UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13D-1
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
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The Cosmetic Center, Inc.
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(Name of Issuer)
Class C Common Stock
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(Title of Class of Securities)
221234305
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(CUSIP Number)
Frank B. Reilly, Esq.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione,
One Riverfront Plaza, Newark NJ 07102
(973) 596-4661
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 10, 1998
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(Date of Event Which Requires Filing of this Statement
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e),13d-1(f) or 13d-1(g), check the following box
[ ].
Page 1 of 10 Pages
<PAGE>
CUSIP NO. 221 234 305 Page 2 of 10 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Prestige I, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF
8,479,335
------------------------------------------------
SHARES BENEFICIALLY OWNED 8 SHARED VOTING POWER
------------------------------------------------
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
8,479,335
------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,479,335
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84.7%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 221 234 305 Page 3 of 10 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Prestige Holdings I, L.L.C.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New Jersey
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7 SOLE VOTING POWER
NUMBER OF
8,479,335
------------------------------------------------
SHARES BENEFICIALLY OWNED 8 SHARED VOTING POWER
------------------------------------------------
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
8,479,335
------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,479,335
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84.7%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 221 234 305 Page 4 of 10 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
York Management Services, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7 SOLE VOTING POWER
NUMBER OF
8,479,335
------------------------------------------------
SHARES BENEFICIALLY OWNED 8 SHARED VOTING POWER
------------------------------------------------
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
8,479,335
------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,479,335
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84.7%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 221 234 305 Page 5 of 10 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
William F. Taggart
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER OF
8,479,335
------------------------------------------------
SHARES BENEFICIALLY OWNED 8 SHARED VOTING POWER
------------------------------------------------
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
8,479,335
------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,479,335
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
84.7%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 221 234 305 Page 6 of 10 Pages
Item 1. Security and Issuer
The class of equity securities to which this statement relates is
the Class C Common Stock (the "Common Stock") of The Cosmetic Center, Inc. (the
"Issuer"). The address of the principal executive office of the Issuer is 8700
Robert Fulton Drive, Columbia, Maryland 21046.
Item 2. Identity and Background
(a) This statement is filed on behalf of the following persons: (i) Prestige
Holdings I, L.P. (the "Limited Partnership"), a Delaware limited partnership,
(ii) the general partner of the Limited Partnership, Prestige I, L.L.C. (the
"General Partner"), a New Jersey limited liability company, (iii) York
Management Services, Inc. ("York"), a New York corporation that controls the
General Partner and (iv) William F. Taggart, who controls York.
In accordance with General Instructions C for complying with
Schedule 13D, the information called for by Items 2 through 6, inclusive, is
also provided with respect to Mr. Gary A. Nacht, who is a member of the General
Partner and an officer of York.
Prestige Holdings I, L.P. - The Limited Partnership
The address of the principal business offices of the Limited
Partnership is 764 Easton Avenue, Suite #8, Somerset, New Jersey 08873. The
principal business of the Limited Partnership is a management company.
Prestige I, L.L.C. - The General Partner
The address of the principal business offices of the General
Partner is 764 Easton Avenue, Suite #8, Somerset, New Jersey 08873. The
principal business of the General Partner is an investment company.
York Management Services, Inc.
The address of the principal business offices of York is 764
Easton Avenue, Suite #8, Somerset, New Jersey 08873. The principal business of
York is an investment and management company.
(b) and (c) The business address of Mr. Taggart and Mr. Nacht is York Management
Services, Inc., 764 Easton Avenue, Suite #8, Somerset, New Jersey 08873.
(d) None.
(e) None.
(f) Messrs. Taggart and Nacht are United States citizens.
<PAGE>
CUSIP NO. 221 234 305 Page 7 of 10 Pages
Item 3. Source and Amount of Funds or Other Consideration
On December 10, 1998, Revlon Consumer Products Corporation, a
Delaware corporation ("Revlon") and the Limited Partnership executed a
Contribution Agreement (the "Contribution Agreement") pursuant to which Revlon
contributed to the Limited Partnership all of its 8,479,335 shares of the
Issuer's Common Stock (the "Contributed Shares"), and certain obligations owed
by the Issuer to Revlon representing advances of cash and other assets from
Revlon to the Issuer for working capital and inventory. In exchange for such
contribution, Revlon received a limited partnership interest in the Limited
Partnership. As a result, no cash was used by the Limited Partnership to acquire
the Contributed Shares.
Item 4. Purpose of Transaction
The acquisition of the Contributed Shares was made for
investment purposes. Pursuant to the Contribution Agreement, the Limited
Partnership acquired beneficial ownership of the Contributed Shares, or
approximately 84.7% of the issued and outstanding capital stock of the Issuer.
The Limited Partnership is comprised of the General Partner and two limited
partners, Revlon and Prestige II, L.L.C., a Delaware limited liability
corporation which is controlled by Mr. Taggart. The General Partner has sole
responsibility for the management and policies of the Limited Partnership.
Simultaneously with the closing of the transactions
contemplated by the Contribution Agreement (the "Closing"), eight members of the
Issuer's Board of Directors (Messrs. Levin, Fox, Fellows, Nichols, Halperin,
Drapkin, Dinkins and Rosenthal) resigned from their positions as Directors of
the Issuer effective ten days after the date the Issuer's Schedule 14F was
mailed to the stockholders of record of the Issuer and transmitted to the
Securities and Exchange Commission. At the Closing, two individuals designated
by the Limited Partnership became Directors of the Issuer (the "Limited
Partnership Designees").
Pursuant to the Contribution Agreement, the Issuer's Bylaws
were amended to require the affirmative vote of at least 85% of the Directors
present at a meeting for meetings of the Board of Directors (but not committees
thereof) where a quorum is present in order to take action and to provide that a
quorum for meetings of the Board (but not committees thereof) requires that at
least 85% of the entire Board be present. In addition, pursuant to the
Contribution Agreement, all of the members of the Executive Committee of the
Board of Directors were removed and replaced by Ms. Mary Elizabeth Burton and
the two Limited Partnership Designees.
Item 5. Interest in Securities of the Issuer
According to the Issuer's Quarterly Report on Form 10-Q for
the quarterly period ended September 26, 1998, the Issuer has 10,025,601
shares of Common Stock outstanding as of September 26, 1998.
(a) The Limited Partnership beneficially owns 8,479,335 shares of
the Issuer's Common Stock, or approximately 84.7% of the outstanding Common
Stock. Such ownership is direct.
The General Partner beneficially owns 8,479,335 shares of the
Issuer's Common Stock, or approximately 84.7% of the outstanding Common Stock.
Such ownership is indirect.
<PAGE>
CUSIP NO. 221 234 305 Page 8 of 10 Pages
York beneficially owns 8,479,335 shares of the Issuer's Common
Stock, or approximately 84.7% of the outstanding Common Stock. Such ownership is
indirect.
Mr. Taggart beneficially owns 8,479,335 shares of the Issuer's
Common Stock, or approximately 84.7% of the outstanding Common Stock. Such
ownership is indirect.
Mr. Nacht does not beneficially own any shares of the Issuer's
Common Stock.
