<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER 0-14756
THE COSMETIC CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1266697
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8700 Robert Fulton Drive, Columbia, Maryland 21046
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (410) 309-4600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OR 12(g) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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CLASS C COMMON STOCK NASDAQ NATIONAL MARKET
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
AS OF MARCH 2, 1998, 10,015,101 SHARES OF CLASS C COMMON STOCK, PAR
VALUE $.01 PER SHARE, AND NO SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER
SHARE, OR CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE, WERE ISSUED AND
OUTSTANDING. THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S CLASS C COMMON
STOCK HELD BY NON-AFFILIATES (USING THE CLOSING MARKET PRICE ON THE NASDAQ
NATIONAL MARKET AS OF MARCH 2, 1998) WAS APPROXIMATELY $8,831,000.
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ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
The Cosmetic Center, Inc. (the "Company") is an approximately 85%
owned subsidiary of Revlon Consumer Products Corporation (together with its
subsidiaries, "Products Corporation"), which is a direct wholly owned
subsidiary of Revlon, Inc.
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), then
a wholly owned subsidiary of Products Corporation, merged with and into The
Cosmetic Center, Inc. (prior to the merger, "CCI"), with the Company being the
surviving corporation (the "Merger"). The Merger has been accounted for as a
reverse acquisition using the purchase method of accounting, and PFC is
considered to be the acquiring entity and CCI the acquired entity for
accounting purposes, even though the Company is the surviving legal entity. The
historical financial statements and all other financial data included herein of
the Company for the period prior to the Merger include the results of
operations of PFC only, and for the period subsequent to the Merger include the
results of operations and other financial data of both entities.
BUSINESS PRINCIPLES
The Company's vision is to be "the leading specialty retailer of
beauty products." The Company intends to implement its vision and continue to
improve its operating performance through its business principles, which the
Company has communicated to its employees as follows:
o Above all else, satisfy our customers' beauty product needs at great value
o Vendors are our partners
o Excellence through individual performance
o Exceptional growth and return on investment
o A company that communicates
GENERAL
The Company operates in one segment as a specialty retailer primarily
engaged in the sale of a wide range of prestige and mass-merchandised brand
name cosmetics, fragrances, skincare and treatment, haircare, bath and body,
personal care appliances, hosiery, beauty care, and related items (sometimes
referred to herein as "Beauty Products") at discounted prices. The Company
believes that it offers a distinctive combination of value pricing, breadth and
depth of product selection, customer service, strategic store concentration and
aggressive marketing. As of December 27, 1997, the Company operated 66 retail
stores and 201 outlet stores in 42 states. Retail stores operate in strip
shopping centers and sell, at discount prices, an extensive selection of first
quality Beauty Products that are usually found in mass market retailers as well
as department stores. Outlet stores operate in outlet centers and sell, at deep
discount prices, a wide range of first quality, first quality excess, returned,
refurbished and discontinued brand name Beauty Products. The Company purchases
its Beauty Products directly from manufacturers and their representatives
("Primary Sources") and from wholesalers and retailers ("Secondary Sources").
All of the Company's stores are currently served by a new 205,000-square foot
leased warehouse and distribution center and corporate headquarters located in
Columbia, Maryland.
RETAIL STORES
As of December 27, 1997, the Company operated 66 retail stores under
the name "The Cosmetic Center" located in the greater metropolitan areas of
Washington, D.C.; Richmond, Virginia; Baltimore, Maryland; Chicago, Illinois;
Charlotte/Raleigh/Durham, North Carolina and Philadelphia, Pennsylvania. The
retail stores offer a broad selection of approximately 25,000 Beauty Products.
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In addition, as of December 27, 1997, 61 retail stores offered hair
salon services for the entire family at moderate prices. Salon services include
shampooing, conditioning, haircutting and styling, hair coloring and permanent
waving. The salons also sell various professional hair and nail care products.
In October 1997, the Company entered into an exclusive agreement to license its
salon operations to Creative Hairdressers, Inc. ("Creative Hairdressers"),
which operates a chain of over 600 hair salons under the name "Hair Cuttery."
During the fourth quarter of 1997, Creative Hairdressers began to operate
salons in certain Cosmetic Center stores.
The Company's retail stores are open every day of the year (except
Thanksgiving and Christmas) generally from 10:00 a.m. to 9:00 p.m., Monday
through Friday; 10:00 a.m. to 7:00 p.m. on Saturday; and 11:00 a.m. to 6:00
p.m. on Sunday. The salon hours generally are shorter. The retail stores range
in size from approximately 5,000 to 10,000 square feet and are designed to
provide a combination of full-service and self-service shopping. Merchandise is
generally displayed on mirror-backed wall displays, color-coordinated aisle
shelving units and in lighted, mirrored showcases in accordance with a
detailed, standardized shelving plan. Products are displayed by department,
manufacturer and size, which allows departments to expand or contract rapidly
in response to changes in customer demand. Store interiors generally include
carpeting, color-coordinated custom designed fixtures and recessed and track
lighting.
The Company previously operated a wholesale division, which was sold
on October 9, 1997.
OUTLET STORES
As of December 27, 1997, the Company operated 201 outlet stores
located principally in outlet malls in 41 states, primarily under the name
"Prestige Fragrance & Cosmetics." The outlet stores primarily sell first
quality, first quality excess, returned, refurbished and discontinued Beauty
Products. The outlet stores provide a channel for major cosmetic manufacturers
to sell these products without competing directly with the retailers that
purchase products from these same manufacturers. The Company also operates
seven employee stores that sell principally to employees of the Company,
Products Corporation and their respective affiliates and are also open to the
general public.
Outlet stores are open every day of the year (except Thanksgiving,
Christmas and New Year's Day) generally from 10:00 a.m. to 8:00 p.m., Monday
through Friday; 10:00 a.m. to 7:00 p.m. on Saturday; and 11:00 a.m. to 6:00
p.m. on Sunday. The outlet stores average approximately 1,650 square feet in
size and provide for both full-service and self-service shopping. Merchandise
is generally displayed by manufacturer within product lines. The outlet stores
generally have carpeting or ceramic tile flooring, color-coordinated custom
designed displays and recessed and track lighting.
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INFORMATION SYSTEMS
The Company's information systems are designed to assist with the
Company's management of inventory levels, distribution, purchasing and
financial and human resource operations. Expenditures on improvements to the
Company's management information systems were approximately $1 million for
1997, and the Company anticipates a similar level of expenditures in 1998.
The Company has made an evaluation of the steps necessary to address
issues related to required changes in its computer systems for the Year 2000.
While the Company has determined that it currently has computer systems that
require modification to be Year 2000 compliant, many of the modifications are
being accomplished as part of the systems improvements referred to above. As to
its systems which are not impacted by the improvements referred to above, the
Company is identifying those which require modification or replacement to
address the Year 2000 issue. Management believes that there is no material risk
that the Company will fail to address the Year 2000 issue in a timely manner.
Additionally, the Company believes that the Year 2000 issue will not have a
material effect on its financial condition.
STORE EXPANSION AND CLOSINGS
The Company reviews its store locations on an ongoing basis and seeks
to open new stores and close underperforming stores to improve performance. In
opening new stores, the Company considers general economic and business
conditions affecting consumer purchases, the availability of suitable store
sites, the ability to obtain leases on favorable terms, the impact of
competition from new stores on sales at the Company's existing stores,
competitor activity and the availability of capital, among other factors. The
Company typically attempts to schedule store closings after the Christmas
holiday season and store openings so that stores are in operation during the
Christmas holiday season. During the year ended December 27, 1997, the Company
opened eleven stores and closed ten stores. New store sites are under
consideration, although whether and when any stores will be opened in 1998
depends upon the factors noted above and, among other things, upon the
completion of the development of the outlet malls where such stores might be
located.
PURCHASING
The Company generally seeks to purchase merchandise based on the most
favorable combination of price, quantity and merchandise selection available
and, accordingly, the extent and nature of the Company's purchases from various
vendors change constantly in the ordinary course of business. The Company
estimates that approximately 71% of the aggregate Beauty Products purchased
during fiscal 1997 by PFC prior to the Merger and by the Company subsequent to
the Merger were purchased directly from Primary Sources and approximately 29%
were purchased from Secondary Sources. The three largest Primary Source
vendors (including Products Corporation) accounted for approximately 11%, 9%
and 2%, respectively, of total purchases in 1997 by PFC prior to the Merger and
by the Company subsequent to the Merger. The largest Secondary Source vendor
accounted for approximately 9% of total purchases in 1997 by PFC prior to the
Merger and by the Company subsequent to the Merger. For fiscal 1997, PFC's
purchases prior to the Merger and the Company's purchases subsequent to the
Merger from Products Corporation and its affiliates accounted for approximately
11% of the aggregate of purchases by PFC and the Company, making Products
Corporation the largest Primary Source vendor in 1997. In connection with the
Merger, the Company entered into a supply agreement with Products Corporation
that expires in April 2001 subject to earlier termination under certain
conditions. The loss of any of the Company's largest vendors or
changes in the terms of any supply agreements could have a material adverse
effect on the Company.
Some of the Beauty Products purchased by the Company from its
Secondary Sources may include Beauty Products that were sold originally to
department stores and other retailers. From time to time, certain manufacturers
have taken actions to prohibit or restrict the resale of such products by
department stores and other retailers. Some of the Beauty Products purchased by
the Company from its Secondary Sources also may include products subject to
copyright, trademark, trade dress or patent rights, either manufactured in
foreign countries or manufactured in the United States and sold to foreign
distributors. Periodically, litigation and administrative
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proceedings have been instituted, and federal legislation has been proposed,
seeking to halt or restrict the importation of such merchandise. Any of the
foregoing prohibitions or restrictions could have a material adverse effect on
the Company if the Company were unable to obtain alternative sources for its
products on terms at least as favorable as are currently available. In
addition, certain manufacturers have not been willing to sell products to
retailers who sell merchandise received from Secondary Sources or who offer
value pricing.
ADVERTISING
The Company's retail stores traditionally use newspaper insert
advertisements in major metropolitan newspapers in the Company's market areas.
The Company may supplement its retail store advertising program with
television and newspaper print advertisements. From time to time, the
Company has been able to obtain cooperative advertising allowances from some
of its vendors. The outlet stores generally advertise by means of in-store
flyers, brochures and promotions. To increase store traffic and sales, the
Company features advertised items priced substantially below the
manufacturers' suggested retail prices.
TRADE NAMES AND SERVICE MARKS
The Company's retail division uses the trade name and service mark
"The Cosmetic Center(R)." The Company has registered "The Cosmetic Center(R)"
as a service mark with the United States Patent and Trademark Office and with
the State of Maryland. In some states, however, other businesses may use
similar names, and the Company's rights to open new stores under the name "The
Cosmetic Center" may be limited in such states. The Company uses the slogan "A
Beautiful Way to Save(R)" as a service mark in certain of its retail
advertising, for which it has obtained registration with the United States
Patent and Trademark Office. The Company purchases Beauty Products produced by
manufacturers for sale under the Company's "Courtney Brooke(R)" and "Biny o
Biny(R)" labels. The Company has obtained federal registration for the
"Courtney Brooke(R)" mark and the " Biny o Biny(R)" mark for substantially all
goods sold under the "Courtney Brooke(R)" mark and the " Biny o Biny(R)" mark.
The Company's outlet stores use the trade names and service marks
"Prestige Fragrance & Cosmetics," "Colours & Scents(R)," "Visage" and "The
Cosmetic Warehouse." The Company has registered the Colours & Scents mark with
the United States Patent and Trademark Office.
EMPLOYEES
At December 27, 1997, the Company had approximately 2,820 employees,
of whom 1,369 were full-time and 1,451 were part-time. The Company pays wages
and salaries and provides fringe benefits that the Company believes are
competitive with those of its competitors in its geographic market areas. The
Company also hires a number of temporary employees during the Christmas season.
At December 27, 1997, none of the Company's employees were covered by a
collective bargaining agreement, and no work stoppages had been experienced.
The Company believes that its relationship with its employees is satisfactory.
COMPETITION
The Company's retail and outlet stores operate in a very competitive
environment. The Company's competitors include department stores, drug stores,
discount stores, large and small professional hair salon chains, and
independently owned salons. Some of these competitors sell cosmetic products
and professional hair services at discount prices, and some are part of large
national or regional chains that have substantially greater resources and name
recognition than the Company. The Company's stores compete on the basis of
price, breadth and depth of product selection, customer service, store
concentration and marketing.
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ITEM 2. PROPERTIES
STORE PROPERTIES
The Company's retail stores range in size from approximately 5,000 to
10,000 square feet, with the average store comprising approximately 6,200
square feet, and the Company's outlet stores range in size from approximately
900 to 3,000 square feet, with the average store comprising approximately 1,650
square feet. All of the Company's stores operate under leases with initial
terms expiring at varying dates until January 2007. As of December 27, 1997,
the average remaining initial term of all retail and outlet store leases was
approximately four years. Certain of the leases contain renewal options, with
the average renewal term being approximately five years. Substantially all of
the Company's leases provide for base rental plus additional rents equal to a
percentage of sales above a certain minimum level. Sixteen of the Company's
leases terminate during 1998. The Company believes it will be able to negotiate
new leases for these properties or lease other space in the vicinity of the
current locations upon terms acceptable to the Company.
The Company's employee stores located in Edison, New Jersey (two
employee stores), Irvington, New Jersey, Oxford, North Carolina and Phoenix,
Arizona are leased from Products Corporation pursuant to leases with initial
terms expiring in April 1998, with the option to renew for nine additional
one-year periods. The leases for the Company's employee stores in Apex, North
Carolina and New York City were assigned to the Company by a subsidiary of
Products Corporation and Products Corporation, respectively, with terms
expiring in 2000 and 2012, respectively.
The following table summarizes the number of stores opened and closed
during the last five fiscal years and in operation at the end of each of the
last five fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------
DEC. 27, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stores opened ........................ 79(a) 14 17 42(b) 28
Stores closed ........................ 10 5 8 7 1
Stores in operation (at end of period) 267 198 189 180 145
</TABLE>
(a) Includes 68 stores operated by CCI acquired in the Merger.
(b) Includes 20 stores acquired in the acquisition of Colours & Scents by PFC.
DISTRIBUTION CENTER AND CORPORATE HEADQUARTERS
All of the Company's stores are currently served by a new
205,000-square foot warehouse and distribution center and corporate
headquarters located in Columbia, Maryland (the "Columbia Facility"), which is
leased by the Company pursuant to a lease that expires in May 2007, with a
five-year renewal option. All support services for the stores are centralized
in the Columbia Facility, including purchasing, data processing, advertising
and general administration. The Company's inventory is stored in the Columbia
Facility until delivery to stores. The Columbia Facility ships product to the
retail stores by Company-leased trucks and to the outlet stores by United
Parcel Service ("UPS").
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings incident
to the ordinary course of its business. The Company believes that the outcome
of all pending legal proceedings in the aggregate is unlikely to have a
material adverse effect on the business or consolidated financial condition of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of December 27, 1997, Products Corporation beneficially owned
8,479,335 shares of the Company's Class C Common Stock (representing 84.6% of
the outstanding shares of Class C Common Stock), and the remaining 1,535,766
shares of the Company's Class C Common Stock were owned by the public. No
dividends were declared or paid during fiscal 1997. The terms of the Company's
bank facility (the "New Facility") currently restrict the ability of the
Company to pay dividends or make distributions to Products Corporation. See the
Financial Statements of the Company and the Notes thereto.
The table below shows the high and low quarterly stock prices for the
Company's Class C Common Stock for the fiscal year ended December 27, 1997.
<TABLE>
<CAPTION>
1997 QUARTERLY STOCK PRICES (1)
----------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
High.............. N/A $ 5 $ 4 7/16 $ 4 3/8
Low............... N/A 2 3/8 4 2 3/8
</TABLE>
(1) Represents the closing price per share on the Nasdaq National
Market, which is the market on which shares of the Company's Class C Common
Stock are listed. The Company's Class C Common Stock was first quoted on April
28, 1997 and commenced trading on April 30, 1997. The symbol for the Company's
Class C Common Stock is COSC.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data as of December 27, 1997,
December 31, 1996, 1995 and 1994 and for the years then ended have been derived
from audited financial statements of the Company. The selected financial data
as of and for the year ended December 31, 1993 are derived from unaudited
financial statements of the Company. In the opinion of the Company's
management, the unaudited data reflects all adjustments (which include only
normal recurring adjustments) necessary for a fair presentation of such data.
