products. We feel we have stabilized our existing market shares given recent market share trends for Playtex and our competitors.
Regulation
Government regulation has not materially restricted or impeded our operations. Certain of our products are subject to regulation under the Federal Food, Drug and Cosmetic Act and the Fair Packaging and Labeling Act. We are also subject to regulation by the Federal Trade Commission with respect to the content of our advertising, our trade practices and other matters. We are subject to regulation by the United States Food and Drug Administration in connection with our manufacture and sale of tampons.
Distribution
We sell our products using approximately 175 direct sales personnel, independent food brokers and exclusive distributors. Independent brokers supplement the direct sales force in the food class of trade,
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by providing more effective coverage at the store level. Our invoiced sales in the U.S. during the past three years were distributed to the following classes of trade:
| | Twelve Months Ended | ||||||
|---|---|---|---|---|---|---|---|
| Class of Trade | December 27, 2003 | December 28, 2002 | December 29, 2001 | ||||
| Mass merchandisers | 49 | % | 46 | % | 44 | % | |
| Supermarkets | 28 | % | 30 | % | 31 | % | |
| Drug stores | 14 | % | 16 | % | 17 | % | |
| Specialty | 9 | % | 8 | % | 8 | % | |
| Total | 100 | % | 100 | % | 100 | % | |
Our field sales force makes sales presentations at the headquarters or home offices of our customers, where applicable, as well as to individual retail outlets. The sales representatives focus their efforts on selling our products, providing services to our customers and executing programs to ensure sales to the ultimate consumer. Consumer-directed programs include arranging for on-shelf and separate displays and coordinating cooperative advertising participation.
We use three third-party distribution centers to ship the majority of our products to customers. These distribution centers are geographically located to maximize our ability to service our customers.
Research and Development
Our research and development group operates out of a state-of-the-art technical center in Allendale, New Jersey and manufacturing facilities in Dover, Delaware. The Allendale facility was built for us under a 15-year lease, which commenced in 1999, with two five-year renewal options. Approximately 80 employees are engaged in our research and development programs, for which expenditures were $16.3 million in fiscal 2003, $15.2 million in fiscal 2002 and $13.9 million in fiscal 2001.
The primary focus of our research and development group is to design and develop new and improved products that address our customers' wants and needs. In addition, our research and development group provides technology support to both in-house and contract manufacturing and safety and regulatory support to all of our businesses.
Trademarks and Patents
We own rights to a number of United States, Canadian and foreign trademarks that are important to our business, including, but not limited to:BABY MAGIC®, BANANA BOAT®, BEYOND™, BIG SIPSTER®, BINACA®, BINKY®, BLASTERS®, DENTAX®, DIAPER GENIE®, DRINKUP®, DROP-INS®, FAST BLAST®, FIRST SIPSTER®, GENTLE GLIDE®, GET ON THE BOAT®, GRIPSTER®, HANDSAVER®, HEAT THERAPY®, HEAVY TRAFFIC®, INSULATOR®, INSULATOR SPORT®, LIPPOPS®, MADE STRONG TO LAST LONG®, MAKES GETTING CLEAN ALMOST AS MUCH FUN AS GETTING DIRTY®, MOST LIKE MOTHER®, MR. BUBBLE®, NATURAL ACTION™, NATURALATCH™, NATURALSHAPE®, NOBODY BABIES YOUR BABY BETTER®, OGILVIE®, OXY DEEP®, PORTABLES®, POWER SHOT®, PRECISELY RIGHT®, QUICKSTRAW®, QUIK BLOK®, SAFE'N SURE®, SILK GLIDE®, SIPEASE®, SLIMFITS®, SO COMFORTABLE YOU CAN'T EVEN FEEL THEM®, SOFT COMFORT™, SOOTH-A-CAINE®, SPARKLIN' SIPSTER™, SUNTANICALS®, TEK®, TUSSY®, TWISTAWAY®, VENTAIRE®, VITASKIN®, WE GLOVE YOUR HANDS®ANDWET ONES®.
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In addition, we also own royalty-free licenses in perpetuity to thePLAYTEX® andLIVING™ trademarks in the United States, Canada and many foreign jurisdictions related to certain of our feminine hygiene, baby care and other products, but excluding certain apparel related products. We license these trademarks in all countries other than the United States and Canada pursuant to a royalty free, perpetual license agreement with Playtex Apparel, Inc., a wholly owned subsidiary of the Sara Lee Corporation. We license these trademarks in the United States and Canada pursuant to a royalty free, perpetual license agreement with Playtex Marketing Corporation, a corporation jointly owned by Playtex Apparel, Inc. and us. We also have exclusive rights to theWOOLITE trademark for rug and upholstery cleaning products in the United States and Canada pursuant to a royalty free, perpetual license agreement with Reckitt & Colman Inc.
We also own and license various United States, Canadian and foreign patents, and have filed numerous patent applications in these jurisdictions, related to certain of our products and their method of manufacture. Our patent rights expire at varying times, ranging from 2004 to 2022 and include, but are not limited to: cardboard and plastic applicators for tampons, special over-wrap for tampons, baby bottles and nipples, disposable liners and plastic holders for the nurser systems, children's drinking cups, pacifiers, sunscreen formulation, carpet cleaning compositions, various containers for liquid and moist wipes products, including special containers for children's bubble bath.
While we consider our patents to be important to our business, we believe that the success of our products is more dependent upon the quality of these products and the effectiveness of our marketing programs.
Raw Materials and Suppliers
The principal raw materials used in the manufacture of our products are synthetic fibers, resin-based plastics and other chemicals and certain natural materials, all of which are normally readily available. While all raw materials are purchased from outside sources, we are not dependent upon a single supplier in any of our operations for any material essential to our business or not otherwise commercially available to us. We have been able to obtain an adequate supply of raw materials, and no shortage of any materials is currently anticipated.
Customers and Backlog
No single customer or affiliated group of customers, except Wal-Mart and Target Corporation ("Target"), accounted for over 10% of our consolidated net sales in fiscal 2003. Wal-Mart, our largest customer, and Target, our second largest customer, represented approximately 27% and 11%, respectively, of our consolidated net sales in fiscal 2003. Our next three largest customers represented in total approximately 12% of our total consolidated net sales in fiscal 2003. In fiscal 2002, Wal-Mart represented approximately 25% of consolidated net sales and our next four largest customers represented, in total, approximately 21% of consolidated net sales.
In accordance with industry practice, we grant credit to our customers at the time of purchase. In addition, we may grant extended payment terms to new customers and for the initial sale of introductory products and product line extensions. We also may grant extended terms on our Sun Care products due to industry convention and the seasonal nature of this business although payment on the specified due dates are not excused for any reason.
Our practice is not to accept returned goods unless authorized by management of the sales organization. Returns result primarily from damage and shipping discrepancies. Exceptions to this policy include our Sun Care seasonal returns. We allow customers to return Sun Care products that have not been sold by the end of the sun care season, which is normal practice in the sun care industry. We record sales at the time the products are shipped and title transfers. The terms of these sales vary but, in all instances, the following conditions are met: the sales arrangement is evidenced by purchase
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orders submitted by customers; the selling price is fixed or determinable; product has shipped and title transferred; there is an obligation to pay at a specified date or dates without any additional conditions or actions required by us; and collectibility is reasonably assured. Simultaneously with the time of the shipment, we reduce sales and cost of sales, and reserve amounts on our consolidated balance sheet for anticipated returns based upon an estimated return level, in accordance with GAAP. Customers are required to pay for the Sun Care product purchased during the season under the required terms. We offer a variety of extended terms options, due to the seasonal nature of sun care, for qualified customers. In all cases, these extended terms require substantial cash payments prior to or during the summer sun care season. We generally receive returns of our Sun Care products from September through March following the summer sun care season.
In 2002, we initiated a more proactive approach to managing late season shipments to retailers. The initiative is to better align our shipment patterns to retail consumption patterns during the Sun Care season. We have continued this proactive process in 2003 with the objective of reducing costs associated with returns. After our first full season of managing shipments and monitoring returns, we see reductions in the amount of returns and their associated handling costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies" for a more complete discussion on our policies regarding Sun Care revenue recognition.
Because of the short period between order and shipment dates (generally less than one month) for most of our orders, the dollar amount of current backlog is not considered to be a reliable indication of future sales volume.
Employees and Labor Relations
Our worldwide workforce consisted of approximately 1,765 employees as of December 27, 2003, of whom approximately 180 were located outside the United States, primarily in Canada. We believe that our labor relations are satisfactory and no material labor cost increases are anticipated in the near future. None of our United States facilities had union representation at December 27, 2003. During 2003, we completed the process of closing our Watervliet, New York facility, which prior to its closing was our only unionized facility. Please see Note 3 of Notes to Consolidated Financial Statement on our fiscal 2003 Form 10-K for further information.
Environmental
We believe that we are in substantial compliance with federal, state and local provisions enacted or adopted regulating the discharge of materials hazardous to the environment. There are no significant environmental expenditures anticipated for fiscal 2004.
Properties
Our principal executive office is located at 300 Nyala Farms Road, Westport, Connecticut 06880 and is occupied pursuant to a lease, which expires in 2005 with two five-year options to renew. Our principal manufacturing and distribution facilities are located in Dover, Delaware, Sidney and Streetsboro, Ohio, and Arnprior and Malton, Canada. In late 2002, we closed our plastic molding facility in Watervliet, New York. We demolished the building in 2003. Please see the footnote to the table set forth in "Properties" for further information. We maintain a research and development facility in Allendale, New Jersey. This facility is leased for a term of 15 years, expiring in 2013. We operate two facilities in Canada. We own the Arnprior facility, which is primarily a warehouse and assembly operation, and we lease the Malton facility, which is a warehouse and office site. This lease expires in 2005. In fiscal 2003, our average utilization rate of manufacturing capacity was an estimated 60%.
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The following table lists our principal properties as of December 27, 2003, which are located in six states, Puerto Rico and Canada. The facilities in Arnprior and Malton, Canada and Guaynabo, Puerto Rico are used specifically by the International/Corporate Sales Division. All of the other facilities are shared among our three segments.
| | Number of Facilities | Estimated Square Footage | |||
|---|---|---|---|---|---|
| Facilities Owned | |||||
| Manufacturing/Office/Distribution/Warehouse | |||||
| Dover, DE | 3 | 710,000 | |||
| Streetsboro, OH | 1 | 189,700 | |||
| Arnprior, Canada | 1 | 91,800 | |||
| Sidney, OH | 1 | 54,400 | |||
Facilities Leased | |||||
| Office/Distribution/Warehouse | |||||
| Dover, DE | 3 | 268,900 | |||
| Sidney, OH | 2 | 216,800 | |||
| Malton, Canada | 1 | 72,800 | |||
| Westport, CT | 1 | 72,600 | |||
| Allendale, NJ | 1 | 43,500 | |||
| Guaynabo, PR | 1 | 15,700 | |||
| Orlando, FL | 1 | 10,400 | |||
| Spokane, WA | 1 | 8,400 | |||
Legal Proceedings
Toxic Shock Syndrome
Beginning in 1980, published studies reported a statistical association between tampon use and Toxic Shock Syndrome ("TSS"), a rare, but potentially serious illness. Since these studies, numerous claims have been filed against all tampon manufacturers, a small percentage of which have been litigated to conclusion. The number of TSS claims relating to our tampons has declined substantially over the years. During the mid-1980s, there were approximately 200 pending claims at any one time relating to our tampons. As of the end of June 2004, there were approximately three pending claims. Additional claims, however, may be asserted in the future. For TSS claims filed from October 1, 1985 until November 30, 1995, we are self-insured and bear the costs of defending those claims, including settlements and trials. Effective December 1, 1995, we obtained insurance coverage with certain limits in excess of the self-insured retention of $1.0 million per occurrence/$4.0 million in total, for claims occurring on or after December 1, 1995. Effective December 1, 2003, we obtained insurance coverage with certain limits in excess of the self-insured retention of $1.0 million per claimant, for claims on or after December 1, 2003.
The incidence rate of menstrually associated TSS has declined significantly over the years. The number of confirmed menstrually-related TSS cases peaked in 1980 at 814, with 38 deaths. At that time, the United States Center for Disease Control found that 71% of women who developed the condition had been using a new brand of tampons. That brand of product was removed from the market and The Food and Drug Administration proposed regulations, which required all tampon manufacturers to provide TSS warnings on their labeling. In 1981, the incidence of menstrually-related TSS was reported to be 470, with 13 deaths. It has continued to fall since then. Compared with the 814 menstrual TSS cases in 1980, there were only three confirmed cases in 1998 and six in 1997.
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As of April 2004, we believe that there are no claims or litigation pending against us, including the TSS cases, which, individually or in the aggregate, would have a material effect on us. This assessment is based on:
| • our experience with TSS cases, | ||
| • our evaluation of the two pending claims, | ||
| • the reported decline in the incidence menstrually associated TSS, | ||
• the federally mandated warnings about TSS on and in our tampon packages, and | ||
| • development of case law upholding the adequacy of tampon warnings that comply with federally mandated TSS warnings. |
Tampax Pearl
In May 2003, we received a favorable ruling in our false advertising lawsuit against Procter & Gamble. We had challenged the superiority advertising claims Procter & Gamble utilized in support of the launch of its Tampax Pearl tampons. In awarding us $2.96 million in damages, payment of which has not been made by Procter & Gamble pending its appeal, the jury found Procter & Gamble's superiority claims for comfort, absorbency and protection to be false and misleading. Our company was granted a permanent injunction against Procter & Gamble. The order bars Procter & Gamble from communicating that its Tampax Pearl tampons are superior in any way to those ofPlaytex products. The order requires Procter & Gamble to immediately recall from retailers and distributors, all offending promotional products, displays, as well as an immediate halt to all television and print advertising, packaging, direct mail, sales presentations and coupons making the claims. Procter & Gamble has appealed both decisions. In a counterclaim, Procter & Gamble had argued that we were falsely advertising that some of our tampons were "so comfortable that you can't even feel them." The jury rejected that claim.
Superfund
We have joined a group of potentially responsible parties with respect to the Kent County Landfill Site in Houston, Delaware, which has been designated a "Superfund" site by the State of Delaware. Based on the information currently available to us, the nature and quantity of material deposited by us and the number of other entities in the group, which are expected to share in the costs and expenses, we do not believe that our costs will be material. We will share equally with The Sara Lee Corporation all expenses and costs associated with our involvement with this site.
General
We are a defendant in various other legal proceedings, claims and investigations that arise in the normal course of business. In our opinion, the ultimate disposition of these matters, including those described above, will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
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Directors
Listed below are our directors and a short description of their prior work experiences. There are no family relationships or arrangements between any of them pursuant to which they were hired or promoted by the company. Ages and positions are shown as of May 31, 2004.
| Name | Age | Position | ||
|---|---|---|---|---|
Douglas D. Wheat | 53 | Chairman and Director | ||
Michael R. Gallagher | 58 | Chief Executive Officer and Director | ||
Glenn A. Forbes | 53 | Executive Vice President, Chief Financial Officer and Director | ||
Michael R. Eisenson | 48 | Director | ||
Robert B. Haas | 56 | Director | ||
R. Jeffrey Harris | 49 | Director | ||
C. Ann Merrifield | 53 | Director | ||
Susan R. Nowakowski | 39 | Director | ||
Todd D. Robichaux | 39 | Director |
Douglas D. Wheat has been our Chairman since January 2004 and a director of our company since June 1995. Mr. Wheat has been President of Haas Wheat & Partners, L.P. and its predecessor ("Haas Wheat") since 1992. (Haas Wheat is a private investment firm specializing in leveraged acquisitions). He was Co-Chairman of Grauer & Wheat, Inc. (a private investment firm) from 1989 to 1992 and Senior Vice President of Donaldson, Lufkin & Jenrette Securities Corporation from 1985 to 1989. Mr. Wheat serves as a director of AMN Healthcare Services, Inc.
Michael R. Gallagher has been our Chief Executive Officer and a director since 1995. Prior to joining our company, Mr. Gallagher was Chief Executive Officer of North America for Reckitt & Colman PLC ("R&C"), a consumer products company, from 1994 to 1995. Mr. Gallagher was President and Chief Executive Officer of Eastman Kodak's L&F Products subsidiary from 1988 until the subsidiary was sold to R&C in 1994. From 1984 to 1988, Mr. Gallagher held various executive positions with the Lehn and Fink Group of Sterling Drug. From 1982 to 1984, he was Corporate Vice President and General Manager of the Household Products Division of The Clorox Company ("Clorox"). Prior to that, Mr. Gallagher had various marketing and general management assignments with Clorox and with The Procter & Gamble Company. Presently he serves as a director of Allergan, Inc., AMN Healthcare Services, Inc., the Association of Sales and Marketing Companies, the Grocery Manufacturers Association and the Haas School of Business-UC Berkeley.
Glenn A. Forbes has been our Executive Vice President and Chief Financial Officer and a director since March 2000. He has served us for the past 32 years in various finance and accounting positions, including Vice President, Finance from 1988 to 2000.
Michael R. Eisenson has been a director of our company since 1997. Mr. Eisenson is Managing Director and the Chief Executive Officer of Charlesbank Capital Partners, LLC ("Charlesbank"), an investment firm which is the successor to Harvard Private Capital Group, Inc. He was the Managing Director of Harvard Private Capital Group from 1986 to 1998, and a Manager with the Boston Consulting Group from 1981 to 1985. He serves on the Board of Directors of CCC Information
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Services Group, Inc., United Auto Group, Inc., and Universal Technical Institute, Inc., as well as those of several private companies.
Robert B. Haas has been a director of our company since 1995. He previously served as Chairman of our company from 1995 until January 2004. Mr. Haas has been actively involved in private business investments since 1978, specializing in leveraged acquisitions. He has served as Chairman of the Board and Chief Executive Officer of Haas Wheat since 1992. (Haas Wheat is a private investment firm specializing in leveraged acquisitions). Mr. Haas also serves as Chairman and a director of AMN Healthcare Services, Inc.
R. Jeffrey Harris has been a director of our company since 2001. Mr. Harris served as Of Counsel to Apogent Technologies, Inc. ("Apogent"), a diversified manufacturer of value added laboratory and life science products for worldwide clinical, research and industrial markets from December 2000 through 2003. Prior to becoming Of Counsel, Mr. Harris served as Vice President, General Counsel and Secretary of Apogent (formerly known as Sybron International Corporation), since 1988. Mr. Harris also serves as a director of Apogent.
C. Ann Merrifield has been a director of our company since 1997. Ms. Merrifield currently serves as President, Genzyme Biosurgery (a division of Genzyme Corporation). Previously, she was employed by Genzyme Genetics (a unit of Genzyme Corporation), serving as President from 1996 to 2001 and by Bain & Company (a consulting firm) where she was a Partner from 1987 to 1992.
Susan R. Nowakowski has been a director of our company since 2001. Ms. Nowakowski currently serves as President and Chief Operating Officer for AMN Healthcare Services, Inc. ("AMN"), a leading publicly traded healthcare staffing company. Ms. Nowakowski serves on the Board of Directors of AMN. Ms. Nowakowski has been with AMN since 1990 and previously served as its Senior Vice President of Business Development, and prior to that as its Chief Financial Officer. Prior to joining AMN, Ms. Nowakowski worked as a financial analyst at a subsidiary of Eli Lilly & Co. and as the Finance Manager of BioVest Partners, a venture capital firm.
Todd D. Robichaux has been a director of our company since January 2004. Mr. Robichaux is a Managing Director of Haas Wheat since January 1, 2004. (Haas Wheat is a private investment firm specializing in leveraged acquisitions). Previously, Mr. Robichaux joined Haas Wheat as a Senior Vice President in 1998; and was with Wells Fargo Bank from 1988 to 1998 where he most recently served as a vice president of structured finance.