(b) The Limited Partnership has the sole power to vote or direct
the vote of the Contributed Shares. As the general partner of the Limited
Partnership, the General Partner has the sole power to vote or direct the vote
of the Contributed Shares. As the majority owner of the General Partner, York
has the sole power to vote or direct the vote of the Contributed Shares. As the
indirect owner of the common stock of York, Mr. Taggart has the sole power to
vote or direct the vote of the Contributed Shares.
(c) Except for the acquisition of Contributed Shares by the
Limited Partnership as set forth in Item 4, none of the persons named in Item 2
has effected any transactions in the Common Stock during the past sixty (60)
days.
(d) None.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
See Items 3 and 4.
Item 7. Material To Be Filed As Exhibits
The following exhibits are annexed hereto:
1. Joint filing agreement.
2. Contribution Agreement dated as of December 10, 1998 between
the Limited Partnership and Revlon.
<PAGE>
CUSIP NO. 221 234 305 Page 9 of 10 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 21, 1998
PRESTIGE HOLDINGS I, L.P.
By: Prestige I, L.L.C., its
General Partner
By: /s/ Gary A. Nacht
--------------------------------------
Name: Gary A. Nacht
Title: Authorized Member
PRESTIGE I, L.L.C.
By: /s/ Gary A. Nacht
--------------------------------------
Name: Gary A. Nacht
Title: Authorized Member
YORK MANAGEMENT SERVICES, INC.
By: /s/ Gary A. Nacht
--------------------------------------
Name: Gary A. Nacht
Title: Executive Vice President
/s/ William F. Taggart
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CUSIP NO. 221 234 305 Page 10 of 10 Pages
EXHIBIT 1 - JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) under the Securities Exchange
Act of 1934, the persons named below agree to the joint filing on behalf of each
of them of a Statement on Schedule 13D (including amendments thereto) with
respect to the Class C Common Stock of The Cosmetic Center, Inc., and further
agree that this Joint Filing Agreement be included as an Exhibit to such joint
filing. In evidence thereof the undersigned, being duly authorized, hereby
execute this Agreement this 21st day of December , 1998.
PRESTIGE HOLDINGS I, L.P.
By: Prestige I, L.L.C., its
General Partner
By: /s/ Gary A. Nacht
--------------------------------------
Name: Gary A. Nacht
Title: Authorized Member
PRESTIGE I, L.L.C.
By: /s/ Gary A. Nacht
--------------------------------------
Name: Gary A. Nacht
Title: Authorized Member
YORK MANAGEMENT SERVICES, INC.
By: /s/ Gary A. Nacht
--------------------------------------
Name: Gary A. Nacht
Title: Executive Vice President
/s/ William F. Taggart
--------------------------------------
EXECUTION COPY
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") dated as of December 10,
1998 is made by and between Prestige Holdings I, L.P., a limited partnership
organized under the laws of Delaware ("Transferee") and Revlon Consumer Products
Corporation, a Delaware corporation ("Transferor").
W I T N E S S E T H:
WHEREAS, Transferor is the owner of 8,479,335 shares (the "Shares") of
Class C common stock, par value $.01 per share (the "Common Stock"), of The
Cosmetics Center, Inc. (the "Company"), representing approximately 84.6% of the
issued and outstanding capital stock of the Company; and
WHEREAS, Transferor is the owner of (i) a promissory note of the
Company dated as of April 25, 1997 in the principal amount of $13.255 million
and bearing interest at the rate of 11% per annum, and (ii) an amended and
restated promissory note of the Company dated as of September 26, 1998 in the
principal amount of $7 million and bearing interest at the rate of 9.25% per
annum, in each case, as amended as of the date hereof to, among other things,
have a term of less than one (1) year (the "Intercompany Debt "); and
WHEREAS, Transferor is the owner of certain trade payables owed by the
Company to Transferor for goods sold and delivered and services provided in the
ordinary course of business by Transferor (the "Trade Payables"); and
WHEREAS, Transferor desires to contribute to Transferee, and Transferee
desires to receive such from Transferor as a contribution, the Shares, the
Intercompany Debt and $6 million of the oldest Trade Payables outstanding (the
"Assigned Trade Payables"); Transferor will retain $3.7 million of Trade
Payables (the "Retained Trade Payables"), a portion of which will be paid or
offset on or prior to the Closing (as herein defined) in accordance with Section
4(e) and the remainder of which will be evidenced by the Promissory Notes (as
herein defined) in accordance with Section 4(b), and the Transferor shall
forgive the remainder of the Trade Payables; and
WHEREAS, in consideration of the foregoing, each of the parties to this
Agreement desires to perform its respective obligations upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter contained, the parties hereto do hereby agree as follows:
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1. Contribution and Receipt of the Shares, the Intercompany Debt and
the Assigned Trade Payables; Closing.
(a) Subject to all of the terms and conditions of this
Agreement, Transferor shall contribute the Shares, the Intercompany Debt and the
Assigned Trade Payables to Transferee, and Transferee shall receive the Shares,
the Intercompany Debt and the Assigned Trade Payables as a contribution from
Transferor, at the Closing (as hereinafter defined). In consideration for the
contribution, Transferor shall be admitted as a limited partner of Transferee in
accordance with the provisions of the Partnership Agreement (as hereinafter
defined).
(b) The closing of the contribution and receipt of the Shares,
the Intercompany Debt and the Assigned Trade Payables (herein called the
"Closing ") shall take place upon execution and delivery of this Agreement at
the offices of Transferor at 625 Madison Avenue, New York, New York 10022, and
shall be effective at the close of business on December 10, 1998, or at such
other location, time or date as may be agreed to in writing by Transferor (such
time and date of the Closing being herein called the "Closing Date").
(c) At the Closing, Transferor shall deliver to Transferee
stock certificates representing the Shares duly endorsed (or accompanied by duly
executed stock powers), the promissory notes representing the Intercompany Debt,
and an assignment of the Assigned Trade Payables, each for transfer to
Transferee. Additionally, at the Closing, Transferor and Transferee shall each
deliver to the other the agreements and documents required of them pursuant to
Schedule I hereto.
2. Representations and Warranties of Transferor. Transferor hereby
represents and warrants to Transferee, except as set forth in the Disclosure
Schedule (as defined below), as follows:
(a) Due Incorporation. Each of Transferor and the Company is a
corporation validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character of the properties owned
or held under lease or license or the nature of the Company's business requires
such qualification, except where the failure to be so qualified and in good
standing shall not have a material adverse effect on the financial condition or
results of operations of the Company taken as a whole (a "Material Adverse
Effect").
(b) Due Authorization. Transferor has corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder, and the execution, delivery and performance of this Agreement by
Transferor have been duly authorized by all necessary corporate action on its
part. The Company has full corporate power and authority to own, conduct and
operate its business, assets and properties. Prior to Closing, the board of
directors of the Company has approved the transaction contemplated
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EXECUTION COPY
hereby pursuant to which Transferee and any "affiliate" or "associate" of
Transferee becomes an "interested" stockholder of the Company for purposes of
Section 203 of the Delaware General Corporation Law, as each such term is
defined therein.
(c) Binding Obligation. This Agreement has been duly executed
and delivered by Transferor and is the valid and binding obligation of
Transferor, enforceable against Transferor in accordance with its terms (except
as such enforcement may be limited by applicable principles of equity, and by
bankruptcy, insolvency, moratorium, receivership, conservancy, fraudulent
conveyance, liquidation and other laws affecting creditors' rights and remedies
generally).