The Selected Financial Data should be read in conjunction with the Financial
Statements of the Company and the Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
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<TABLE>
<CAPTION>
YEAR ENDED
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DEC. 27, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
STATEMENTS OF OPERATIONS DATA: (a) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales ..................................... $ 159,045 $ 77,417 $ 72,717 $ 62,674 $ 54,677
=========== =========== =========== =========== ===========
Income (loss) from operations (b) ............. $ (967) $ 1,403 $ (1,827) $ (689) $ (600)
=========== =========== =========== =========== ===========
Income (loss) from continuing
operations before income taxes ......... (4,732) 431 (3,964) (2,018) (1,514)
Provision for income taxes .................... 115 50 50 25 17
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing operations ...... (4,847) 381 (4,014) (2,043) (1,531)
Income (loss) from discontinued operations (c) -- -- (1,248) 842 1,174
----------- ----------- ----------- ----------- -----------
Net income (loss) ............................. $ (4,847) $ 381 $ (5,262) $ (1,201) $ (357)
=========== =========== =========== =========== ===========
Basic and diluted income (loss) per share:
Income (loss) from continuing operations $ (0.51) 0.04 (0.47) (0.24) (0.18)
Loss from discontinued operations ...... -- -- (0.15) 0.10 0.14
----------- ----------- ----------- ----------- -----------
Net income (loss) ...................... $ (0.51) 0.04 (0.62) (0.14) (0.04)
=========== =========== =========== =========== ===========
Basic and diluted weighted average
shares outstanding (d) ................. 9,514,399 8,479,335 8,479,335 8,479,335 8,479,335
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF
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DEC. 27, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA: (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Working capital................................ $ 69,264 $ 31,338 $ 30,014 $ 25,782 $ 21,218
Inventory...................................... 88,976 31,713 29,171 26,701 22,003
Total assets................................... 118,410 45,621 41,337 40,504 30,372
Due to/ Note payable to Products
Corporation (e).............................. 13,255 12,315 9,615 21,353 11,681
Long-term debt................................. 38,954 -- -- -- --
Stockholders' equity........................... $ 34,687 $ 28,679 $ 28,298 $ 14,067 $ 15,405
</TABLE>
(a) The amounts presented include the results of PFC only through the date
of the Merger, and the results of CCI and PFC after the date of the
Merger through December 27, 1997.
(b) As a result of the Merger, the Company incurred business consolidation
costs during 1997 of approximately $4.0 million in connection with the
consolidation of certain warehouse, distribution and headquarters
operations of PFC and CCI.
(c) On June 30, 1995, PFC adopted a plan to discontinue certain businesses
the net assets of which, consisting principally of inventory and a
payable to Products Corporation, were subsequently transferred to
Products Corporation. Such businesses have been reported as discontinued
operations.
(d) Weighted average shares outstanding is computed assuming that the
8,479,335 shares of Class C Common Stock that Products Corporation
received in the Merger were outstanding and owned by Products
Corporation for all periods prior to the Merger. Immediately after the
Merger, the number of shares of Class C Common Stock outstanding was
10,015,101.
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(e) Prior to April 25, 1997 (the "Merger Date"), PFC's working capital and
capital expenditure needs were financed through interest-bearing
obligations that were payable by PFC to Products Corporation. In
connection with the Merger, amounts due to Products Corporation on the
Merger Date were converted into a note payable by the Company bearing
interest at 11% per annum.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BASIS OF PRESENTATION
As described in Notes 1 and 2 to the Financial Statements, the Merger
has been accounted for as a reverse acquisition pursuant to which PFC is
considered to be the acquiring entity and CCI the acquired entity for
accounting purposes, even though the Company is the surviving legal entity. As
a result, the financial statements of the Company include PFC results of
operations only through the Merger Date and CCI and PFC combined results of
operations after the Merger Date. The following discussion and analysis should
be read in conjunction with the Financial Statements and notes thereto included
herein.
OVERVIEW
The Company operates in one segment as a specialty retailer primarily
engaged in the sale of Beauty Products at discounted prices. At December 27,
1997, the Company operated 201 outlet stores and 66 retail stores in 42 states.
RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 27, 1997 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1996
Net sales for the year ended December 27, 1997 were $159.0 million, an
increase of $81.6 million, or 105%, from the $77.4 million in net sales for the
year ended December 31, 1996. The increase in net sales is primarily
attributable to the acquisition of CCI, which contributed approximately $87.6
million in net sales for the year ended December 27, 1997, partially offset by
a decline in PFC comparable store sales (sales from stores in operation during
all of fiscal 1997 and fiscal 1996) primarily due to disruptions experienced in
the distribution and warehouse consolidation and in the post-Merger transition
and the impact of the UPS strike during August 1997. The Company operated 267
stores at December 27, 1997 and 198 stores at December 31, 1996. Excluding the
CCI stores acquired in the Merger, PFC comparable store sales for the year
ended December 27, 1997 declined to $66.8 million from $75.6 million for the
year ended December 31, 1996 for the reasons stated above.
Cost of sales, including buying, occupancy and distribution expenses
("COS"), was $109.9 million (69.0% of net sales) for the year ended December
27, 1997 compared to $49.9 million (64.5% of net sales) for the year ended
December 31, 1996. COS as a percentage of net sales for the year ended December
27, 1997 increased primarily as a result of higher COS in the CCI stores
included after the Merger Date associated with the product mix in such stores.
Selling, general and administrative ("SG&A") expenses were $46.1
million (29.0% of net sales) for the year ended December 27, 1997 compared to
$26.1 million (33.7% of net sales) for the year ended December 31, 1996. SG&A
expenses as a percentage of net sales decreased in the year ended December 27,
1997, primarily due to the benefit of certain synergies achieved as a result of
the consolidation of the CCI and PFC operations.
The Company incurred business consolidation costs of $4.0 million in
connection with the consolidation of certain warehouse, distribution and
headquarters operations of PFC and CCI during 1997.
Interest expense was $3.7 million for the year ended December 27, 1997
compared to $1.0 million for the year ended December 31, 1996. The increase in
interest expense for 1997 is primarily attributable to higher outstanding
borrowings as a result of the cash election in connection with the Merger and
the repayment of the
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Former Facility, as defined herein, occurring as a result of the Merger. See
Notes 2 and 7 to the Financial Statements.
The provision for income taxes was $0.1 million for each of the years
ended December 27, 1997 and December 31, 1996, and for both periods consisted
solely of state and local franchise taxes.
FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995
Net sales were $77.4 million and $72.7 million for the years ended
December 31, 1996 and 1995, respectively, an increase of $4.7 million or 6.5%,
primarily as a result of 14 new store openings as well as increased fragrance
sales during the Christmas season, offset in part by sales lost due to five
store closings in the ordinary course of business. Comparable store sales
(sales from stores in operation during all of fiscal 1996 and fiscal 1995) were
$68.2 million for each of the years ended December 31, 1996 and 1995.
As a percentage of net sales, COS was 64.5% for the year ended
December 31, 1996, a decrease from 67.6% for the year ended December 31, 1995.
COS as a percentage of net sales decreased in the 1996 period as a result of
increased sales volume of higher margin products and lower occupancy costs
associated with the new stores opened in 1996.
As a percentage of net sales, SG&A expenses were 33.7% and 34.9% for
the years ended December 31, 1996 and 1995, respectively. The decrease resulted
primarily from lower payroll and benefit expenses and the elimination of $0.2
million of reserves that were no longer required.
Interest expense was $1.0 million for the year ended December 31, 1996
and $2.1 million for the year ended December 31, 1995, a decrease of $1.1
million. The decrease was primarily due to lower average outstanding
intercompany balances due Products Corporation during the 1996 period compared
to balances due Products Corporation during the 1995 period as a result of the
capitalization of $24.7 million of intercompany balances by Products
Corporation in September 1995, offset in part by increased borrowings in 1996
to finance PFC's capital expenditures.
The provision for income taxes was $0.1 million for each of the years
ended December 31, 1996 and 1995, and for both periods consisted solely of
state and local franchise taxes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used for) operating activities was $0.5 million,
$1.3 million and $(4.7) million for 1997, 1996 and 1995, respectively. The
decrease in the net cash provided by operating activities for 1997 compared to
1996 resulted primarily from a net loss in 1997 compared to net income in 1996
and an increase in inventory in 1997, partially offset by increased
depreciation in 1997. The increase in the net cash provided by operating
activities for 1996 compared with net cash used for operating activities in
1995 resulted primarily from net income in 1996 and an increase in accounts
payable in 1996.
Net cash used for investing activities was $23.9 million, $3.9 million
and $3.0 million for 1997, 1996 and 1995, respectively. The increase in cash
used for investing activities during 1997 was due primarily to the cash
election in connection with the Merger. Net cash used for investing activities
for each of the periods included capital expenditures for new store fixtures
and leasehold improvements at new and existing stores as well as new
point-of-sale registers at PFC's outlet stores and enhancements in information
systems. Additionally, in 1996 net cash used for investing activities included
costs related to the Merger that were deferred.
In connection with the Merger, on April 25, 1997 the Company entered
into a new loan and security agreement (the "New Facility") with the same
lender from the Company's previous credit facility (the "Former Facility"). On
April 25, 1997, the Company paid the then outstanding balance of $14.0 million
on the Former Facility with borrowings under the New Facility. On April 28,
1997, the Company used approximately $21.2
-10-
<PAGE>
million of borrowings under the New Facility to fund the cash election
associated with the Merger. The New Facility, which expires April 30, 1999,
provides up to $70 million of revolving credit tied to a borrowing base of 65%
of eligible inventory, as defined in the New Facility. Borrowings under the New
Facility are collateralized by the Company's accounts receivable and inventory
(and proceeds therefrom). Under the New Facility, the Company may borrow at its
option at LIBOR plus 2.25% per annum or at the bank's base rate plus 0.5% per
annum. The Company also pays a commitment fee equal to one-quarter of one
percent per annum on the average daily unused amount of the facility. Interest
is payable on a monthly basis except for interest on LIBOR rate loans with a
maturity of less than three months, which is payable at the end of the LIBOR
rate loan period then in effect, and interest on LIBOR rate loans with a
maturity of more than three months which is payable every three months. If the
Company terminates the New Facility, the Company is obligated to pay a
prepayment penalty (subject to certain exceptions, including refinancing with
the same lender) of $700,000 if termination occurs before the first anniversary
date and $175,000 if termination occurs after the first anniversary date. The
New Facility requires the Company to maintain a minimum adjusted tangible net
worth and a minimum interest coverage ratio. The New Facility also contains
various restrictive covenants, including, among other things, limitations
relating to (i) mergers, consolidations and sales of assets, (ii) distributions
and dividends, (iii) transactions that materially and adversely affect the
Company's business, properties, prospects or the collateral under the New
Facility, (iv) guarantees, (v) incurring debt, (vi) prepaying debt, (vii)
transactions with affiliates, (viii) engaging in other lines of business, (ix)
liens, (x) sale leasebacks, (xi) creating or acquiring new subsidiaries and
(xii) acquisitions and investments. Certain of these limitations are subject to
various exceptions. Additionally, the terms of Products Corporation's debt
instruments and those of Products Corporation's indirect parent, REV Holdings
Inc., impose restrictions on the ability of Products Corporation and its
subsidiaries, including the Company, to incur debt, make acquisitions or
investments, sell assets, create liens and consent to restrictions on their
ability to pay dividends or make distributions. All of these restrictions are
subject to various exceptions.
In connection with the Merger, the Company issued a promissory note to
Products Corporation for $13.3 million, which was the amount due to Products
Corporation at the Merger Date with interest payable quarterly at a rate of 11%
per annum. The promissory note matures on June 30, 1999. The New Facility
prohibits the Company from making payments of principal (but not interest) on
the note unless borrowing availability (as defined in the New Facility) exceeds
$5.0 million and other than from excess cash flow of the Company (as defined in
the New Facility).
Net cash provided by financing activities was $25.3 million, $2.7
million and $7.8 million for 1997, 1996 and 1995, respectively. The increase in
cash provided by financing activities in 1997 resulted primarily from
borrowings under the New Facility (see Note 7 to the Financial Statements) to
fund the cash election in connection with the Merger and repay the Former
Facility. Cash provided by financing activities for 1996 and 1995 consisted
principally of financing provided by Products Corporation and certain of its
affiliates to PFC for inventory purchases, direct expenses incurred by Products
Corporation on behalf of PFC and allocated costs charged to PFC by Products
Corporation for services provided, partially offset by net distributions to
Products Corporation recorded by PFC in 1995.
The Company expects that its future cash needs will result primarily
from the cash required for working capital and the payment of costs and
expenses associated with the Merger, costs to integrate further the operations
of CCI and PFC, costs to expand the operations of the Company, including store
openings and closings, capital expenditures, and debt service on the New
Facility. The Company estimates that capital expenditures for 1998 will be
approximately $5 million, including upgrades to the Company's management
information systems. Pursuant to a tax sharing agreement, the Company may be
required to pay Products Corporation amounts equal to the taxes that the
Company would otherwise have to pay if it were to file separate federal, state
and local tax returns. The Company currently anticipates that no significant
federal tax payments or payments in lieu of taxes pursuant to the Tax Sharing
Agreement will be made by the Company for 1998.
Based upon the Company's current level of operations and anticipated
growth as a result of its business strategy, the Company expects that cash
flows from operations and funds from the New Facility will be sufficient to
enable the Company to meet its anticipated cash requirements for the
foreseeable future. However, there can be no assurance that cash flows from
operations and funds from the New Facility will be sufficient to meet the
Company's
-11-
<PAGE>
cash requirements. If the Company is unable to satisfy such cash requirements,
the Company could be required to adopt one or more alternatives, such as
reducing or delaying capital expenditures and store openings and closings,
restructuring indebtedness, selling assets or operations or selling additional
common stock. There can be no assurance that any of such actions could be
effected, that they would enable the Company to continue to satisfy its capital
requirements or that they would be permitted under the terms of the New
Facility or the Products Corporation or REV Holdings Inc. debt instruments
then in effect.
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K for the year ended December 27, 1997
as well as other public documents of the Company contain forward-looking
statements, which involve risks and uncertainties. The Company's actual results
may differ materially from those discussed in such forward-looking statements.
Such statements include, without limitation, statements regarding future
financial performance, including growth, costs to integrate further the
operations of CCI and PFC after the Merger, costs associated with anticipated
store openings and closings, costs to expand the operations of the Company,
capital expenditures, including information systems upgrades, the cost and
timely implementation of the Company's Year 2000 compliance modifications,
expectations as to the Company's cash flows from operations and the
availability of funds from the New Facility, and the Company's ability to
negotiate new store leases upon terms acceptable to the Company. Readers are
urged to consider that statements which use the terms "believes," "does not
believe," "no reason to believe," "expects," "plans," "intends," "estimates,"
"anticipated," "anticipates" or similar expressions, as they relate to the
Company or the Company's management, are intended to identify forward looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions. In addition to factors that may be described in the Company's
filings with the Securities and Exchange Commission (the "Commission"),
including this filing, the following factors, among others, could cause the
Company's actual results to differ materially from those expressed in any
forward looking statements made by the Company: (i) the unavailability of
sufficient cash flows from operations and from the New Facility to fund the
Company's cash requirements, (ii) unanticipated costs or difficulties or delays
in integrating further the operations of CCI and PFC after the Merger, (iii)
unanticipated costs or difficulties or delays in connection with store openings
or closings, (iv) unanticipated costs or difficulties or delays in connection
with expanding the operations of the Company, (v) unanticipated capital
expenditures, (vi) unanticipated costs or difficulties or delays in
implementing the Company's Year 2000 compliance modifications, (vii) actions by
competitors that may have greater capital resources than the Company, including
combinations within the retail industry and successful new retail store
concepts, (viii) the lack of viability of the Company's new salon arrangement,
(ix) the unavailability of product or the loss of suppliers, including
Secondary Source suppliers, and (x) general business and economic conditions,
as well as other factors described from time to time in the Company's reports
filed with the Commission. The Company assumes no responsibility to update
forward looking information contained herein.
EFFECT OF NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued SFAS
130, "Reporting Comprehensive Income," which establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The Company will adopt SFAS 130 in
fiscal 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS
131, "Disclosure about Segments of an Enterprise and Related Information,"
which requires the Company to present certain information about operating
segments and related information. The Company believes that SFAS 131 will not
materially impact the manner of presentation of its financial statements as
currently reported.
SEASONALITY
The Company's business is seasonal, with the highest sales volume for
its stores occurring during the last quarter of the year (October to December).
-12-
<PAGE>
INFLATION
In general, costs are affected by inflation, and the effects of
inflation may be experienced by the Company in future periods. Management
believes, however, that such effects have not been material to the Company
during the past three years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the index on page F-1 of the Financial Statements
of the Company and the Notes thereto contained herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this Item 9 has been previously reported
(as that term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended) in the Company's Current Report on Form 8-K dated May 8, 1997
and Form 8-K/A dated May 15, 1997.
-13-
<PAGE>
PART III
ITEMS 10, 11, 12 AND 13.
The information required by Items 10, 11, 12 and 13 is incorporated by
reference from the Company's 1997 Proxy Statement with respect to its 1998
Annual Meeting of Shareholders (to be filed with the Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Annual Report on Form 10-K) in accordance with General Instruction G(3)
to the Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Form 10-K:
(1) Financial Statements and Independent Auditors' Report included
herein:
See Index on page F-1
(2) List of Exhibits:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Agreement and Plan of Merger, as amended, by and among the
Company, Products Corporation and PFC dated as of November 27,
1996 and amended February 20, 1997 and March 20, 1997.