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Executive Officers
Listed below are our executive officers, who are not directors, and a short description of their prior work experiences. There are no family relationships or arrangements between any of them pursuant to which they were hired or promoted by the company. Ages and positions are shown as of March 26, 2004.
| Name | Age | Position | ||
|---|---|---|---|---|
Kevin M. Dunn | 51 | President, Consumer Products Division | ||
John D. Leahy | 50 | President, International/Corporate Sales Division | ||
Richard G. Powers | 58 | President, Personal Products Division | ||
James S. Cook | 52 | Senior Vice President, Operations | ||
Paul A. Siracusa, Ph.D. | 47 | Senior Vice President, Research and Development | ||
Frank M. Sanchez | 53 | Vice President, Human Resources | ||
Vincent S. Viviani | 51 | Vice President, Quality Systems | ||
Paul E. Yestrumskas | 52 | Vice President, General Counsel and Secretary |
Kevin M. Dunn has been President, Consumer Products Division since 2000. Prior to joining us, Mr. Dunn was President of R&C's North American Household Products Division from 1998 to 2000 and President, Food Products Division—North America from 1994 to 1997. He also held various executive positions with Eastman Kodak's L&F Products subsidiary from 1988 until the subsidiary was sold to R&C in 1994.
John D. Leahy has been President of the International/Corporate Sales Division since 2000 and Senior Vice President, International/Corporate Sales from 1998 to 2000. He was Vice President of International/Corporate Sales from 1996 to 1998 and our Vice President of Sales from 1993 to 1996. From 1982 to 1993, Mr. Leahy held various sales positions with us.
Richard G. Powers has been President, Personal Products Division since 1996. Prior to joining us, Mr. Powers was President of R&C's North American Personal Products Division. From 1992 to 1995, he was Vice President of Sales for R&C, and from 1990 to 1992 he was Vice President of Marketing for R&C's Durkee—French Foods Division. From 1973 to 1990, Mr. Powers held various positions in marketing and general management at General Foods Corp.
James S. Cook has been Senior Vice President, Operations since 1991. From 1990 to 1991, he was our Vice President of Dover Operations. From 1988 to 1990, he was our Vice President of Distribution, Logistics & Management Information Systems. From 1982 to 1988, Mr. Cook held various senior level positions in manufacturing and distribution with us. From 1974 to 1982, he held various manufacturing and engineering positions at P&G.
Paul A. Siracusa, Ph.D. has been Senior Vice President, Research and Development since 2000. From 1997 to 2000, he was Senior Vice President Research and Development for R&C. From 1995 to 1997, he was Divisional Vice President of Research & Development, North America for R&C. From 1992 to 1995, he was Director of Technology for the Lehn & Fink Group of Sterling Drug. Prior to that, he held various Research and Development positions with Henkel Corporation, International Flavors and Fragrances, and Union Carbide Corporation.
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Frank M. Sanchez has been Vice President of Human Resources since 1990. From 1987 to 1990, Mr. Sanchez was Vice President of Human Resources for Signal Apparel. Prior to that, he held various positions with Owens-Illinois and the American Can Company.
Vincent S. Viviani has been Vice President of Quality Systems since 1998. Mr. Viviani was Director of Canadian & External Manufacturing for Reckitt & Colman from 1994 to 1998 and held the same position for Eastman Kodak's L&F Products subsidiary from 1988 to 1994. Prior to that, he held various manufacturing and distribution positions at Revlon.
Paul E. Yestrumskas has been Vice President, General Counsel and Secretary since 1995. Prior to joining us, Mr. Yestrumskas was Senior Counsel of Rhone—Poulenc, Inc. from 1991 to 1995. Prior to 1991, Mr. Yestrumskas held various positions in legal and government relations at Timex, Hubbell, Inc. and General Motors.
Summary Compensation Table
The following table details the total compensation paid to our Chief Executive Officer and each of our four most highly compensated executive officers in fiscal 2003 who served the Company on December 27, 2003 (collectively, "Named Executive Officers") for services rendered to the Company for each of the last three fiscal years.
| | | Annual Compensation | Long-Term Compensation | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Other Annual Compensation ($) | Securities Underlying Options/SARs(2) (#) | All Other Compensation(3) ($) | ||||||
| Michael R. Gallagher Chief Executive Officer and Director | 2003 2002 2001 | 1,300,000 1,300,000 1,215,385 | — 1,230,000 825,000 | — — — | — — 400,000 | 260,432 220,556 218,530 | ||||||
Glenn A. Forbes Executive Vice President, Chief Financial Officer and Director | 2003 2002 2001 | 326,769 313,154 293,269 | 90,000 180,000 155,000 | — — — | 25,000 25,000 140,000 | 55,973 52,799 48,709 | ||||||
Richard G. Powers President, Personal Products Division | 2003 2002 2001 | 307,769 300,154 289,077 | 50,000 130,000 120,000 | — — — | 15,000 15,000 20,000 | 48,381 46,954 42,687 | ||||||
John D. Leahy President, International/Corporate Sales Division | 2003 2002 2001 | 306,115 295,154 282,500 | 45,000 135,000 120,000 | — — — | 15,000 15,000 20,000 | 49,624 47,406 44,793 | ||||||
James S. Cook Senior Vice President, Operations | 2003 2002 2001 | 287,385 278,616 261,154 | 70,000 135,000 125,000 | — — — | 15,000 15,000 15,000 | 47,555 45,609 39,061 | ||||||
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Severance Agreements
Each of our Named Executive Officers has an agreement with respect to termination of employment. In the event Mr. Gallagher or Mr. Forbes is terminated without cause (as defined in such agreement) prior to a change of control (as defined in such agreement), each respectively is entitled to receive two years' salary and bonus. In the event the other Named Executive Officers are terminated without cause prior to a change of control, they are entitled to receive one year's salary and bonus. Additionally, in the event of termination of employment prior to a change of control due to death or disability (as defined in our Long Term Disability Policy), Mr. Gallagher or his estate is entitled to receive two years' salary and bonus. In the event employment is terminated within three years following a change of control, each Named Executive Officer except Mr. Gallagher and Mr. Forbes would receive one year's salary, bonus and fringe benefits. Mr. Gallagher would be subject to a five-year non-compete agreement following termination arising from a change of control for total payment equal to three years' salary, bonus and fringe benefits. Following termination arising from a change of control, Mr. Forbes would receive one year's salary, bonus and fringe benefits, and would be subject to a two-year non-compete agreement for additional payment equal to one years' salary, bonus and fringe benefits. In the event of a change of control, each Named Executive is entitled to receive a one-time payment equal to the highest annual bonus received in the last three fiscal years, whether or not employment is terminated.
Retirement Agreement
On June 23, 2004, the Company announced that its Chief Executive Officer, Mr. Michael R. Gallagher, plans to retire at or prior to the end of the year. Under the terms of Mr. Gallagher's retirement agreement, Mr. Gallagher has agreed to certain non-competition and non-solicitation provisions for a five-year period following his retirement. Mr. Gallagher will receive a payment of $2.5 million upon his retirement. In addition, $5.0 million will be paid to him ratably over twenty-four months commencing in January 2005. These payments will be recorded ratably as an expense over the five-year period of the non-competition and non-solicitation provisions. In addition, Mr. Gallagher will receive certain other benefits such as medical and life insurance coverage in accordance with the retirement agreement. At June 26, 2004, the total obligation of $7.5 million under this agreement has been recorded and reflected as an intangible asset, which amount will amortized to expense commencing upon Mr. Gallagher's retirement over the five year period of the non-compete and non-solicitation period.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our Common Stock as of March 26, 2004 by (i) each director, (ii) each of our Named Executive Officers, (iii) each person we believe to own beneficially more than five percent of our outstanding common stock and (iv) all directors and executive officers as a group.
| Name of Beneficial Owner | Number of Shares Beneficially Owned And Nature of Beneficial Ownership(1) | Percent | |||
|---|---|---|---|---|---|
| Robert B. Haas | 20,000,000 | (2) | 32.7 | % | |
| Richard C. Blum | 4,471,436 | (3)(7) | 7.3 | % | |
| Michael R. Eisenson | 2,915,963 | (4) | 4.8 | % | |
| Michael R. Gallagher | 2,056,000 | (5) | 3.3 | % | |
| Glenn A. Forbes | 414,821 | * | |||
| James S. Cook | 330,000 | * | |||
| John D. Leahy | 239,478 | * | |||
| Richard G. Powers | 243,334 | * | |||
| R. Jeffrey Harris | 7,100 | * | |||
| C. Ann Merrifield | 35,000 | * | |||
| Susan R. Nowakowski | 5,600 | * | |||
| Todd D. Robichaux | — | — | |||
| John C. Walker | — | (7) | — | ||
| Douglas D. Wheat | — | — | |||
| Partnerships managed by Haas Wheat & Partners, L.P. | 20,000,000 | (2) | 32.7 | % | |
| Blum Capital Partners, L.P. | 4,471,436 | (3) | 7.3 | % | |
| Southwest Carpenters Pension Trust | 4,379,300 | (6) | 7.2 | % | |
| All current directors, director nominees and executive officers as a group (14 persons) | 27,802,769 | 43.2 | % |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On June 6, 1995, following the receipt of stockholder approval at our 1995 Annual Meeting of Stockholders (the "1995 Annual Meeting"), we completed the sale of 20 million shares of our Common Stock at a price of $9.00 per share to partnerships managed by Haas Wheat & Partners, L.P. pursuant to a Stock Purchase Agreement, dated as of March 17, 1995 (the "Stock Purchase Agreement"), between the Company and the Haas Wheat Partnerships (the "Haas Wheat Transaction"). The Haas Wheat Partnerships' shares constitute approximately 32.7% of our outstanding Common Stock as of March 26, 2004. At the 1995 Annual Meeting, designees of the Haas Wheat Partnerships were elected by our stockholders as a majority of our Board of Directors. Pursuant to the Stock Purchase Agreement, the Haas Wheat Partnerships have agreed that, for up to ten years from June 1995, so long as they own at least 25% of our outstanding voting securities, unless any of certain events have occurred (including in the event that nominees of the Purchaser Nominating Committee of our Board of Directors were to cease to constitute a majority of our Board of Directors), they will vote all of their voting securities of the Company for a Board of Directors that will consist at all times of a simple majority of nominees selected by the Purchaser Nominating Committee and the remainder of nominees selected by the Non-Purchaser Nominating Committee of our Board of Directors.
In connection with the Haas Wheat Transaction described in the preceding paragraph, we granted to the Haas Wheat Partnerships and certain of their affiliates certain demand and piggyback registration rights.
On January 28, 1998, in connection with our acquisition (the "PCH Acquisition") of Personal Care Holdings, Inc. ("PCH"), we issued to J.W. Childs Equity Partners, L.P. (the "Principal PCH Shareholder") and other holders of the capital stock of PCH (collectively, the "PCH Holders") an aggregate of 9,257,345 shares of our Common Stock (of which 7,855,764 shares were issued to the Principal PCH Shareholder) and cash in an aggregate amount of approximately $91.0 million. We also entered into a Stockholders Agreement with the Principal PCH Shareholder and the other PCH Holders, dated as of January 28, 1998 (the "PCH Stockholders Agreement"). In satisfaction of an obligation under the PCH Stockholders Agreement, our Board of Directors, effective January 28, 1998, increased the size of our Board and filled the vacancies thus created by electing John W. Childs and Wyche H. Walton as directors and approved an amendment to our By-Laws to provide that until the earlier of (i) January 28, 2008 and (ii) the date on which the Principal PCH Shareholder holds fewer than 4,628,688 shares of our Common Stock, one of the nominees selected by the Non-Purchaser Nominating Committee shall be designated by the Principal PCH Shareholder. The amendment to our By-Laws was approved by our stockholders at the 1998 Annual Meeting of Stockholders.
In connection with the PCH Acquisition, we granted to the PCH Holders certain demand and piggyback registration rights.
On June 1, 1998, the Principal PCH Shareholder sold 6,000,000 shares of our Common Stock at a price of $13.25 per share to RCBA (the "Blum & Associates Sale"), pursuant to a Stock Purchase Agreement, dated as of June 1, 1998, between the Principal PCH Shareholder, RCBA and Richard C. Blum & Associates, Inc. As a result of the Blum & Associates Sale, the Principal PCH Shareholder ceased to have the right to designate one of the nominees for election as a director to be selected by the Non-Purchaser Nominating Committee.
In connection with the Blum & Associates Sale, we granted to RCBA certain demand and piggyback registration rights, and we amended the Haas Wheat and PCH registration rights agreements to establish the relative priorities of such holders in respect of public offerings of our Common Stock. The PCH registration rights agreement was also amended to eliminate the demand registration rights of the PCH Holders and the Principal PCH Shareholder. The By-Laws were also amended to provide that Blum Capital Partners and its affiliates collectively have the right to designate two nominees for
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election as directors, so long as they own at least 11% of our outstanding voting securities. In February 2004, Blum Capital's beneficial ownership of our voting securities decreased below 11%.
In connection with the granting of certain registration rights to a third party in January 1999, we entered into a further amendment of the HWH and RCBA registration rights agreements, in each case to establish the relative priorities of such holders in respect of public offerings of our Common Stock.
We believe that the terms of all the arrangements with the Haas Wheat Partnerships, the Principal PCH Shareholder, Blum Capital Partners and RCBA were and are fair to the Company.
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DESCRIPTION OF OTHER INDEBTEDNESS
New Credit Facility
General
On February 19, 2004, we entered into our new credit facility with a syndicate of banks, as lenders, and General Electric Capital Corporation, as agent. Our new credit facility provides for (1) a $7.5 million term loan and (2) a $142.5 million revolving credit facility (which includes a $15 million letter of credit sub-facility). Availability under the revolving credit facility is subject to the satisfaction of a borrowing base test. Proceeds of our new credit facility may be used to fund our working capital and general corporate needs. The revolving credit facility and the term loan each have a term of five years. Interest will be payable on the outstanding principal balance of all loans at a floating rate per annum, at our option, equal to either (a) the LIBOR Rate plus an applicable margin or (b) the Index Rate plus an applicable margin. Our new credit facility provides for payment by us of customary fees and expenses to the agent and the lenders and for customary indemnification provisions.
The obligations under our new credit facility are guaranteed by all of our existing and future domestic subsidiaries. The obligations under our new credit facility are secured by a first lien on substantially all of our and the guarantors' personal property and material owned real property, other than our and the guarantors' intellectual property, and a second lien on our and the guarantors' intellectual property. Notwithstanding the foregoing, the lenders under the credit facility have been granted a limited license or sublicense to sell inventory bearing certain of our and the guarantors' intellectual property in connection with any sale of inventory during the occurrence and continuation of an event of default under our new credit facility, and the proceeds of certain license royalties (such as if we grant a license to a third-party) can be applied to the amounts outstanding under our new credit facility prior to acceleration of the notes.
Covenants
Our new credit facility contains various covenants that restrict us from taking certain actions and requires us to take certain actions and contains certain financial covenants. Our new credit facility includes covenants relating to limitations on indebtedness, contingent obligations, liens, capital expenditures, mergers and acquisitions, asset sales, dividends and distributions, redemption or repurchase of equity interests, subordinated debt payments and modifications, loans and investments, transactions with affiliates, changes of control, payment of consulting and management fees and compliance with laws and regulations. Our new credit facility also grants the lenders and the agent rights of inspection and access to management and provides for certain financial reporting requirements and requires us to make pre-payments with the proceeds generated by us or the guarantors resulting from the disposition of assets, the receipt of condemnation settlements and insurance settlements from casualty losses and from the sale of equity securities. Any such prepayments will be applied to the term loan. These covenants and requirements are subject to various exceptions and baskets.
Events of Default
Our new credit facility contains events of default that are customary for financings of this type. These events of default are include, without limitation, nonpayment of principal, interest or fees, violations of covenants, inaccuracy or representations or warranties in any material respect, cross default and cross acceleration to certain other indebtedness, bankruptcy, ERISA, environmental matters, material judgments and material liabilities and change of control. These events of default will be subject to customary grace periods.
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93/8% Senior Subordinated Notes
General
In May 2001, we issued $350 million principal amount of 93/8% Senior Subordinated Notes due 2011. Our 93/8% Senior Subordinated Notes have a maturity of June 1, 2011. Interest is payable in cash semi-annually on June 1 and December 1 of each year.
Ranking
The 93/8% Senior Subordinated Notes rank junior to all of our and the guarantors' of the notes senior indebtedness, including the notes offered hereby and the borrowings under the new credit facility.
Guarantees
Our 93/8% Senior Subordinated Notes are jointly and severally guaranteed on an unsecured senior subordinated basis by certain of our existing and future domestic subsidiaries.
Redemption
Our 93/8% Senior Subordinated Notes are redeemable at our option at any time on or after June 1, 2006, in whole or in part, in cash at a redemption price with accrued and unpaid interest to the redemption date. In addition, on or before June 1, 2004, we may redeem up to 35% of the aggregate principal amount of notes originally issued at up to 35% of the aggregate principal amount of notes originally issued at a redemption price of 109.375%, plus accrued and unpaid interest to the date of redemption with the proceeds of certain equity offerings within 90 days of the closing of those equity offerings. We may make that redemption only if, after that redemption, at least 65% of the aggregate principal amount of notes originally issued remain outstanding.
Change of Control
Upon occurrence of specified change of control events, we are required to make an offer to repurchase all of our 93/8% Senior Subordinated Notes. The purchase price will be 101% of the outstanding principal amount of the notes plus any accrued and unpaid interest to the date of repurchase on them.
Asset Sales
We are not, and certain of our subsidiaries are not permitted, to directly or indirectly, consummate an asset sale unless (a) at least 75% of the proceeds are received in cash and (b) we, or certain of our subsidiaries, receive consideration at the time of such asset sale at least equal to the fair market value of the shares or assets sold.
Covenants
The indenture governing our 93/8% Senior Subordinated Notes contains covenants that, among other things, limited our (and certain of our subsidiaries') ability to:
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These covenants are subject to a number of important limitations and exceptions.
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Terms of the Exchange Offer
We are offering to exchange our exchange notes for a like aggregate principal amount of our initial notes.
The exchange notes that we propose to issue in this exchange offer will be substantially identical to our initial notes except that, unlike our initial notes, the exchange notes will have no transfer restrictions or registration rights. You should read the description of the exchange notes in the section in this prospectus entitled "Description of the Notes."
We reserve the right in our sole discretion to purchase or make offers for any initial notes that remain outstanding following the expiration or termination of this exchange offer and, to the extent permitted by applicable law, to purchase initial notes in the open market or privately negotiated transactions, one or more additional tender or exchange offers or otherwise. The terms and prices of these purchases or offers could differ significantly from the terms of this exchange offer.
Expiration Date; Extensions; Amendments; Termination
This exchange offer will expire at 5:00 p.m., New York City time, on September 2, 2004, unless we extend it in our reasonable discretion. The expiration date of this exchange offer will be at least 20 business days after the commencement of the exchange offer in accordance with Rule 14e-1(a) under the Securities Exchange Act of 1934.
We expressly reserve the right to delay acceptance of any initial notes, extend or terminate this exchange offer and not accept any initial notes that we have not previously accepted if any of the conditions described below under "—Conditions to the Exchange Offer" have not been satisfied or waived by us. We will notify the exchange agent of any extension by oral notice promptly confirmed in writing or by written notice. We will also notify the holders of the initial notes by a press release or other public announcement communicated before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date unless applicable laws require us to do otherwise.
We also expressly reserve the right to amend the terms of this exchange offer in any manner. If we make any material change, we will promptly disclose this change in a manner reasonably calculated to inform the holders of our initial notes of the change including providing public announcement or giving oral or written notice to these holders. A material change in the terms of this exchange offer could include a change in the timing of the exchange offer, a change in the exchange agent and other similar changes in the terms of this exchange offer. If we make any material change to this exchange offer, we will disclose this change by means of a post-effective amendment to the registration statement which includes this prospectus and will distribute an amended or supplemented prospectus to each registered holder of initial notes. In addition, we will extend this exchange offer for an additional five to ten business days as required by the Exchange Act, depending on the significance of the amendment, if the exchange offer would otherwise expire during that period. We will promptly notify the exchange agent by oral notice, promptly confirmed in writing, or written notice of any delay in acceptance, extension, termination or amendment of this exchange offer.