(d) No Conflict. Except as set forth on Schedule 2(d) of the
disclosure schedule delivered by Transferor to Transferee upon the execution and
delivery of this Agreement (the "Disclosure Schedule"), the execution, delivery
and performance of this Agreement by Transferor and the consummation by
Transferor of the transactions contemplated hereby do not (i) contravene the
certificate of incorporation, bylaws or other organizational documents of
Transferor or the Company, (ii) violate, conflict with or result in a breach of
or default under any agreement, license, instrument, indenture, mortgage, lease,
judgment, decree, order or ruling to which Transferor or the Company is a party
or by which Transferor or the Company or any of their respective assets or
properties is bound, or to which the Shares are subject, or (iii) result in or
permit the creation of any lien, charge or encumbrance upon the Shares, except,
in the case of clause (ii), where such conflict, violation, breach or default,
lien, charge or encumbrance would not result in a Material Adverse Effect on the
Company. Except as set forth in Disclosure Schedule 2(d), no consents are
required in order for Transferor to enter into this Agreement or consummate the
transactions contemplated hereby, except any consent the failure of which to
secure would not result in a Material Adverse Effect on the Company. The
execution, delivery and performance of a financing agreement which refinances
all amounts owed under the Company's existing Credit Agreement with Bank of
America Business Credit, as amended to the date hereof, providing for revolving
credit secured by the Company's inventory, receivables, tangible and intangible
assets would not violate, conflict with or result in a breach or default under
any agreement, license, indenture, mortgage, lease, judgment, order or ruling to
which the Company is a party or by which the Company or any of its assets is
bound, except where such conflict, violation, breach or defaults would not
result in a Material Adverse Effect on the Company.
(e) No Violation of Law; Regulatory Approvals. The execution,
delivery and performance of this Agreement by Transferor and the consummation by
Transferor of the transactions contemplated hereby do not violate any law, rule,
regulation or governmental order or decree applicable to Transferor or the
Company, except any violations which would not have a Material Adverse Effect on
the Company. Neither Transferor nor the Company is required to file, seek or
obtain any governmental notice, filing, authorization, approval, order or
consent ("Governmental Consent") in connection with execution, delivery and
performance
3
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EXECUTION COPY
of this Agreement by Transferor, except for such Governmental Consents the
failure of which to obtain would not result in a Material Adverse Effect on
the Company.
(f) Litigation. Except as set forth on Schedule 2(f) of the
Disclosure Schedule, neither Transferor nor the Company is engaged in or a party
to, or threatened in writing with, any suit, legal action, arbitration or other
proceeding (a "Proceeding") before any court, administrative agency, arbitration
panel or other similar authority that (i) relates to or may affect the business,
assets or properties of the Company, except for Proceedings that would not
result in a Material Adverse Effect on the Company, or (ii) challenges or seeks
to prevent, delay or make illegal the transactions contemplated by this
Agreement.
(g) Shares. At the Closing, Transferor will deliver to
Transferee the Shares, free and clear of any and all liens, rights, interests,
hypothecations, violations, pledges, encumbrances, charges, agreements or
claims, and, upon delivery of the certificates for the Shares at the Closing,
Transferee will acquire valid title to the Shares, free and clear of any
security interests, hypothecations, violations, judgments or encumbrances or
"adverse claims" within the meaning of Section 8-302 of the New York Uniform
Commercial Code. The Shares are fully paid and nonassessable. The Shares are not
registered and may not be transferred except pursuant to registration or an
exemption therefrom.
(h) Capitalization of the Company. The Company's authorized
capital stock consists solely of: (i) 40,000,000 authorized shares of Class C
common stock, par value $.01 per share, of which 10,025,601 shares are issued,
outstanding, fully paid and nonassessable, 80,361 shares are reserved for
issuance under the Company's Amended and Restated 1991 Stock Option Plan (the
"1991 Plan") and 1,000,000 shares are reserved for issuance and 616,250 options
are outstanding under the Company's 1997 Stock Option Plan (the "1997 Plan");
(ii) 5,000,000 shares of Class A common stock, par value $.01 per share, none of
which is issued and outstanding; and (iii) 5,000,000 shares of Class B common
stock, par value $.01 per share, none of which is issued and outstanding. Except
as set forth on Disclosure Schedule 2(h) and except for this Agreement, the 1991
Plan and the 1997 Plan, there are no outstanding options, warrants or other
rights to acquire, or any outstanding securities or obligations convertible into
or exchangeable for, or any voting agreements with respect to, any shares of
capital stock of the Company. The Company has no subsidiaries.
(i) Ownership and Condition of Property. Except as set forth
on Disclosure Schedule 2(i), the Company owns or leases all material assets used
in the conduct its business as presently conducted. To Transferor's knowledge,
all of the Company's assets are in all material respects in good operating
condition and repair, ordinary wear and tear excepted.
(j) Trade Payables. At the Closing before the contribution by
Transferor to Transferee of the Assigned Trade Payables, the total amount of the
Trade Payables owed by the Company to Transferor or any of its Affiliates shall
not be less than $11.1 million.
4
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EXECUTION COPY
(k) Employee Benefit Plans and Agreements.
(i) Schedule 2(k) of the Disclosure Schedule contains a true
and complete list of, and the Transferor has delivered a complete and accurate
copy to Transferee of, each material "employee benefit plan" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") of the Company, and each material stock purchase, stock
option, severance, employment, change in control, fringe benefit, bonus,
incentive, deferred compensation and all other material employee benefit plans,
agreements, programs, policies or other arrangements of the Company, whether or
not subject to ERISA, under which any employee or former employee, or the
spouse, beneficiary or dependent of any employee or former employee, of the
Company has any present or future right to benefits or under which the Company
has any present or future liability. All such plans, agreements, programs,
policies and arrangements are hereinafter referred to as "Employee Benefit
Plans."
(ii) With respect to the Employee Benefit Plan intended to
qualify under Code (section)401(a), (1) an application for a determination
letter filed in August 1998 is pending with the Internal Revenue Service, (2)
the Company has not engaged in a transaction prohibited by Code(section)4975 or
Section 406 of ERISA, and (3) Transferor has delivered to Transferee the most
recent valuation that was delivered by the third party administrator for such
Employee Benefit Plan.
(iii) Except for any failure to so maintain or to take or
fail to take action as would not result in a Material Adverse Effect on the
Company, the Employee Benefit Plans have been maintained in all material
respects in accordance with their terms, the requirements of ERISA, the Code
(where applicable), and all other applicable laws and no Employee Benefit Plan
has taken, or has failed to take, any action that could result in the imposition
of any excise tax, penalty, judgment or assessment.
(iv) The Company does not sponsor a plan subject to Title IV
of ERISA or Code (section)412, nor does the Company have a current or contingent
obligation to contribute to any multiemployer plan (as defined in Section 3(37)
of ERISA). The Company has not incurred (and no event, transaction or condition
has occurred or exists which will result in the Company incurring) any
withdrawal liability under Section 201 or 4202 of ERISA in respect of any
multiemployer plan.
(v) Except as set forth on Disclosure Schedule 2(k), the
Company has no commitment, whether formal or informal and whether legally
binding or not, to create any additional material Employee Benefit Plan or
modify any existing Employee Benefit Plan in any material respect.