(Incorporated by reference to Annex I to the Company's Proxy
Statement/Prospectus dated April 3, 1997 included in the
Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on December 20, 1996, and
the amendments thereto filed on January 31, 1997, February 25,
1997, March 24, 1997 and April 3, 1997 (File No. 333-18321)
(the "Form S-4")).
3.2 Restated Certificate of Incorporation of the Company as filed
with the Delaware Secretary of State on July 7, 1997.
(Incorporated by reference to Exhibit 3(i) to the Company's
Form 10-Q for the quarterly period ended June 27, 1997 (the
"1997 Second Quarter Form 10-Q")).
*3.3 Amended and Restated By-Laws of the Company dated as of April
25, 1997.
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES.
4.1 Loan and Security Agreement dated as of April 25, 1997 by and
among the Company, BankAmerica Business Credit, Inc., as agent,
and the lenders that are parties thereto. (Incorporated by
reference to Exhibit 5 to the Schedule 13D filed on behalf of
Products Corporation and Mafco Holdings Inc. dated May 5, 1997
(the "Schedule 13D")).
10. MATERIAL CONTRACTS.
10.1 Employment and Non-Competition Agreement dated as of April 25,
1997 between the Company and Mark S. Weinstein. (Incorporated
by reference to Exhibit 10 (A) to the 1997 Second Quarter Form
10-Q).
10.2 Employment Agreement dated October 1, 1996 by and between the
Company and Allan Goldman. (Incorporated by reference to
Exhibit 10(V) to the Form S-4).
-14-
<PAGE>
10.3 Employment Agreement dated as of April 25, 1997 between the
Company and I. Howard Diener. (Incorporated by reference to
Exhibit 10(F) to the 1997 Second Quarter Form 10-Q).
10.4 Stockholders Agreement by and among Anita J. Weinstein, Mark S.
Weinstein, Susan K. Magenheim and Products Corporation, dated
as of November 27, 1996. (Incorporated by reference to Exhibit
10(S) to the Form S-4).
10.5 Registration Rights Agreement between Products Corporation and
the Company dated as of April 25, 1997. (Incorporated by
reference to Exhibit 3 to the Schedule 13D).
10.6 Supply Agreement between Products Corporation and the Company
dated as of April 25, 1997. (Incorporated by reference to
Exhibit 10(C) to the 1997 Second Quarter Form 10-Q).
10.7 Services Agreement between Products Corporation and the Company
dated as of April 25, 1997. (Incorporated by reference to
Exhibit 10(D) to the 1997 Second Quarter Form 10-Q).
10.8 Lease Agreement by and between the Company and Parcel A-40
Associates, LLC dated as of June 1, 1997 (Incorporated by
reference to Exhibit 10(G) to the 1997 Second Quarter Form
10-Q).
10.9 Assignment and Assumption Agreement by and between the Company
as Assignor and GPA Associates, LLC as Assignee dated as of
June 15, 1997. (Incorporated by reference to Exhibit 10(H) to
the 1997 Second Quarter Form 10-Q).
10.10 Form of Lease to be entered into between Products Corporation
and the Company with respect to employee stores. (Incorporated
by reference to Exhibit 10(P) to the Form S-4).
10.11 Form of Sublease to be entered into between Products
Corporation and the Company with respect to the New York City
employee store. (Incorporated by reference to Exhibit 10(Q) to
the Form S-4).
10.12 Tax Sharing Agreement, dated as of June 24, 1992, among Mafco
Holdings Inc., Revlon, Inc., Products Corporation and certain
subsidiaries of Products Corporation (the "Tax Sharing
Agreement"). (Incorporated by reference to Exhibit 10.5 to
Amendment No. 1 to the Revlon, Inc. Form S-1 filed with the
Securities and Exchange Commission on June 29, 1992 (File No. l
33-47100)).
10.13 First Amendment, dated as of February 28, 1995, to the Tax
Sharing Agreement. (Incorporated by reference to Exhibit 10.5
to Products Corporation's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.14 Second Amendment, dated as of January 1, 1997, to the Tax
Sharing Agreement. (Incorporated by reference to Exhibit 10.7
to Revlon, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996).
10.15 Agreement by the Company dated April 25, 1997 to be bound by
the Tax Sharing Agreement. (Incorporated by reference to
Exhibit 10.8 to Revlon, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997).
*10.16 The Cosmetic Center, Inc. Amended and Restated Employee
Retirement Plan effective as of April 25, 1997.
*10.17 The Cosmetic Center, Inc. Executive Deferred Compensation Plan
effective January 1, 1998.
10.18 The Cosmetic Center, Inc. 1991 Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10(H) to Amendment No. 1
to the Company's Registration Statement on Form S-l filed with
the Securities and Exchange Commission on March 2, 1992 (File
No. 33-46094)).
-15-
<PAGE>
10.19 The Cosmetic Center, Inc. 1997 Stock Option Plan. (Incorporated
by reference to Annex IV to the Company's Proxy
Statement/Prospectus dated April 3, 1997 included in the Form
S-4).
24. POWERS OF ATTORNEY.
*24.1 Power of Attorney of Jerry W. Levin
*24.2 Power of Attorney of David N. Dinkins
*24.3 Power of Attorney of Donald G. Drapkin
*24.4 Power of Attorney of George Fellows
*24.5 Power of Attorney of William J. Fox
*24.6 Power of Attorney of Richard Halperin
*24.7 Power of Attorney of Wade H. Nichols
*24.8 Power of Attorney of Harvey Rosenthal
- --------------------
* Filed herewith.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated May 8, 1997 and an
amended report on Form 8-K/A dated May 15, 1997 with respect to Item 1, Changes
in Control of Registrant; Item 2, Acquisition or Disposition of Assets; Item 4,
Changes in Registrant's Certifying Accountant; Item 7, Financial Statements,
Pro Forma Financial Information and Exhibits and Item 8, Change in Fiscal Year.
The Company did not file any financial statements or pro forma financial
information with the Form 8-K or Form 8-K/A since all relevant information had
previously been filed in the Company's Registration Statement on Form S-4 filed
with the Commission under the Securities Act of 1933, as amended, on December
20, 1996, and the amendments thereto filed on January 31, 1997, February 25,
1997, March 24, 1997 and April 3, 1997. The Company also filed a report on Form
8-K dated December 17, 1997 with respect to Item 8, Change in Fiscal Year.
-16-
<PAGE>
THE COSMETIC CENTER, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report...............................................F-2
AUDITED FINANCIAL STATEMENTS:
Balance Sheets as of December 27, 1997 and December 31, 1996...........F-3
Statements of Operations for the years ended December 27, 1997,
December 31, 1996 and December 31, 1995..............................F-4
Statements of Stockholders' Equity for the years ended
December 27, 1997, December 31, 1996 and December 31, 1995...........F-5
Statements of Cash Flows for the years ended December 27, 1997,
December 31, 1996 and December 31, 1995..............................F-6
Notes to Financial Statements..........................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
The Cosmetic Center, Inc.:
We have audited the accompanying balance sheets of The Cosmetic Center, Inc. as
of December 27, 1997 and December 31, 1996, and the related statements of
operations, stockholders' equity and cash flows for the years ended December
27, 1997, December 31, 1996 and December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Cosmetic Center, Inc. as
of December 27, 1997 and December 31, 1996 and the results of its operations
and its cash flows for the years ended December 27, 1997, December 31, 1996 and
December 31, 1995, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Washington, D.C.
January 20, 1998
F-2
<PAGE>
THE COSMETIC CENTER, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash .............................................................. $ 5,359 $ 3,479
Accounts receivable, net .......................................... 1,320 --
Inventories ....................................................... 88,976 31,713
Deferred tax assets ............................................... 2,879 --
Prepaid expenses and other ........................................ 179 773
--------- ---------
Total current assets ........................................... 98,713 35,965
Property and equipment, net .......................................... 14,172 7,616
Other assets ......................................................... 1,031 589
Intangible assets related to businesses aquired, net ................. 4,494 1,451
--------- ---------
Total assets ................................................... $ 118,410 $ 45,621
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 17,234 $ 2,242
Accrued expenses and other ........................................ 9,715 2,385
Due to Products Corporation ....................................... 2,500 --
--------- ---------
Total current liabilities ...................................... 29,449 4,627
Note payable - Products Corporation .................................. 13,255 --
Due to Products Corporation, non-current ............................. -- 12,315
Long-term debt ....................................................... 38,954 --
Other long-term liabilities .......................................... 2,065 --
Stockholders' equity:
Common stock, $1.00 par value; 1,000 shares authorized;
1 share issued and outstanding prior to the Merger .............. -- --
Class A common stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding .................... -- --
Class B common stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding .................... -- --
Class C common stock, $.01 par value; 40,000,000 shares
authorized; 10,015,101 shares issued and outstanding in 1997 .... 100 --
Additional paid in capital ........................................ 39,291 28,536
Retained earnings (Accumulated deficit) ........................... (4,704) 143
--------- ---------
Total stockholders' equity ..................................... 34,687 28,679
--------- ---------
Total liabilities and stockholders' equity ..................... $ 118,410 $ 45,621
========= =========
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
THE COSMETIC CENTER, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
DECEMBER 27, DECEMBER 31, DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales .................................................. $ 159,045 $ 77,417 $ 72,717
----------- ----------- -----------
Cost of sales, including buying, occupancy and distribution 109,891 49,897 49,176
Selling, general and administrative expenses ............... 46,121 26,117 25,368
Business consolidation costs ............................... 4,000 -- --
----------- ----------- -----------
Operating expenses ......................................... 160,012 76,014 74,544
----------- ----------- -----------
Income (loss) from operations .............................. (967) 1,403 (1,827)
Interest expense ........................................... (3,722) (972) (2,137)
Other expense, net ......................................... (43) -- --
----------- ----------- -----------
Income (loss) from continuing operations before income taxes (4,732) 431 (3,964)
Provision for income taxes ................................. 115 50 50
----------- ----------- -----------
Income (loss) from continuing operations ................... (4,847) 381 (4,014)
----------- ----------- -----------
Discontinued operations:
Loss from discontinued operations ................ -- -- (351)
Loss on disposal ................................. -- -- (897)
----------- ----------- -----------
Loss from discontinued operations .......................... -- -- (1,248)
----------- ----------- -----------
Net income (loss) .......................................... $ (4,847) $ 381 $ (5,262)
=========== =========== ===========
Basic and diluted income (loss) per common share
Income (loss) from continuing operations ......... $ (0.51) $.0.04 $ (0.47)
Loss from discontinued operations ................ -- -- (0.15)
----------- ----------- -----------
Net income (loss) ................................ $ (0.51) $ 0.04 $ (0.62)
=========== =========== ===========
Basic and diluted weighted average
common shares outstanding ........................ 9,514,399 8,479,335 8,479,335
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
THE COSMETIC CENTER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Retained
Additional earnings Total
Common paid-in (accumulated stockholders'
Stock capital deficit) equity
-------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 ......................... $ -- $ 9,043 $ 5,024 $ 14,067
Net loss ................................... -- -- (5,262) (5,262)
Net distributions to Products Corporation .. -- (5,194) -- (5,194)
Capitalization of indebtedness by parent (a) -- 24,687 -- 24,687
-------- ---------- ------------ -------------
Balance at December 31, 1995 ....................... -- 28,536 (238) 28,298
Net income ................................. -- -- 381 381
-------- ---------- ------------ -------------
Balance at December 31, 1996 ....................... -- 28,536 143 28,679
Net loss ................................... -- -- (4,847) (4,847)
Aquisition of business (b) ................. 100 10,755 -- 10,855
-------- ---------- ------------ -------------
Balance at December 27, 1997 ....................... $ 100 $ 39,291 $ (4,704) $ 34,687
======== ========== ============ =============
</TABLE>
(a) Represents capitalized intercompany receivables due to Products
Corporation. See Note 3.
(b) Represents the merger of Prestige Fragrance & Cosmetics, Inc. with and
into The Cosmetic Center, Inc. See Note 2.
See Notes to Financial Statements.
F-5
<PAGE>
THE COSMETIC CENTER, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 27, DECEMBER 31, DECEMBER 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) ............................................................... $ (4,847) $ 381 $ (5,262)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating activities:
Depreciation and amortization .......................................... 4,122 2,177 1,996
Change in assets and liabilities, net of aquired assets and liabilities:
Increase in accounts receivable, net ........................... (293) -- --
Increase in inventories ........................................ (5,243) (2,542) (2,470)
Decrease (increase) in prepaid expenses and other current assets 1,852 73 (51)
Decrease in net assets from discontinued operations ............ -- -- 2,735
Decrease in other assets ....................................... 134 -- --
Increase (decrease) in accounts payable ........................ 3,654 1,366 (1,939)
(Decrease) increase in accrued expenses and other .............. (1,440) (163) 279
Increase in due to Products Corporation - current .............. 2,500 -- --
Other .......................................................... 52 -- --
-------- -------- --------
Net cash provided by (used for) operating activities ............................ 491 1,292 (4,712)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................................ (4,061) (3,345) (2,992)
Acquisition of business, net of cash acquired ................................... (19,883) -- --
Deferred acquisition costs....................................................... -- (589) --
-------- -------- --------
Net cash used for investing activities .......................................... (23,944) (3,934) (2,992)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.......................................... 65,690 -- --
Repayment of long-term debt....................................................... (41,297) -- --
Increase in due to Products Corporation - non-current, net ....................... 940 2,700 12,949
Net distributions to Products Corporation ........................................ -- -- (5,194)
-------- -------- --------
Net cash provided by financing activities ........................................ 25,333 2,700 7,755
-------- -------- --------
Net increase in cash ............................................................ 1,880 58 51
Cash at beginning of period ..................................................... 3,479 3,421 3,370
-------- -------- --------
Cash at end of period ........................................................... $ 5,359 $ 3,479 $ 3,421
======== ======== ========
Supplemental schedule of cash flow information: Cash paid during the period
for:
Interest ....................................................... $ 2,608 -- --
Income taxes, net of refunds ................................... (71) -- --
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
THE COSMETIC CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The Cosmetic Center, Inc. (the "Company") is an approximately 85% owned
subsidiary of Revlon Consumer Products Corporation (together with its
subsidiaries, "Products Corporation"), which is a direct wholly owned
subsidiary of Revlon, Inc. As of December 27, 1997, the Company operated 66
retail stores and 201 outlet stores in 42 states that are primarily engaged in
the sale of a wide range of brand name cosmetics, fragrances, skincare and
treatment, haircare, bath and body, personal care appliances, hosiery, beauty
care and related items (sometimes referred to herein as "Beauty Products") at
discounted prices.
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), then a
wholly owned subsidiary of Products Corporation, merged with and into The
Cosmetic Center, Inc. (prior to the merger, "CCI"), with the Company being the
surviving corporation (the "Merger"). The Merger was accounted for as a reverse
acquisition using the purchase method of accounting, and PFC is considered to
be the acquiring entity and CCI the acquired entity for accounting purposes,
even though the Company is the surviving legal entity. The historical financial
statements of the Company for the period prior to the Merger include the
results of operations of PFC only, and for the period subsequent to the Merger
include the results of operations of both entities. See Note 2.
In 1997, the Company changed its fiscal year end to the Saturday closest to
December 31. Prior to the change, the Company's fiscal year ended on December
31. The fiscal period ended December 27, 1997 was a 52-week period.
MERCHANDISE INVENTORIES:
The Company's inventories, consisting of finished goods, are valued at the
lower of cost or market. Cost is determined using the weighted average cost
method. Distribution, buying and occupancy costs are included in cost of sales.
RENTAL EXPENSES:
Certain store leases provide for minimum rentals plus additional rentals
computed as a percentage of net sales in excess of amounts specified in the
applicable lease as minimum rentals. The Company accrues percentage rent
expense during interim periods based on actual net sales in excess of the
prorated annual amounts specified in the related lease.
PROPERTY AND EQUIPMENT:
Machinery, office furniture and equipment are recorded at cost and are
depreciated on a straight-line basis over the estimated useful lives of such
assets, which is generally five years. Leasehold improvements are amortized
over their estimated useful lives or the terms of the leases, whichever is
shorter. The estimated useful lives for leasehold improvements is generally
five years. Repairs and maintenance are charged to operations as incurred, and
expenditures for additions and improvements are capitalized. Capital leases are
amortized on a straight-line basis over the shorter of the terms of the
respective leases or the useful life of the asset.
ADVERTISING COSTS:
The Company expenses advertising costs as incurred.
F-7
<PAGE>
INTANGIBLE ASSETS RELATED TO BUSINESSES ACQUIRED:
Intangible assets consist of goodwill as a result of the Merger (see Note
2) of $3,280 (net of accumulated amortization of $54), as of December 27, 1997,
and goodwill related to the acquisition in July 1994 of the assets and
liabilities assumed of Colours & Scents, Inc. of approximately $1,393 (net of
accumulated amortization of $125 and $87 as of December 27, 1997 and December
31, 1996, respectively). Total goodwill amortization expense was $92, $38 and
$38 for 1997, 1996 and 1995, respectively. These assets are being amortized on
a straight-line basis over 40 years. The Company evaluates, when circumstances
warrant, the recoverability of its intangible assets on the basis of
undiscounted cash flow projections and through the use of various other
measures, which include, among other things, a review of its business plans.