Procedures for Tendering Initial Notes
Proper Execution and Delivery of Letters of Transmittal
To tender your initial notes in this exchange offer, you must useone of the three alternative procedures described below:
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required by the letter of transmittal. Mail or otherwise deliver the letter of transmittal or the facsimile together with the certificates representing the initial notes being tendered and any other required documents to the exchange agent on or before 5:00 p.m., New York City time, on the expiration date.
The method of delivery of the initial notes, the letter of transmittal and all other required documents is at your election and risk. Instead of delivery by mail, we recommend that you use an overnight or hand-delivery service. If you choose the mail, we recommend that you use registered mail, properly insured, with return receipt requested.In all cases, you should allow sufficient time to assure timely delivery. You should not send any letters of transmittal or initial notes to us. You must deliver all documents to the exchange agent at its address provided below. You may also request your broker, dealer, commercial bank, trust company or nominee to tender your initial notes on your behalf.
Only a holder of initial notes may tender initial notes in this exchange offer. A holder is any person in whose name initial notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder.
If you are the beneficial owner of initial notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your notes, you must contact that registered holder promptly and instruct that registered holder to tender your notes on your behalf. If you wish to tender your initial notes on your own behalf, you must, before completing and executing the letter of transmittal and delivering your initial notes, either make appropriate arrangements to register the ownership of these notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.
You must have any signatures on a letter of transmittal or a notice of withdrawal guaranteed by:
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an office or correspondent in the United States or an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934.
If the letter of transmittal or any bond powers are signed by:
To tender your initial notes in this exchange offer, you must make the following representations:
You must also warrant that the acceptance of any tendered initial notes by the issuers and the issuance of exchange notes in exchange therefor shall constitute performance in full by the issuers of its obligations under the registration rights agreement relating to the initial notes.
To effectively tender notes through The Depository Trust Company, the financial institution that is a participant in The Depository Trust Company will electronically transmit its acceptance through the
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Automatic Tender Offer Program. The Depository Trust Company will then edit and verify the acceptance and send an agent's message to the exchange agent for its acceptance. An agent's message is a message transmitted by The Depository Trust Company to the exchange agent stating that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the notes that this participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce this agreement against this participant.
Book-Entry Delivery Procedure
Any financial institution that is a participant in The Depository Trust Company's systems may make book-entry deliveries of initial notes by causing The Depository Trust Company to transfer these initial notes into the exchange agent's account at The Depository Trust Company in accordance with The Depository Trust Company's procedures for transfer. To effectively tender notes through The Depository Trust Company, the financial institution that is a participant in The Depository Trust Company will electronically transmit its acceptance through the Automatic Tender Offer Program. The Depository Trust Company will then edit and verify the acceptance and send an agent's message to the exchange agent for its acceptance. An agent's message is a message transmitted by The Depository Trust Company to the exchange agent stating that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the notes that this participation has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce this agreement against this participant. The exchange agent will make a request to establish an account for the initial notes at The Depository Trust Company for purposes of the exchange offer within two business days after the date of this prospectus.
A delivery of initial notes through a book-entry transfer into the exchange agent's account at The Depository Trust Company will only be effective if an agent's message or the letter of transmittal or a facsimile of the letter of transmittal with any required signature guarantees and any other required documents is transmitted to and received by the exchange agent at the address indicated below under "—Exchange Agent" on or before the expiration date unless the guaranteed delivery procedures described below are complied with.Delivery of documents to The Depository Trust Company does not constitute delivery to the exchange agent.
Guaranteed Delivery Procedure
If you are a registered holder of initial notes and desire to tender your notes, and (1) these notes are not immediately available, (2) time will not permit your notes or other required documents to reach the exchange agent before the expiration date or (3) the procedures for book-entry transfer cannot be completed on a timely basis and an agent's message delivered, you may still tender in this exchange offer if:
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may be, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent, and
Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes
Your tender of initial notes will constitute an agreement between you and us governed by the terms and conditions provided in this prospectus and in the related letter of transmittal.
We will be deemed to have received your tender as of the date when your duly signed letter of transmittal accompanied by your initial notes tendered, or a timely confirmation of a book-entry transfer of these notes into the exchange agent's account at The Depository Trust Company with an agent's message, or a notice of guaranteed delivery from an eligible institution is received by the exchange agent.
All questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tenders will be determined by us in our sole discretion. Our determination will be final and binding.
We reserve the absolute right to reject any and all initial notes not properly tendered or any initial notes which, if accepted, would, in our opinion or our counsel's opinion, be unlawful. We also reserve the absolute right to waive any conditions of this exchange offer or irregularities or defects in tender as to particular notes. If we waive a condition to this exchange offer, the waiver will be applied equally to all note holders. Our interpretation of the terms and conditions of this exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of initial notes must be cured within such time as we shall determine. We, the exchange agent or any other person will be under no duty to give notification of defects or irregularities with respect to tenders of initial notes. We and the exchange agent or any other person will incur no liability for any failure to give notification of these defects or irregularities. Tenders of initial notes will not be deemed to have been made until such irregularities have been cured or waived. The exchange agent will return without cost to their holders any initial notes that are not properly tendered and as to which the defects or irregularities have not been cured or waived promptly following the expiration date.
If all the conditions to the exchange offer are satisfied or waived on the expiration date, we will accept all initial notes properly tendered and will issue the exchange notes promptly thereafter. Please refer to the section of this prospectus entitled "—Conditions to the Exchange Offer" below. For purposes of this exchange offer, initial notes will be deemed to have been accepted as validly tendered for exchange when, as and if we give oral or written notice of acceptance to the exchange agent.
We will issue the exchange notes in exchange for the initial notes tendered pursuant to a notice of guaranteed delivery by an eligible institution only against delivery to the exchange agent of the letter of transmittal, the tendered initial notes and any other required documents, or the receipt by the exchange agent of a timely confirmation of a book-entry transfer of initial notes into the exchange agent's account at The Depository Trust Company with an agent's message, in each case, in form satisfactory to us and the exchange agent.
If any tendered initial notes are not accepted for any reason provided by the terms and conditions of this exchange offer or if initial notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged initial notes will be returned without expense to the tendering holder, or, in the case of initial notes tendered by book-entry transfer procedures
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described above, will be credited to an account maintained with the book-entry transfer facility, promptly after withdrawal, rejection of tender or the expiration or termination of the exchange offer.
By tendering into this exchange offer, you will irrevocably appoint our designees as your attorney-in-fact and proxy with full power of substitution and resubstitution to the full extent of your rights on the notes tendered. This proxy will be considered coupled with an interest in the tendered notes. This appointment will be effective only when, and to the extent that we accept your notes in this exchange offer. All prior proxies on these notes will then be revoked and you will not be entitled to give any subsequent proxy. Any proxy that you may give subsequently will not be deemed effective. Our designees will be empowered to exercise all voting and other rights of the holders as they may deem proper at any meeting of note holders or otherwise. The initial notes will be validly tendered only if we are able to exercise full voting rights on the notes, including voting at any meeting of the note holders, and full rights to consent to any action taken by the note holders.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders of initial notes at any time before 5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, you must send a written or facsimile transmission notice of withdrawal to the exchange agent before 5:00 p.m., New York City time, on the expiration date at the address provided below under "—Exchange Agent" and before acceptance of your tendered notes for exchange by us.
Any notice of withdrawal must:
We will determine all questions as to the validity, form and eligibility, including time of receipt, of all notices of withdrawal and our determination will be final and binding on all parties. Initial notes that are withdrawn will be deemed not to have been validly tendered for exchange in this exchange offer.
The exchange agent will return without cost to their holders all initial notes that have been tendered for exchange and are not exchanged for any reason, promptly after withdrawal, rejection of tender or expiration or termination of this exchange offer.
You may retender properly withdrawn initial notes in this exchange offer by following one of the procedures described under "—Procedures for Tendering Initial Notes" above at any time on or before the expiration date.
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Conditions to the Exchange Offer
We will complete this exchange offer only if:
These conditions are for our sole benefit. We may assert any one of these conditions regardless of the circumstances giving rise to it and may also waive any one of them, in whole or in part, at any time and from time to time, if we determine in our reasonable discretion that it has not been satisfied, subject to applicable law. Notwithstanding the foregoing, all conditions to the exchange offer must be satisfied or waived before the expiration of this exchange offer. If we waive a condition to this exchange offer, the waiver will be applied equally to all note holders. We will not be deemed to have waived our rights to assert or waive these conditions if we fail at any time to exercise any of them. Each of these rights will be deemed an ongoing right which we may assert at any time and from time to time.
If we determine that we may terminate this exchange offer because any of these conditions is not satisfied, we may:
Accounting Treatment
We will record the exchange notes at the same carrying value as the initial notes as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. We will capitalize and amortize the costs of the exchange offer and the unamortized expenses related to the issuance of the exchange notes over the term of the exchange notes.
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Exchange Agent
We have appointed Wells Fargo Bank, N.A. as exchange agent for this exchange offer. You should direct all questions and requests for assistance on the procedures for tendering and all requests for additional copies of this prospectus or the letter of transmittal to the exchange agent as follows:
| By Registered and Certified Mail | By Overnight Courier or Regular Mail: | By Hand Delivery | ||
Wells Fargo Bank, N.A. | Wells Fargo Bank, N.A. | Wells Fargo Bank, N.A. | ||
| Corporate Trust Operations | Corporate Trust Operations | Corporate Trust Services | ||
| MAC N9303-121 | MAC N9303-121 | 608 2nd Avenue South | ||
| P.O. Box 1517 | 6th & Marquette Avenue | Northstar East Building — 12th Floor | ||
Minneapolis, MN 55480 | Minneapolis, MN 55479 | Minneapolis, MN 55402 | ||
| Attention: Reorg. | Attention: Reorg | Attention: Reorg | ||
Or By Facsimile Transmission: (612) 667-4927 | ||||
Confirm by Telephone: (612) 667-9764 |
Fees and Expenses
We will bear the expenses of soliciting tenders in this exchange offer, including fees and expenses of the exchange agent and trustee and accounting, legal, printing and related fees and expenses.
We will not make any payments to brokers, dealers or other persons soliciting acceptances of this exchange offer. However, we will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection with this exchange offer. We will also pay brokerage houses and other custodians, nominees and fiduciaries their reasonable out-of-pocket expenses for forwarding copies of the prospectus, letters of transmittal and related documents to the beneficial owners of the initial notes and for handling or forwarding tenders for exchange to their customers.
We will pay all transfer taxes, if any, applicable to the exchange of initial notes in accordance with this exchange offer. However, tendering holders will pay the amount of any transfer taxes, whether imposed on the registered holder or any other persons, if:
If you do not submit satisfactory evidence of the payment of any of these taxes or of any exemption from this payment with the letter of transmittal, we will bill you directly the amount of these transfer taxes.
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Your Failure to Participate in the Exchange Offer Will Have Adverse Consequences
The initial notes were not registered under the Securities Act or under the securities laws of any state and you may not resell them, offer them for resale or otherwise transfer them unless they are subsequently registered or resold under an exemption from the registration requirements of the Securities Act and applicable state securities laws. If you do not exchange your initial notes for exchange notes in accordance with this exchange offer, or if you do not properly tender your initial notes in this exchange offer, you will not be able to resell, offer to resell or otherwise transfer the initial notes unless they are registered under the Securities Act or unless you resell them, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act.
In addition, except as set forth in this paragraph, you will not be able to obligate us to register the initial notes under the Securities Act. You will not be able to require us to register your initial notes under the Securities Act unless you notify us prior to the 20th day following consummation of the exchange offer that:
in which case the registration rights agreement requires us to file a registration statement for a continuous offer in accordance with Rule 415 under the Securities Act for the benefit of the holders of the initial notes described in this sentence. We do not currently anticipate that we will register under the Securities Act any notes that remain outstanding after completion of the exchange offer.
Delivery of Prospectus
Each broker-dealer that receives exchange notes for its own account in exchange for initial notes, where such initial notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See "Plan of Distribution."
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The initial notes were issued and the exchange notes will be issued under the indenture, dated February 19, 2004, among us, the Guarantors and Wells Fargo Bank, N.A., as trustee. The terms of the notes included those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939. The security documents referred to below under the caption "—Security" define the terms of the security interests that secured the notes. You can find the definitions of certain terms used in this description under the subheading "—Certain Definitions." In this description, the word "Playtex" refers only to Playtex Products, Inc. and not to any of its subsidiaries.
The following description is a summary of the material provisions of the indenture and the security documents. It does not restate those agreements in their entirety. We urge you to read the indenture and the security documents because they, and not this description, define your rights as Holders of the exchange notes. Copies of the indenture and the security documents are available as set forth below under the caption "—Additional Information." Certain defined terms used in this description but not defined below under the caption "—Certain Definitions" have the meanings assigned to them in the indenture.
The registered Holder of an exchange note will be treated as the owner of it for all purposes. Only registered Holders will have rights under the indenture.
Brief Description of the Notes and the Guarantees
The Exchange Notes:
As of the date of the indenture, all of our subsidiaries were "Restricted Subsidiaries." However, under the circumstances described below under the caption "—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate one or more of our subsidiaries to be "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries be subject to many of the restrictive covenants in the indenture. Our Unrestricted Subsidiaries and Foreign Subsidiaries will not guarantee the exchange notes.
The Guarantees
The exchange notes will be guaranteed by all of Playtex's current and future Domestic Subsidiaries.
Each guarantee of the exchange notes:
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Pursuant to the indenture, Playtex is permitted to designate additional Indebtedness as Additional First Lien Debt, subject to the Additional First Lien Cap and the covenant described below under the caption "—Certain Covenants—Limitations on Liens," which is secured by a Lien on the Credit Agreement First Lien Collateral which is prior to the Lien thereon securing the Note Obligations and by a Lien on the Note First Lien Collateral which is junior to the Lien thereon securing the Note Obligations. Playtex also is permitted to designate additional Indebtedness as Additional Second Lien Debt, which is secured by a first lien on the Note First Lien Collateral and by a second lien on the Credit Agreement First Lien Collateral, subject to the covenants described below under the captions "—Certain Covenants—Limitation on Indebtedness" and "—Certain Covenants—Limitations on Liens." At March 27, 2004 Playtex and the Guarantors had $27.5 million of Indebtedness outstanding under the Credit Agreement and had approximately $94.7 million available for borrowings under the Credit Agreement. See "Description of Other Indebtedness—New Credit Facility," "—Certain Covenants—Limitation on Indebtedness" and "—Certain Covenants—Limitations on Liens."
Playtex's ability to make interest and principal payments under its indebtedness will depend on its financial and operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond its control. Although Playtex's cash flow from operations have been sufficient to meet its historical debt obligations, there can be no assurance that Playtex's operating results will continue to be sufficient or that future borrowing facilities will be available for the payment or refinancing of Playtex's indebtedness. See "Risk Factors."
Principal, Maturity and Interest
The exchange notes will be exchanged for the initial notes of which $460,000,000 in aggregate principal amount were issued on February 19, 2004. Playtex may issue additional notes under the indenture from time to time. Any issuance of additional notes is subject to all of the covenants in the indenture, including the covenant described below under the caption "—Certain Covenants—Limitation on Indebtedness." The initial notes, the exchange notes and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Playtex will issue notes in denominations of $1,000 and integral multiples of $1,000. The notes mature on March 1, 2011.
Interest on the notes accrues at the rate of 8% per annum and will be payable semi-annually in arrears on March 1 and September 1, commencing on September 1, 2004. Interest on overdue principal and interest accrues at a rate that is 1% higher than the then applicable interest rate on the notes. Playtex will make each interest payment to the Holders of record on the immediately preceding February 15 and August 15.
Interest on the notes accrues from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to Playtex, Playtex will pay all principal, interest, premium, if any, on that Holder's notes in accordance with those instructions. All other payments on notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless Playtex elects to make interest payments by check mailed to the Holders at their address set forth in the register of Holders.
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Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. Playtex may change the paying agent or registrar without prior notice to the Holders of the notes, and Playtex or any of its Subsidiaries may act as paying agent or registrar.
Transfer and Exchange
A Holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a Holder to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders will be required to pay all taxes due on transfer. Playtex is not required to transfer or exchange any note selected for redemption. Also, Playtex is not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed.
Security
Security Documents
The payment of the principal of and interest and premium on the notes when due, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise and whether by Playtex pursuant to the notes or by any Guarantor pursuant to the Guarantees, the payment of all other Note Obligations and the performance of all other Obligations of Playtex and its Subsidiaries under the Note Documents is secured by the Collateral pursuant to the Note Security Documents delivered as required or permitted by the indenture.
Playtex, the Guarantors and the trustee entered into Note Security Documents creating and establishing the terms of the security interests that secure the notes and the Guarantees. The trustee holds (directly or through co-trustees, agents or sub-agents) all Liens on the Collateral securing Note Obligations. The trustee is entitled to enforce all Liens on the Note First Lien Collateral securing Note Obligations subject to the intercreditor provisions of the indenture.
Playtex, the Guarantors and the Credit Agreement Agent entered into Credit Agreement Security Documents creating and establishing the terms of the security interests that secure Credit Agreement Obligations. The Credit Agreement Agent holds (directly or through agents or sub-agents) all Liens on the Collateral securing Credit Agreement Obligations. The Credit Agreement Agent is entitled to enforce all Liens on the Credit Agreement First Lien Collateral securing the Credit Agreement Obligations subject to the intercreditor provisions of the indenture.
Note Collateral and Credit Agreement Collateral; First Liens and Second Liens
The notes, the Guarantees and the other Note Obligations are secured by:
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cash and cash equivalents, investment property, general intangibles (excluding Note First Lien Collateral), supporting obligations, letter of credit rights, commercial tort claims and all other personal property and owned real property and all substitutions, accessions, products and proceeds from any or all of the foregoing at any time owned or acquired by Playtex or any other Guarantor,
in each case, subject to Permitted Prior Liens.
The obligations of Playtex with respect to the notes and the obligations of the Guarantors under the guarantees are secured by second-priority security interests in the Credit Agreement First Lien Collateral granted to the trustee for the benefit of the Holders of the notes equally and ratably with Liens securing Additional Second Lien Obligations. These Liens are second in priority to the Liens securing Credit Agreement Obligations, Additional First Lien Obligations up to the Additional First Lien Cap and other Permitted Prior Liens.
The Collateral securing Note Obligations does not and will not include (i) any property or assets owned by any Foreign Subsidiary, (ii) any voting Capital Stock in excess of 65% of the total outstanding voting Capital Stock in any Excluded Foreign Subsidiary, (iii) any capital stock and other securities of Subsidiaries referred to in clause (2) above only to the extent the Applicable Value (defined as the aggregate principal amount, par value or book value as carried by Playtex or the market value, whichever is the greatest of such capital stock and other securities) (on a Subsidiary-by-Subsidiary basis) is equal to or greater than 20% of the aggregate principal amount of notes then outstanding, (iv) any lease, license, contract, property right or agreement to which Playtex or any Guarantor is a party or any of its rights or interests thereunder if and only for so long as the grant of a security interest under the security documents shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or any other applicable law or principles of equity);provided that such lease, license, contract, property right or agreement shall be an Excluded Note Asset only to the extent and for so long as the consequences specified above shall result and shall cease to be an Excluded Note Asset and shall become subject to the security interest granted under the security documents, immediately and automatically, at such time as such consequences shall no longer result; (v) any interests in real property owned or leased by Playtex or any Guarantor only for so long as such interest represents an Excluded Perfection Asset; and (vi) proceeds and products from any and all of the foregoing excluded collateral described in clauses (i) through (v), unless such proceeds or products would otherwise constitute Collateral securing Note Obligations within the definition above (collectively, the "Excluded Note Assets").