(vi) There are no pending or threatened claims by or on
behalf of any Employee Benefit Plan, or by or on behalf of any individual
participants or beneficiaries of
5
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any such Employee Benefit Plan, alleging any breach of fiduciary duty on the
part of the Company or any of its officers, directors or employees under ERISA
or any other applicable laws, or claiming benefit payments (other than those
made in the ordinary operation of such plans), nor, to Transferor's knowledge,
is there any basis for such claim, except in the case of this Section 2(k)(vi)
any such claims as would not have a Material Adverse Effect on the Company.
(l) Environment.
(i) For purposes of this Agreement, "Hazardous Substance"
shall mean any material or substance defined or identified as a hazardous
material, hazardous waste, hazardous substance, toxic substance, pollutant or
contaminant, or which is otherwise regulated, under any Environmental Law, or
which is or contains petroleum, gasoline, diesel fuel or another petroleum
hydrocarbon product; "Environmental Laws" shall collectively mean all Federal,
state and local laws, statutes, ordinances, rules, regulations, common law
rules, orders, codes, licenses, permits, decrees, judgments, directives,
guidelines, standards or the equivalent of or by any Governmental Authority and
relating to or addressing the protection of the environment or human health
(including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section
1801 et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C.
Section 6901 et seq.), and the regulations adopted pursuant thereto);
"Governmental Authority" shall mean the Federal government, any state or other
political subdivision thereof, exercising executive, legislative, judicial,
regulatory or administrative functions.
(ii) Except as set forth in Disclosure Schedule 2(l), to the
knowledge of Transferor (i) there has been no material treatment storage,
disposal, release or threatened release of any Hazardous Substance on or from
any of the premises of the Company in a manner which (a) has caused damage to
persons, property or resources or would result in any material liability to the
Company under any Environmental Law, or (b) is required by Environmental Law to
be investigated, cleaned up or remediated; (ii) except in accordance with
applicable Environmental Laws, during the period of time that Transferor has
owned the Shares the Company has not disposed of any Hazardous Substance and no
third party with which the Company has contracted to dispose of any Hazardous
Substance has so disposed of any such substance at any location; (iii) except as
set forth in Disclosure Schedule 2(l), there are no claims pending or threatened
by any regulatory authority or third party that the Company is in violation of
or non-compliance with any Environmental Law or that the Company is liable to
any party for property damage, personal injury or otherwise as a result of the
presence of Hazardous Substances at or from the Company's premises or as a
result of the Company's operations; and (iv) the Company is in compliance in all
material respects with all Environmental Laws and possesses all permits required
by Environmental Laws and all such permits are currently in effect, except for
any exceptions to (i), (ii), (iii) or (iv) as would not result in a Material
Adverse Effect on the Company.
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(m) Labor Matters. The Company is not a party to any
collective bargaining agreement or other contract or commitment to any labor
union or association representing any employee of the Company. During the period
of time that Transferor has owned the Shares, no such agreement has been
requested of management of the Company by, or is under discussion by management
of the Company with, any group of employees or others not covered by any such
agreement.
(n) Lease Payments. Except as set forth in Disclosure
Schedule 2(n), (i) Company has paid any and all amounts due pursuant to all real
property leases under which it is lessee or sublessee, and is not otherwise in
default thereunder, and (ii) the Transferor has no knowledge of any event
(including but not limited to the execution and delivery of this Agreement)
that, with the giving of notice or lapse of time or both, would be a default
under any such lease, except in the case of (i) for any amounts in dispute and
except in the case of (ii) for any defaults that would not have a Material
Adverse Effect on the Company.
(o) Affiliate Agreements. Except as disclosed in Disclosure
Schedule 2(o), Company is not party to any agreement with, or requiring the
performance from and after the Closing Date of any obligations by or for the
benefit of, Transferor or any other Affiliate of the Transferor. For purposes of
this Agreement, "Affiliate" shall mean any person that, directly or indirectly,
controls, is controlled by or is under common control with, the first mentioned
person.
(p) Services Agreement. There are no services provided by
Transferor or any Affiliate of Transferor that are not contemplated by the
Services Agreement dated April 25, 1997 (the "Service Agreement") by and between
the Company and Transferor.
(q) Supply Agreement. The Transferor presently sells
inventory to the Company pursuant to the Supply Agreement dated April 25, 1997
(the "Supply Agreement") by and between the Company and Transferor, as amended
as provided herein.
(r) Letters of Credit. Other than as set forth on Disclosure
Schedule 2(r), there are no letters of credit or bank guarantees presently used
by the Company in connection with its business.
(s) SEC Documents. To Transferor's knowledge, except as set
forth on Disclosure Schedule 2(s), since April 25, 1997 the Company has filed
all required forms, statements, schedules, exhibits, reports and other documents
with the Securities and Exchange Commission ("SEC") required to be filed by it
pursuant to the Federal securities laws and the SEC rules and regulations
thereunder, other than any such failure to file as would not have a Material
Adverse Effect on the Company (as such documents have since the time of their
filing been amended, the "Company SEC Documents"). To Transferor's knowledge, as
of their respective dates, the Company SEC Documents complied in all material
respects with the
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requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Documents or such other forms, reports or other documents, as
of their respective dates and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, other than any
non-compliance, untrue statements or omissions that would not result in a
Material Adverse Effect on the Company.
(t) Employment Agreements, Consulting Agreements and
Severance Agreements. Except as set forth in Disclosure Schedule 2(t), the
Company is not a party to (i) any written employment or consulting agreements
with any employees or consultants pursuant to which the Company is obligated to
pay in excess of $100,000 after the Closing Date, or (ii) any written severance
or separation agreement with any former employee pursuant to which the Company
is obligated to pay in excess of $100,000 after the Closing Date.
(u) Intercompany Debt and Assigned Trade Payables. The
Intercompany Debt and Assigned Trade Payables have not been sold, pledged,
assigned or transferred by Transferor and as of the date hereof are free and
clear of all liens and encumbrances.
3. Representations and Warranties of Transferee. Transferee
hereby represents and warrants to Transferor as follows:
(a) Due Formation; Non-Contravention. Transferee is a limited
partnership validly existing and in good standing under the laws of the State of
Delaware.
(b) Due Authorization. Transferee has the power and authority
as a limited partnership to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and performance of this
Agreement by Transferee have been duly authorized by all necessary partnership
action on the part of Transferee.
(c) Binding Obligation. This Agreement has been duly executed
and delivered by Transferee and is the valid and binding obligation of
Transferee, enforceable against it in accordance with its terms (except as such
enforcement may be limited by applicable principles of equity, and by
bankruptcy, insolvency, moratorium, receivership, conservancy, fraudulent
conveyance, liquidation and other laws affecting creditors' rights and remedies
generally).
(d) No Conflict. Neither the execution, delivery and
performance of this Agreement by Transferee, nor the consummation by it of the
transactions contemplated hereby (i) contravene the certificate of limited
partnership or other organizational documents of Transferee or (ii) violate,
conflict with or result in a breach of or default under any agreement,
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license, instrument, indenture, mortgage, lease, judgment, decree, order or
ruling to which Transferee is a party or by which Transferee or any of its
assets or properties is bound, except in the case of clause (ii) where such
conflict, violation, breach or default, lien, charge or encumbrance would not
adversely affect the business, assets or properties of Transferee.