REVENUE RECOGNITION:
The Company recognizes revenue upon sale of its products at its stores.
INCOME TAXES:
Income taxes are calculated using the liability method in accordance with
the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes."
The Company is included in the affiliated group of which Mafco Holdings
Inc. ("Mafco Holdings") is the common parent, and the Company's federal taxable
income and loss will be included in such group's tax return filed by Mafco
Holdings. The Company also may be included in certain state and local tax
returns of Mafco Holdings or its subsidiaries. On June 24, 1992, Revlon
Holdings Inc. ("Holdings"), Revlon, Inc., Products Corporation and certain of
its subsidiaries, including PFC, and Mafco Holdings entered into a tax sharing
agreement, which is described in Note 9. As a result of the Merger, the Company
became a party to the tax sharing agreement. For all periods presented,
federal, state and local income taxes are provided as if the Company filed its
own income tax returns.
BASIC AND DILUTED INCOME (LOSS) PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which
establishes new standards for computing and presenting basic and diluted
earnings per share. As required by SFAS No. 128, the Company adopted the
provisions of the new standard with retroactive effect beginning in 1997. The
adoption of SFAS No. 128 did not have a material impact on the Company's
reported earnings per share.
Basic income (loss) per common share is computed by dividing income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted income (loss) per common share
has been computed based upon the weighted average shares of common stock
outstanding and shares that would have been outstanding assuming the issuance
of common stock for all dilutive potential common stock outstanding. The
Company's outstanding stock options represent the only dilutive potential
common stock outstanding. The amounts of income (loss) and number of shares
used in the calculations of diluted and basic income (loss) per common share
were the same for all years presented. Weighted average shares outstanding is
computed assuming that the 8,479,335 shares of the Company's Class C Common
Stock that Products Corporation received were outstanding and owned by
Products Corporation for all periods prior to the Merger. Immediately after
the Merger, the number of shares of the Company's Class C Common Stock
outstanding was 10,015,101.
STOCK-BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but
does not require, companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen to account
for stock-based compensation plans using the intrinsic value method prescribed
in Accounting Principles
F-8
<PAGE>
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock. See Note 11.
CONCENTRATION OF RISK:
The Company's financial instruments that are exposed to concentration of
credit risk consist of cash, checks and accounts receivable. The Company's cash
is deposited with major banks and financial institutions. The Company's
accounts receivable result primarily from advertising rebates and construction
allowances. The Company believes that its exposure resulting from concentration
of credit risk is limited.
The Company purchased Beauty Products from Products Corporation amounting
to $10,556, $12,946 and $13,468 for 1997, 1996 and 1995, respectively. The loss
of Products Corporation as a supplier could have a material adverse effect on
the Company's business if it were unable to secure alternative sources of
similar products.
PRE-OPENING EXPENSES:
Costs related to new store openings are expensed as incurred and are
included in selling, general and administrative expenses.
FINANCIAL INSTRUMENTS:
The Company's principal financial instruments consist of cash, accounts
payable, a note payable to Products Corporation and long-term debt. The Company
believes that the carrying values of these financial instruments approximate
fair value.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. THE MERGER
On April 25, 1997, pursuant to the Agreement and Plan of Merger among CCI,
Products Corporation and PFC dated as of November 27, 1996 and amended as of
February 20, 1997 and March 20, 1997 (the "Merger Agreement"), the Company
consummated the Merger of PFC with and into CCI, with the Company being the
surviving corporation. Pursuant to the Merger, Products Corporation received
8,479,335 shares of the Company's newly issued Class C Common Stock, par value
$.01 per share (the "Class C Common Stock"), the only class of the Company's
stock outstanding after the Merger. As a result of the Merger, CCI's
stockholders were entitled to receive, for each share of Class A Common Stock
or Class B Common Stock held, one share of newly issued Class C Common Stock
or, at each stockholder's election and subject to the limitation discussed
below, $7.63 in cash (the "Cash Election"). Holders of options to purchase
CCI's Class A Common Stock or Class B Common Stock with an exercise price of
less than $7.63 were entitled to receive for each such option they held, an
equivalent option to purchase Class C Common Stock or, at each such
optionholder's election and subject to the limitation discussed below, cash
equal to the difference between $7.63 and the exercise price per share of such
options. The right of stockholders and optionholders to receive cash was
limited to an aggregate of 2,829,065 shares and options for shares. Holders of
3,688,440 shares of Class A Common Stock and Class B Common Stock in the
aggregate and 86,500 options exercised their Cash Election so that after
proration, 2,764,116 shares of Class A Common Stock and Class B Common Stock
in the aggregate were accepted for Cash Election. The number of shares of
Class C Common Stock owned by Products Corporation after the Merger
constitutes approximately 85% of the outstanding Class C Common Stock after
giving effect to the Cash Election.
F-9
<PAGE>
The Merger was accounted for as a reverse acquisition using the purchase
method of accounting with Products Corporation effectively acquiring
approximately 85% of CCI for a purchase price of approximately $27,905. This
amount was allocated to the assets of CCI acquired and liabilities of CCI
assumed, to the extent of Products Corporation's ownership interest, based upon
their estimated fair values. A total of $3,280, representing the excess of
acquisition cost over estimated fair value of CCI's net tangible assets, has
been allocated to goodwill and is being amortized over 40 years. The purchase
price has been allocated to CCI's assets and liabilities as follows:
<TABLE>
<CAPTION>
<S> <C>
Inventory $ 52,020
Property and equipment, net 6,244
Goodwill 3,280
Accounts payable and accrued liabilities (22,500)
Long-term debt (14,152)
Other, net 3,013
--------
Purchase price $ 27,905
========
</TABLE>
As a result of the Merger, the Company incurred costs of approximately
$6,800, which were included in the purchase price of CCI. These costs primarily
related to direct costs of the acquisition, closing certain CCI stores and
severance benefits for certain CCI employees. As of December 27, 1997,
approximately $3,600 related to these amounts is included in accrued
liabilities and other long-term liabilities.
UNAUDITED PRO FORMA RESULTS OF OPERATIONS
The Company's results of operations incorporate CCI's results of operations
commencing after the effective date of the Merger. The unaudited summary pro
forma information below combines the actual results of each of CCI and PFC for
the period from January 1, 1996 to the effective date of the Merger and the
actual results of the Company from the effective date of the Merger through
December 27, 1997, and, for the period from January 1, 1996 to the effective
date of the Merger, reflects the increased amortization of goodwill, increased
interest expense and certain income tax adjustments related to the Merger and
the Cash Election that would have been incurred had the Merger and the Cash
Election occurred on January 1, 1996. The unaudited summary pro forma
information is not necessarily indicative of the results of operations of the
Company had the Merger and the Cash Election occurred at January 1, 1996, nor
is it necessarily indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
DECEMBER 27, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 194,687 $ 211,212
Income (loss) from operations 980 (4,936)
Net loss $ (3,959) $ (8,931)
========= =========
Basic and diluted net loss per common share $ (0.40) $ (0.89)
========= =========
</TABLE>
As a result of the Merger, the Company incurred business consolidation
costs of approximately $4,000 in connection with the consolidation of certain
warehouse, distribution and headquarters operations of PFC into the Company.
The unaudited pro forma results above exclude the effect of the $4,000 of
business consolidation costs. As of December 27, 1997, the balance of the
business consolidation liability was approximately $487, which consisted of
$428 in accrued expenses and $59 in other long-term liabilities.
F-10
<PAGE>
3. ADDITIONAL PAID-IN CAPITAL
During 1995, Products Corporation capitalized intercompany receivables from
the Company in the amount of $24,687. The Company recorded the capital infusion
as additional paid-in capital and reduced the Due to Products Corporation
correspondingly.
4. DISCONTINUED OPERATIONS
On June 30, 1995, the Company adopted a plan to discontinue the wig kiosk
and warehouse sales businesses. The net assets of the warehouse sales business
were transferred to Products Corporation on December 31, 1995. A substantial
portion of the wig kiosk business was shut down and the net liability was
transferred to another subsidiary of Products Corporation on December 31, 1995.
The transfer of the businesses resulted in an estimated loss of $897 on the
disposal of certain assets of the wig kiosk business and estimated losses from
operations for the six months through the date of transfer. Accordingly, the
wig kiosk and warehouse sales businesses have been reported as discontinued
operations. Net assets of the discontinued operations consisted primarily of
inventory and a payable to Products Corporation.
5. PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Machinery and equipment $ 5,034 $ 2,545
Office furniture and fixtures 11,605 7,056
Leasehold improvements 7,365 4,411
Construction-in-progress -- 362
-------- --------
24,004 14,374
Accumulated depreciation (9,832) (6,758)
======== ========
$ 14,172 $ 7,616
======== ========
</TABLE>
Depreciation and amortization expense for the years ended December 27,
1997, December 31, 1996 and 1995 was $4,012, $2,138 and $1,958, respectively.
6. ACCRUED EXPENSES AND OTHER
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Taxes, other than federal income taxes .. $1,951 $ 995
Compensation and related benefits ....... 3,096 353
Business consolidation costs ............ 428 --
Advertising costs ....................... 889 --
Interest ................................ 237 --
Income taxes ............................ 321 --
Rent .................................... 1,372 419
Other ................................... 1,421 618
------ ------
$9,715 $2,385
====== ======
</TABLE>
7. LONG-TERM DEBT
In connection with the Merger, on April 25, 1997 the Company entered into a
loan and security agreement (the "New Facility") and paid the then outstanding
balance of $14,152 on the previous credit facility of CCI (the
F-11
<PAGE>
"Former Facility") with borrowings under the New Facility. On April 28, 1997,
the Company used approximately $21,238 of borrowings under the New Facility to
fund the Cash Election associated with the Merger. The New Facility, which
expires on April 30, 1999, provides up to $70,000 of revolving credit tied to a
borrowing base of 65% of eligible inventory, as defined in the New Facility. As
of December 27, 1997, $38,954 was outstanding and an additional $13,893 was
available for borrowing under the New Facility. Availability under the New
Facility varies with the borrowing base. Borrowings under the New Facility are
collateralized by the Company's accounts receivable and inventory (and proceeds
therefrom). Under the New Facility, the Company may borrow at its option at
LIBOR plus 2.25% per annum or at the bank's prime rate plus 0.5% per annum. The
Company also pays a commitment fee equal to one-quarter of one percent per
annum on the average daily unused amount of the facility. Interest is payable
on a monthly basis except for interest on LIBOR rate loans with a maturity of
less than three months, which is payable at the end of the LIBOR rate loan
period then in effect and interest on LIBOR rate loans with a maturity of more
than three months, which is payable every three months. If the Company
terminates the New Facility, the Company is obligated to pay a prepayment
penalty (subject to certain exceptions, including refinancing with the same
lender) of $700 if the termination occurs before the first anniversary date of
the New Facility and $175 if the termination occurs after the first anniversary
date. The New Facility requires the Company to maintain a minimum tangible net
worth and a minimum interest coverage ratio. The New Facility also contains
various restrictive covenants including among other things limitations relating
to (i) mergers, consolidations and sales of assets, (ii) distributions and
dividends, (iii) transactions that materially and adversely affect the
Company's business, properties, prospects or the collateral under the New
Facility, (iv) guarantees, (v) incurring debt, (vi) prepaying debt, (vii)
transactions with affiliates, (viii) engaging in other lines of business, (ix)
liens, (x) sale leasebacks, (xi) creating or acquiring new subsidiaries and
(xii) acquisitions and investments. Certain of these limitations are subject to
various exceptions. The weighted average interest rate on the New Facility was
8.12% as of December 27, 1997. Additionally, the terms of Products
Corporation's debt instruments and those of Products Corporation's indirect
parent, REV Holdings Inc., impose restrictions on the ability of Products
Corporation and its subsidiaries, including the Company, to incur debt, make
acquisitions or investments, sell assets, create liens and consent to
restrictions on their ability to pay dividends or make distributions. All of
these restrictions are subject to various exceptions.
8. NOTE PAYABLE - PRODUCTS CORPORATION
In connection with the Merger, the Company issued a promissory note, dated
April 25, 1997, to Products Corporation for $13,255, which was the amount due
to Products Corporation at the Merger Date, with interest payable quarterly at
a rate of 11% per annum. The promissory note matures on June 30, 1999. The New
Facility prohibits the Company from making payments of principal (but not
interest) on the note unless borrowing availability (as defined in the New
Facility) exceeds $5,000 and other than from excess cash flow of the Company
(as defined in the New Facility). As of December 27, 1997 and December 31,
1996, the Company had an outstanding obligation due to Products Corporation of
$13,255 and $12,315, respectively. Prior to the Merger, PFC's working capital
and capital expenditure needs were satisfied through interest-bearing
obligations that were payable by the Company to Products Corporation. The
weighted average interest rate on the outstanding balances due to Products
Corporation for the years ended December 27, 1997 and December 31, 1996 and
1995 was approximately 10%, respectively.
9. INCOME TAXES
Products Corporation and the Company are, for federal income tax purposes,
included in the affiliated group of which Mafco Holdings is the common parent.
As a result, Products Corporation's and the Company's federal taxable income
and loss will be included in such group's consolidated tax return filed by
Mafco Holdings. Products Corporation and the Company also may be included in
certain state and local tax returns of Mafco Holdings or its subsidiaries.
In June 1992, Mafco Holdings, Holdings, Revlon Inc., Products Corporation
and certain of Products Corporation's subsidiaries, including PFC, entered into
a tax sharing agreement (as subsequently amended, the "Tax Sharing
Agreement"), pursuant to which Mafco Holdings has agreed to indemnify Revlon,
Inc. and Products Corporation against federal, state or local income tax
liabilities of the consolidated or combined group of which Mafco Holdings (or a
subsidiary of Mafco Holdings other than Revlon, Inc. and Products
F-12
<PAGE>
Corporation or its subsidiaries) is the common parent for taxable periods
beginning on or after January 1, 1992 during which Revlon, Inc. and Products
Corporation or a subsidiary of Products Corporation is a member of such group.
On April 25, 1997, the Company became a party to the Tax Sharing Agreement.
Revlon, Inc. has agreed to pay Products Corporation its share of any payment
received by Revlon, Inc. from Mafco Holdings under the Tax Sharing Agreement
and Products Corporation has agreed to pay to each of its subsidiaries,
including the Company, its share of any payment received by Products
Corporation from Revlon, Inc. under the Tax Sharing Agreement. Pursuant to the
Tax Sharing Agreement, for all taxable periods beginning on or after January 1,
1992, Products Corporation will pay to Revlon, Inc., which in turn will pay to
Mafco Holdings, amounts equal to the taxes that such corporation would
otherwise have to pay if it were to file separate federal, state or local
income tax returns (including any amounts determined to be due as a result of a
redetermination arising from an audit or otherwise of the consolidated or
combined tax liability relating to any such period which is attributable to
Products Corporation), except that Products Corporation will not be entitled to
carry back any losses to taxable periods ending prior to January 1, 1992. No
payments are required by Products Corporation or Revlon, Inc. if and to the
extent Products Corporation is prohibited under the Products Corporation credit
agreement from making tax sharing payments to Revlon, Inc. The Products
Corporation credit agreement currently prohibits Products Corporation from
making tax sharing payments other than in respect of state and local income
taxes.
Pursuant to the Tax Sharing Agreement, each of the subsidiaries of Products
Corporation, including the Company, has agreed to pay to Products Corporation
an amount equal to its liability for federal, state and local income
taxes (including estimated taxes), if any, calculated as if it were filing
separate returns. Since the payments to be made by subsidiaries of Products
Corporation, including the Company, to Products Corporation under the Tax
Sharing Agreement will be determined by the amount of taxes that such
subsidiaries would otherwise have to pay if they were to file separate federal,
state or local income tax returns, the Tax Sharing Agreement will benefit
Products Corporation to the extent Products Corporation can offset the taxable
income generated by such subsidiaries, including the Company, against losses
and tax credits generated by Products Corporation and its other subsidiaries.
There were no payments in respect of federal taxes by the Company to Products
Corporation pursuant to the Tax Sharing Agreement for 1997, 1996 or 1995.