In addition, in the event that Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act is amended, modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC of separate financial statements of any Restricted Subsidiary of Playtex due to the fact that such Restricted Subsidiary's Capital Stock or other securities secure the notes, then the Capital Stock or other securities of such Restricted Subsidiary shall automatically be deemed to not be part of the Collateral securing the Note Obligations, but only to the extent necessary to not be subject to such requirement. In such event, the Note Security Documents may be amended or modified, without the consent of any Holder of Notes, to the extent necessary to release the Liens securing the Note Obligations on the shares of Capital Stock or other securities that are so deemed to no longer
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constitute part of the Collateral securing the Note Obligations. In the event that Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act is amended, modified or interpreted by the SEC to permit (or are replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) such Restricted Subsidiary's Capital Stock and other securities to secure the notes in excess of the amount or value then pledged without the filing with the SEC of separate financial statements of such Restricted Subsidiary, then the Capital Stock and other securities of such Restricted Subsidiary shall automatically be deemed to be a part of the Collateral securing the Note Obligations (and the Note Security Documents will be amended to so reflect such inclusion in the Collateral securing the Note Obligations), but only to the greatest extent which would not cause the financial statements of such Restricted Subsidiary to be subject to any such financial statement requirement.
Notwithstanding the foregoing provisions, if granting or perfecting any first or second lien in any Collateral to secure the Note Obligations consisting of rights that are licensed or leased from a third-party requires the consent of such third party pursuant to the terms of an applicable license or lease agreement, and such terms are enforceable under applicable law, Playtex or the Guarantors, as the case may be, will use all commercially reasonable efforts to obtain such consent with respect to the granting or perfecting of such first or second lien, but if the third-party does not consent to the granting or perfecting of such first or second lien after the use of commercially reasonable efforts, none of Playtex or the Guarantors will be required to do so. Also, if a first or second lien in the assets or property to be subject to such first or second lien cannot be granted or perfected under applicable law, neither Playtex nor the Guarantors will be required to grant or perfect, as applicable, such first or second lien.
Although the Excluded Perfection Assets are included in the Collateral securing the Note Obligations, Playtex and the Guarantors are required to perfect the second-priority security interests in such assets to secure the Note Obligations and, as a result, the security interest granted to the trustee in those assets may not have priority with respect to a competing security interest in those assets in favor of another secured creditor.
The second-priority security interests in the Credit Agreement First Lien Collateral securing the Note Obligations are second in priority to Liens on the Credit Agreement First Lien Collateral securing Credit Agreement Obligations, Additional First Lien Debt and Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the Note Security Documents.
The Credit Agreement Obligations and any Additional First Lien Debt are secured by first-priority security interests in the Credit Agreement First Lien Collateral and second-priority security interests in the Note First Lien Collateral. The second-priority security interests in the Note First Lien Collateral securing the Credit Agreement Obligations and any Additional First Lien Debt are second in priority to Liens on the Note First Lien Collateral.
Under the indenture, Playtex agreed that if Playtex or any of the Guarantors at any time owns or acquires any property, other than Excluded Note Assets, that is not subject to a valid, enforceable perfected Lien in favor of the trustee (or its co-trustee, agent or sub-agent) as security for the Note Obligations, then Playtex will, or will cause such Guarantor to, execute and deliver to the trustee a Note Security Document upon substantially the same terms as the Note Security Documents delivered in connection with the issuance of the notes, granting a Lien upon such property in favor of the trustee as security for the Note Obligations, cause such Lien to be duly perfected in any manner permitted by law and cause each other Lien upon such property to be released, unless it is a Permitted Lien, or junior in priority to the Liens securing Note Obligations if it is a Permitted Lien but not a Permitted Prior Lien. However, the Note Obligations are secured by a Lien that is second in priority to all Liens securing Credit Agreement Obligations and any Additional First Lien Debt, if such property is Credit Agreement First Lien Collateral.
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The notes and other Note Obligations have the benefit of the first-priority security interests in the Note First Lien Collateral and second-priority security interests in the Credit Agreement First Lien Collateral. The indenture permits other Additional Second Lien Debt to be secured equally and ratably with the notes and other Note Obligations. The indenture permits Liens on the Collateral securing Credit Agreement Obligations so long as (except as otherwise provided herein as to Proceeds and payments under "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents—Payments from Proceeds of Collateral") such Liens are second in priority insofar as they attach to property constituting Note First Lien Collateral. The security interests securing the notes and other Note Obligations are subject to existing Liens, purchase money security interests and other Liens entitled to priority by law and are second in priority only insofar as they attach to (a) property constituting Credit Agreement First Lien Collateral, and as to such property will rank junior only to security interests in such property held by the Credit Agreement Agent securing the principal amount of Indebtedness up to the Maximum Credit Agreement Indebtedness Amount outstanding under the Credit Agreement and other Obligations outstanding under the Credit Agreement, including interest and fees and (b) property constituting Credit Agreement First Lien Collateral securing Additional First Lien Debt.
In the event that Playtex or any other Obligor sells any assets that constitute Collateral, in whole or in part, the indenture requires it to apply the Net Cash Proceeds of such sale as provided under the covenant described below under the caption "—Repurchase at the Option of Holders—Asset Sales."
Authorization of Actions to Be Taken
Each Holder of notes, by its acceptance of a note, consents and agrees to the terms of each Note Security Document, as originally in effect and as amended, supplemented or replaced from time to time in accordance with its terms or the terms of the indenture, authorizes and directs the trustee to enter into the Note Security Documents, and authorizes and empowers the trustee to bind the Holders of notes and other holders of Note Obligations as set forth in the Note Security Documents and to perform its obligations and exercise its rights and powers thereunder.
The trustee is authorized and empowered to receive for the benefit of the Holders of notes any funds collected or distributed under the Note Security Documents and to make further distributions of such funds to the Holders of notes according to the provisions of the indenture.
Subject to the provisions of the indenture entitled "Duties of Trustee" and "Rights of Trustee" and subject to the provisions of the indenture described below in "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents—Ranking of Liens," the trustee may, in its sole discretion and without the consent of the Holders of notes, take all actions it deems necessary or appropriate in order to:
The trustee is authorized and empowered to institute and maintain such suits and proceedings as it may deem expedient to protect or enforce the Liens securing Note Obligations or the Note Security Documents or to prevent any impairment of Collateral by any acts that may be unlawful or in violation of the Note Security Documents or the indenture, and such suits and proceedings as the trustee may deem expedient to preserve or protect its interests and the interests of the Holders of notes in the Collateral, including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of Holders of notes or the trustee.
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Release of Liens Securing Note Obligations
The indenture provides that the Liens securing Note Obligations will automatically and without the need for any further action by any Person be released:
Further Assurances; Inspection; Expense Reimbursement; Indemnity
Playtex will, and will cause each of its Subsidiaries to, do or cause to be done all acts and things which may be required, or which the trustee from time to time may reasonably request, to assure and confirm that the trustee holds, for the benefit of the Holders of Note Obligations, duly created and enforceable and, except in the case of any Excluded Perfection Assets, perfected Liens upon the Collateral as contemplated by the indenture and the Note Security Documents, so as to render the same available for the security and benefit of the indenture and of the notes, Guarantees and all other Note Obligations, according to the intent and purposes herein expressed.
Upon request of the trustee at any time and from time to time, Playtex will, and will cause each of its Subsidiaries to, promptly execute, acknowledge and deliver such Note Security Documents, instruments, certificates, notices and other documents and take such other actions as the trustee may reasonably request to create, perfect (except in the case of any Excluded Perfection Assets), protect, assure or enforce the Liens securing Note Obligations and benefits intended to be conferred as contemplated by the indenture for the benefit of the holders of Note Obligations. If Playtex or such
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Subsidiary fails to do so, the trustee is hereby irrevocably authorized and empowered, with full power of substitution, to execute, acknowledge and deliver such Note Security Documents, instruments, certificates, notices and other documents and, subject to the indenture, take such other actions in the name, place and stead of Playtex or such Subsidiary, but the trustee will have no obligation to do so and no liability for any action taken or omitted by it in good faith in connection therewith.
Playtex will bear and pay all legal expenses, collateral audit and valuation costs, filing fees, insurance premiums and other costs associated with the performance of the obligations of Playtex and its Subsidiaries set forth in this section.
Playtex will pay, reimburse the trustee and the Holders of notes for, and, to the fullest extent lawful, defend and indemnify each of them against, all claims, liabilities, taxes, costs and expenses of every type and nature (including, without limitation, the reasonable fees and charges of attorneys, advisors, auditors and consultants acting for any of them) incurred by any of them as a result of or in connection with the creation, perfection (except in the case of Excluded Perfection Assets), protection or enforcement of the Liens securing Note Obligations or the exercise or enforcement of any right or remedy under the Note Security Documents or to prove, preserve, protect or enforce any Lien securing Note Obligations or any claim based upon any Lien securing Note Obligations in any legal proceeding, including any Insolvency or Liquidation Proceeding, except that the trustee or a Holder of notes will not be entitled to indemnity in respect of any claim, liability or loss that resulted directly and primarily from its own gross negligence or willful misconduct.
Playtex will pay, reimburse the trustee and the Holders of notes for, and, to the fullest extent lawful, defend and indemnify each of them against, all claims, liabilities, taxes, costs and expenses of every type and nature (including, without limitation, the reasonable fees and charges of attorneys, advisors, auditors and consultants acting for any of them) incurred by any of them as a result of or in connection with: (A) the presence, release, or threatened release of or exposure to any hazardous material at, from, in, to, on, or under any property currently or formerly owned, leased or otherwise used or occupied by Playtex or any of its Subsidiaries; (B) the transportation, treatment, storage, handling, recycling or disposal or arrangement for transportation, treatment, storage, handling, recycling or disposal of any hazardous material at or to any location by or on behalf of Playtex or any of its Subsidiaries; or (C) any violation of environmental law by Playtex or any of its Subsidiaries, except that the trustee or Holder of notes will not be entitled to indemnity in respect of any claim, liability or loss that resulted directly and primarily from its own gross negligence or willful misconduct.
Playtex will comply with the applicable provisions of TIA §314(b).
To the extent applicable, Playtex will cause TIA §313(b), relating to reports, and TIA §314(d), relating to the release of property or securities or relating to the substitution therefore of any property or securities to be subjected to the Lien of the Note Security Documents, to be complied with. Any certificate or opinion required by TIA §314(d) may be made by an officer of Playtex except in cases where TIA §314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected or reasonably satisfactory to the trustee or as otherwise permitted under TIA §314(d).
To the extent applicable, Playtex will furnish to the trustee, prior to each proposed release of Collateral securing the Note Obligations pursuant to the Note Security Documents:
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Amendment of Note Security Documents
No amendment or supplement to the provisions of the Note Security Documents will be effective without the consent of at least a majority in aggregate principal amount of the notes outstanding, except that:
Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents
Intercreditor Provisions
The indenture includes the provisions described below, which are intended for the benefit of, and will be enforceable as a third-party beneficiary by, (i) the Credit Agreement Agent as holder of Liens securing Credit Agreement Obligations for the benefit of each present and future holder of Credit Agreement Obligations, (ii) any First Lien Debt Representative as holder of the Liens securing Additional First Lien Obligations for the benefit of each present and future holder of Additional First Lien Obligations and (iii) any Second Lien Debt Representative as holder of the Liens securing Additional Second Lien Obligations for the benefit of each present and future holder of Additional Second Lien Obligations but only if (a) the Credit Agreement Agent, any First Lien Debt Representative or any Second Lien Debt Representative, as the case may be, provides, in an undertaking intended for the benefit of, and enforceable as a third-party beneficiary by, the trustee as holder of Liens securing Note Obligations for the benefit of each present and future holder of Note Obligations, that the holders of Credit Agreement Obligations and Credit Agreement Agent, any holders of First Lien Obligations and First Lien Debt Representatives, and any holders of Second Lien Obligations and Second Lien Debt Representatives are bound by such provisions and (b) each of the Credit Agreement Agent, First Lien Debt Representative or Second Lien Debt Representative, as applicable, delivers to the trustee its written confirmation thereof and its written agreement to observe and perform each and all of the obligations of the Credit Agreement Agent, First Lien Debt Representative or Second Lien Debt Representative, as applicable, under these provisions. No other person is entitled to rely on, have the benefit of or enforce these provisions.
Ranking of Liens
Notwithstanding anything to the contrary contained in the Security Documents or any Additional Lien Documents, the time of incurrence of any Secured Obligation, the order or method of attachment or perfection of any Lien securing any Secured Obligation, the time or order of filing or recording of financing statements, mortgages or other documents filed or recorded to perfect any Lien securing any Secured Obligations, the time of taking possession or control over any Collateral or the rules for determining priority under any law governing relative priorities of Liens:
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If any cash or Cash Equivalents constituting Credit Agreement First Lien Collateral are converted into, or invested in, property constituting Note First Lien Collateral at any time when the trustee and any Second Lien Debt Representative have not received written notice from the Credit Agreement Agent, any holder of Credit Agreement Obligations, any holder of Additional First Lien Debt or any First Lien Debt Representative, as applicable, stating that the Indebtedness outstanding under the Credit Agreement or any Additional First Lien Documents have become due and payable in full (whether at maturity, upon acceleration or otherwise) or that such conversion or investment violates the provisions of the Credit Agreement or any Additional First Lien Documents, then concurrently with such conversion or investment, all Liens upon such cash or Cash Equivalents or such property securing Credit Agreement Obligations or Additional First Lien Obligations shall lose their priority over, and shall become subject and second in priority to, all Liens securing Note Obligations or Additional Second Lien Obligations. If any cash or Cash Equivalents constituting Credit Agreement First Lien Collateral are converted into, or invested in, property constituting Note First Lien Collateral at any time when the trustee and any Second Lien Debt Representatives have received the written notice set forth above, then all Liens upon such cash or Cash Equivalents or such property securing Second Lien Obligations shall remain subject and second in priority to all Liens thereon securing First Lien Obligations.
If any cash or Cash Equivalents constituting Note First Lien Collateral are converted into, or invested in, property constituting Credit Agreement First Lien Collateral at any time when the Credit Agreement Agent and any First Lien Debt Representative have not received written notice from the trustee or any Holder of notes or any Second Lien Debt Representative, as applicable, stating that the notes have become due and payable in full (whether at maturity, upon acceleration or otherwise) and any outstanding Additional Second Lien Debt has become due and payable in full (whether at maturity, upon acceleration or otherwise), or that such cash or Cash Equivalents are required by the indenture to be deposited in an Asset Sale Proceeds Account or that such conversion or investment violates the provisions of the indenture or any Additional Second Lien Documents, then concurrently with such conversion or investment all Liens upon such cash or Cash Equivalents or such property securing Note Obligations and Additional Second Lien Obligations shall lose their priority over, and shall become subject and second in priority to, all Liens securing Credit Agreement Obligations and Additional First Lien Obligations. If any cash or Cash Equivalents constituting Note First Lien Collateral are converted into, or invested in, property constituting Credit Agreement First Lien Collateral at any time when the Credit Agreement Agent and any First Lien Debt Representative have received the written notice set forth above, then all Liens upon such cash or Cash Equivalents or such property securing First Lien Obligations shall remain subject and second in priority to all Liens thereon securing Second Lien Obligations.
Payments from Proceeds of Collateral
The holders of Second Lien Obligations shall be entitled to receive and retain, free from all Liens thereon securing First Lien Obligations, all payments made in cash by Playtex or any other Obligor and all amounts received with respect to Second Lien Obligations through the exercise of a set-off or other similar right, even if such cash constitutes property or proceeds of property subject to a Lien securing First Lien Obligations, if such payment is made at any time when the trustee or any Second Lien Debt Representative have not received written notice from the Credit Agreement Agent or any holder of First Lien Obligations or any First Lien Debt Representative, as applicable, stating that the Indebtedness outstanding under the Credit Agreement or any Additional First Lien Documents have become due and payable in full (whether at maturity, upon acceleration or otherwise) or that such
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payment or the application of such amount violates or would violate the provisions of the Credit Agreement.
The holders of First Lien Obligations shall be entitled to receive and retain, free from all Liens thereon securing Second Lien Obligations, all payments made in cash by Playtex or any other Obligor and all amounts received with respect to First Lien Obligations through the exercise of a set-off or other similar right, even if such cash constitutes property or proceeds of property subject to a Lien securing Second Lien Obligations, if such payment is made at any time when the Credit Agreement Agent and any First Lien Debt Representative have not received written notice from the trustee, any holder of Second Lien Obligations or any Second Lien Debt Representative stating that the notes or all outstanding Additional Second Lien Debt have become due and payable in full (whether at maturity, upon acceleration or otherwise) or that such payment is from the proceeds of the sale of Note First Lien Collateral.
Consent to License to Use Intellectual Property; Access to Information
The indenture provides that the trustee and each Second Lien Debt Representative consent (without making any representation or warranty or undertaking any obligation whatsoever) to any grant by any Obligor to the Credit Agreement Agent and any First Lien Debt Representative of a non-exclusive royalty-free license to use any Note First Lien Collateral of such Obligor, solely in connection with the enforcement of any Lien held by the Credit Agreement Agent or First Lien Debt Representative, as applicable, or in connection with the sale or liquidation of any or all of the Credit Agreement First Lien Collateral, in each case, in order to manufacture, produce, complete, remove or sell any such Inventory in any lawful manner. The consent shall be binding on the successors and assigns of the trustee and each Second Lien Debt Representative, including a purchaser of any or all of the Note First Lien Collateral subject to such license at a foreclosure sale conducted in foreclosure of any Lien thereon securing Second Lien Obligations. The indenture also provides that the Liens securing the Second Lien Obligations are second in priority to any such license.
If the trustee, any Second Lien Debt Representative or a purchaser at a foreclosure sale conducted in foreclosure of any Lien securing Second Lien Obligations takes actual possession of any documentation of Playtex or an Obligor (whether such documentation is in the form of a writing or is stored in any data equipment or data record in the physical possession of the trustee or the foreclosure purchaser), then upon request of the Credit Agreement Agent or any First Lien Debt Representative and reasonable advance notice, the trustee, each Second Lien Debt Representative or such foreclosure purchaser will permit the Credit Agreement Agent, any First Lien Debt Representative or their respective representative to inspect and copy such documentation.
Restriction on Enforcement of Collective Second Liens
Subject to the provisions described below under the caption "—Relative Rights" and subject to clauses (a) through (e) below, neither trustee nor any Second Lien Debt Representative are to and are not authorized to direct any Person acting for it or any holder of Second Lien Obligations to) take any action to enforce, collect or realize upon any Collective Second Lien attached to any property constituting Credit Agreement First Lien Collateral as security for any Second Lien Obligations, and the Credit Agreement Agent and any First Lien Debt Representative will not (and will not authorize or direct any Person acting for it or any holder of First Lien Obligations to) take any action to enforce, collect or realize upon any Collective Second Lien attached to any property constituting Note First Lien Collateral as security for any First Lien Obligations, in each case including, without limitation, any right, remedy or action to:
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except that, in any event, any and all such actions may be taken, authorized or instructed and all rights and remedies for the enforcement, collection, foreclosure or realization of a Collective Second Lien may be exercised and enforced, in each case without any limitation or restriction whatsoever:
The restriction set forth in the preceding paragraph applies only to Collective Second Liens and does not apply to any Collective First Liens. The trustee and any Second Lien Debt Representative, as the case may be, may freely take (and authorize or direct any other Person to take) any action to enforce, collect or realize upon any Lien securing Second Lien Obligations attached to any property constituting Note First Lien Collateral, and the Credit Agreement Agent and any First Lien Debt Representative, as the case may be, may freely take (and authorize or direct any other Person to take) any action to enforce, collect or realize upon any Lien securing First Lien Obligations attached to any property constituting Credit Agreement First Lien Collateral.