(e) No Violation of Law; Regulatory Approvals. Neither the
execution, delivery and performance of this Agreement by Transferee, nor the
consummation of the transactions contemplated hereby, will violate any law, rule
or regulation applicable to Transferee which violation would adversely affect
the business, assets or properties of Transferee. Transferee is not required to
seek any Governmental Consent in connection with the execution, delivery and
performance of this Agreement, except for such Governmental Consents the failure
of which to obtain would not adversely affect the business, assets or properties
of Transferee.
(f) Litigation. Transferee is not engaged in or a party to,
or threatened with, any Proceeding before any court, administrative agency,
arbitration panel or other similar authority that relates to or may adversely
affect the business, assets or properties of Transferee, and Transferee is not a
party to, or threatened with any such Proceeding that may have the effect of
preventing, delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement.
(g) Investment Intent. Transferee is and will be acquiring
the Shares for its own account, for investment and not with a view to the
distribution thereof within the meaning of the Securities Act. Transferee has no
present intention of selling, distributing or otherwise disposing of the Shares.
Transferee is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act. Transferee understands that (i) the Shares
have not been registered under the Securities Act and (ii) the Shares must be
held by Transferee indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration and
agrees not to dispose of the Shares other than pursuant to such registration or
exemption. Transferee understands that there is a legend on the certificates
delivered hereunder stating that the Shares have not registered under the
Securities Act and, therefore, cannot be offered, sold or transferred unless
they are registered under the Securities Act or an exemption from such
registration is available.
(h) Access to Information. Transferee acknowledges that it
and its representatives have been permitted full and complete access to the
filings of the Company under the Securities Act and the Exchange Act, and that
it and its representatives have had a full opportunity to meet with the officers
and employees of Transferor and the Company to discuss the Company and have had
access to all relevant books, records and documents. Transferee acknowledges
that none of
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Transferor or any of its Affiliates or any other person has made any
representation or warranty, expressed or implied, as to the accuracy or
completeness of any information regarding the businesses of the Company or the
Shares, except as expressly set forth in this Agreement and the schedules
hereto, and none of Transferor or any of its Affiliates shall have or be subject
to any liability to Transferee, its representatives or any other person
resulting from the distribution to Transferee or its representatives, or their
use of, any such information, documents or materials made available to
Transferee or its representatives in any form in expectation of the transactions
contemplated hereby except as and to the extent expressly provided in this
Agreement.
4. Covenants of the Parties.
(a) Partnership Agreement. Transferor shall execute and
deliver at the Closing a partnership agreement (the "Partnership Agreement")
setting forth the organization of Transferee and the rights and obligations of
its partners in the form attached hereto as Exhibit A.
(b) Promissory Notes. Transferor shall cause the Company to
execute and deliver to Transferor at the Closing two promissory notes (the
"Promissory Notes"). One Promissory Note shall be payable to Transferor in the
amount of $850,000, representing the obligation of the Company to repay to
Transferor $850,000 of the most current outstanding Retained Trade Payables due
from the Company to Transferor, which are amounts due in the ordinary course
under the Supply Agreement, in the form attached hereto as Part I to Exhibit B.
The Second Promissory Note shall be payable to Transferor in the amount of
$850,000, representing the obligation of the Company to repay to Transferor
$850,000 of the next most current outstanding Retained Trade Payables due from
the Company to Transferor, which are amounts due in the ordinary course under
the Supply Agreement, in the form attached hereto as Part II to Exhibit B.
Transferor will forgive the remainder of the Trade Payables owed by the Company
to Transferor, after giving effect to the payments and offset to be made in
accordance with Section 4(e), on or prior to the Closing. At the Closing,
Transferor will assign the Assigned Trade Payables to the Transferee.
(c) Leases.
(i) At the Closing, Transferor shall cause the Company to
transfer and assign to Transferor the real property lease with respect to the
Company store located on Fifth Avenue, New York City, and, simultaneously
therewith, Transferor, as sublessor, and the Company, as sublessee, shall enter
into a sublease for such store terminating on December 31, 1999, which sublease
shall provide that between the Closing Date and the termination date of the
sublease the Company will operate such store in the ordinary course of business
and the Company will transfer and assign to Transferor all fixtures and
inventories owned by the Company or Transferor located at such store on such
termination date.
(ii) At the Closing, Transferee shall cause the Company to
(x) amend the leases for the Company stores located in Irvington, New Jersey,
Phoenix, Arizona, and Oxford, North Carolina (the "Leases") to provide that each
of the Leases shall terminate on December 31, 1999, time being of the essence
(the "1999 Termination Date"), (y) operate
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such stores in the ordinary course of business until the 1999 Termination Date
and (z) transfer and assign to Transferor all fixtures and inventories owned by
the Company or Transferor located at such store on such 1999 Termination Date.
(iii) It is expressly understood and agreed that the Company
will retain the rights under the lease for the Company store located in Apex,
North Carolina for the balance of the lease term, together with any renewal
options or extensions thereof.
(d) Supply Agreement. The Supply Agreement shall be amended
(i) to provide that it may be terminated by Transferor (x) immediately for
non-payment by the Company of amounts due and payable with respect to goods and
services provided after the Closing Date; and (y) immediately for failure to
comply with covenants relating to wholesaling products; and (ii) to waive,
solely in connection with the consummation of the transactions contemplated by
this Agreement, the change in control provisions in Section 2.02 of the Supply
Agreement to the extent required for such provisions not to be triggered by and
on the occasion of the consummation of the such transactions.
(e) Payment of Balance of Retained Trade Payables. On or
prior to the Closing, Transferee shall cause the Company to pay to Transferor an
amount equal to $1.5 million, by certified check or wire transfer of immediately
available funds, in partial payment of the Retained Trade Payables. On or prior
to the Closing, the Transferor will offset $100,000 owed by it to the Company
against the Trade Payables. From and after the Closing, Transferee shall cause
the Company to pay to Transferor the balance of the Retained Trade Payables
(other than the Retained Trade Payables represented by the Promissory Notes) in
accordance with the payment terms thereof.
(f) Board of Directors. Transferor shall arrange at the
Closing for (i) two (2) designees of Transferee (the "Transferee Designees") to
be elected to the board of directors of the Company (the "Board"), (ii) the
Transferee Designees to be elected to fill two of the seats on the Executive
Committee of the Board, and (iii) the amendment of the by-laws of the Company to
provide that no action of the Board, other than the filling of vacancies on the
Board or its Executive Committee, may be taken without the affirmative vote of
85% of the full Board.
(g) Non-Competition. Transferor hereby agrees that for three
(3) years after the Closing Date, Transferor will not own or operate a retail
outlet store in the United States that sells cosmetics, fragrances or health and
beauty products. Notwithstanding the foregoing, Transferor may operate (i) full
priced "flagship" stores operating under the "Revlon" name or any other
trademarks or tradenames used by Transferor in its business, (ii) employee
stores located on or near Transferor's premises, (iii) retail stores acquired
through the acquisition of an entity, provided that the purpose of such
acquisition is not to acquire retail stores and that no more than 25% of such
acquired entity's gross sales are derived from retail sales of cosmetics,
fragrances, and/or health and beauty products, (iv) "tent" and warehouse sales
having a duration of ten (10) days or less, and
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(v) stores located in or adjacent to hair, nail and/or beauty salons owned or
operated by Transferor which are incidental to the business of the salon.