A reconciliation of the actual tax expense to the expected tax provision
(computed by applying the federal corporate income tax rate of 35% to earnings
before income taxes) follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 27, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Expected federal income tax provision
(benefit) at the statuatory rate .. $(1,656) $ 151 $(1,387)
Change in valuation allowance ............... 1,651 (132) 1,380
State and local taxes, net of federal benefit 115 33 33
Other ....................................... 5 (2) 24
------- ------- -------
$ 115 $ 50 $ 50
======= ======= =======
</TABLE>
F-13
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
27, 1997 and December 31, 1996 are presented below:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Inventories ............................................ $ 1,399 $ 747
Net operating loss carryforwards ....................... 15,176 9,594
Business consolidation costs and Merger related accruals 1,405 --
Employee benefits ...................................... 324 --
Other .................................................. 381 943
-------- --------
Total gross deferred tax assets ................ 18,685 11,284
Less valuation allowance ....................... (14,637) (11,027)
-------- --------
Net deferred tax assets ........................ 4,048 257
Deferred tax liabilities:
Plant, equipment and other assets ...................... (826) (257)
-------- --------
Total gross deferred tax liabilities ........... (826) (257)
======== ========
Net deferred tax asset ........................................... $ 3,222 $ --
======== ========
</TABLE>
The valuation allowance for deferred tax assets at January 1, 1996 was
$10,987. The valuation allowance increased by $40 during the year ended
December 31, 1996 and increased by $3,610 during the year ended December 27,
1997, primarily as a result of the increase in deferred tax assets as a result
of the Merger. As of December 27, 1997, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $43,400 which
expire between 2007 and 2012. If during such period the Company ceased to be
part of the Mafco Holdings consolidated or combined group, certain of these
tax loss carryforwards could become unavailable to the Company under certain
circumstances.
10. EMPLOYEE BENEFIT - RETIREMENT PLAN
The Company's Employee Retirement Plan (the "Retirement Plan") is a defined
contribution plan which covers all eligible employees. The Retirement Plan
provides that participants may elect to contribute a portion of their
compensation (between 1% and 16% of salary) on a pre-tax basis, and the
Company, on a discretionary basis, may match a portion of such employee
contributions. There were no Company contributions for fiscal year 1997. See
Note 12, Related Party Transactions - Employee Benefits.
11. STOCK COMPENSATION PLAN
At December 27, 1997, the Company had a stock-based compensation plan (the
"1997 Stock Plan") which is described below. Prior to the Merger, PFC did not
have a stock-based compensation plan. The Company applies APB Opinion No. 25
and related interpretations in accounting for the 1997 Stock Plan. Under APB
Opinion No. 25, because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation cost has been recognized. Had compensation cost for the
Company's 1997 Stock Plan been determined consistent with SFAS No. 123, the
Company's net (loss) and net (loss) per share for 1997 of ($4,847) and ($0.51),
respectively, would have been increased to the pro forma amounts of ($5,097)
and ($0.54), respectively. The effects of applying SFAS No. 123 in this pro
forma disclosure are not necessarily indicative of future amounts.
Under the 1997 Stock Plan, the Company may grant options to employees to
purchase up to an aggregate of one million shares of Class C Common Stock.
Unless otherwise provided in the applicable option grant, non-qualified options
granted under the 1997 Stock Plan have a term of 10 years during which the
holder can purchase shares of Class C Common Stock at an exercise price which
must be not less than the market price on the date of the grant. Options
granted in 1997 will vest 25% each year beginning on the first anniversary of
the date of grant and will become 100% vested on the fourth anniversary of the
date of grant except for options granted to the president and chief executive
officer of the Company, which will vest 100% on the third anniversary of the
date of grant (except that upon termination of employment by the Company
other than for "cause" under his employment agreement, such options will vest
with respect to 25% of the shares (if termination is between the first and
second anniversaries of the grant date) and 50% of the shares (if termination
is between the second and third anniversaries of the grant date)), and options
F-14
<PAGE>
granted to the chairman of the board of the Company, 50% of which vested on the
date of grant and 50% of which will vest on the first anniversary of the date
of grant.
CCI had a former stock option plan (the "1991 Stock Plan"). Pursuant to the
Merger Agreement, each option to purchase CCI's Class A and Class B Common
Stock outstanding under the 1991 Stock Plan on the date of the Merger vested
and became exercisable for the same number of shares of Class C Common Stock
with the same exercise price and expiration date as was applicable to such
option immediately prior to the Merger. Holders of options with an exercise
price of less than $7.63 per share were able to elect, in lieu of retaining
such stock option, to participate in the Cash Election and receive in
cancellation thereof cash in an amount equal to the difference between $7.63
and the exercise price of such option; provided, however, that the Cash
Election was subject to the limitation that not more than 2,829,065 shares of
Class A and Class B Common Stock and options with an exercise price of less
than $7.63 per share were exchangeable for cash pursuant to the Cash Election
(with each stockholder's and optionholder's Cash Election being reduced pro
rata to the extent that the Cash Election was made for an aggregate number of
shares and options exceeding such amount). In April 1997, the Company's Board
of Directors amended the 1991 Stock Plan to provide that no further grants of
options would be made under the 1991 Stock Plan.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for option grants in 1997: no dividend yield;
expected volatility of 116%; a risk-free interest rate of 6.79%; and an
expected average life of three years for the Plan's options. At December 27,
1997, there were 156,119 options exercisable with an average exercise price of
$9.18 under the 1991 Stock Plan and the 1997 Stock Plan.
A summary of the status of the 1997 Stock Plan as of December 27, 1997 and
changes during the year then ended is presented below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Outstanding at beginning of year -- --
Granted ........................ 480,774 $ 5.57
Exercised ...................... -- --
Forfeited ...................... (94,905) 5.54
-------
Outstanding at end of year ..... 385,869 5.58
=======
</TABLE>
The weighted average fair value of options granted during 1997 approximated
$1.93 per share.
The following table summarizes options outstanding under the 1991 Stock Plan
and the 1997 Stock Plan at December 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
RANGE AVERAGE AVERAGE AVERAGE
OF NUMBER YEARS EXERCISE OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING REMAINING PRICE EXERCISABLE PRICE
- --------------- ----------- --------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$3.13 to $4.53 277,647 9.06 $ 3.21 47,897 $ 3.62
6.32 to 9.62 68,222 3.93 7.83 68,222 7.83
15.12 to 21.17 40,000 0.55 18.15 40,000 18.15
------- -------
3.13 to 21.17 385,869 7.27 5.58 156,119 9.18
======= =======
</TABLE>
F-15
<PAGE>
12. RELATED PARTY TRANSACTIONS
HOLMDEL LEASE
During 1995, 1996 and in 1997 prior to the Merger, PFC occupied a
headquarters office, warehouse and distribution facility in Holmdel, New Jersey
owned by Products Corporation without any written arrangement with Products
Corporation. The amount charged to PFC by Products Corporation for the Holmdel
facility amounted to approximately $557 and $594 for 1995 and 1996,
respectively, and approximately $211 for the period in 1997 prior to the
Merger. During 1997 after the Merger, the Company leased from Products
Corporation the headquarters and warehouse and distribution facility that PFC
occupied in Holmdel, New Jersey at a base rental of approximately $395 per
annum plus the Company's proportionate share of operating and tax
expense escalations (the "Holmdel Lease"). The Holmdel Lease was terminated by
the Company effective June 25, 1997. The Company paid Products Corporation
approximately $141 under the Holmdel Lease for the period in 1997 after the
Merger until the termination of the Holmdel Lease.
EMPLOYEE STORE LEASES
During 1995, 1996 and in 1997 prior to the Merger, PFC occupied the
employee stores located in New York City and Apex, North Carolina, which were
leased from unaffiliated third parties by Products Corporation and a subsidiary
of Products Corporation, respectively, and occupied the five remaining employee
stores located in Edison, New Jersey (two stores); Irvington, New Jersey;
Phoenix, Arizona and Oxford, North Carolina without any written arrangement
with Products Corporation. PFC did not make any payments to Products
Corporation for the New York City store for the period in 1997 prior to the
Merger. PFC paid Products Corporation approximately $5 for the Apex,
North Carolina employee store for the period in 1997 prior to the Merger. PFC
paid to Products Corporation rental and other allocated charges for the five
employee stores that amounted to approximately $30 in the aggregate for the
period in 1997 prior to the Merger.
The Company sublet the New York City employee store from Products
Corporation from the date of the Merger, and approximately $68 is payable to
Products Corporation under such sublease from the date of the Merger through
the end of fiscal 1997. The lease for the Apex, North Carolina store was
assigned to the Company by a subsidiary of Products Corporation at the time of
the Merger. From and after the Merger, the Company continues to occupy the
employee stores located in Edison, New Jersey; Irvington, New Jersey; Oxford,
North Carolina and Phoenix, Arizona pursuant to leases from Products
Corporation with terms of one year at an annual rent of approximately $73, $20,
$40 and $31, respectively, for the first year, with the option to renew for
nine additional one-year periods with rent increases of 5% of the annual base
rent for each renewal year (the "Employee Store Leases"). Operating costs are
included in the rent. If at any time during the term of such Employee Store
Leases Products Corporation enters into an agreement with a non-affiliate for
the sale or lease of the facility in which a store is located, Products
Corporation may terminate the relevant lease upon notice effective the earlier
to occur of five business days before the closing of such sale or lease
transaction, or 180 days following the giving of such notice. In addition, at
any time during the term either party may terminate the applicable lease if
Products Corporation ceases or substantially diminishes its operations in the
portion of a building in which a store is located. Products Corporation may
terminate at any time after the second anniversary of the date of the leases if
(i) Products Corporation or any of its affiliates no longer have the power to
vote, directly or indirectly, a majority of the voting power of outstanding
shares of the Company; (ii) all or substantially all of the Company's assets
are sold to any person other than an affiliate of Products Corporation or (iii)
an agreement is entered into by Products Corporation that would result in
either (i) or (ii). If Products Corporation exercises such termination right
after the second year of the leases but before the beginning of the fifth year,
Products Corporation must give at least one year's notice. Thereafter, Products
Corporation may terminate in such event on 180 days' notice. Products
Corporation is not obligated to terminate any or all of the leases in such
event, but may choose to retain the Company as a tenant in one or more
locations.
F-16
<PAGE>
SERVICES AGREEMENT
During 1995, 1996 and in 1997 prior to the Merger, Products Corporation
provided certain services to PFC for which PFC was charged direct and indirect
expenses incurred by Products Corporation in providing such services. Such
services included insurance and risk management services, travel, legal
services, treasury and finance services, customer service, information systems
and audit services. The amounts charged by Products Corporation to PFC for such
allocated expenses amounted to approximately $2,037 and $2,348 for 1995 and
1996, respectively, and approximately $689 for the period in 1997 prior to the
Merger. These expenses are included within cost of sales and selling, general
and administrative expenses in the accompanying Statements of Operations.
On April 25, 1997, Products Corporation and the Company entered into a
services agreement (the "Services Agreement") pursuant to which Products
Corporation provides services, including executive, treasury, legal, human
resources, accounting, tax, real estate, management information services,
corporate information services, including investor relations, risk management,
participation in Products Corporation's insurance and self-insurance programs
and warehouse and distribution services (collectively, the "Services"), as and
to the extent requested by the Company. The Company pays Products Corporation
the actual cost incurred by Products Corporation in providing the Services. To
the extent the Services are secured from third party providers such as
insurance carriers or outside advisors such as lawyers and accountants, the
Company pays to Products Corporation that portion of the amounts due to such
third party providers as is allocable to the Services purchased for and
provided to or for the benefit of the Company. Additionally, the Company
reimburses Products Corporation for all other reasonable out-of-pocket expenses
incurred by Products Corporation in providing the Services. During 1997, the
Company paid Products Corporation a one-time payment of $340 to cover all
severance costs expected to be incurred by Products Corporation with respect to
the termination of certain Products Corporation employees who provided Services
to PFC prior to the Merger as a result of the Company's decision to consolidate
certain warehouse, distribution and headquarters operations in Maryland. The
Services Agreement provides that Products Corporation need not make available
any Services to the Company to the extent doing so would cause an unreasonable
burden to Products Corporation or to the extent that Products Corporation
discontinues such Services within its organization. The total amount paid to
Products Corporation in connection with the provision of such Services during
1997 after the Merger was approximately $688 (not including the one-time
payment of $340 to cover severance costs). The Services Agreement or any
severable part thereof may be terminated by either party on 180 days' notice.
In addition, if at any time Products Corporation together with its affiliates
no longer have the power to vote, directly or indirectly, a majority of the
voting power of outstanding shares of the Company or if all or substantially
all of the Company's assets are sold to any person other than an affiliate,
Products Corporation may terminate the Services Agreement upon 30 days' prior
notice.
SUPPLY AGREEMENT
During 1995, 1996 and in 1997 prior to the Merger, PFC purchased products
for approximately $13,468, $12,946 and $2,791, respectively, from Products
Corporation and its affiliate, Holdings, without any written arrangement.
On April 25, 1997, Products Corporation and the Company entered into a
purchase and supply agreement (the "Supply Agreement") for a term of at least
two and a maximum of four years pursuant to which Products Corporation supplies
to the Company for resale in its retail stores, and not for wholesale
distribution, first quality products and first quality excess products, and for
resale only in the PFC outlet stores, and not for wholesale distribution,
discontinued and returned and refurbished products (subject in all cases to the
availability of product). During 1997 subsequent to the Merger, the Company
purchased products under the Supply Agreement from Products Corporation
for approximately $7,765. The Supply Agreement provides that Products
Corporation may terminate the agreement effective at any time after April 25,
1999 on one year's notice if Products Corporation together with its affiliates
no longer have the power to vote, directly or indirectly, a majority of the
voting power of outstanding shares of the Company or if all or substantially
all of the Company's assets are sold to any person other than an affiliate.
EMPLOYEE BENEFITS
Prior to the Merger, PFC employees were eligible to participate in Products
Corporation sponsored employee pension benefit plans, including the Revlon
Savings Investment and Profit Sharing Plan and the Revlon Employees'
F-17
<PAGE>
Retirement Plan and Products Corporation sponsored employee welfare benefit
plans, including medical, dental, life and disability insurance coverage. The
minimum amounts required pursuant to the Employee Retirement Income Security
Act, as amended, were contributed annually by Products Corporation on behalf of
PFC employees who participated in the Products Corporation sponsored plans. PFC
recorded $2,754 and $2,822 in 1995 and 1996, respectively, and $1,318 in 1997
during the period prior to the Merger, in benefit expenses for its share of the
pension and welfare benefit plans liability for the PFC employees. Products
Corporation union employees who provided services to PFC prior to the Merger
were covered by the Revlon/UAW Pension Plan and the UAW Group Welfare Plan.
Pension and welfare expenses for the Products Corporation union employees were
charged directly to PFC and were included within amounts reflected in the
"Services Agreement" paragraph above. From and after the Merger, employees of
the Company participate in benefit plans sponsored by the Company and no longer
participate in plans sponsored by Products Corporation.
TAX SHARING AGREEMENT
Holdings, Revlon, Inc., Products Corporation and certain of its
subsidiaries, including PFC during 1995, 1996 and in 1997 prior to the Merger
and the Company subsequent to the Merger, and Mafco Holdings are parties to the
Tax Sharing Agreement, which is described in Note 9.
REGISTRATION RIGHTS AGREEMENT
On April 25, 1997, the Company entered into a registration rights agreement
with Products Corporation pursuant to which Products Corporation is entitled to
demand on any three occasions that the Company file a registration statement
under the Securities Act in connection with the sale of the Company's Class C
Common Stock owned by Products Corporation and will also be entitled to include
such shares in certain registration statements filed for the benefit of the
Company (the "Registration Rights Agreement"). The Company will bear all
expenses of such registration statements, except for fees and expenses of
counsel for Products Corporation and underwriters' discounts, fees and
expenses.
STOCKHOLDERS AGREEMENT
At the time of the Merger, Mark Weinstein, Vice Chairman and a Director of
the Company during 1997, and certain members of his family (the "Weinstein
Group") and Products Corporation entered into a stockholders agreement (the
"Stockholders Agreement"). Pursuant to the Stockholders Agreement, members of
the Weinstein Group holding at least 25% of all outstanding Class C Common
Stock held by the Weinstein Group in the aggregate are entitled to demand on
one occasion that the Company file a registration statement under the
Securities Act for the sale of their Class C Common Stock. Mr. Weinstein and
the other members of the Weinstein Group are also entitled to include their
Class C Common Stock in certain registration statements filed for the benefit
of the Company. The Company will bear all expenses of such registration
statements, except for fees and expenses of counsel for the Weinstein Group and
underwriters' discounts, fees and expenses. The Stockholders Agreement provides
that for three years from the consummation of the Merger, Mr. Weinstein and the
other members of the Weinstein Group will vote all of their Class C Common
Stock in favor of Products Corporation's nominees for director so that Products
Corporation will at all times maintain representation on the Company's Board of
Directors equal to Products Corporation's percentage ownership of Class C
Common Stock, but not less than seven board seats, including two independent
directors, and Products Corporation will vote its shares in favor of Mr.
Weinstein or the Weinstein Group's nominee for director equal to the Weinstein
Group's aggregate percentage ownership of Class C Common Stock, after giving
effect to the Merger and the Cash Election, but not less than one nor more than
two board seats.
13. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company currently leases retail space at various locations under
operating lease agreements. Certain leases provide for contingent rents based
upon store sales exceeding specified amounts. Additionally, some store leases
F-18
<PAGE>
have specified annual rental increases or rent abatements. Total rent expense
to third parties for 1997, 1996 and 1995 was approximately $11,259, $7,743 and
$7,793, respectively, of which $551, $389 and $358 was recorded for contingent
rent in 1997, 1996 and 1995, respectively. Certain of the leases contain
provisions pursuant to which the Company may terminate if the location does not
achieve at least a specified occupancy rate. Certain of the leases permit
either the Company or the lessor to terminate the lease if specified minimum
sales levels are not met. In addition, the majority of the leases permit the
Company to renew for specified terms.
Future minimum lease commitments under noncancelable operating leases with
initial lease terms in excess of one year from December 27, 1997 aggregated
$55,268; such commitments for each of the five years subsequent to December 27,
1997 are $11,613, $10,377, $8,760, $7,295 and $5,929, respectively.
OTHER:
The Company is involved as a defendant in certain litigation and
proceedings arising in the normal conduct of its business. In the opinion of
the Company's management, based upon advice of its counsel handling such
litigation and proceedings, an adverse outcome, if any, will not have a
material effect on the Company's financial condition or results of operations.
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 27, 1997 (a)
----------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ..................... $ 12,859 $ 36,473 $ 45,355 $ 64,358
Income (loss) from operations . (2,542) (4,186)(b) (225) 5,986
Net income (loss) ............. (2,831) (5,153) (1,319) 4,456
-------- -------- -------- --------
Basic and diluted income (loss)
per common share ......... $ (0.33) $ (0.54) $ (0.13) $ 0.44
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ..................... $ 12,707 $ 16,267 $ 19,996 $ 28,447
Income (loss) from operations . (2,953) (616) 872 4,100
Net income (loss) ............. (3,115) (875) 549 3,822
-------- -------- -------- --------
Basic and diluted income (loss)
per common share ......... $ (0.37) $ (0.10) $ 0.06 $ 0.45
======== ======== ======== ========
</TABLE>
(a) Results subsequent to April 25, 1997 include the operations of CCI (see
Note 2).
(b) Includes business consolidation costs associated with the Merger
of $4,000 (see Note 2).
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
The Cosmetic Center, Inc.
(Registrant)
By: /s/ I. Howard Diener By: /s/ Dwight W. Crawley
--------------------------- ---------------------------
I. Howard Diener Dwight W. Crawley
President and Senior Vice President--Finance,
Chief Executive Officer Chief Financial Officer and
Chief Accounting Officer
Dated: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
registrant on March 26, 1998 and in the capacities indicated.
Signature Title
*
- ----------------------------------- Chairman of the Board and Director
(Jerry W. Levin)
*
- ----------------------------------- Vice Chairman of the Board and Director
(William J. Fox)
/s/ I. Howard Diener
- ----------------------------------- President, Chief Executive Officer and
(I. Howard Diener) Director
(Principal Executive Officer)
*
- ----------------------------------- Director
(David N. Dinkins)
<PAGE>
*
___________________________________ Director
(Donald G. Drapkin)
*
___________________________________ Director
(George Fellows)
*
___________________________________ Director
(Richard Halperin)
*
___________________________________ Director
(Wade H. Nichols)
*
___________________________________ Director
(Harvey Rosenthal)
* Robert K. Kretzman, by signing his name hereto, does hereby sign this report
on behalf of the Directors of the Registrant after whose typed names asterisks
appear, pursuant to powers of attorney duly executed by such Directors and
filed with the Securities and Exchange Commission.
By: /s/ Robert K. Kretzman
Robert K. Kretzman
Attorney-in-fact
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
BY-LAWS
OF
THE COSMETIC CENTER, INC.
Dated: April 25, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I OFFICES
Section 1. Registered Office...............................................1
Section 2. Other Offices...................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings...............................................1
Section 2. Annual Meetings.................................................1
Section 3. Special Meetings................................................1
Section 4. Quorum..........................................................2
Section 5. Proxies.........................................................2
Section 6. Voting..........................................................2
Section 7. Organization and Order of Business..............................2
Section 8. Consent of Stockholders in Lieu of Meeting......................3
Section 9. List of Stockholders Entitled to Vote...........................3
Section 10. Stock Ledger....................................................3
Section 11. Record Date.....................................................3
Section 12. Inspectors of Election..........................................4
ARTICLE III DIRECTORS
Section 1. Number and Election of Directors................................4
Section 2. Vacancies.......................................................5
Section 3. Duties and Powers...............................................5
Section 4. Organization....................................................5
Section 5. Resignations and Removals of Directors..........................5
Section 6. Meetings........................................................6
Section 7. First Yearly Meeting............................................6
Section 8. Quorum and Manner of Acting.....................................6
Section 9. Action by Written Consent.......................................6
Section 10. Meetings by Means of Conference Telephone.......................6
Section 11. Compensation....................................................6
Section 12. Interested Directors............................................7
ARTICLE IV COMMITTEES
Section 1. How Constituted and Powers......................................7
Section 2. Executive Committee.............................................8
Section 3. Organization....................................................8
Section 4. Meetings........................................................8
Section 5. Quorum and Manner of Acting.....................................8
Section 6. General.........................................................8
<PAGE>
ARTICLE V OFFICERS
Section 1. Officers........................................................8
Section 2. Term of Office and Qualifications...............................8
Section 3. Subordinate Officers............................................9
Section 4. Removal.........................................................9
Section 5. Resignations....................................................9
Section 6. Vacancies.......................................................9
Section 7. Compensation....................................................9
Section 8. Chairman of the Board of Directors..............................9
Section 9. Vice Chairman of the Board of Directors.........................9
Section 10. President......................................................10
Section 11. Vice Presidents................................................10
Section 12. Treasurer......................................................11
Section 13. Controller.....................................................11
Section 14. Secretary......................................................11
Section 15. Duties of Assistant Treasurers, Assistant Secretaries and
Other Subordinate Officers.....................................12
Section 16. Appointed Officers.............................................12
ARTICLE VI CONTRACTS, VOTING OF STOCK HELD,CHECKS, DRAFTS, BANK ACCOUNTS,
ETC.
Section 1. Execution of Contracts.........................................13
Section 2. Loans and Loan Guarantees......................................13
Section 3. Voting of Stock Held...........................................13
Section 4. Checks, Drafts, etc............................................13
Section 5. Deposits.......................................................14
ARTICLE VII STOCK AND DIVIDENDS
Section 1. Form of Certificates...........................................14
Section 2. Signatures.....................................................14
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates..............14
Section 4. Transfers......................................................15
Section 5. Transfer and Registry Agents...................................15
Section 6. Beneficial Owners..............................................15
Section 7. Dividends......................................................15
Section 8. Limitations on Transfer........................................16
ARTICLE VIII NOTICES
Section 1. Notices........................................................16
Section 2. Waivers of Notice..............................................16
ARTICLE IX BOOKS
Section 1. Books..........................................................17
Section 2. Form of Books..................................................17
<PAGE>
ARTICLE X INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation....................17
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation...................................18
Section 3. Authorization of Indemnification...............................18
Section 4. Good Faith Defined.............................................18
Section 5. Indemnification by a Court.....................................19
Section 6. Expenses Payable in Advance....................................19
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses..19
Section 8. Insurance......................................................20
Section 9. Certain Definitions............................................20
Section 10. Survival of Indemnification and Advancement of Expenses........20
Section 11. Limitation on Indemnification..................................20
Section 12. Indemnification of Appointed Officers, Employees and Agents....21
ARTICLE XI AMENDMENT OF BY-LAWS
Section 1. Amendment of By-Laws...........................................21
Section 2. Entire Board of Directors......................................21
ARTICLE XII GENERAL PROVISIONS
Section 1. Seal...........................................................21
Section 2. Fiscal Year....................................................21
<PAGE>
BY-LAWS
(as restated and amended)
OF
THE COSMETIC CENTER, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be held at and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of
Stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting of Stockholders stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 3. Special Meetings. Unless otherwise prescribed by
law or by the Certificate of Incorporation, Special Meetings of Stockholders,
for any purpose or purposes, may be called by either (i) the Board of
Directors, (ii) the Chairman of the Board of Directors or (iii) the Chairman of
the Executive Committee of the Board of Directors (if any). Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting of Stockholders stating the
<PAGE>
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum. Except as otherwise required by law or by
the Certificate of Incorporation, the holders of a majority in total number of
votes of the capital stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave
less than a quorum. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the Chairman of the meeting or
the holders of a majority in number of votes of the capital stock entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting of the time and place of the adjourned meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a written notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting not less
than ten nor more than sixty days before the date of the meeting.
Section 5. Proxies. Any stockholder entitled to vote may do
so in person or by his proxy appointed by an instrument in writing subscribed
by such stockholder or by his attorney thereunto authorized, delivered to the
Secretary of the meeting; provided, however, that no proxy shall be voted or
acted upon after three years from its date, unless said proxy provides for a
longer period. All proxies must be filed with the Secretary of the Corporation
at the beginning of the meeting in order to be counted in any vote at the
meeting.
Section 6. Voting. At all meetings of the stockholders at
which a quorum is present, except as otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the total number of votes of the capital stock present in person or
represented by proxy and entitled to vote thereat voting as a single class. At
the Annual Meeting of Stockholders, or any Special Meeting of Stockholders at
which directors are to be elected, the directors shall be elected by a
plurality vote.
Section 7. Organization and Order of Business. At every
meeting of stockholders, the Chairman of the Board of Directors or, in such
person's absence, such person as shall have been designated by the Board of
Directors or, if none, by the Chairman of the Board of Directors, shall act as
Chairman of the meeting. The Secretary or, in such person's absence, an
Assistant Secretary, shall act as Secretary of the meeting. The Chairman of the
meeting shall have the sole authority to prescribe the agenda and rules of
order for the conduct of any Annual or Special Meeting of Stockholders and to
determine all questions arising thereat relating to the order of business and
the conduct of the meeting,
2
<PAGE>
except as otherwise required by law. Unless otherwise directed by the Chairman
of the meeting, the vote at any meeting of the stockholders need not be by
written ballot. In case none of the officers above designated to act as
Secretary of the meeting shall be present, the Chairman of the meeting or
Secretary of the meeting shall be appointed by vote of a majority of the total
number of votes of the capital stock present in person or represented by proxy
and entitled to vote thereat.
Section 8. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing. In the event that the action which is consented to is such as would
have required the filing of a certificate under the General Corporation Law of
the State of Delaware ("DGCL") if such action had been voted on by stockholders
at a meeting thereof, the certificate filed shall state, in lieu of any
statement concerning any vote of stockholders, that written consent and written
notice has been given as provided in this Section 8.
Section 9. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 10. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 9 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 11. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon
3
<PAGE>
which the resolution fixing the record date is adopted by the Board of
Directors and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall not be more than sixty nor less than ten days before the date of
such meeting; (2) in the case of determination of stockholders entitled to
express consent to corporate action in writing without a meeting, shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors; and (3) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (1) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; (2) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
when no prior action of the Board of Directors is required by law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in accordance with
applicable law, or if prior action by the Board of Directors is required by
law, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (3) the record
date for determining stockholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 12. Inspectors of Election. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors of
elections to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the Chairman of the meeting shall appoint one
or more inspectors to act at the meeting. Unless otherwise required by law,
inspectors may be officers, employees or agents of the Corporation. Each
inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. The inspector shall take
charge of the polls and, when the vote is completed, shall make a certificate
of the result of the vote taken and of such other facts as may be required by
law.
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors. The Board of
Directors shall consist of not less than three members, the exact number of
which shall from time to time be determined by resolution of the Board of
Directors. Except as provided in Section 2 of this Article, directors shall be
elected by the stockholders at the Annual Meetings of Stockholders, and each
director so elected shall hold office until his successor is duly elected and
qualified, or until his death, or until his earlier resignation or removal.
Directors need not be stockholders. The directors shall be classified, with
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respect to the time for which they severally hold office, into three classes,
as nearly equal in number as possible, one class to be originally elected for a
term expiring at the annual Stockholders Meeting to be held in 1998, another
class to be originally elected for a term expiring at the annual Stockholders
Meeting to be held in 1999, and another class to be originally elected for a
term expiring at the annual Stockholders Meeting to be held in 2000, with each
director in each class to hold office until his successor is elected and
qualified. At each annual Stockholders Meeting, the successors of the class of
directors whose term expires at the meeting shall be elected to hold office for
a term expiring at the annual Stockholders Meeting held in the third year
following the year of their election, or until each such director's successor
is elected and qualified.
Section 2. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, except that any vacancy resulting from
the death, resignation, removal or disqualification of a director elected by
the holders of any class or classes of the stock of the Corporation voting as a
class, or from an increase in the number of directors which such holders are
entitled to elect, may be filled by the affirmative vote of a majority of the
directors elected by such class or classes, or by a sole remaining director so
elected, and each director so chosen shall hold office until his successor is
duly elected and qualified or until his death, or until his earlier resignation
or removal, or disqualification.
Section 3. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws required to be exercised or done by the stockholders.
Section 4. Organization. At each meeting of the Board of
Directors, the Chairman of the Board of Directors, or, in such person's
absence, a director chosen by a majority of the directors present, shall act as
Chairman. The Secretary of the Corporation shall act as Secretary at each
meeting of the Board of Directors. In case the Secretary shall be absent from
any meeting of the Board of Directors, an Assistant Secretary shall perform the
duties of Secretary at such meeting; and in the absence from any such meeting
of the Secretary and all the Assistant Secretaries, the Chairman of the meeting
may appoint any person to act as Secretary of the meeting.
Section 5. Resignations and Removals of Directors. Any
director of the Corporation may resign at any time, by giving written notice to
the Chairman of the Board of Directors, the Chairman of the Executive Committee
of the Board of Directors (if any), the President or the Secretary of the
Corporation. Such resignation shall take effect at the time therein specified
or, if no time is specified, immediately; and, unless otherwise specified in
such notice, the acceptance of such resignation shall not be necessary to make
it effective. Except as otherwise required by law, any director or the entire
Board of Directors may be removed, with or without cause, by the affirmative
vote or written consent of a majority in total voting power of the issued and
outstanding capital stock of the Corporation represented and entitled to vote
in the election of directors.
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Section 6. Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware. Regular meetings of the Board of Directors may
be held at such time and at such place as may from time to time be determined
by the Board of Directors and, unless required by resolution of the Board of
Directors, without notice. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors, the Chairman of the Executive
Committee of the Board of Directors (if any), or a majority of directors then
in office. Notice thereof stating the place, date and hour of the meeting shall
be given to each director either by mail not less than forty-eight hours before
the date of the meeting; by telephone, telecopy or telegram on twenty-four
hours notice; or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the circumstances.
Section 7. First Yearly Meeting. The Board of Directors shall
meet for the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each Annual Meeting
of Stockholders, and no notice of such meeting to the existing or newly elected
directors shall be necessary in order to legally constitute the meeting,
provided a quorum is present. Such first meeting may be held at any other time
or place specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or in a waiver of notice thereof.
Section 8. Quorum and Manner of Acting. Except as otherwise
required by law, the Certifiate of Incorporation or these By-Laws, at all
meetings of the Board of Directors, a majority of the entire Board of Directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting of the time and place of the adjourned meeting, until a quorum
shall be present.
Section 9. Action by Written Consent. Unless otherwise
required by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting, if all the members of
the Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 10. Meetings by Means of Conference Telephone. Unless
otherwise required by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 10 shall
constitute presence in person at such meeting.
Section 11. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary, or such other emoluments, as the Board of
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Directors shall from time to time determine. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Each director who shall serve as a member or Chairman of
special or standing committee may be allowed like compensation for attending
committee meetings.
Section 12. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers, are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
COMMITTEES
----------
Section 1. How Constituted and Powers. The Board of Directors
may, by resolution passed by a majority of the entire Board of Directors,
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation, except as otherwise provided in these
By-Laws. The Board of Directors may designate one or more directors as
alternate members of any committee who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act in the place of any absent or
disqualified. Each committee, to the extent permitted by law, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation as provided in the
resolution establishing such committee.
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Section 2. Executive Committee. The Board of Directors may
designate an Executive Committee, to consist of not less than three members of
the Board of Directors, which shall have and may exercise, to the extent
permitted by law, all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, including, unless otherwise
specified by a resolution or resolutions of the Board of Directors, the power
and authority to declare dividends, to authorize the issuance of stock and to
adopt a certificate of ownership and merger pursuant to Section 253 of the
DGCL.
Section 3. Organization. The Board of Directors or each such
committee may choose its Chairman and Secretary, and shall keep and record all
its acts and proceedings and report the same from time to time to the Board of
Directors.
Section 4. Meetings. Regular meetings of any such committee,
of which no notice shall be necessary, shall be held at such times and in such
places as shall be fixed by the committee or by the Board of Directors. Special
meetings of any such committee shall be held at the request of any member of
the committee.
Section 5. Quorum and Manner of Acting. A majority of the
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of the committee.
Section 6. General. The Board of Directors shall have the
power at any time to change the members of, fill vacancies in, and discharge or
disband any such committee, either with or without cause.