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Until the Discharge of Credit Agreement Indebtedness and release, in whole, of all Liens securing Additional First Lien Obligations, the Credit Agreement Agent and any First Lien Debt Representative as the holders of all Liens securing Collective First Liens on the Credit Agreement First Lien Collateral will have the exclusive right to manage, perform and enforce the terms of the Credit Agreement Security Documents and Additional First Lien Documents with respect to all Credit Agreement First Lien Collateral and to exercise and enforce all rights and remedies thereunder according to its discretion and exercise of its business judgment, including, without limitation, the exclusive right to take the actions enumerated in clauses (1) through (9) of the first paragraph of this section, but only as to the Credit Agreement First Lien Collateral. Until the release, in whole, of all Liens securing Note Obligations and Additional Second Lien Obligations, the trustee and any Second Lien Debt Representative as holders of Collective First Liens on the Note First Lien Collateral will have the exclusive right to manage, perform and enforce the terms of the Note Security Documents and Additional Second Lien Documents with respect to all Note First Lien Collateral and to exercise and enforce all rights and remedies thereunder according to its discretion and exercise of its business judgment, including, without limitation, the exclusive right to take the actions enumerated in clauses (1) through (9) of the first paragraph of this section, but only as to the Note First Lien Collateral. In connection with the exercise or enforcement of any such right, each holder of any Collective Second Lien waives any and all rights to affect the method or challenge the appropriateness of any action by any holder of any Collective First Lien and hereby consents to each holder of any Collective First Lien exercising or not exercising such rights and remedies as if no Collective Second Lien existed, except only that the holders of Collective Second Liens reserve all rights granted by law:
Until (A) the release, in whole, of all Liens securing Second Lien Obligations, in the case of Collective Second Liens upon Note First Lien Collateral, or (B) the Discharge of Credit Agreement Indebtedness and release, in whole, of all Liens securing Additional First Lien Obligations, in the case of Collective Second Liens upon Credit Agreement First Lien Collateral, the holders of Collective Second Liens will not:
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Proceeds of Insurance
For as long as the Liens upon Note First Lien Collateral securing First Lien Obligations are Collective Second Liens to the extent permitted by the indenture, the Note Security Documents or Additional Second Lien Documents:
and for as long as the Liens upon Credit Agreement First Lien Collateral securing Second Lien Obligations are Collective Second Liens to the extent permitted by the Credit Agreement or any Credit Agreement Security Document or Additional First Lien Documents:
In the event of any covered loss, theft or destruction or condemnation of both Note First Lien Collateral and Credit Agreement First Lien Collateral for which an insurer of Playtex or any Obligor will only settle one claim or award, the trustee, the Credit Agreement Agent, any Second Lien Debt Representative and any First Lien Debt Representative will co-operate to adjust settlement of the
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insurance claims in respect of the Note First Lien Collateral and Credit Agreement First Lien Collateral.
Insolvency or Liquidation Proceedings
If, in any Insolvency or Liquidation Proceeding and prior to the Discharge of Credit Agreement Indebtedness and release of any Liens securing Additional First Lien Obligations, the holders of all Indebtedness outstanding under the Credit Agreement or any Additional First Lien Documents (or such holders as may have the power to bind all of them):
then the holders of Second Lien Obligations, the trustee and each Second Lien Debt Representative will not oppose or otherwise contest the entry of such order, but only in respect of the provisions described in this paragraph.
If, in an Insolvency or Liquidation Proceeding and prior to the release, in whole, of all Liens securing Second Lien Obligations, the trustee and any Second Lien Debt Representative:
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then, so long as the trustee and any Second Lien Debt Representative does not oppose or otherwise contest any request made by the holders of First Lien Obligations (which may be made only if, pursuant to any such order, the holders of Second Lien Obligations are, or are to be, granted a Lien upon any property) for the grant to the Credit Agreement Agent and any First Lien Debt Representative, for the benefit of the holders of Credit Agreement Obligations or Additional First Lien Obligations, as applicable, and as adequate protection (or its equivalent) for the Credit Agreement Agent or any First Lien Debt Representative's interest in the Note First Lien Collateral under the Liens securing the Credit Agreement Obligations or Additional First Lien Obligations, as applicable, of a junior lien upon such property that is co-extensive in all respects with, but junior in priority (as set forth in "—Ranking of Liens") in all respects to, all Liens securing Second Lien Obligations upon such property pursuant to such order, any holders of First Lien Obligations, the Credit Agreement Agent and any First Lien Debt Representative will not oppose or otherwise contest the entry of such order solely in their capacity as a secured creditor based solely on any ground that may be asserted only by a secured creditor arising from or relating to any Lien securing First Lien Obligations.
If, in an Insolvency or Liquidation Proceeding and prior to the Discharge of Credit Agreement Indebtedness or release, in whole, of all Liens securing Additional First Lien Obligations, the holders of all Indebtedness outstanding under the Credit Agreement or Additional First Lien Documents (or such holders as may have the power to bind all of them):
then, so long as the holders of First Lien Obligations do not oppose or otherwise contest any request made by the holders of Second Lien Obligations (which may be made only if, pursuant to any such order, the holders of First Lien Obligations are, or are to be, granted a Lien upon any property) for the grant to the trustee or any Second Lien Debt Representative, for the benefit of the holders of Note Obligations or Additional Second Lien Obligations, as applicable, and as adequate protection (or its equivalent) for the trustee or Second Lien Debt Representative's interest in the Credit Agreement First Lien Collateral under the Liens securing Note Obligations or Additional Second Lien Obligations, as applicable, of a junior lien upon such property that is co-extensive in all respects with, but subordinated (as set forth in "—Ranking of Liens") in all respects to, all Liens securing First Lien Obligations upon such property pursuant to such order, any holders of Second Lien Obligations, the trustee and each Second Lien Debt Representative will not oppose or otherwise contest the entry of such order solely in their capacity as a secured creditor based solely on any ground that may be asserted only by a secured creditor arising from or relating to any Lien securing Second Lien Obligations.
The holders of Second Lien Obligations, the trustee and any Second Lien Debt Representative will not, at any time prior to the Discharge of Credit Agreement Indebtedness or release, in whole, of all Liens securing Additional First Lien Obligations, file or prosecute in any Insolvency or Liquidation Proceeding any motion for adequate protection (or any comparable request for relief) based upon their Collective Second Liens in the Credit Agreement First Lien Collateral. The holders of First Lien Obligations, the Credit Agreement Agent and any First Lien Debt Representative will not, at any time prior to the release, in whole, of all Liens securing Second Lien Obligations, file or prosecute in any Insolvency or Liquidation Proceeding any motion for adequate protection (or any comparable request for relief) based upon their Collective Second Liens in the Note First Lien Collateral. No right of any
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holder of Second Lien Obligations or Liens securing Second Lien Obligations to demand, seek and obtain adequate protection (or any comparable relief) for any Collective First Lien upon any Note First Lien Collateral, and no right of any holder of First Lien Obligations or Liens securing First Lien Obligations to demand, seek and obtain adequate protection (or any comparable relief) for any Collective First Lien upon any Credit Agreement First Lien Collateral, will be in any respect reduced, limited or affected hereby.
The holders of Second Lien Obligations, the trustee and any Second Lien Debt Representative will not assert or enforce, at any time prior to the Discharge of Credit Agreement Indebtedness or release, in whole, of all Liens securing Additional First Lien Obligations, any claim under §506(c) of the United States Bankruptcy Code senior to or on a parity with any Collective First Lien upon Credit Agreement First Lien Collateral for costs or expenses of preserving or disposing of any Credit Agreement First Lien Collateral. The holders of First Lien Obligations, the Credit Agreement Agent and any First Lien Debt Representative will not assert or enforce, at any time prior to the release in whole of all Liens securing Second Lien Obligations, any claim under §506(c) of the United States Bankruptcy Code senior to or on a parity with any Collective First Lien upon Note First Lien Collateral for costs or expenses of preserving or disposing of any Note First Lien Collateral.
Amendment of Intercreditor Provisions
The indenture provides that no amendment or supplement to the provisions set forth above under the caption "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents" will:
Any such amendment or supplement that:
Notwithstanding anything to the contrary in this section, no consent of any holder of Second Lien Obligations shall be required to change, waive, modify or vary the provisions set forth under
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"—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents" as agreed to by the holders of First Lien Obligations, unless such change, waiver or modification materially adversely affects the rights of holders of the Second Lien Obligations as such and not the other secured creditors in a like manner.
Waiver of Certain Subrogation, Marshalling, Appraisal and Valuation Rights
To the fullest extent permitted by law, the holders of Second Lien Obligations, the trustee and any Second Lien Debt Representative agree not to assert or enforce at any time prior to the Discharge of Credit Agreement Indebtedness and release, in whole, of Liens securing Additional First Lien Obligations:
that otherwise may be enforceable in respect of any Lien securing Note Obligations as against any holder of Collective First Liens upon any Credit Agreement First Lien Collateral.
To the fullest extent permitted by law, the holders of First Lien Obligations, the Credit Agreement Agent and any First Lien Debt Representative agree not to assert or enforce at any time prior to the release, in whole, of all Liens securing Second Lien Obligations:
that otherwise may be enforceable in respect of any Lien securing First Obligations as against any holder of Collective First Liens upon any Note First Lien Collateral.
Without in any way limiting the generality of the foregoing, each holder of Collective First Liens or Obligations secured by Collective First Liens may at any time and from time to time, without the consent of or notice to any holder of Collective Second Liens or Obligations secured thereby, without incurring any responsibility or liability to any holder of Collective Second Liens or Obligations secured thereby and without in any manner prejudicing, affecting or impairing the agreements and other obligations set forth in "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents":
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No exercise, delay in exercising or failure to exercise any right set forth in or arising under the provisions described in "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents," no act or omission of any holder of Collective First Liens or Obligations secured thereby in respect of Playtex or any of its Restricted Subsidiaries or any other person or entity or any collateral security for any Obligation or any right arising under such provisions, no change, impairment, or suspension of any right or remedy of any holder of any Collective First Lien or Obligations secured thereby, and no other act, failure to act, circumstance, occurrence or event which, but for this sentence, would or could act as a release or exoneration of any obligation set forth in or arising under such provisions will in any way affect, decrease, diminish or impair any of the ranking agreements or any of the other rights and obligations of the holders of Secured Obligations, the trustee, the Credit Agreement Agent and any Second Lien Debt Representative or First Lien Debt Representative set forth in or arising under such provisions.
Except for the contractual obligations set forth in or arising under the provisions described in "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents," the Credit Agreement Agent, any First Lien Debt Representative and holders of First Lien Obligations will not have any duty, express or implied, fiduciary or otherwise, to any holder of Second Lien Obligations, the trustee or any Second Lien Debt Representative, and any holder of Second Lien Obligations, the trustee or any Second Lien Debt Representative will not have any duty, express or implied, fiduciary or otherwise, to any holder of Credit Agreement Obligations, the Credit Agreement Agent or First Lien Debt Representative.
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The holders of First Lien Obligations, on the one hand, and the holders of Second Lien Obligations, on the other hand, shall each be responsible for keeping themselves informed of the financial condition of Playtex and its Subsidiaries and all other circumstances bearing upon the risk of nonpayment of their outstanding Obligations. The Credit Agreement Agent, any First Lien Debt Representative and holders of First Lien Obligations will have no duty to advise the trustee, any Second Lien Debt Representative or any holder of Second Lien Obligations, and the trustee, any Second Lien Debt Representative and holders of Second Lien Obligations will have no duty to advise the Credit Agreement Agent, any First Lien Debt Representative or any holder of First Lien Obligations, of information regarding such condition or circumstances or as to any other matter. If any of them undertakes at any time or from time to time to provide any such information, it shall be under no obligation to provide any similar information on any subsequent occasion, to provide any additional information, to undertake any investigation, or to disclose any information which, pursuant to accepted or reasonable commercial finance practice, it wishes to maintain confidential.
Obligations Not Subordinated
The provisions of "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents" are intended solely to set forth the relative ranking of the Collective First Liens and Collective Second Liens and the other rights and obligations described therein. The Note Obligations, Credit Agreement Obligations, Additional First Lien Obligations and Additional Second Lien Obligations are senior non-subordinated obligations of Playtex and Guarantors. Neither the Note Obligations, the Credit Agreement Obligations, the Additional First Lien Obligations the Additional Second Lien Obligations nor the exercise or enforcement of any right or remedy for the payment or collection thereof are intended to be, or will ever be by reason of the provisions of "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents" in any respect subordinated, deferred, postponed, restricted or prejudiced.
Enforcement
The rights and obligations set forth in or arising under the caption "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents" are enforceable only by the trustee, any Second Lien Debt Representatives, the Credit Agreement Agent and any First Lien Debt Representatives against each other (and their respective successors, including, but only to the extent expressly provided herein, a purchaser at a foreclosure sale conducted in foreclosure of the trustee or Second Lien Debt Representative's Liens), against the holders of Secured Obligations, and against the Obligors. No other Person (including holders of Secured Obligations) shall be entitled to enforce any such right or obligation.
Relative Rights
The provisions described above under the caption "—Intercreditor Provisions Relating to Credit Agreement or Additional Lien Documents" sets forth certain relative rights, as lienholders, of the trustee and any Second Lien Debt Representative and the Credit Agreement Agent and any First Lien Debt Representative. Nothing in the indenture or any comparable provision of the Credit Agreement or Additional Lien Documents will:
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which are borrowers under or guarantors of the Credit Agreement or any Additional Lien Documents, as applicable, which is absolute and unconditional, to pay principal of, premium and interest, on such Indebtedness in accordance with the terms of the Credit Agreement or any Additional Lien Documents, as applicable, or to perform any other obligation of Playtex or any other Obligor under the Credit Agreement or any Additional Lien Document, as applicable;
Optional Redemption
At any time prior to March 1, 2007, Playtex may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price of 100.000% of the principal amount of notes redeemed plus the Applicable Premium, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Equity Offerings ("Equity Offering Redemption") or Restructuring Sales ("Restructuring Sale Redemption");provided that:
In addition, at any time prior to March 1, 2007, Playtex may also redeem the notes, in whole but not in part, upon the occurrence of a Change of Control ("Change of Control Redemption"), upon not less than 30 nor more than 60 days' prior notice (but in no event may any such redemption occur more than 90 days after the occurrence of such Change of Control) mailed by first-class mail to each holder's registered address, at the redemption price of 100.000% of the principal amount of notes redeemed plus the Applicable Premium, plus accrued and unpaid interest to the redemption date, subject to the rights of Holders of notes on the relevant record date to receive interest due on the relevant interest payment date.
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"Applicable Premium" means (i) with respect to an Equity Offering Redemption, 8% of the principal amount of the notes redeemed and (ii) with respect to a Restructuring Sale Redemption or a Change of Control Redemption, the percentage (expressed as percentages of principal amount of notes redeemed) set forth below if redeemed during the twelve-month period prior to March 1 of the years indicated below:
| Year | Percentage | ||
|---|---|---|---|
| 2005 | 12.000 | % | |
| 2006 | 10.000 | % | |
| 2007 | 8.000 | % |
Except pursuant to the preceding paragraphs, the notes will not be redeemable at Playtex's option prior to March 1, 2008.
On or after March 1, 2008, Playtex may redeem all or a part of the notes upon not less than 30 nor more than 90 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest on the notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 1 of the years indicated below:
| Year | Percentage | ||
|---|---|---|---|
| 2008 | 104.000 | % | |
| 2009 | 102.000 | % | |
| 2010 and thereafter | 100.000 | % |
Sinking Fund
The notes will not be entitled to the benefit of any sinking fund.
Subsidiary Guarantees
The notes will be guaranteed on a senior basis by each of Playtex's current and future Domestic Subsidiaries. These Guarantees will be joint and several obligations of the Guarantors. Each Guarantor's Guarantee will be secured on either a first or second lien basis, as the case may be, by the portion (if any) of the Collateral owned by such Guarantor. The obligations of each Guarantor under its Guarantee will be limited as necessary to prevent that Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors—The guarantees and the liens securing the guarantees may not be enforceable because of fraudulent conveyance laws."
A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than Playtex or another Guarantor, unless:
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The Guarantee of a Guarantor will be released:
See "—Repurchase at the Option of Holders—Asset Sales."
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of notes will have the right to require Playtex to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of Control Offer, Playtex will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid interest on the notes repurchased, to the date of purchase. Within 15 days following any Change of Control, Playtex will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the Change of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the indenture and described in such notice. Playtex will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture, Playtex will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the indenture by virtue of such conflict.
On the Change of Control Payment Date, Playtex will, to the extent lawful:
Playtex will not be required to make a Change of Control Offer upon a Change of Control (i) if Playtex has obtained a Rating Agency Confirmation prior to such Change of Control or (ii) if a third-
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party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by Playtex and purchases all notes properly tendered and not withdrawn under the Change of Control Offer. The provisions under the indenture relative to Playtex's obligation to make an offer to repurchase the notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the notes then outstanding.
The paying agent will promptly mail to each Holder of notes properly tendered the Change of Control Payment for such notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any;provided that each new note will be in a principal amount of $1,000 or an integral multiple of $1,000.
If a Change of Control Offer is made, there can be no assurance that Playtex will have available funds sufficient to make the Change of Control Payment for any or all of the notes that might be delivered by Holders of the notes seeking to accept the Change of Control Offer and, accordingly, none of the Holders of the notes may receive the Change of Control Payment for their notes in the event of a Change of Control. The failure of Playtex to make or consummate the Change of Control Offer or pay the Change of Control Payment when due will give the trustee and the Holders of the notes the rights described under "—Events of Default and Remedies."
The term "all or substantially all" as used in the definition of "Change of Control" has not been interpreted under New York law (which is the governing law of the indenture) to represent a specific quantitative test. There can be no assurance as to how a court interpreting New York law would interpret the phrase if a dispute were to arise whether a specific event was a Change of Control.
The existence of a Holder's right to require Playtex to repurchase such Holder's notes upon a Change of Control may deter a third-party from acquiring Playtex in a transaction which constitutes a Change of Control.
In addition to the obligations of Playtex under the indenture with respect to the notes in the event of a "Change of Control," the Credit Agreement requires Playtex to repay all amounts outstanding under the Credit Agreement and terminate the commitments thereunder on the date which is the earlier of (1) 30 days after the date of a Change of Control and (2) the date on which Playtex shall have made a Change of Control Offer. In addition, a "change of control" as defined in the Credit Agreement is an event of default thereunder and upon such event, the lenders under the Credit Agreement may terminate their commitments and accelerate all amounts outstanding under the Credit Agreement. Accordingly, Playtex would be required to obtain the consent of the lenders under the Credit Agreement prior to the repayment of the notes upon a Change of Control. See "Description of Other Indebtedness—New Credit Facility—Events of Default."
Asset Sales
Playtex will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:
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Equivalents received in that conversion), shall be deemed to be cash for purposes of this provision; and
Notwithstanding the foregoing, clause (1) of the preceding paragraph shall not apply to the making of any Permitted Investment pursuant to the definition of "Permitted Investment" or any Restricted Payment permitted pursuant to the covenant entitled "—Certain Covenants—Limitation on Restricted Payments."
If the Net Cash Proceeds from an Asset Sale are equal to or exceed $100.0 million, Playtex (or the Restricted Subsidiary that owned those assets, as the case may be) will be required to deliver, concurrently with the closing of such Asset Sale, a report to the trustee from an independent nationally recognized investment banking firm or firm experienced in the appraisal or similar review of similar types of transactions, certifying the fair market value of the Note First Lien Collateral and/or other property and assets sold in such Asset Sale. After the receipt of any Net Cash Proceeds from an Asset Sale:
The amount of such Net Cash Proceeds not applied as described in clause (1) of the preceding sentence and the amount of Net Cash Proceeds deposited into the Asset Sales Proceeds Account shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals $25.0 million or more, Playtex shall apply the Excess Proceeds to the repayment of the notes and any other Additional Second Lien Debt
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required to be repurchased under the instrument governing such Additional Second Lien Debt as follows:
The offer price shall be payable in cash in an amount equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any, to the date (the "Purchase Date") such Offer is consummated (the "Offered Price"), in accordance with the procedures set forth in the indenture.
To the extent that the aggregate Offered Price of the notes tendered pursuant to the Offer is less than the Note Amount relating thereto or the aggregate amount of Additional Second Lien Debt that is purchased is less than the Additional Second Lien Debt Amount (the amount of such shortfall, if any, constituting a "Deficiency"), Playtex shall use such Deficiency in the business of Playtex and its Restricted Subsidiaries or for any other purpose permitted under the terms of the indenture. Upon completion of the purchase of all the notes tendered pursuant to an Offer and repurchase of the Additional Second Lien Debt pursuant to a Additional Second Lien Debt Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
Except any Excess Proceeds deposited in an Asset Sales Proceeds Account, Excess Proceeds may be invested in Temporary Cash Investments or used to temporarily repay amounts outstanding under a revolving credit facility until they are applied as provided above. Playtex shall be entitled to any interest or dividends accrued, earned or paid on such Temporary Cash Investments.