5. Further Agreements and Assurances.
(a) Further Assurances. Transferor and Transferee shall
execute and deliver any and all documents or instruments reasonably necessary or
desirable to effectuate the transactions contemplated by this Agreement or any
of the agreements executed and delivered in connection herewith. Without
limitation of the foregoing, (i) Transferor shall use commercially reasonable
efforts to assist Transferee in discussions with any landlords that are party to
lease agreements with the Company that may be necessary or advisable as a result
of the transactions contemplated by this Agreement; provided, however, that
Transferor does not hereby make any covenant or undertaking that any consents
that may be required will be secured and provided further that Transferor shall
not be required to take any actions that would obligate Transferor to (x) incur
any third party costs or expenses or (y) commence or join any litigation or
similar proceeding; and (ii) after the Closing, Transferee shall and shall cause
the Company to provide Transferor and its agents with access during normal
business hours to the Company's Columbia, Maryland facility, and to any other
property of the Company as is reasonably necessary, in order for Transferor to
remove Transferor's routing equipment located on the Company's property.
Transferor will be responsible for any actual damage to the Company's property
that occurs as a direct result of such removal of Transferor's equipment by
Transferor and its agents.
(b) Post-Closing Access by Transferor and Transferee.
Transferee shall and shall cause the Company to cooperate with Transferor to
make available to Transferor financial, tax and other information (including
reasonable access to books and records of the Company) for periods up to and
including the Closing Date, reasonably required by Transferor in connection with
any audit or other investigation by any taxing authority or for tax compliance
or any required reports or submissions to governmental bodies or judicial
authorities with respect to the Company, or its business and operations or for
the purpose of defending third party claims under Section 7(c) hereof.
Transferor shall cooperate with Transferee and the Company to make available to
Transferee and the Company financial, tax and other information for periods up
to and including the Closing Date, not delivered to the Company or Transferee on
the Closing Date, reasonably required by Transferee and the Company in
connection with any audit or other investigation by any taxing authority or for
tax compliance or any required reports or submissions to governmental bodies or
judicial authorities with respect to the Company, or for the purpose of
defending third party claims under Section 7(c) hereof.
(c) Post-Closing Cooperation. Transferor shall use
commercially reasonable efforts to assist Transferee in the transition to its
own service providers of services provided by Transferor to the Company pursuant
to the Services Agreement prior to the Closing, provided that in no event shall
Transferor be required to perform any such services
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for the Company post-Closing. The Services Agreement shall be terminated as of
the Closing Date.
(d) Directors and Officers. Transferor will indemnify the
Company for any actual losses arising out of matters that occurred up to and
including the Closing Date if the Company is required after the Closing Date
pursuant to and subject to the terms and conditions of Article X of its By-Laws
and any applicable Delaware laws to indemnify any of Harvey Rosenthal, David
Dinkins, Jerry W. Levin, William J. Fox, Donald Drapkin, George Fellows, Richard
Halperin, Wade H. Nichols or Steven Isko by reason of the fact that any such
person was a director or officer of the Company up to and including the Closing
Date. Transferor may secure at its own cost and expense a "runoff" insurance
policy for the Company providing directors and officers liability coverage for
the matters, individuals and periods set forth in the preceding sentence (the
"Runoff Policy"). Transferee acknowledges that prior to Transferor's ownership
of the Company certain insurance policies which included coverage for directors
and officers were purchased by the Company (the "Predecessor Policies").
Transferee agrees that it shall cause the Company to grant Transferor the
authority to file claims with the insurers under the Predecessor Policies and
the Runoff Policy and pursue the benefits of such coverage to the extent that
such Predecessor Policies and the Runoff Policy provide coverage for directors
and officers liability claims for which Transferor has agreed to indemnify the
Company pursuant to this Section 5(d). Transferee agrees that it shall cause the
Company to assign to Transferor all benefits of the insurance under the
Predecessor Policies and the Runoff Policy to the extent such benefits are
actually received for the directors and officers liability claims for which
Transferor has agreed to indemnify the Company pursuant to this Section 5(d).
Transferee agrees to aid and to cause the Company to aid and support Transferor
in pursuit of the insurance under the Predecessor Policies and the Runoff Policy
which shall include, but not be limited to, supplying records, personnel, and,
if necessary, filing lawsuits or claims against insurers to collect the
insurance under the Predecessor Policies and the Runoff Policy and Transferor
shall reimburse Company and Transferee for its third party costs incurred in
connection with such assistance to Transferor. Transferor shall be entitled to
control the proceedings for any such lawsuits or claims. The indemnification
provided under this Section 5(d) shall survive indefinitely.
(e) Publicity. No press releases or filings with respect to
this Agreement and the transactions contemplated hereby shall be made by either
party without the prior approval of the other party (which approval shall not be
unreasonably withheld) except as required by law or the rules of any stock
exchange.
(f) Confidentiality. The Confidentiality Agreement dated
September 25, 1998, between the Company and York Management Services, Inc. shall
remain in full force and effect.
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(g) Use of Revlon Name. From and after the Closing date,
Transferee shall cause the Company to cease to use the "Revlon" name as a
tradename in any of its stores, and shall have no right, title or interest in
the "Revlon" name following the Closing.
6. Survival of Representations and Warranties. With the
exception of the representations and warranties set forth in Sections 2(c), 2(g)
and 2(u) hereof and Section 8, which shall survive the Closing forever and the
representations set forth in Section 3 hereof, which shall survive for a period
of six (6) months from the Closing Date, the other representations and
warranties set forth in this Agreement (the "Non-Surviving Reps and Warranties")
shall not survive the Closing Date and after the Closing Date no party shall
have any right to make a claim for indemnification or otherwise with respect to
the breach or inaccuracy of any Non-Surviving Reps and Warranties.
7. Indemnification.
(a) Indemnification by Transferor. Transferor hereby agrees
to indemnify, defend, save and hold Transferee and its Affiliates and their
respective directors, officers, employees, representatives and agents and each
of the successors and assigns of any of the foregoing (the "Transferee Group")
harmless from and against any and all damage, liability, loss, expense,
assessment, judgment or deficiency of any nature whatsoever (including, without
limitation, attorneys' fees and other costs and expenses incident to any
Proceeding) (together, "losses") incurred or sustained by any member of the
Transferee Group which shall arise out of or result from (1) any breach or
inaccuracy of any representation or warranty set forth in Sections 2(c), 2(g)
and 2(u), and (2) the nonfulfillment or breach of any agreement, obligation or
covenant of Transferor contained herein, in each case after offset by any
related insurance proceeds directly related to the matter for which
indemnification is claimed (net of increased insurance premiums and charges
related directly to such losses) to which any member of the Transferee Group is
entitled under its insurance policies (it being understood that no member of the
Transferee Group has any obligation hereunder to carry insurance coverage for
any particular or general group of risks), or other third party recovery
received by any member of the Transferee Group related to the matter for which
indemnification is claimed (it being understood that no member of the Transferee
Group has any obligation hereunder to institute a Proceeding or take any other
action detrimental to any member of Transferee Group to seek such recovery).