ARTICLE V
OFFICERS
--------
Section 1. Officers. The Board of Directors shall elect a
Chairman of the Board of Directors, a President, one or more Vice Presidents, a
Treasurer, a Controller and a Secretary. The Board of Directors may designate
one or more Vice Presidents as Senior Executive Vice Presidents, Executive Vice
Presidents or Senior Vice Presidents, and may use such other descriptive words
as it may determine to designate the seniority or areas of special competence
or responsibility of the officers. Any two or more offices may be held by the
same person.
Section 2. Term of Office and Qualifications. Each such
officer shall hold office until such officer's successor shall have been duly
chosen and shall qualify, or until such officer's death, resignation or removal
in the manner hereinafter provided. The Chairman of the Board of Directors
shall be chosen from among the directors, but no other officer need be a
director. Each officer shall have such functions or duties as are provided in
these By-Laws, or as the Board of Directors may from time to time determine.
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Section 3. Subordinate Officers. The Board of Directors may
from time to time elect such other officers or assistant officers as it may
deem necessary, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these By-Laws, or as the
Board of Directors may from time to time determine.
Section 4. Removal. Any officer may be removed, either with
or without cause, by the Board of Directors, and any officer also may be
removed in such other manner as may be specified by the Board of Directors in
the resolution or resolutions electing such officer. Any officer may be
suspended by the Chairman of the Board of Directors either with or without
cause.
Section 5. Resignations. Any officer may resign at any time
by giving written notice to the Board of Directors, the Chairman of the Board
of Directors or the Secretary of the Corporation. Any such resignation shall
take effect at the time therein specified or if no time is specified,
immediately; and, unless otherwise specified in such notice, the acceptance of
such resignation shall not be necessary to make it effective.
Section 6. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these By-Laws for the regular election to
that office.
Section 7. Compensation. Salaries or other compensation of
the officers may be fixed from time to time by the Board of Directors or any
duly authorized committee of directors and shall be so fixed by the Board of
Directors or such committee as to any officer serving the Corporation as a
director. No officer shall be prevented from receiving proper compensation for
such officer's services by reason of the fact that such officer is also a
director of the Corporation.
Section 8. Chairman of the Board of Directors. The Chairman
of the Board of Directors, if present, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors may, with the Treasurer or the Secretary or an Assistant Treasurer or
an Assistant Secretary, sign certificates for stock of the Corporation. The
Chairman of the Board of Directors may enter into and execute in the name of
the Corporation deeds, mortgages, bonds, guarantees, contracts and other
instruments, except in cases where the making and execution thereof shall be
expressly restricted or delegated by the Board of Directors or by a duly
authorized committee of directors or by these By-Laws to some other officer or
agent of the Corporation, or shall be required by law otherwise to be made or
executed. In general, the Chairman of the Board of Directors shall have all
authority incident to the office of Chairman of the Board of Directors and
shall have such other authority and perform such other duties as may from time
to time be assigned by the Board of Directors or by any duly authorized
committee of directors.
Section 9. Vice Chairman of the Board of Directors. The Vice
Chairman shall be an officer of the Corporation and, in general, the Vice
Chairman will render such services to the
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Corporation as are customarily rendered by the Vice Chairman of comparable
publicly held companies. The Vice Chairman also generally shall assist the
Chairman of the Board.
Section 10. President. The President shall be the chief
executive officer of the Corporation and shall have general supervision of the
business, affairs and property of the Corporation and over its several
officers, subject, however, to the control of the Board of Directors. The
President also shall be the chief operating officer of the Corporation and,
subject to the direction of the Board of Directors and any duly authorized
committee of directors, shall have general supervision of the operations of the
Corporation. The President may, with the Treasurer or the Secretary or an
Assistant Treasurer or an Assistant Secretary, sign certificates for stock of
the Corporation. The President may enter into and execute in the name of the
Corporation deeds, mortgages, bonds, guarantees, contracts and other
instruments, except in cases where the making and execution thereof shall be
expressly restricted or delegated by the Board of Directors or by a duly
authorized committee of directors, or by these By-Laws to some other officer or
agent of the Corporation, or shall be required by law otherwise to be made or
executed. The President shall have the power to fix the compensation of elected
officers whose compensation is not fixed by the Board of Directors or a
committee thereof in accordance with Section 7 of this Article V, and also to
engage, discharge, determine the duties and fix the compensation of all
employees and agents of the Corporation necessary or proper for the transaction
of the business of the Corporation. In general, the President shall have all
authority incident to the office of President, chief executive officer and
chief operating officer and shall have such other authority and perform such
their duties as may from time to time be assigned by the Board of Directors or
by any duly authorized committee of directors.
Section 11. Vice Presidents. The Vice Presidents shall have
supervision over the operations of the Corporation within their respective
areas of special competence or responsibility and in accordance with policies,
procedures and practices in effect from time to time, subject, however, to the
control of the Board of Directors, any duly authorized committee of directors,
the Chairman of the Board of Directors, the President and any other officer to
whom they report. They shall, within such areas (in the order of their
designation, or in the absence of such designation, in the order of their
seniority based on title or, in the case of officers of equal title, in order
of their tenure), at the request or in the absence or disability of the
President, perform the duties and exercise the powers of such officer. They
may, with the Treasurer or the Secretary or an Assistant Treasurer or an
Assistant Secretary, sign certificates for stock of the Corporation. They may
enter into and execute in the name of the Corporation deeds, mortgages,
guarantees, bonds, contracts and other instruments, except in cases where the
making and execution thereof shall be expressly restricted or otherwise
delegated by these By-Laws or by the Board of Directors, a duly authorized
committee of directors, the Chairman of the Board of Directors, the President
or any other officer to whom they report, or shall be required by law otherwise
to be made or executed. In general, they shall have all authority incident to
their respective offices and shall have such other authority and perform such
other duties as may from time to time be assigned to them by the Board of
Directors, any duly authorized committee of directors, the Chairman of the
Board of Directors, the President or any other officer to whom they report.
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Section 12. Treasurer. The Treasurer shall, if required by
the Board of Directors, the Chairman of the Board of Directors, the President
or any other officer to whom the Treasurer reports, give a bond for the
faithful discharge of duties, in such sum and with such sureties as may be so
required. The Treasurer shall have custody of, and be responsible for, all
funds and securities of the Corporation; receive and give receipts for money
due and payable to the Corporation from any source whatsoever; deposit all such
money in the name of the Corporation in such banks, trust companies, or other
depositories as shall be selected in accordance with the provisions of Section
5 of Article VI of these By-Laws; against proper vouchers, cause such funds to
be disbursed by check or draft on the authorized depositories of the
Corporation signed in such manner as shall be determined in accordance with the
provisions of Section 4 of Article VI of these By-Laws and be responsible for
the accuracy of the amounts of all funds so disbursed; regularly enter or cause
to be entered in books to be kept by the Treasurer or under the Treasurer's
direction, full and adequate accounts of all money received and paid by the
Treasurer for the account of the Corporation; have the right to require, from
time to time, reports or statements giving such information as the Treasurer
may determine to be necessary or desirable with respect to any and all
financial transactions of the Corporation from the officers and agents
transacting the same; render to the Board of Directors, any duly authorized
committee of directors, the Chairman of the Board of Directors, the President
or any officer to whom the Treasurer reports, whenever they or any of them,
respectively, shall require the Treasurer so to do, an account of the financial
condition of the Corporation and of all transactions of the Treasurer; exhibit
at all reasonable times the books of accounts and other records provided for
herein to any of the directors of the Corporation; and, in general, have all
authority incident to the office of Treasurer and such other authority and
perform such other duties as from time to time may be assigned by the Board of
Directors, any duly authorized committee of directors, the Chairman of the
Board of Directors, the President or any other officer to whom the Treasurer
reports, and may sign with the Chairman of the Board of Directors, the
President or any Vice President, certificates for stock of the Corporation.
Section 13. Controller. The Controller shall be responsible
for preparing and maintaining reasonable and adequate books of account and
other accounting records of the assets, liabilities and transactions of the
Corporation in accordance with generally accepted accounting principles and
procedures, shall see that reasonable and adequate audits thereof are regularly
made and that reasonable and adequate systems of financial control are
maintained, shall examine and certify the financial accounts of the
Corporation, shall prepare and render such budgets and other financial reports
as the Board of Directors, the Chairman of the Board of Directors, the
President or any other officer to whom the Controller reports may require, and
shall, in general, have all authority incident to the office of Controller and
such other authority and perform such other duties as from time to time may be
assigned by the Board of Directors, any duly authorized committee of directors,
the Chairman of the Board of Directors, the President or any other officer to
whom the Controller reports.
Section 14. Secretary. The Secretary shall act as Secretary
of all meetings of the stockholders and of the Board of Directors of the
Corporation; shall keep the minutes thereof in the proper book or books to be
provided for that purpose; shall see that all notices required to be given by
the Corporation in connection with meetings of stockholders and of the Board of
Directors are duly
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given; may, with the Chairman of the Board of Directors, the President or any
Vice President, sign certificates for stock of the Corporation; shall be the
custodian of the seal of the Corporation and shall affix the seal or cause it
or a facsimile thereof to be affixed to all certificates for stock of the
Corporation and to all documents or instruments requiring the same, the
execution of which on behalf of the Corporation is duly authorized in
accordance with the provisions of these By-Laws; shall have charge of the stock
records and also of the other books, records and papers of the Corporation
relating to its organization and acts as a corporation, and shall see that the
reports, statements and other documents related thereto required by law are
properly kept and filed; and shall, in general, have all authority incident to
the office of Secretary and such other authority and perform such other duties
as from time to time may be assigned by the Board of Directors, any duly
authorized committee of directors, the Chairman of the Board of Directors, the
President or any other officer to whom the Secretary reports.
Section 15. Duties of Assistant Treasurers, Assistant
Secretaries and Other Subordinate Officers. The Assistant Treasurers shall,
respectively, if required by the Board of Directors, the Chairman of the Board
of Directors, the President or any other officer to whom they report, give
bonds for the faithful discharge of their duties in such sums and with such
sureties as may be so required. Assistant Treasurers and Assistant Secretaries
may, with the Chairman of the Board of Directors, the President or any Vice
President, sign certificates for stock of the Corporation. Subordinate officers
shall have all authority incident to their respective offices and such other
authority and perform such other duties as shall be assigned to them by the
Board of Directors, any duly authorized committee of directors, the Chairman of
the Board of Directors, the President or the officers to whom they report.
Section 16. Appointed Officers. The Chairman of the Board of
Directors and the President may appoint or cause to be appointed, in accordance
with the policies and procedures established by them, such Presidents, Vice
Presidents and other officers of the Divisions, Groups and Staffs of the
Corporation (each an "Appointed Officer") as each of them shall determine to be
necessary or desirable in furtherance of the business and affairs of such
Divisions, Groups and Staffs, may designate such Vice Presidents as Senior
Executive Vice Presidents, Executive Vice Presidents or Senior Vice Presidents,
and may use such other descriptive words as each of them may determine to
designate the seniority or areas of special competence or responsibility of the
Appointed Officers appointed in accordance with this Section 15. Appointed
Officers appointed in accordance with this Section 15 shall not be deemed to be
officers as elsewhere referred to in this Article V or in Article X hereof but
as between themselves and the Corporation shall have such authority and perform
such duties in the management and operations of the Divisions, Groups and
Staffs of the Corporation of which they are appointed officers as the officer
appointing them and the persons to whom they report may from time to time
determine. Such Appointed Officers shall have the authority as between
themselves and third parties to bind the Corporation solely to the extent of
their apparent authority based upon their titles and solely in relation to the
business affairs of the Divisions, Groups and Staffs of which they are
appointed officers.
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ARTICLE VI
CONTRACTS, VOTING OF STOCK HELD,
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
-----------------------------------
Section 1. Execution of Contracts. The Board of Directors or
any duly authorized committee of directors, except as by these By-Laws
otherwise require, may authorize any officer other than or in addition to the
officers authorized by Article V of these By-Laws, including Appointed
Officers, and any employee or agent or agents, in the name and on behalf of the
Corporation, to enter into and execute any deed, mortgage, bond, guarantee,
contract or other instrument, and any such authority may be general or may be
confined to specific instances or otherwise limited.
Section 2. Loans and Loan Guarantees. Any officer, employee
or agent of the Corporation thereunder authorized by the Board of Directors or
by any duly authorized committee of directors may effect in the name and on
behalf of the Corporation, loans or advances from, or guarantees of loans or
advances to, any bank, trust company or other institution or any firm,
corporation or individual, and for such loans and advances or guarantees may
make, execute and deliver promissory notes bonds or other certificates or
evidences of indebtedness or guaranty of the Corporation, and may pledge or
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans, advances or guarantees. Such authority conferred
by the Board of Directors or any duly authorized committee of directors may be
general or may be confined to specific instances or otherwise limited.
Section 3. Voting of Stock Held. The Chairman of the Board of
Directors and the President and, unless otherwise provided by resolution of the
Board of Directors or directed by the Chairman of the Board of Directors or the
President, the Secretary may from time to time personally or by an attorney or
attorneys or agent or agents of the Corporation, in the name and on behalf of
the Corporation, cast the votes which the Corporation may be entitled to cast
as a stockholder or otherwise in any other corporation, any of the stock or
securities of which may be held by the Corporation, at meetings of the holders
of the stock or other securities of such other corporations, or consent in
writing to any action by any such other corporation, and may instruct any
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed on behalf of the
Corporation and under its corporate seal, or otherwise, such written proxies,
consents, waivers or other instruments as the Secretary may deem necessary or
proper in the premises; or may attend any meeting of the holders of stock or
other securities of any such other corporation and thereat vote or exercise any
or all other powers of the Corporation as the holder of such stock or other
securities of such other corporation.
Section 4. Checks, Drafts, etc. All checks, drafts and other
orders for payment of money out of the funds of the Corporation and all notes
and other evidences of indebtedness of the Corporation shall be signed on
behalf of the Corporation by the Treasurer or an Assistant Treasurer or by any
other officer, employee or agent of the Corporation to whom such power may from
time to
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time be delegated by the Board of Directors or any duly authorized committee of
directors or by any officer, employee or agent of the Corporation to whom the
power of delegation may from time to time be granted by the Board of Directors
or any duly authorized committee of directors.
Section 5. Deposits. The funds of the Corporation not
otherwise employed shall be deposited from time to time to the order of the
Corporation in such banks, trust companies or other depositories as the Board
of Directors or any duly authorized committee of directors may from time to
time select, or as may be selected by any officer, employee or agent of the
Corporation to whom such power may from time to time be delegated by these
By-Laws, the Board of Directors or any duly authorized committee of directors.
ARTICLE VII
STOCK AND DIVIDENDS
Section 1. Form of Certificates. (a) Every holder of stock in
the Corporation shall be entitled to have a certificate signed, in the name of
the Corporation (i) by the Chairman of the Board of Directors, the President or
one of the Vice Presidents and (ii) by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation.
(b) If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise required by Section 202 of the DGCL, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Signatures. Any or all signatures on the
certificate may be a facsimile. In case an officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, unless otherwise ordered by the Board of Directors, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates.
The Board of Directors may direct a new certificate to be issued in place of
any certificate theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed, upon the making of an affidavit or such other proof
satisfactory to the Board of Directors of that fact by the person claiming the
certificate of
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stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation and its transfer agents and registrars
with respect to the certificate alleged to have been lost, stolen or destroyed
or the issuance of such new certificate.
Section 4. Transfers. Except as otherwise prescribed by law
or the Certificate of Incorporation, stock of the Corporation shall be
transferable in the manner prescribed in these By-Laws. Transfers of stock
shall be made on the books of the Corporation only by the person named in the
certificate or by such person's duly authorized attorney appointed by a power
of attorney duly executed and filed with the Secretary of the Corporation or a
transfer agent of the Corporation, and upon surrender of the certificate or
certificates for such stock properly endorsed for transfer and payment of all
necessary transfer taxes; provided, however, that such surrender and
endorsement or payment of taxes shall not be required in any case in which the
officers of the Corporation shall determine to waive such requirement. Every
certificate exchanged, returned or surrendered to the Corporation shall be
marked "Cancelled," with the date of cancellation, by the Secretary or an
Assistant Secretary of the Corporation or the transfer agent thereof. No
transfer of stock shall be valid as against the Corporation, its stockholders
or creditors for any purpose until it shall have been entered in the stock
records of the Corporation by an entry showing from and to whom transferred.
Section 5. Transfer and Registry Agents. The Corporation may
from time to time maintain one or more transfer offices or agencies and
registry offices or agencies at such place or places as may be determined from
time to time by the Board of Directors.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise required by law.
Section 7. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the
Corporation's capital stock. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for purchasing
any of the shares of capital stock, warrants, rights, options, bonds,
debentures, notes, scrip or other securities or evidences of indebtedness of
the Corporation, or for equalizing dividends, or for repairing
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or maintaining any property of the Corporation, or for any proper purpose, and
the Board of Directors may modify or abolish any such reserve.