If Playtex becomes obligated to make an Offer pursuant to this covenant, the notes shall be purchased by Playtex, at the option of the Holder thereof, in whole or in part in integral multiples of $1,000, on a date that is not earlier than 30 days and not later than 60 days from the date the notice is given to Holders, or such later date as may be necessary for Playtex to comply with the requirements under the Exchange Act, subject to proration in the event the Note Amount is less than the aggregate Offered Price of all notes tendered.
Playtex will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture, Playtex will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such conflict.
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If less than all of the notes are to be redeemed at any time, the trustee will select notes for redemption on a pro rata basis unless otherwise required by law or applicable stock exchange requirements.
No notes of $1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the Holder of notes upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of them called for redemption.
Certain Covenants
The indenture contains, among others, the following covenants:
Limitation on Indebtedness
Playtex will not, and will not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee, or otherwise in any manner become directly or indirectly liable for or with respect to or otherwise incur (collectively, "incur") any Indebtedness (including any Acquired Indebtedness but excluding any Permitted Indebtedness) except for:
provided that, in each case, the Consolidated Fixed Charge Coverage Ratio for Playtex for the four full fiscal quarters immediately preceding the incurrence of such Indebtedness taken as one period would have been at least 2.0 to 1.0 (calculated after giving pro forma effect to:
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acquisition-related cost savings that have been realized or that Playtex's chief financial officer reasonably believes will be realized).
The accrual or accretion of interest or dividends and the payment of interest or dividends in kind shall not be deemed to be an incurrence of Indebtedness.
Limitation on Restricted Payments
Playtex will not and will not permit any Restricted Subsidiary to, directly or indirectly:
(any of the payments described in clauses (1) through (5) above, other than any such action that is a Permitted Payment, being referred to, collectively, herein as "Restricted Payments") unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a board resolution):
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Notwithstanding the foregoing, and in the case of clauses (2), (3) and (4) below, so long as there is no Default or Event of Default continuing, the foregoing provisions shall not prohibit the following actions (which are, collectively, referred to as "Permitted Payments"):
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In determining whether any payment is permitted by the foregoing covenant, Playtex may allocate or reallocate, among clauses (1)-(8) of the preceding paragraph or among such clauses and the first paragraph of this covenant all or any portion of such payment and all or any portion of any payment
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previously allocated;provided that, after giving effect to such allocation or reallocation, all such payments (or allocated portions of such payments) would be permitted under the various provisions of this covenant.
If Playtex makes a Restricted Payment or Permitted Investment that, at the time of the making of such Restricted Payment or Permitted Investment, would in the good faith determination of Playtex be permitted under the requirements of this covenant, such Restricted Payment or Permitted Investment will be deemed to have been made in compliance with this covenant notwithstanding any subsequent adjustments or restatements made in good faith to Playtex's financial statements for any period which adjustments or restatements affect any of the financial data used to make the calculations with respect to such Restricted Payment or Permitted Investment.
Limitation on Transactions with Affiliates
Playtex will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of Playtex (other than Playtex or a Restricted Subsidiary) (other than any transaction or series of related transactions with respect to the making of any Permitted Investment pursuant to the definition of "Permitted Investment" or any Restricted Payment permitted pursuant to the covenant described above under the caption "—Limitation on Restricted Payments") unless:
provided that any transaction or series of related transactions otherwise permitted under this paragraph pursuant to which Playtex or any Restricted Subsidiary of Playtex shall receive or render value exceeding $25.0 million shall not be permitted unless, prior to the consummation of any such transaction or series of related transactions, Playtex shall have received an opinion, from an independent nationally recognized investment banking firm or firm experienced in the appraisal or similar review of similar types of transactions, that the financial terms of such transaction are fair to Playtex from a financial point of view.
Notwithstanding the foregoing, the provisions of this covenant shall not apply to:
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Limitation on Liens
Playtex will not, and will not permit any Restricted Subsidiary to, create, incur, affirm or suffer to exist any Lien of any kind securing any Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) upon any property or assets (including any intercompany notes) of Playtex or any Restricted Subsidiary owned on the date of the indenture or acquired after the date of the indenture, or any income or profits therefrom, unless the notes are directly secured equally and ratably with (or prior to in the case of Subordinated Indebtedness) the obligation or liability secured by such Lien, except for (which are, collectively, referred to as "Permitted Liens"):
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provided that (a) the Liens may secure such Credit Agreement Obligations, Additional First Lien Debt or Additional Second Lien Debt only if on the date of the incurrence of such Credit Agreement Obligations, Additional First Lien Debt or Additional Second Lien Debt, after giving pro forma effect to the incurrence thereof and the application of the proceeds therefrom, the Secured Leverage Ratio is not greater than 3.0 to 1.0 and (b) Playtex (or, the Surviving Entity if Playtex is not the continuing obligor under the indenture) could incur $1.00 of additional Indebtedness under the provisions of the covenant described above under the caption "—Limitations on Indebtedness" (other than Permitted Indebtedness);
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any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor;
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Notwithstanding the foregoing, any security interest granted by Playtex or any Restricted Subsidiary to secure the notes created pursuant to the first paragraph of this covenant shall provide by its terms that such security interest shall be automatically and unconditionally released and discharged upon the release by the holders of the Indebtedness of Playtex or any Restricted Subsidiary described in the first paragraph of this covenant of their security interest (including any deemed release upon payment in full of all obligations under such Indebtedness or as a result of the satisfaction and discharge or legal or covenant defeasance of such Indebtedness) at a time when:
Limitation on Sale and Leaseback Transactions
Playtex will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction that results in a Capital Lease Obligation; provided that Playtex or any Guarantor may enter into a sale and leaseback transaction that results in a Capital Lease Obligation if:
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Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
Playtex will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:
No Amendment to Subordination Provisions
Without the consent of the Holders of at least a majority in aggregate principal amount of the notes then outstanding, Playtex will not amend, modify or alter any agreement governing Subordinated Indebtedness in any way to:
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to the extent that such alteration or amendment would be disadvantageous to the Holder of notes in any material respect.
Provision of Financial Statements
Whether or not Playtex is subject to Section 13(a) or 15(d) of the Exchange Act, Playtex will, to the extent permitted under the Exchange Act, file with the Commission the annual reports, quarterly reports and other documents which Playtex would have been required to file with the Commission pursuant to such Sections 13(a) or 15(d) if Playtex were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which Playtex would have been required so to file such documents if Playtex were so subject. Playtex will also in any event within 15 days of each Required Filing Date:
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by Playtex and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption "—Limitation on Restricted Payments" or one or more of the clauses of the defined term Permitted Investments, as determined by Playtex. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Payments for Consent
Playtex will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the notes unless such consideration is offered to be paid and is paid to all Holders of the notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.
Consolidation, Merger, Sale of Assets
The indenture provides that Playtex will not, in a single transaction or a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated Persons, or permit any of its Restricted Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in an assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of
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Playtex and its Restricted Subsidiaries on a consolidated basis to any other Person or group of affiliated Persons, unless at the time and after giving effect thereto:
In the event of any transaction described in and complying with the conditions listed in the preceding paragraph in which Playtex is not the continuing Person, the successor Person formed or remaining shall succeed to, and be substituted for, and may exercise every right and power of, Playtex and Playtex will be discharged from all obligations and covenants under the indenture, the notes and the security documents.
In addition, Playtex may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions to any other Person. This "Consolidation, Merger, Sale of Assets" covenant will not apply to the sale, assignment, transfer, conveyance or other disposition of assets or merger or consolidation between or among Playtex and any of its Restricted Subsidiaries.
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Events of Default and Remedies
An Event of Default will occur under the indenture if:
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If an Event of Default (other than as specified in clause (7) and (8) of the prior paragraph with respect to Playtex) shall occur and be continuing, the trustee or the Holders of not less than 25% in aggregate principal amount of the notes then outstanding may declare the notes due and payable immediately at their principal amount together with accrued and unpaid interest, if any, to the date the notes shall have become due and payable by a notice in writing to Playtex (and to the trustee if given by the Holders of the notes), and upon any such declaration such amount shall become immediately due and payable.
If an Event of Default specified in clause (7) or (8) of the first paragraph under the caption "—Events of Default and Remedies" occurs with respect to Playtex and is continuing, then all the notes shall ipso facto become and be immediately due and payable, in an amount equal to the principal amount of the notes, together with accrued and unpaid interest, if any, to the date the notes become due and payable, without any declaration or other act on the part of the trustee or any Holder.
After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the trustee, the Holders of a majority in aggregate principal amount of notes outstanding, by written notice to Playtex and the trustee, may rescind and annul such declaration and its consequences if:
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The Holders of not less than a majority in aggregate principal amount of the notes outstanding may on behalf of the Holders of all the notes waive any past defaults under the indenture and its consequences, except a default in the payment of the principal, interest, premium, if any, or interest on any Note, or in respect of a covenant or provision which under the indenture cannot be modified or amended without the consent of the Holder of each note outstanding.
Playtex is also required to notify the trustee within five business days of the occurrence of any Default.
The Trust Indenture Act of 1939 contains limitations on the rights of the trustee, should it become a creditor of Playtex or any Guarantor, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The trustee is permitted to engage in other transactions,provided that if it acquires any conflicting interest it must eliminate such conflict upon the occurrence of an Event of Default or else resign.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Playtex or any Guarantor, as such, will have any liability for any obligations of Playtex or the Guarantors under the notes, the indenture, the security documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.
Defeasance and Covenant Defeasance
Playtex may, at its option and at any time (provided that Playtex obtains all legal opinions and complies with all other requirements under the indenture), elect to have the obligations of Playtex and any Guarantor discharged with respect to the outstanding notes ("defeasance"). Such defeasance means that Playtex and any Guarantor shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes, except for:
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In addition, Playtex may, at its option and at any time, elect to have the obligations of Playtex and any Guarantor released with respect to certain covenants (provided that Playtex's obligations to pay principal, interest, premium, if any, on the notes under the indenture shall remain in full force and effect as long as the notes are outstanding), that are described in the indenture ("covenant defeasance") and any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the notes. In the event covenant defeasance occurs, certain events (not including non-payment, enforceability of any Guarantee, bankruptcy and insolvency events) described under "—Events of Default and Remedies" will no longer constitute an Event of Default with respect to the notes.
In order to exercise either defeasance or covenant defeasance:
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The Collateral will be released from the Lien securing the notes, as provided under the caption "—Security—Release of Liens Securing Note Obligations," upon a Legal Defeasance or Covenant Defeasance in accordance with the provisions described above.
Satisfaction and Discharge
The indenture will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the notes, as expressly provided for in the indenture) as to all outstanding notes when:
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The Collateral will be released from the Lien securing the notes, as provided under the caption "—Security—Release of Liens Securing Note Obligations," upon a satisfaction and discharge in accordance with the provisions described above.
Modifications and Amendments
Modifications and amendments of the indenture and the Note Security Documents may be made by Playtex, any Guarantor, if any, and the trustee with the consent of the Holders of greater than 50% of the aggregate outstanding principal amount of the notes;provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding note affected thereby:
The Holders of greater than 50% in aggregate principal amount of the notes outstanding may waive compliance with certain restrictive covenants and provisions of the indenture.
Without the consent of any Holder of the notes, Playtex, the Guarantors and the trustee may amend the indenture and the Note Security Documents:
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Concerning the Trustee
If the trustee becomes a creditor of Playtex or any Guarantor, the indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any Holder of notes, unless such Holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.
"2001 Refinancing Transactions" means:
"Acquired Indebtedness" means Indebtedness of a Person:
in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary upon such acquisition. Acquired Indebtedness shall be deemed to be
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incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.
"Additional First Lien Cap" means, as of any date, an amount equal to the Indebtedness outstanding under and, without duplication, the aggregate Credit-Linked Deposits made pursuant to, the Credit Agreement and/or the Indebtedness outstanding under any other Credit Facility in an aggregate principal amount not to exceed the sum of the amount provided by clause (1) of the definition of Permitted Indebtedness, as of any date,plus the amount provided by clause (14) of the definition of Permitted Indebtedness. For purposes of this definition of Additional First Lien Cap, all letters of credit shall be valued at face amount, whether or not drawn.
"Additional First Lien Debt" means Indebtedness under any Credit Facility (other than the Credit Agreement) that is secured by a Lien that was permitted to be incurred under clause (4) of the definition of "Permitted Liens."
"Additional First Lien Documents" means any Credit Facility (other than the Credit Agreement) pursuant to which any Additional First Lien Debt is incurred and all other agreements governing, securing or relating to any Additional First Lien Obligations.
"Additional First Lien Obligations" means the Additional First Lien Debt and all other Obligations in respect of Additional First Lien Debt.
"Additional Lien Documents" means the Additional First Lien Documents and Additional Second Lien Documents.
"Additional Second Lien Debt" means any other Indebtedness (including additional notes) that (a) is permitted to be incurred by the covenant described above under the caption "—Certain Covenants—Limitation on Indebtedness;" and (b) is permitted to be secured by Liens under clause (5) of the definition of Permitted Liens;provided, in the case of each issue or series of Indebtedness:
(and the satisfaction of such requirements shall be conclusively established, for purposes of entitling the holders of such Indebtedness to share equally and ratably with the Holders of the notes and other holders of Additional Second Lien Debt in the benefits and proceeds of the Liens on the Collateral, if Playtex delivers to each Second Lien Debt Representative and the trustee a notice stating that such requirements and other provisions have been satisfied and that such Indebtedness is Additional Second Lien Debt).
"Additional Second Lien Documents" means the agreements governing, securing or relating to any Additional Second Lien Obligations.
"Additional Second Lien Obligations" means Additional Second Lien Debt and all other Obligations in respect thereof.
"Affiliate" of any specified Persons means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of
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this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise;provided that beneficial ownership of more than 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction but not the grant of a pledge or security interest) (collectively, a "transfer"), directly or indirectly, in one or a series of related transactions, of:
For the purposes of this definition, the term "Asset Sale" shall not include:
"Asset Sales Proceeds Account" means one or more deposit accounts established and maintained by and in the name of Playtex and under the control of the Credit Agreement Agent and the trustee in accordance with the intercreditor provisions of the indenture for the purpose of holding any Net Cash
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Proceeds from the sale or other disposition of property or assets constituting Note First Lien Collateral in accordance with the covenant described under the caption "—Repurchase at the Option of Holders—Asset Sales."
"Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (2) the sum of all such principal payments.
"Bankruptcy Law" means Title 11 of the United States Code, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person," such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Capital Lease Obligation" of any Person means any obligations of such Person and its Restricted Subsidiaries on a consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock.
"Cash Equivalents" means:
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"Change of Control" means the occurrence of any of the following events:
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property upon which a Lien is at any time granted to secure any Secured Obligation or to secure any outstanding Additional Second Lien Debt or Additional First Lien Debt.
"Collective First Liens" means (a) any Lien securing First Lien Obligations if and insofar as such Lien is attached to property constituting Credit Agreement First Lien Collateral and (b) any Lien securing Second Lien Obligations if and insofar as such Lien is attached to property constituting Note First Lien Collateral.
"Collective Second Liens" means (a) any Lien securing First Lien Obligations if and insofar as such Lien is attached to property constituting Note First Lien Collateral and (b) any Lien securing Second Lien Obligations if and insofar as such Lien is attached to property constituting Credit Agreement First Lien Collateral.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of the indenture such Commission is not existing and performing the duties now assigned to it under the Trust indenture Act, then the body performing such duties at such time.
"Common Stock" means the common stock, par value $.01 per share, of Playtex.
"Consolidated Assets" means with respect to Playtex, the total assets shown on the balance sheet of Playtex and its Restricted Subsidiaries, as determined on a consolidated basis in accordance with GAAP, as of the end of Playtex's latest full fiscal quarter.
"Consolidated Cash Flow" means, with respect to any specified Person for any period, the sum of Consolidated Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense, Consolidated Non-Cash Charges deducted in computing Consolidated Net Income (Loss) and the fees and expenses related to Playtex's strategic alternatives review announced in 2002, Playtex's operational
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reorganization begun in 2003 and Playtex's lawsuits against Procter & Gamble as described in this Prospectus, in each case, for such period, of such Person and its Restricted Subsidiaries on a consolidated basis, all determined in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, for any Person for any period, the ratio of:
"Consolidated Income Tax Expense" means, for any period, as applied to any Person, the provision for federal, state, local and foreign income taxes of such Person and its Restricted Subsidiaries for such period as determined in accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication, for any period, as applied to any Person, the sum of:
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in each case as determined in accordance with GAAP;provided that interest expense on the 151/2% Junior Subordinated Notes due 2003 shall be included in Consolidated Interest Expense only to the extent that such interest expense exceeds the amount of interest income that Playtex earns on the 15% Debentures due 2003 of Playtex Apparel Partners, L.P.
"Consolidated Net Income (Loss)" of any Person means, for any period, the consolidated net income (or loss) of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted, to the extent included in calculating such consolidated net income (or loss), by excluding, without duplication:
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refinanced or incurred in connection with the Refinancing Transactions or the 2001 Refinancing Transactions; and
Notwithstanding the foregoing, for purposes of calculating Consolidated Net Income under the covenant described under "—Certain Covenants—Limitation on Restricted Payments," Consolidated Net Income shall also be adjusted, to the extent included in calculating consolidated net income (or loss), by excluding Consolidated Non-Cash Charges to the extent the Restricted Payment is used to repurchase, redeem, defease, retire, refinance, acquire for value or pay principal of Subordinated Indebtedness.
"Consolidated Non-Cash Charges" of any Person means, for any period, the aggregate depreciation, amortization and other non-cash charges of such Person and its Restricted Subsidiaries for such period, as determined in accordance with GAAP (excluding any non-cash charge which requires an accrual or reserve for cash charges for any future period).
"Core Collateral" shall mean any assets related to Playtex's tampon business.
"Credit Agreement" means the Credit Agreement, dated as of the date of the indenture, among Playtex, the lenders thereto and General Electric Capital Corporation, as agent for the lenders and the credit parties party thereto from time to time, as further amended (including any amendment, restatement or restructuring thereof), supplemented, renewed, extended or otherwise modified, refunded, refinanced or replaced from time to time, including any agreement (and any related document or instrument) extending the maturity of, refunding, refinancing, increasing the amount available under or replacing such agreement or document (in whole or in part, and, without limitation, as to amount, terms, conditions, covenants and other provisions) or any successor or replacement agreement or document and whether by the same or any other agent, lender or group of lenders (including, without limitation, any agreements relating to debt securities or other forms of debt financing).
"Credit Agreement Agent" means, at any time, the Person serving at such time as the "Agent" or "Administrative Agent" under the Credit Agreement or any other representative of the Lenders then most recently designated by Lenders holding a majority of aggregate loans and commitments.
"Credit Agreement Obligations" means Indebtedness of Playtex and Guarantors in an aggregate outstanding principal amount not exceeding the Maximum Credit Agreement Indebtedness Amount outstanding under the Credit Agreement, guarantees of such Maximum Credit Agreement Indebtedness Amount by the Guarantors and other Obligations of any Guarantors, not constituting the principal of Indebtedness, under the Credit Agreement, together with Credit-Linked Deposits made pursuant to the Credit Agreement.
"Credit Agreement First Lien Collateral" means (a) substantially all of Playtex's and each Guarantor's property and assets, other than Note First Lien Collateral, including, without limitation: inventory, accounts, equipment (excluding motor vehicles), fixtures, chattel paper, contract rights (other than contract rights constituting Note First Lien Collateral), documents, instruments, deposit accounts, cash and cash equivalents, investment property, general intangibles (excluding Note First Lien Collateral), supporting obligations, letter of credit rights, commercial tort claims and all other personal property and owned real property and all substitutions, accessions, products and proceeds from any or all of the foregoing at any time owned or acquired by Playtex or any other Guarantor, (b) all of the capital stock or other securities of Domestic Subsidiaries owned directly by Playtex or a Guarantor, and (c) 65% of the voting and 100% of the non-voting stock of Foreign Subsidiaries owned directly by Playtex or a Domestic Subsidiary.