(b) Indemnification by Transferee. Transferee hereby agrees
to indemnify, defend, save and hold harmless Transferor and its Affiliates and
their respective directors, officers, employees, representatives and agents and
each of the successors and assigns of any of the foregoing (the "Transferor
Group") from and against any and all losses incurred or sustained by any member
of the Transferor Group which shall arise out of or result from (1) any breach
or inaccuracy of any representation or warranty set forth in Section 3 hereof
and (2) the nonfulfillment or breach of any agreement, obligation or covenant of
Transferee under this Agreement, in each case after offset by any related
insurance proceeds directly related to
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the matter for which indemnification is claimed (net of increased insurance
premiums and charges related directly to such losses) to which any member of the
Transferor Group is entitled under its insurance policies (it being understood
that no member of the Transferor Group has any obligation hereunder to carry
insurance coverage for any particular or general group of risks), or other third
party recovery received by any member of the Transferor Group related to the
matter for which indemnification is claimed (it being understood that no member
of the Transferor Group has any obligation hereunder to institute a Proceeding
or to take any other action detrimental to any member of the Transferor Group to
seek such recovery).
(c) Tax Indemnification.
(i) Transferor hereby agrees to indemnify, defend, save and
hold harmless the Transferee Group from and against any and all Federal and
state and local (but only to the extent the Company filed state and local
consolidated or combined income or franchise Tax returns with a group in which
Transferor was a member or would have been included in a state and local
consolidated or combined income or franchise Tax return in which Transferor was
a member if the Shares had been owned by Transferor for all periods prior to the
Closing Date) income Tax liabilities relating to periods ending on or prior to
the Closing Date, including, without limitation, Taxes owed by any other member
of a consolidated group in which the Company and Transferor joined pursuant to
Treasury Regulation (section)1.1502-6 or as a transferee or successor, by
contract or otherwise. For purposes of this Agreement "Tax" or "Taxes" mean all
Federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customer duties, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, intangible
property, sales, use or transfer, registration, value added, alternative or
add-on minimum, estimated or other taxes of any kind whatsoever, including any
interest, penalty or additions thereto, whether disputed or not. A claim for
indemnification may be made under this Section 7(c) at any time during the
applicable Tax statutory period of limitations with respect to such Tax claim.
(ii) Tax Matters. The following provisions shall govern the
allocation of responsibility as between Transferee and Transferor for certain
tax matters following the Closing Date:
(A) Filing of Tax Returns. Transferor shall prepare
or cause to be prepared and file or cause to be filed all Tax returns
for the Company for all Tax periods ending on or prior to the Closing
Date which are required to be filed before or after the Closing Date.
Transferee shall prepare and file or cause to be prepared and filed any
Tax returns of the Company for tax periods which begin before the
Closing Date and end after the Closing Date. Transferor shall pay all
Federal and state and local (but only to the extent the Company filed
state and local consolidated or combined income or franchise Tax
returns with a group in which Transferor was a member) Taxes shown to
be due on such income Tax returns.
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(B) Cooperation on Tax Matters. Transferee and
Transferor shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's reasonable request) the provision
of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on
a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Transferee and
Transferor agree (x) to retain, and cause the Company to retain, all
books and records with respect to Tax matters pertinent to the Company
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Transferee or Transferor, any extensions thereof) of the
respective taxable periods, and to abide, and to cause the Company to
abide, by all record retention agreements entered into with any taxing
authority, and (y) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and
records and, if the other party so reasonably requests, Transferee and
Transferor, as the case may be, shall allow, and Transferee shall cause
the Company to allow, the other party to take possession of such books
and records. Transferee and Transferor further agree, upon request, to
use their commercially reasonable efforts to obtain any certificate or
other document from any governmental authority or any person as may be
necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby). Transferee and Transferor further
agree, upon request, to provide the other party with all information
that either party may be required to report pursuant to Code
(section)6043 and all Treasury Department Regulations promulgated
thereunder.
(C) Certain Taxes. All transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement
(including any New York State Real Estate Transfer Tax, New York City
Transfer Tax and any similar tax imposed in other states or
subdivisions), shall be paid by Transferor when due, and Transferor
will, at its own expense, file all necessary Tax returns and other
documentation with respect to all such transfer, documentary, sales,
use, stamp registration and other Taxes and fees, and, if required by
applicable law, Transferee will, and will cause its Affiliates to, join
in the execution of any such Tax returns and other documentation.
(D) Tax Sharing Agreements. Notwithstanding the
provisions of any tax sharing agreements, tax powers of attorney or
similar agreements in effect on the date hereof with respect to or
involving the Company and Transferor and its Affiliates relating to
Taxes (the "Tax Agreements"), Transferor shall be responsible for, and
shall indemnify the Company for, any Taxes, as and to the extent
provided in Section
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7(c) hereof, and Company shall have no liability with respect to such
Taxes under the Tax Agreements.
(E) Audits. Transferor will conduct any Federal,
state or local (but only to the extent the Company filed state and
local consolidated or combined income or franchise Tax returns with a
group in which Transferor was a member or would have been included in a
state and local consolidated or combined income or franchise Tax return
in which Transferor was a member if the Shares had been owned by
Transferor for all periods prior to the Closing Date) income Tax
audits. Transferor agrees not to settle any Federal income or state or
local (but only to the extent the Company filed state and local
consolidated or combined income or franchise Tax returns with a group
in which Transferor was a member or would have been included in a state
and local consolidated or combined income or franchise Tax return in
which Transferor was a member if the Shares had been owned by
Transferor for all periods prior to the Closing Date) income Tax audit
in a manner that would adversely affect the Company after the Closing
Date unless such settlement would be reasonable in the case of a person
that owned the Company both before and after the Closing Date, and
Transferor will advise and consult with Transferee prior to such
settlement. Transferee shall have the sole right to represent the
Company in any Tax audit or administrative or court proceeding for all
other taxable periods and to employ counsel of its choice at its own
expense.
(d) ERISA Indemnification. (i) Transferor hereby agrees to
indemnify, defend, save and hold harmless the Transferee Group from and against
any and all losses, including, without limitation, withdrawal or underfunding
liabilities, arising out of any employee benefit plan (other than the Employee
Benefit Plans) maintained or sponsored by any entity affiliated with the Company
prior to the Closing under Section 414(b), (c), (m) or (o) of the Code, to the
extent such losses arise solely as a legal result of such affiliation. A claim
for indemnification may be made under this Section 7(d) at any time during the
applicable ERISA statutory period of limitations with respect to such claim.
(ii) With respect to the Employee Benefit Plan intended to
qualify under Section 401(a) of the Code, immediately following the Closing,
Transferee agrees to file a Power of Attorney Form 2848 with the Internal
Revenue Service designated Steven H. Sholk as power of attorney in place of
Kenneth J. Raphael, E. Maureen Olson and Therese Michaels-Boyle. Transferee
agrees to indemnify the Company, Transferor, Kenneth J. Raphael, E. Maureen
Olson and Therese Michaels-Boyle for any liability arising out of its failure to
comply with this Section 7(d)(ii).
(e) Third-Party Claims.
(i) Promptly after receipt by an indemnified party under
Section 7(a), (b), (c) or (d) hereof of notice of any claim or
Proceeding for which it may seek indemnification hereunder, such
indemnified party shall, if a claim is to be made
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against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim or Proceeding,
but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such claim or Proceeding is
prejudiced by the indemnifying party's failure to receive such notice.
(ii) If an indemnified party gives notice to the
indemnifying party of the commencement of such claim or Proceeding
pursuant to Section 7(e)(i), the indemnifying party shall be entitled
to participate in such claim or Proceeding, and, to the extent that it
wishes (unless the indemnifying party is also a party to such claim or
Proceeding and the indemnified party determines in good faith that
joint representation would result in a conflict of interest), to assume
the control of the investigation and defense of such claim or
Proceeding with counsel reasonably satisfactory to the indemnified
party and, after notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or
Proceeding, the indemnifying party shall not, as long as it diligently
conducts such defense, be liable to the indemnified party under this
Section 7 for any fees of other counsel or any other expenses with
respect to the defense of such claim or Proceeding. If the indemnifying
party assumes the defense of a claim or Proceeding, (1) no compromise
or settlement of such claim or Proceeding may be effected by the
indemnifying party without the indemnified party's consent unless the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (2) the indemnifying party shall have no
liability with respect to any compromise or settlement of such claim or
Proceeding effected without its consent.
(iii) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a claim or Proceeding may adversely affect it or its
Affiliates other than as a result of monetary damages for which it
would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such claim or
Proceeding, but the indemnifying party shall not pay defense costs and
shall not be bound by or liable for any determination of a claim or
Proceeding so defended or any compromise or settlement thereof.
(f) Certain Limitations. The indemnification provided for in
this Section 7 shall be the sole and exclusive remedy for damages available to
any party hereto for any breach or alleged breach of any representation,
warranty, covenant or agreement in this Agreement or given pursuant hereto.
Notwithstanding anything to the contrary contained herein, no indemnification
shall be provided under this Section 7 for lost profits or other special,
indirect, incidental, punitive or consequential damages of any kind or nature
whatsoever.
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8. Finder's Fees; Brokers. Each of Transferor and Transferee
represents and warrants to the other that, with the exception of Financo, Inc.
(whose fees shall be paid by Transferor), there are no claims (or any basis for
any claims) for brokerage commissions, finder's fees or like payments in
connection with this Agreement or the transactions contemplated hereby resulting
from any action taken by it or on its behalf. Transferor shall indemnify and
hold Transferee harmless and Transferee shall indemnify and hold Transferor
harmless with respect to the representations and warranties set forth in this
Section 8.
9. Waiver; Requirements of Writing. This Agreement cannot be
changed or any performance, term or condition waived in whole or in part except
by a writing signed by the party against which enforcement of the change or
waiver is sought. Any term or condition of this Agreement may be waived at any
time by the party hereto entitled to the benefit thereof and any such term or
condition may be modified at any time by an agreement in writing executed by the
party or parties hereto affected by such term or condition.
10. Expenses. Each of the parties hereto shall pay all the
costs incurred by it incident to the preparation, execution and delivery of this
Agreement and, except to the extent otherwise provided in this Agreement, the
performance of its obligations hereunder.
11. No Assignment. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns, but may not be assigned by either party without the prior
written consent of the other party.
12. Miscellaneous.
(a) Notices. Any notice, request, consent, waiver or other
communication required or permitted hereunder shall be effective only if it is
in writing and personally delivered or sent by certified or registered mail,
postage prepaid, reputable overnight courier (such as Federal Express) or
facsimile transmissions (with electronic confirmation) addressed or transmitted
as follows:
If to Transferor:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attn: Senior Vice President and Deputy General Counsel
Fax No.: (212) 527-5693
with a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
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New York, New York 10022
Attn: Thomas E. Constance, Esq.
Fax No.: (212) 715-8000
If to Transferee:
Prestige Holdings I, L.P.
c/o York Management Services, Inc.
764 Easton Avenue
Suite #8
Somerset, New Jersey 08873
Attn: Chairman
Fax No.: (732) 296-6606
with a copy to:
Gibbons, Del Deo, Dolan, Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102-5497
Attn: Frank B. Reilly, Esq.
Fax No.: (973) 639-6248
or such other person or address (or Fax No.) as the addressee may have specified
in a notice duly given to the sender as provided herein. Such notice or
communication shall be deemed to have been given as of the date so personally
delivered or mailed.
(b) Integration. This Agreement (including the Schedules and
Exhibits attached hereto) constitutes the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, whether oral or written, relating
to the subject matter hereof.
(c) Waiver. No delay or failure on the part of any party in
exercising any rights hereunder, and no partial or single exercise thereof, will
constitute a waiver of such rights or of any other rights hereunder.
(d) No Third-Party Beneficiaries. Nothing in this Agreement
will be construed as giving any person, firm, corporation or other entity, other
than the parties hereto and their successors and permitted assigns, any right,
remedy or claim under or in respect of this Agreement or any provision hereof.
(e) Applicable Law. This Agreement will be construed and
interpreted in accordance with and governed by the laws of the State of New
York, without giving effect to the conflict of laws principles thereof.
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(f) Headings; Knowledge. The headings in this Agreement are
included for convenience of reference only and shall not in any way affect the
meaning or interpretation of this Agreement. Any reference in this Agreement to
the "knowledge" of Transferor means the actual knowledge on the date hereof of
Robert K. Kretzman, Esq., Eli Shahmoon, Esq., Beverly O'Toole, Esq., Michael
Goodman and Steven Isko, Esq.
(g) Severability. If any term, provision, covenant or
condition of this Agreement or part thereof, or the application thereof to any
person, place or circumstance, shall be held to be invalid, unenforceable or
void by a court of competent jurisdiction, the remainder of this Agreement and
such term, provision, covenant or condition shall remain in full force and
effect, and any such invalid, unenforceable or void term, provision, covenant or
condition shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited, and the court shall have the power to
modify, amend and limit such term, provision, covenant or condition to the
extent necessary to render the same and the remainder of this Agreement valid,
enforceable and lawful.
(h) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(i) Publicity. Neither Transferor nor Transferee shall make or
issue, or cause to be made or issued, any announcement or written statement
concerning this Agreement, or the transactions contemplated hereby or thereby
for dissemination to the press or general public without the prior written
consent of the other except for any announcement or written statement which is
required to be made by law or the regulations of any governmental entity or any
stock exchange or national market (except that the party required to make such
announcement shall consult with the other party concerning the timing and
content of such announcement before such announcement is made).
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IN WITNESS WHEREOF, the parties hereto have executed, or
caused to be executed by their duly authorized officers, this Agreement as of
the date first above written.
PRESTIGE HOLDINGS I, L.P.
By: Prestige I, L.L.C., its General Partner
By:
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Name:
Title:
REVLON CONSUMER PRODUCTS
CORPORATION
By:
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Name:
Title:
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EXHIBIT A
FORM OF PARTNERSHIP AGREEMENT
FORM OF AGREEMENT DISTRIBUTED SEPARATELY
<PAGE>
EXECUTION COPY
EXHIBIT B
FORM OF PROMISSORY NOTES
FORM OF NOTES DISTRIBUTED SEPARATELY