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"Credit Agreement Security Documents" means one or more security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, control agreements, lock-box agreements or similar agreements to any of the foregoing or other grants or transfers for security executed and delivered by Playtex or any other Obligor creating (or purporting to create) a Lien upon the property owned or to be acquired by Playtex or such other Obligor in favor of the Administrative Agent for the benefit of the Lenders under the Credit Agreement and any other holder of Credit Agreement Obligations.
"Credit Bid Rights" means, in respect of any order relating to a sale of assets in any Insolvency or Liquidation Proceeding, that:
"Credit Facilities" means one or more debt facilities or instruments (including the Credit Agreement) with banks or other lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, including arrangements relating to the sale of debt securities or other forms of debt financing, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced (including by means of sales of debt securities to investors) in whole or in part from time to time.
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"Credit-Linked Deposits" means the cash deposit made by the lenders under the Credit Agreement and held by the Credit Agreement Agent which shall be made to reimburse drawings on certain letters of credit issued under the Credit Agreement.
"Default" means any event which is, or after notice or passage of any time or both would be, an Event of Default.
"Deposit Account" shall have the meaning assigned to such term in the NYUCC.
"Discharge of Credit Agreement Indebtedness" means termination of all commitments to extend credit under the Credit Agreement, payment in full in cash of the principal of and interest and premium (if any) on all Indebtedness outstanding under the Credit Agreement other than any undrawn letter of credit, discharge or cash collateralization (at 105% of the aggregate undrawn amount) of all letters of credit issued and outstanding under the Credit Agreement, and payment in full in cash of all other Credit Agreement Obligations (except Unasserted Contingent Obligations) that are unpaid at the time the Indebtedness outstanding under the Credit Agreement (other than any undrawn letter of credit) is paid in full in cash.
"Disinterested Director" means, with respect to any transaction or series of related transactions, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions.
"Domestic Subsidiary" means any Restricted Subsidiary of Playtex that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of Playtex.
"equally and ratably" means, in reference to sharing of Liens or proceeds thereof as between the Holders of notes and the holders of Additional Second Lien Obligations with respect to each outstanding Series of Additional Second Lien Debt, that such Liens or proceeds:
"Equity Offering" means any sale of Qualified Capital Stock of a Person (a) to the public pursuant to an effective registration statement under the Securities Act or (b) in a private placement pursuant to an exemption from the registration requirements of the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Excluded Foreign Subsidiaries" means, at any time, any Foreign Subsidiary that is (or is treated as) for United States federal income tax purposes either (1) a corporation or (2) a pass-through entity owned directly or indirectly by another Foreign Subsidiary that is (or is treated as) a corporation.
"Excluded Perfection Assets" means any property or assets (other than any Core Collateral) in which a security interest cannot be perfected by the filing of a financing statement under the UCC of the relevant jurisdiction or, in the case of Capital Stock, the possession of certificates representing such Capital Stock;provided that such property or assets shall not have a fair market value at any time exceeding $1.0 million (or, if such property or asset is a Deposit Account or Securities Account, $500,000) individually or $10.0 million in the aggregate and, to the extent that the fair market value of any such property or asset shall exceed $1.0 million (or, if such property or asset is a Deposit Account or Securities Account, $500,000) individually, such property or asset shall cease to be an Excluded Perfection Asset and, to the extent that the fair market value of such property or assets shall exceed $10.0 million in the aggregate at any time, such property or assets shall cease to be Excluded Perfection Assets to the extent of such excess fair market value.
"First Lien Debt Representative" means in the case of any Additional First Lien Debt, the trustee, agent or representative of the holders of such Additional First Lien Debt and is appointed as a First Lien Debt Representative (for purposes related to the administration of the security documents) pursuant to the indenture, credit agreement or other agreement governing such Additional First Lien Debt.
"First Lien Obligations" means Credit Agreement Obligations and Additional First Lien Obligations.
"Foreign Subsidiary" means any Subsidiary that is not a Domestic Subsidiary.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, which are in effect on the date of the indenture.
"Guarantee" means the guarantee by any Guarantor of the Indenture Obligations.
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness that has been guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement:
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"Guarantor" means any guarantor of the notes.
"Indebtedness" means, with respect to any Person, without duplication:
For the purposes hereof, the maximum fixed repurchase price of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the Board of Directors of such Person.
"Indenture Obligations" means the obligations of Playtex under the indenture or under the, notes to pay principal of, premium, if any, and interest when due and payable, and all other amounts due or to become due under or in connection with the indenture, the notes and the performance of all other obligations to the trustee and the Holders under the indenture and the notes, according to the terms thereof. If any Indebtedness has been satisfied or discharged or defeased (either by defeasance or covenant defeasance), then such Indebtedness shall not be deemed to be outstanding for the purposes of the indenture.
"Insolvency or Liquidation Proceeding" means:
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the assets or liabilities of Playtex or any other Obligor, any receivership or assignment for the benefit of creditors relating to Playtex or any other Obligor or any similar case or proceeding relative to Playtex or any other Obligor or its creditors, as such, in each case whether or not voluntary;
"Inventory" means all "inventory" as such term is defined in the NYUCC.
"Interest Rate Agreements" means one or more of the following agreements which shall be entered into by one or more financial institutions, interest rate protection agreements (including, without limitation, interest rate swaps (whether from fixed to floating or from floating to fixed), caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements from time to time.
"Investment" means, with respect to any Person, directly or indirectly, any advance, loan (including guarantees), or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures, limited liability company interests or other securities issued or owned by, any other Person and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.
"Lenders" means, at any time, the parties to the Credit Agreement then holding (or committed to provide) loans, letters of credit, Credit-Linked Deposits or other extensions of credit that constitute (or when provided will constitute) Credit Agreement Obligations outstanding under the Credit Agreement.
"Lien" means with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law including any conditional sale or other title retention agreement, and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Marketing Corporation" means Playtex Marketing Corporation, a Delaware corporation.
"Material Subsidiary" means each Restricted Subsidiary of Playtex which:
"Maximum Credit Agreement Indebtedness Amount" means $225.0 million.
"Net Cash Proceeds" means:
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received in the form of, or stock, or other assets when disposed of for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to Playtex or any Restricted Subsidiary) net of:
"Note Documents" means the indenture, the notes, the Guarantees and the Note Security Documents.
"Note Obligations" means the notes, the Guarantees and all other Obligations of any Obligor under the Note Documents.
"Note First Lien Collateral" means registered and unregistered U.S. and foreign patents, trademarks, copyrights, applications therefor and licenses with respect thereto and trade names, trade secrets, service marks and know-how, manufacturing processes and formulas, wherever located, now owned or at any time hereafter acquired by Playtex or any of the Guarantors, the Asset Sales Proceeds Account and proceeds and products from any of the foregoing, other than Credit Agreement First Lien Collateral and, solely with respect to Note First Lien Collateral securing Note Obligations and Additional Second Lien Obligations, Excluded Note Assets.
"Note Security Documents" means one or more security agreements, pledge agreement, collateral assignments, mortgages, deeds of trust or other grants or transfers for security executed and delivered by Playtex or any other Obligor creating (or purporting to create) a Lien upon the property owned or to be acquired by Playtex or such other Obligor in favor of the trustee for the benefit of the Holders of the notes, the Guarantees and any other Obligations in respect of the Note Obligations.
"NYUCC" means the New York Uniform Commercial Code as in effect on the date of the indenture.
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"Obligations" means any principal (including reimbursement obligations with respect to letters of credit whether or not drawings have been made thereon), interest, (including any interest accruing at the then applicable rate provided in any applicable Additional First Lien Document, Additional Second Lien Document or Security Document after the maturity of the Indebtedness thereunder and any reimbursement obligations therein and interest accruing at the then applicable rate provided in any applicable Additional First Lien Document, Additional Second Lien Document or Security Document after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.
"Obligor" means Playtex and Person (if any) that at any time guarantees or provides collateral security or credit support for any Secured Obligations.
"Permitted Group" means any group of investors that is deemed to be a "person" (as that term is used in Section 13(d)(3) of the Exchange Act) and that includes any of the Permitted Holders described in clause (i) of the definition of "Permitted Holders;"provided that no single Person (other than the Permitted Holders and their Related Parties) Beneficially Owns more than 50% of the outstanding Voting Stock of Playtex.
"Permitted Holders" means (i) HWH Capital Partners, L.P., HWH Valentine Partners, L.P., HWH Surplus Valentine Partners, L.P. or Haas Wheat & Partners Incorporated and any of their respective Affiliates; (ii) any officer or other member of management employed by Playtex or any Subsidiary as of the date of the indenture; (iii) BLUM Capital Partners, Richard C. Blum & Associates, Inc., and RCBA GP, L.L.C.; (iv) Stinson Capital Partners, L.P., Stinson Capital Partners II, L.P., Stinson Capital Partners III, BK Capital Partners IV, L.P., RCBA-Playtex, L.P. and RCBA Strategic Partners, L.P., in each case, for so long as BLUM Capital Partners serves as the general partner of such partnership; (v) The Carpenters Pension Trust for Southern California, The Common Fund for its Multi-Strategy and Value Opportunity Funds, The United Brotherhood of Carpenters Pension Plan, and Stinson Capital Fund (Cayman), Ltd., in each case, for so long as BLUM Capital Partners has voting and investment discretion over such investment advisory account; (vi) Robert B. Haas, Douglas D. Wheat and Richard C. Blum; (vii) family members or relatives of the persons described in clauses (i), (ii), (iii), (iv) and (vi); (viii) any trusts created for the benefit of the persons described in clauses (i), (ii), (iii), (iv), (vi) and (vii); (ix) in the event of the death or incompetence of an individual described in clauses (i), (ii), (iii), (iv), (vi) or (vii), such person's estate, executor, administrator, committee or other personal representatives or beneficiaries; and (x) upon a distribution by a partnership described in clause (i), (iii) or (iv) of all or any of the stock of Playtex, the limited partners of such partnership.
"Permitted Indebtedness" means the following:
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provided that any such Indebtedness of Playtex owing to a Restricted Subsidiary, is subordinated in right of payment from and after such time as the notes shall become due and payable (whether at Stated Maturity, acceleration or otherwise) to the payment and performance of Playtex's obligations under the notes. Notwithstanding the foregoing, any disposition, pledge or transfer of any such Indebtedness to a Person (other than Playtex or a Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the obligor not permitted by this clause (5) and any transaction pursuant to which any Restricted Subsidiary, which has Indebtedness owing to Playtex or any other Restricted Subsidiary, ceases to be a Restricted Subsidiary shall be deemed to be the incurrence of Indebtedness by Playtex or such other Restricted Subsidiary that is not permitted by this clause (5);
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In the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above, or would be permitted to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the covenant described above under the caption "—Certain Covenants—Limitation on Indebtedness," Playtex will be permitted to classify such item of Indebtedness, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this definition and the covenant described under the caption "—Certain Covenants—Limitation on Indebtedness." Indebtedness under the Credit Agreement outstanding on the date on which notes are first issued and authenticated under the indenture will be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of this definition.
"Permitted Investment" means:
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"Permitted Prior Liens" means (a) Liens described in clauses (1), (2), (3), (4) and (7) of the definition of Permitted Liens and (b) Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the Security Documents.
"Person" means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivisions thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over the Capital Stock of any other class in such Person.
"Proceeds" means "proceeds" as such term is defined in the NYUCC.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on assets related to the business of Playtex or its Restricted Subsidiaries, and any additions and accessions thereto, which are purchased by Playtex or any Restricted Subsidiary at any time after the notes are issued;provided that:
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thereto and except in respect of fees and other obligations in respect of such Indebtedness; and
"Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock.
"Rating Agencies" means, at any time, Standard & Poor's Ratings Group and Moody's Investors Service, Inc. and any successor to each such corporation's business of rating securities, which is then providing a rating for the notes.
"Rating Agency Confirmation" means, with respect to any proposed Change of Control, that both of the Rating Agencies which are then providing a rating for the notes shall have unconditionally confirmed in writing that the contemplated Change of Control will not result in a downgrade, withdrawal or qualification of the then current rating given to the notes by such Rating Agency;provided, that the notes will not be rated below BB or Ba2 (or any equivalent or successor ratings), as applicable, by such Rating Agency.
"Redeemable Capital Stock" means any Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any Stated Maturity of the principal of the notes or is redeemable at the option of the holder thereof at any time prior to any such Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to any such Stated Maturity at the option of the holder thereof;provided,however, that any Capital Stock that would not constitute Redeemable Capital Stock but for the provisions thereof giving the holders the right to require such Person to redeem or repurchase such Capital Stock upon the occurrence of an asset sale or change of control shall not be deemed to be Redeemable Capital Stock.
"Refinancing Transactions" means:
"Related Party" means:
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"Required Lenders" means, at any time in respect of any action or matter, (a) holders of the principal amount of the Indebtedness (or commitments) under the Credit Agreement then outstanding whose consent to such action or matter is required pursuant to the terms of the Credit Agreement in order to bind all holders of such Indebtedness (or commitments) to such action or matter or (b) the Credit Agreement Agent acting upon the authorization or consent of the holders referred to in clause (a).
"Responsible Officer," when used with respect to the trustee, means any officer within the Corporate Trust Administration of the trustee (or any successor group of the trustee) or any other officer of the trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
"Restructuring Sale" means a sale of any assets (excluding those related to Playtex's tampon business) sold as part of Playtex's strategic review as described in the prospectus which yields Net Cash Proceeds of at least $25.0 million.
"Sale of Note First Lien Collateral" means any Asset Sale involving a sale or other disposition of Note First Lien Collateral.
"Second Lien Debt Representative" means in the case of any other Series of Additional Second Lien Debt, the trustee, agent or representative of the holders of such Series of Additional Second Lien Debt who maintains the transfer register for such Series of Additional Second Lien Debt and is appointed as a Second Lien Debt Representative (for purposes related to the administration of the security documents) pursuant to the indenture, credit agreement or other agreement governing such Series of Additional Second Lien Debt.
"Second Lien Obligations" means Note Obligations and Additional Second Lien Obligations.
"Secured Debt" means the notes, Indebtedness outstanding under the Credit Agreement, Additional First Lien Debt and Additional Second Lien Debt.
"Secured Leverage Ratio" means, on any date, the ratio of:
In addition, for purposes of calculating the Secured Leverage Ratio:
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financial officer reasonably believes will be realized) as if they had occurred on the first day of the four-quarter reference period;
"Secured Obligations" means the Note Obligations, the Credit Agreement Obligations, Additional Second Lien Obligations and Additional First Lien Obligations.
"Securities Account" shall have the meaning assigned to such term in the NYUCC.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Documents" means the Note Security Documents and the Credit Agreement Security Documents.
"security documents" means one or more security agreements, pledge agreements, collateral assignments, mortgages, collateral agency agreements, control agreements, deeds of trust or other grants or transfers for security executed and delivered by Playtex or any other Obligor creating (or purporting to create) a Lien upon Collateral, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms.
"Series of Additional Second Lien Debt" means each issue or series of Additional Second Lien Debt for which a single transfer register is maintained.
"Sharing Confirmation" means, as to any Series of Additional Second Lien Debt, the written agreement of the holders of such Series of Second Lien Debt, as set forth in the indenture or agreement governing such Series of Additional Second Lien Debt, for the enforceable benefit of all Holders of notes and each other existing and future Series of Additional Second Lien Debt and the trustee and each existing and future Second Lien Debt Representative, that all Additional Second Lien Obligations shall be and are secured equally and ratably by all Liens at any time granted by Playtex or any other Obligor to secure any Obligations in respect of such Series of Additional Second Lien Debt, whether or not upon property otherwise constituting Collateral, that all such Liens shall be enforceable by the trustee for the benefit of the Holders of the notes and all holders of Additional Second Lien Obligations equally and ratably, and that the holders of Obligations in respect of such Series of Additional Second Lien Debt are bound by the intercreditor provisions in the indenture relating to the order of application of proceeds from enforcement of the Liens upon the Collateral, and consent to and direct the trustee to perform its obligations under the intercreditor provisions in the indenture.
"Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon, means the dates specified in such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest, as the case may be, is due and payable.
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"Subordinated Indebtedness" means Indebtedness of Playtex subordinated in right of payment to the notes.
"Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by Playtex or by one or more other Subsidiaries, or by Playtex and one or more other Subsidiaries.
"Temporary Cash Investments" means:
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"UCC" means the Uniform Commercial Code as in effect in the State of New York or any other applicable jurisdiction as in effect on the date of the indenture.
"Unasserted Contingent Obligations" means, at any time, Obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities (except for (i) the principal of or premiums (if any) on, and fees relating to, any Indebtedness and (ii) contingent reimbursement obligations in respect of amounts that may be drawn under letters of credit) in respect of which no claim or demand for payment has been made (or, in the case of Obligations for indemnification, no notice of indemnification has been issued by the indemnitee) at such time.
"Unrestricted Subsidiary" means any Subsidiary that would but for this definition of "Unrestricted Subsidiary" be a Restricted Subsidiary as to which all of the following conditions apply:
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The Board of Directors of Playtex may designate any Unrestricted Subsidiary as a Restricted Subsidiary;provided that:
Any Subsidiary of an Unrestricted Subsidiary shall be an Unrestricted Subsidiary for purposes of the indenture.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means Indebtedness of such Unrestricted Subsidiary:
"Voting Stock" means stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation or other entity (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
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Except as set forth below, the notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. Notes will be issued at the closing of the exchange offer only in exchange for initial notes.
The exchange notes initially will be represented by one or more notes in registered, global form without interest coupons (the "Global Notes"). The Global Notes will be deposited upon issuance with the trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee, in each case, for credit to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for definitive notes in registered certificated form ("Certificated Notes") except in the limited circumstances described below. See "—Exchange of Global Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes in certificated form.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. Playtex takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters.
DTC has advised Playtex that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.
DTC has also advised Playtex that, pursuant to procedures established by it:
Investors in the Global Notes who are Participants may hold their interests therein directly through DTC. Investors in the Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear System ("Euroclear") and Clearstream Banking, S.A. ("Clearstream")) which are Participants. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such
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systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of the Participants, which in turn act on behalf of the Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not have notes registered in their names, will not receive physical delivery of notes in certificated form and will not be considered the registered owners or "holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, Playtex and the trustee will treat the Persons in whose names the notes, including the Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither Playtex, the trustee nor any agent of Playtex or the trustee has or will have any responsibility or liability for:
DTC has advised Playtex that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe that it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee or Playtex. Neither Playtex nor the trustee will be liable for any delay by DTC or any of the Participants or the Indirect Participants in identifying the beneficial owners of the notes, and Playtex and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between the Participants will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the notes described herein, cross-market transfers between the Participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by their respective depositaries; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for
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same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
DTC has advised Playtex that it will take any action permitted to be taken by a holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for legended notes in certificated form, and to distribute such notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of Playtex, the trustee and any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend referred to in "Notice to Investors," unless that legend is not required by applicable law.
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the trustee a written certificate (in the form provided in the indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such notes. See "Notice to Investors."
Same Day Settlement and Payment
Playtex will make payments in respect of the notes represented by the Global Notes (including principal, premium, if any, and interest) by wire transfer of immediately available funds to the accounts specified by DTC or its nominee. Playtex will make all payments of principal, interest and premium, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such holder's registered address. The notes represented by the Global Notes are expected to be eligible to trade in PORTAL and to trade in DTC's Same-Day Funds Settlement System, and any
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permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. Playtex expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a Participant will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised Playtex that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a Participant will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC's settlement date.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain United States federal income tax consequences to the exchange of initial notes in accordance with the exchange offer, and of the ownership and disposition of the exchange notes by U.S. and Non-U.S. holders, each as defined below. In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, our special U.S. tax counsel, subject to the exceptions, assumptions and qualifications set forth below, the discussion accurately reflects the material U.S. federal income tax consequences to U.S. and Non-U.S. holders of the consummation of the exchange offer and the ownership and disposition of the exchange notes. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions, existing and proposed Treasury Regulations, and interpretations of the foregoing, all as of the date hereof. All of the foregoing authorities are subject to change (possibly with retroactive effect) and any such change may result in United States federal income tax consequences to a holder that are materially different from those described below. The United States Internal Revenue Service ("IRS") may not take a similar view of the consequences described below.
The following discussion does not purport to be a full description of all United States federal income tax considerations that may be relevant to a holder in light of such holder's particular circumstances and only addresses holders who hold notes as capital assets within the meaning of Section 1221 of the Code. Furthermore, this discussion does not address the United States federal income tax considerations applicable to holders subject to special rules, such as certain financial institutions, tax-exempt entities, real estate investment trusts, regulated investment companies, insurance companies, partnerships or other pass-through entities, persons who have ceased to be United States citizens or to be taxed as resident aliens, dealers in securities or currencies, persons holding notes in connection with a hedging transaction, "straddle," conversion transaction or a synthetic security or other integrated transaction and holders whose "functional currency" is not the United States dollar. In addition, except as otherwise indicated, this discussion does not include any description of any alternative minimum tax consequences, or estate and gift tax consequences, or the tax laws of any state, local or foreign government that may be applicable to the notes.
As used in this prospectus, a "U.S. holder" means a beneficial owner of a note who is, for United States federal income tax purposes:
As used in this summary, the term "Non-U.S. holder" means a beneficial owner of a note who is not a U.S. holder.
If a partnership, or other entity taxable as a partnership for United States federal income tax purposes, holds a note, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Prospective purchasers of notes that are partnerships or who would hold the notes through a partnership or similar pass-through entity should consult their tax advisors regarding the United States federal income tax consequences to them of holding notes.
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Prospective investors should consult their tax advisors with regard to the application of United States federal tax laws to their particular situations, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Exchange Offer
The exchange of an initial note for an exchange note pursuant to the Registration Rights Agreement will not constitute a taxable exchange for United States federal income tax purposes. In such case, a holder will not recognize any gain or loss upon the receipt of an exchange note pursuant to the Registration Rights Agreement. A holder's holding period for an exchange note should include the holding period for the initial note exchanged pursuant to the Registration Rights Agreement and the holder's initial basis in an exchange note should be the same as the adjusted basis of such holder in the initial note at the time of the exchange. The United States federal income tax consequences of holding and disposing of an exchange note generally should be the same as the United States federal income tax consequences of holding and disposing of an initial note.
U.S. Holders
Payments of Interest
We have determined that the exchange notes should be treated as "contingent payment debt instruments" under applicable Treasury Regulations. This is because we have the right to redeem exchange notes under certain circumstances for payment of additional amounts in excess of stated interest or principal in the case of a Change of Control or Restructuring Sale (see "Description of the Notes—Optional Redemption") and we could not conclude under applicable Treasury Regulations that the potential payment of such amounts was "remote" or "incidental" at the time of issuance of the initial notes. There is limited guidance in this area, however, and it is possible the IRS could treat the exchange notes in a different manner, in which case the timing and the amount of interest accruals and other tax consequences may differ significantly from that described below.
Under the contingent payment debt regulations, a U.S. holder will be required to accrue interest income on the notes on a constant yield basis at an assumed yield determined at the time of issuance of the notes (the "comparable yield"), regardless of its method of accounting for U.S. federal income tax purposes. Accordingly, U.S. holders generally will be required to recognize interest income with respect to the exchange notes on a constant yield basis, subject to certain adjustments if actual payments differ from those projected on the projected payment schedule (described below). Such interest income determined under the projected payment schedule is treated as "original issue discount" for United States federal income tax purposes.
Solely for purposes of determining the amount of interest income that a U.S. holder will be required to accrue, we are required to construct a "projected payment schedule" in respect of the exchange notes representing a series of payments the amount and timing of which would produce a yield to maturity on the exchange notes equal to the comparable yield. The projected payment schedule will include each noncontingent payment and an estimate of the amount and timing of each contingent payment on the exchange notes determined as of the issue date. The comparable yield for the exchange notes is based on the yield at which we would have issued a fixed rate debt instrument with no contingent payments but with terms and conditions otherwise similar to those of the initial notes as of the issue date of the initial notes. We have determined the comparable yield to be 8%, compounded semi-annually. Under Treasury Regulations, the precise manner of calculating the comparable yield and projected payment schedule is not entirely clear.The IRS may not respect the projected payment schedule including the comparable yield set forth therein, in which case a U.S. holder could be required for any particular taxable year to include a greater or lesser amount of interest in income. U.S. holders that wish to obtain the projected payment schedule may do so by contacting 300 Nyala Farms Road, Westport,
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Connecticut 06880, telephone number (203) 341-4000. For United States federal income tax purposes, a U.S. holder is required under the contingent payment debt regulations to use the comparable yield and the projected payment schedule established by us in determining interest accruals and adjustments in respect of an exchange note, unless such U.S. holder timely discloses and justifies the use of a different comparable yield and projected payment schedule to the IRS.
Neither the comparable yield nor the projected payment schedule constitutes a projection or representation by us regarding the actual amount that will be paid on the notes.
Based on the comparable yield and the issue price of the exchange notes, a U.S. holder of an exchange note (regardless of its accounting method) will be required to accrue interest as the sum of the daily portions of interest on the exchange notes for each day in the taxable year on which the U.S. holder holds the exchange note, adjusted upward or downward to reflect the difference, if any, between the actual and projected amount of any payments on the exchange notes (as set forth below). The issue price of the exchange notes is the first price at which a substantial amount of the initial notes was sold to the public, excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers (the "issue price").
The daily portions of interest in respect of an exchange note are determined by allocating to each day in an accrual period the ratable portion of interest on the exchange note that accrues in the accrual period. The amount of interest on an exchange note that accrues in an accrual period is the product of the comparable yield on the note and the adjusted issue price of the note at the beginning of such accrual period. The adjusted issue price of an exchange note at the beginning of the first accrual period will equal its issue price and for any accrual periods thereafter will be (x) the sum of the issue price of such note and any interest previously accrued thereon (disregarding any positive or negative adjustments described below) minus (y) the amount of any projected payments on the exchange notes for previous accrual periods. To the extent that a payment made in respect of the exchange notes is consistent with the projected payment schedule, the receipt of any such payment will not be subject to U.S. federal income taxation but rather will first be treated as paid in respect of accrued but unpaid original issue discount and thereafter as repayment of principal.
In addition to the interest accrual discussed above, a U.S. holder will be required to recognize as additional interest income equal to the amount of the excess of actual payments over projected payments (a "net positive adjustment") on an exchange note for a taxable year. If a U.S. holder receives actual payments that are less than the projected payments on an exchange note for a taxable year, the U.S. holder will incur a "net negative adjustment" equal to the amount of such difference. This negative adjustment will (i) first reduce the amount of interest in respect of the exchange note that a U.S. holder would otherwise be required to include in the taxable year, and (ii) to the extent of any excess after application of clause (i), give rise to an ordinary loss to the extent of the U.S. holder's interest income on the exchange notes previously included in income during prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. A net negative adjustment is not subject to the two percent floor limitation imposed on miscellaneous deductions under Section 67 of the Code. Any negative adjustment in excess of the amounts described in (i) and (ii) will be carried forward to offset future interest income in respect of the exchange notes or to reduce the amount realized on a sale, exchange, or other disposition of the exchange notes.
Because we have determined that the comparable rate is the same as the stated interest rate on the exchange notes, we expect that the application of the rules described above will mean that the amount of a holder's interest income inclusions should not materially differ from the inclusions that would result if the exchange notes were not subject to the contingent payment debt regulations, and we intend to take a position consistent with the foregoing for all relevant tax reporting purposes. However, the rules governing contingent payment debt instruments are complex and there can be no assurance that the IRS will agree with this result.
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In the case of a holder whose tax basis in the exchange notes differs from the adjusted issue price of the exchange notes (e.g., a holder who purchased notes for cash at a price different than the adjusted issue price of the notes at the time of purchase), applicable Treasury Regulations require that, in addition to including interest income on the exchange notes under the method prescribed above, such a holder reasonably allocate such difference to daily portions of interest and/or projected payments over the remaining term of the exchange notes. Each allocated amount will generally be accounted for as a positive adjustment (in the case of a holder whose basis is less than the exchange notes' adjusted issue price) or a negative adjustment (in the case of a holder whose basis is greater than the exchange notes' adjusted issue price) on the day on which the related interest accrual or payment falls in the same manner as differences between actual payments of contingent interest on the exchange notes and the projected amounts of those payments (as described above). Any holder whose tax basis in the exchange notes differs from their adjusted issue price should consult its tax advisor as to the proper allocation of such difference and the effect thereof on the holder's accruals of interest on the exchange notes and the realization of gain or loss on a subsequent sale or other disposition of the exchange notes (including the characterization for United States federal income tax purposes of such gain or loss).
In certain circumstances other than those described above (see "Description of the Notes—Optional Redemption"; and "—Repurchase at the Option of Holders"), we may be obligated to pay a holder additional amounts in excess of stated interest or principal on the exchange notes. According to Treasury Regulations, the possibility that any such payments in excess of stated interest or principal will be made will not affect the amount of interest income to be currently recognized by a holder if there is only a remote chance as of the date the initial notes were issued that any of the circumstances that would give rise to the payment of such additional amounts (considered individually and in the aggregate) will occur, or if the potential of any such payments as of the date the initial notes were issued is incidental (considered individually or in the aggregate). Under Treasury Regulations, a payment amount is considered incidental for these purposes if, under all reasonably expected market conditions, the potential amount of the payment is insignificant relative to the total expected amount of the remaining payments on the debt instrument. Because we believed the likelihood that we would be obligated to make any such payments was remote or, in the case of certain payments, such as the Change of Control Payment, the potential amount of such payments was incidental, as of the date of issuance of the initial notes, we do not intend to treat the potential payment of any such amounts as part of the yield to maturity of any exchange notes. In the event such a contingency occurs, it would affect the amount and timing of the income that a holder must recognize. Our determination that these contingencies are remote or incidental is binding on a holder unless such holder discloses a contrary position in the manner required by applicable Treasury Regulations. However, there is very limited guidance on these issues. Further, our determination is not binding on the IRS and if the IRS were to challenge this determination, a holder might be required to include such amount as ordinary interest income to the extent that such it creates or increases a "net positive adjustment" under the contingent payment debt regulations as described above. U.S. holders of exchange notes should consult their own tax advisors as to the treatment of these payments for United States federal income tax purposes.
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Sale, Exchange or Disposition of the Notes
Upon the sale, exchange or other disposition of an exchange note, a U.S. holder will generally recognize gain or loss equal to the difference between the amount realized, reduced by any negative adjustment carryforward as described above, and such U.S. holder's adjusted tax basis in the exchange note. A U.S. holder's adjusted tax basis in an exchange note will generally be equal to the U.S. holder's purchase price for the exchange note, increased by any interest income previously accrued by the U.S. Holder (determined without regard to any positive or negative adjustments to interest accruals described above) and decreased by the amount of any projected payments previously scheduled to be made on the exchange note to the U.S. holder (without regard to the amount paid) and increased or decreased by the amount of any positive or negative adjustment, respectively that the U.S. holder is required to make if such U.S. holder purchased the exchange note at a price other than its adjusted issue price. A U.S. holder generally will treat any gain as interest income and any loss as ordinary loss to the extent of the excess of previous interest inclusions over the total net negative adjustments previously taken into account as ordinary loss, and the balance as capital loss. In the event there are no contingent payments remaining on the exchange note, such gain or loss will instead generally be treated as capital gain or loss. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain payments of principal of, and interest on, an exchange note, and the proceeds of disposition of an exchange note before maturity, to U.S. holders other than certain exempt recipients such as corporations. In general, backup withholding at the then applicable rate (currently at a rate of 28%) will be applicable to a U.S. holder that is not an exempt recipient, such as a corporation, if such U.S. holder:
Any amount withheld from payment to a holder under the backup withholding rules will be allowed as a credit against the holder's federal income tax liability and may entitle the holder to a refund, provided the required information is furnished to the IRS. U.S. holders of exchange notes should consult their tax advisors regarding the application of backup withholding in their particular situation, the availability of an exemption from backup withholding and the procedure for obtaining such an exemption, if available.
Non-U.S. Holders
The rules governing United States federal income taxation of Non-U.S. holders are complex. Non-U.S. holders should consult with their own tax advisors to determine the effect of federal, state, local and foreign income tax laws, as well as treaties, with regard to an investment in the exchange notes, including any reporting requirements.
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Payments of Interest
Subject to the discussion below concerning backup withholding, payments of interest on the exchange notes by us or our paying agent to a Non-U.S. holder will generally not be subject to U.S. federal income tax or withholding tax, if:
The certification requirement referred to above will be fulfilled if either (A) the Non-U.S. holder provides to us or our paying agent an IRS Form W-8BEN (or successor form), signed under penalties of perjury, that includes such holder's name and address and a certification as to its Non-U.S. status, or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business holds the exchange note on behalf of the beneficial owner and provides a statement to us or our paying agent, signed under penalties of perjury, in which the organization, bank or financial institution certifies that it has received an IRS Form W-8BEN (or successor form) from the Non-U.S. holder or from another financial institution acting on behalf of such holder and furnishes us or our paying agent with a copy thereof and otherwise complies with the applicable IRS requirements. Other methods might be available to satisfy the certification requirements described above, depending on the circumstances applicable to the Non-U.S. holder.
The gross amount of payments of interest that do not qualify for the exception from withholding described above (the "portfolio interest exemption") will be subject to United States withholding tax at a rate of 30% unless (A) the Non-U.S. holder provides a properly completed IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under an applicable tax treaty, or (B) such interest is effectively connected with the conduct of a United States trade or business by such Non-U.S. holder and such holder provides a properly completed IRS Form W-8ECI (or successor form).
If a Non-U.S. holder is engaged in a trade or business in the United States and if interest on the exchange note or gain realized on the disposition of the exchange note is effectively connected with the conduct of such trade or business, the Non-U.S. holder generally will be subject to regular United States federal income tax on the interest or gain on a net basis in the same manner as if it were a U.S. holder, unless an applicable treaty provides otherwise. In addition, if the Non-U.S. holder is a foreign corporation, it may also be subject to a branch profits tax at a rate of 30% on its earnings and profits for the taxable year, subject to certain adjustments, unless reduced or eliminated by an applicable tax treaty. Even though such effectively connected income is subject to income tax, and may be subject to the branch profits tax, it is not subject to withholding tax if the Non-U.S. holder satisfies the certification requirements described above.
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Sale, Exchange or Disposition of the Notes
Subject to the discussion below concerning backup withholding, a Non-U.S. holder of an exchange note generally will not be subject to U.S. federal income tax on gain realized on the sale, exchange or other taxable disposition of such note unless:
Federal Estate Tax
An exchange note held (or treated as held) by an individual who is a Non-U.S. holder at the time of his or her death will not be subject to United States federal estate tax, provided the interest on the exchange note is exempt from withholding of United States federal income tax under the "portfolio interest exemption" described above (without regard to the certification requirement) and income on such note was not United States trade or business income. If you are an individual, you should consult with your tax advisor regarding the possible application of the United States federal estate tax to your particular circumstances, including the effect of any applicable treaty.
Information Reporting and Backup Withholding
Unless certain exceptions apply, we must report annually to the IRS and to each Non-U.S. holder any interest paid to the Non-U.S. holder. Copies of these information returns may also be made available under the provisions of a specific treaty or other agreement to the tax authorities of the country in which the Non-U.S. holder resides.
Under current United States federal income tax law, backup withholding tax will not apply to payments of interest by us or our paying agent on an exchange note if the certifications described above under "Non-U.S. Holders—Payments of Interest" are received, provided that we or our paying agent, as the case may be, do not have actual knowledge or reason to know that the payee is a U.S. person.
Payments on the sale, exchange or other disposition of an exchange note made to or through a foreign office of a foreign broker generally will not be subject to backup withholding or information reporting. However, if such broker is for United States federal income tax purposes:
then information reporting will be required unless the broker has in its records documentary evidence that the beneficial owner is not a U.S. person and certain other conditions are met or the beneficial owner otherwise establishes an exemption. Backup withholding may apply to any payment that such broker is required to report if the broker has actual knowledge or reason to know that the payee is a
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U.S. person. Payments to or through the U.S. office of a broker will be subject to backup withholding and information reporting unless the holder certifies, under penalties of perjury, that it is not a U.S. person or otherwise establishes an exemption.
Backup withholding is not an additional tax: any amounts withheld from a payment to a Non-U.S. holder under the backup withholding rules will be allowed as a credit against such holder's U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the IRS. Non-U.S. holders of notes should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption from backup withholding and the procedure for obtaining such an exemption, if available.
The foregoing discussion is for general information only and is not tax advice. Accordingly, you should consult your tax advisor as to the particular tax consequences to you of purchasing, holding and disposing of the notes, including the applicability and effect of any state, local, or non-U.S. tax laws and any tax treaty and any recent or prospective changes in any applicable tax laws or treaties.
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Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer in exchange for initial notes acquired by such broker-dealer as a result of market making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and, therefore, must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales, offers to resell or other transfers of the exchange notes received by it in connection with the exchange offer. Accordingly, each such broker-dealer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for initial notes where such initial notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration of this exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. The Issuers have agreed to pay all of their expenses incident to the exchange offer other than commissions or concessions of any brokers or dealers and will indemnify the holders of the exchange notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
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Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York has passed upon the validity of the exchange notes and related guarantees.
The consolidated financial statements and schedule of Playtex Products, Inc. and subsidiaries as of December 27, 2003 and December 28, 2002, and for the twelve month periods ended December 27, 2003, December 28, 2002 and December 29, 2001, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG LLP refers to the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" and Statement of Financial Accounting Standards No. 145, "Rescission of Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and file reports, proxy statements and other information with the Commission. We have also filed with the Commission a registration statement on Form S-4 to register the exchange notes. This prospectus, which forms part of the registration statement, does not contain all of the information included in that registration statement. For further information about us and the exchange notes offered in this prospectus, you should refer to the registration statement and its exhibits. You may read and copy any document we file with the Commission at the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these reports, proxy statements and information may be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. In addition, the Commission maintains a web site that contains reports, proxy statements and other information regarding registrants, such as us, that file electronically with the Commission. The address of this web site ishttp://www.sec.gov.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates by reference important business and financial information about Playtex Products, Inc. that is not included in or delivered with this document. The information incorporated by reference is considered to be part of this prospectus, and later information that Playtex Products, Inc. files with the Commission will automatically update and supersede this information. Any statement modified or superseded by subsequently filed materials shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Subject to the preceding, the information in this prospectus is qualified in its entirety by the information appearing in the documents incorporated by reference. Playtex Products, Inc. incorporates by reference the documents listed below (excluding any portions of such documents that have been "furnished" but not "filed"):
You should rely only on the information contained in this document or that information to which Playtex Products, Inc. has referred you. Playtex Products, Inc. has not authorized anyone to provide you with any additional information.
The documents incorporated by reference into this prospectus are available from Playtex Products, Inc. upon request. These documents are also available on our website atwww.playtexproductsinc.com. Playtex Products, Inc. will provide a copy of any and all of the information that is incorporated by reference in this prospectus to any person, without charge, upon written or oral request. Requests for such copies should be directed to the following:
Playtex Products, Inc.
Chief Financial Officer
300 Nyala Farms Road
Westport, Connecticut 06880
(203) 341-4000
Except as provided above, no other information, including, but not limited to, information on the web sites of Playtex Products, Inc., is incorporated by reference into this prospectus.
You should only rely on information contained in this prospectus and incorporated by reference in it.
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Playtex Products, Inc.
Exchange Offer For Its $460,000,000
8% Senior Secured Notes Due 2011
Prospectus
August 3, 2004
No person has been authorized to give any information or to make any representation other than those contained in this prospectus, and, if given or made, any information or representations must not be relied upon as having been authorized. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy these securities in any circumstances in which this offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made under this prospectus shall, under any circumstances, create any implication that there has been no change in the affairs of Playtex Products, Inc. since the date of this prospectus. We will update the information contained in this prospectus to the extent required by law during such time as this prospectus is required to be in use. Broker-dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
Broker-dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the broker-dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