Section 8. Limitations on Transfer. A written restriction on
the transfer or registration of transfer of a security of the Corporation, if
permitted by Section 202 of the DGCL and noted conspicuously on the certificate
representing the security or, in the case of uncertificated shares, contained
in the notice sent pursuant to Section 151(f) of the DGCL, may be enforced
against the holder of the restricted security or any successor or transferee of
the holder including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing the security
or, in the case of uncertificated shares, contained in the notice sent pursuant
to Section 151(f) of the DGCL, a restriction, even though permitted by Section
202 of the DGCL, is ineffective except against a person with actual knowledge
of the restriction. A restriction on the transfer or registration of transfer
of securities of the Corporation may be imposed either by the Certificate of
Incorporation or by these By-laws or by an agreement among any number of
security holders or among such holders and the Corporation. No restriction so
imposed shall be binding with respect to securities issued prior to the
adoption of the restriction unless the holders of the securities are parties to
an agreement or voted in favor of the restriction.
ARTICLE VIII
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by courier service, facsimile transmission, telegram,
telex or cable.
Section 2. Waivers of Notice. (a) Whenever any notice is
required by law, the Certificate of Incorporation or these By-Laws, to be given
to any director, member of a committee or stockholder, a waiver thereof in
writing, signed, by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting, present by person or represented by proxy,
shall constitute a waiver of notice of such meeting, except where the person
attends the meeting for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
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(b) Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders, directors or members of
a committee of directors need be specified in any written waiver of notice
unless so required by law, the Certificate of Incorporation or these By-Laws.
ARTICLE IX
BOOKS
-----
Section 1. Books. The Corporation shall keep in accordance
with applicable law correct and adequate books and records of account and
minutes of proceedings of the stockholders, the Board of Directors and any
committees of the Board of Directors. The Corporation shall keep in accordance
with applicable law at the office designated in the Certificate of
Incorporation or at the office of the transfer agent or registrar of the
Corporation, a record containing the names and addresses of all stockholders,
the number and class of shares held by each and the dates when they
respectively became the owners of record thereof.
Section 2. Form of Books. Any books maintained by the
Corporation, including its stock ledger, books of account and minute books, may
be kept on, or be in the form of, electronic data storage, computer discs,
punch cards, magnetic tape, photographs, microphotographs or any other
information storage device, provided that the records so kept can be converted
into clearly legible written form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled to
inspect the same.
ARTICLE X
INDEMNIFICATION
---------------
Section 1 . Power to Indemnify in Actions, Suits or
Proceedings other Than Those by or in the Right of the Corporation. Subject to
Section 3 of this Article X, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and,
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with respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that such person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or
Proceedings by or in the Right of the Corporation. Subject to Section 3 of this
Article X, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that such person is or was a director or officer of
the Corporation, or is or was a director or officer of the Corporation serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article X (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2, and in each case Section 11, of this Article X, as the
case may be. Such determination shall be made (i) by a majority vote of the
directors who were not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or
(iii) by the stockholders. To the extent, however, that a director or officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding described above, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article X, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
such person's conduct was unlawful, if such person's action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an
independent certified public accountant or by an appraiser or other expert
selected
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with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 4 shall mean any other corporation
or any partnership, joint venture, trust, employee benefit plan or other entity
or enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2, and in each case Section 11,
of this Article X, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article X,
and notwithstanding the absence of any determination thereunder, any director
or officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2, and in each case Section 11, of this Article X. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standards of conduct set forth in
Sections 1 or 2, and in each case Section 11, of this Article X, as the case
may be. Neither a contrary determination in the specific case under Section 3
of this Article X nor the absence of any determination thereunder shall be a
defense to such application or create a presumption that the director or
officer seeking indemnification has not met any applicable standard of conduct.
Notice of any application for indemnification pursuant to this Section 5 shall
be given to the Corporation promptly upon the filing of such application. If
successful, in whole or in part, the director or officer seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.
Section 6. Expenses Payable in Advance. Expenses (including
attorneys' fees) incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the Corporation as
authorized in this Article X.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article X shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article X shall be made to the
fullest extent permitted by law. The provisions of this Article X shall not be
deemed to preclude the indemnification of any person who is not specified in
Sections 1 or 2 of this Article X but whom the Corporation has the power or
obligation to indemnify under the provisions of the DGCL, or otherwise.
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Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against such
liability under the provisions of this Article X.
Section 9. Certain Definitions. For purposes of this Article
X, references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other entity or enterprise,
shall stand in the same position under the provisions of this Article X with
respect to the resulting or surviving corporation as such person would have
with respect to such constituent corporation if its separate existence had
continued. For purposes of this Article X, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article X. For purposes of
this Article X, the term "officers" shall not include "Appointed Officers" as
defined in Section 15 of Article V.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article X shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article X to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
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Section 12. Indemnification of Appointed Officers, Employees
and Agents. The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the
advancement of expenses to Appointed Officers, employees and agents of the
Corporation similar to those conferred in this Article X to directors and
officers of the Corporation.
ARTICLE XI
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment of By-Laws. These By-Laws may be
altered, amended or repealed, in whole or in part, or new By-Laws may be
adopted by the stockholders or by the Board of Directors; provided, however,
that notice of such alteration, amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting of stockholders or Board of Directors
as the case may be. All such amendments must be approved by either the
affirmative vote of the holders of a majority in total number of votes of the
outstanding capital stock entitled to vote thereon or by a majority of the
directors then in office.
Section 2. Entire Board of Directors. As used in this Article
XI and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would have if there were no
vacancies.
ARTICLE XII
GENERAL PROVISIONS
------------------
Section 1. Seal. The Board of Directors shall approve a
corporate seal which shall be in the form of a circle and shall bear the name
of the Corporation, the year of its incorporation and the word "Delaware." The
Seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be determined and may be changed by resolution of the Board of Directors,
and unless and until otherwise so determined, shall be the calendar year.
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EXHIBIT 10.7
THE COSMETIC CENTER EMPLOYEE RETIREMENT PLAN
Amended and Restated
Effective as of April 25, 1997
<PAGE>
TABLE OF CONTENTS PAGE
ARTICLE 1 Definitions 2
ARTICLE 2 Participation 16
ARTICLE 3 Basic and Matching Contributions 20
ARTICLE 4 Accounts and Designation of Investment Funds 25
ARTICLE 5 Vesting 34
ARTICLE 6 Normal Withdrawals During Employment 37
ARTICLE 7 Withdrawals for Hardship 40
ARTICLE 8 Distributions on Termination of Employment 43
ARTICLE 9 Payment of Benefits 45
ARTICLE 10 Beneficiary Designation 50
ARTICLE 11 Administration 53
ARTICLE 12 Trust Agreement 60
ARTICLE 13 Amendment or Merger 61
ARTICLE 14 Termination of the Plan 63
ARTICLE 15 Miscellaneous 65
ARTICLE 16 Leased Employees 71
ARTICLE 17 Limitation on Maximum Benefits and Contributions 73
Under All Plans
ARTICLE 18 "Top Heavy" Provisions, Etc. 75
ARTICLE 19 Termination, etc. Prior to Amendment 81
ARTICLE 20 401(k) Deferral and 401(m) Contributions Tests 82
ARTICLE 21 Rollover Contributions 87
ARTICLE 22 Direct Rollover 89
SCHEDULE OF EMPLOYERS
<PAGE>
THE COSMETIC CENTER EMPLOYEE RETIREMENT PLAN
PREAMBLE
Effective January 1, 1978, a predecessor of The Cosmetic Center, Inc.,
a Delaware corporation, adopted the L.R.W. Profit Sharing Plan. Such Plan was
subsequently amended from time to time.
An amendment effective July 1, 1993 changed the name of the Plan to
The Cosmetic Center Employee Retirement Plan and the Plan sponsor was changed,
effective July 1, 1993, to The Cosmetic Center, Inc. (the "Company").
The Plan is a profit-sharing plan which contains a cash or deferred
arrangement described in section 401(k) of the Internal Revenue Code of 1986,
as amended.
Effective April 25, 1997, The Plan is hereby amended and restated to
take into account the purchase of a majority interest in the Cosmetic Center,
Inc. by Revlon, Inc., a Delaware corporation, and the merger of Prestige
Fragrance, Inc. into The Cosmetic Center, Inc.
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ARTICLE 1
Definitions
When used in the Plan, the following terms shall have the designated
meanings, unless a different meaning is clearly required by the context:
1.1 Accounts. A Participant's Basic Account, Pre-IPO Matching
Contributions Account, Post-IPO Matching Contributions Account, Old Profit
Share Account, New Profit Share Account, Company Matching Account, Company
Account or Rollover Account or the aggregate thereof as the context may
indicate.
1.2 Affiliate. Any business entity, other than an Employer, whether or
not incorporated, which at the time of reference controls, is controlled by or
is under common control with an Employer (within the meaning of section 414(b)
or 414(c) of the Code or, effective January 1, 1980, section 414(m)(2) of the
Code, or as effective December 31, 1983, section 414(m)(5) of the Code, or as
effective July 18, 1984, section 414(o) of the C ode, and, for purposes of
applying Article 17 of the Plan, section 415(h) of the Code). In accordance
with rules which the Administrative Committee may adopt from time to time, the
term "Affiliate" may also include any joint venture or other business
organization with which the Company is affiliated, or in which it has an
interest or with which it has business dealings, either for all purposes of the
Plan or for such limited purposes as the Administrative Committee may specify
in such rules, and subject to such conditions and limitations (if any) as the
Committee may specify in such rules.
1.3 Appropriate Form. A form prescribed by the Committee for a
particular purpose specified in the Plan.
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1.4 Basic Account. The aggregate of a Participant's Employee 401(k)
Account and his Post-Tax Contributions Account.
1.5 Basic Contributions. Contributions made by an Employer or
Participant in accordance with the provisions of Section 3.1 and/or 3.2,
respectively.
1.6 Beneficiary. The person or persons entitled to benefits under the
Plan following a Participant's death, pursuant to Article 10.
1.7 Break in Service. A Severance Period of not less than twelve (12)
consecutive months. In the case of an individual who is absent from work for
maternity or paternity reasons (whether or not the employment relation-ship has
terminated) (or for any other reason which entitles such individual to a FMLA
leave (as described below)), the first twelve (12) consecutive months of such
absence (or such lesser period of the FMLA leave) shall not be included in a
Break in Service, but only to the extent required by applicable law. For
purposes of this Section 1.7, an absence from work for maternity or paternity
reasons means a cessation of active employment after 1984 which commences and
continues (a) by reason of the pregnancy of the individual, (b) by reason of
the birth of a child of the individual, (c) by reason of the placement of a
child with the individual in connection with the adoption of such child by such
individual, or (d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
For purposes of this Section 1.7, an absence from work for a
FMLA leave means a cessation of active employment (and continuous absence from
such employment) commencing on or after August 5, 1993, for a leave of absence
for one or more of the following reasons: (a) because of the birth of a son or
daughter of the individual and in order to care for such son or
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daughter; (b) because of the placement of a son or daughter with the individual
for adoption or foster care; (c) in order to care for the spouse, or a son,
daughter, or parent of the individual, if such spouse, son, daughter, or parent
has a serious health condition, or (d) because of a serious health condition
that makes the individual unable to perform the functions of the position of
such individual, in each case (a) through (d) which entitles the individual to
be granted a leave of absence under the provisions of the Family and Medical
Leave Act of 1993, as it may be amended from time to time, and the regulations
promulgated thereunder.
Nothing in this Section 1.7 shall be construed to grant an employee
any right to a leave of absence for any reason.
1.8 Board of Directors. The Board of Directors of the Company, or any
duly authorized committee thereof
1.9 Committee. The Administrative Committee or the Investment
Committee, as the context may indicate, provided for in Article 11.
1.10 Company Account. A separate sub-account maintained for each
Participant which reflects his share of the Trust and attributable to Company
Contributions made on his behalf.
1.11 Company Contributions. Employer contributions not to exceed 6% of
a Participant's Compensation. Such contributions (if any) shall be made in the
Employer's sole discretion.
1.12 Company Matching Contributions. Matching Contributions which are
attributable to payroll periods ending on or after April 25, 1997.
1.13 Company Stock. Shares of common stock of the Company.
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1.14 Company Stock Matching Contributions Account. A separate
sub-account maintained for each Participant which reflects his share of the
Trust Fund attributable to Matching Contributions made in the form of Company
Stock.
1.15 Compensation. As used herein, the term Compensation shall mean;
1.15.1 The amount reported by an Employer on an Employee's IRS Form
W-2 for a Plan Year for services performed as an Eligible Employee,
determined before giving effect to (a) any Participation Agreement under
this Plan or (b) any similar agreement under any plan described in section
125 of the Code, but not including: (i) deferred compensation,
contributions under the Plan or any other program of fringe benefits, or
other additional remuneration; (ii) any remuneration for services
performed while an Employee is employed primarily to render services
within the jurisdiction of a union and with respect to which compensation,
hours of work or conditions of employment are determined by collective
bargaining with such union; provided, however, that any such remuneration
not otherwise excluded from Compensation by the provisions of this Section
1.15.1 shall be treated as Compensation if, and to the extent, that the
applicable collective bargaining agreement expressly so provides.
1.15.2 For purposes of Section 20.4, Compensation shall include
Pre-Tax Contributions.
1.15.3 In no event shall the Plan take into account Compensation in
excess of $200,000 for Plan Years beginning after 1988, or in excess of
$150,000 for Plan Years beginning after 1993, each as adjusted under
sections 401(a)(17) and 415(d) of the Code, for any Employee in any Plan
Year. For purposes of applying the $200,000 and $150,000
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limitations, the Compensation of certain Employees shall include the
Compensation of any family member, as prescribed by section 414(q)(6),
except that in applying such rules, the term "family" shall include only
the Spouse and any lineal descendants of an Employee who have not attained
age 19 before the close of the Plan Year.
1.16 Disability. Entitlement to disability benefits under the Federal
Social Security Act, provided satisfactory information of such entitlement is
provided to the Administrative Committee.
1.17 Early Retirement Age. The first day of any calendar month after a
Participant's 55th birthday, provided the Participant has completed at least
five (5) years of Service with the Employer.
1.18 Eligible Employee. Any Employee of an Employer who meets all of
the following requirements:
1.18.1 He is at least twenty-one (21) years of age;
1.18.2 He is employed in a division, subdivision, plant,
location or other identifiable group of Employees to which his
Employer has extended the Plan; provided, however, that in
determining the divisions, subdivisions, plants, locations or groups
of Employees to which the Plan shall be extended, the Employer shall
not discriminate in favor of Highly Compensated Employees so as to
prevent the Plan from qualifying under section 401 (a) of the Code.
1.18.3 If: (i) he is employed primarily to render services
within the jurisdiction of a union, (ii) his compensation, hours of
work or conditions of employment are determined by collective
bargaining with such union, and (iii) an applicable collective
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bargaining agreement expressly provides that he shall be eligible to
participate in the Plan, then he shall be entitled to participate in
the Plan only to the extent and on the terms and conditions specified
in such collective bargaining agreement; and
1.18.4 He is not a nonresident alien.
1.19 Employee. An employee of an Employer or Affiliate.
1.20 Employer 401(k) Account. A sub-account of a Participant's Basic
Account which reflects his share of the Trust Fund attributable to his Pre-Tax
Contributions.
1.21 Employer. The Company and its subsidiaries and affiliates listed
on the Schedule attached hereto and any other corporation, partnership or other
entity which has adopted the Plan with the approval of the Board of Directors.
1.22 Employer Contributions. Pre-Tax Contributions and Matching
Contributions.
1.23 Employment Date. The first day on which an Employee is credited
with an Hour of Service with an Employer or an Affiliate.
1.24 Entry Date. Each January 1, April 1, July 1, and October 1; and
any other date established as an "Entry Date" by the Administrative Committee
with respect to Eligible Employees generally, or such specified group of
Eligible Employees as the Administrative Committee may prescribe in its
discretion.
1.25 ERISA. The Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.26 Highly Compensated Employee. A "highly compensated employee" as
the term is defined in section 414(q) of the Code and the Treasury Regulations
thereunder.
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1.27 Hour of Service. Subject to the equivalency rules of Section
2.1.4, an Employee is credited with an Hour of Service pursuant to the
following rules, determined without duplication:
(i) Each hour for which an Employee is paid, or entitled to
payment, by an Employer, for the performance of duties for the
Employer;
(ii) Each hour for which an Employee is paid, or entitled
to payment, by an Employer on account of a period of time during
which no duties are performed due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military
duty or leave of absence. No more than 501 Hours of Service will
be credited under this paragraph for any single continuous
period (whether or not such period occurs in a single
computation period). Hours of Service under this paragraph will
be calculated and credited pursuant to section 2530.200b-2 of
the Department of Labor Regulations which are incorporated
herein by this reference;
(iii) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by an
Employer. These hours will be credited to the Employee for the
Year of Service or Plan Years to which the award or agreement
pertains rather than the Year of Service or Plan Year in which
the award, agreement or payment is made;
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(iv) In addition to service with an Affiliate, Hours of
Service will also be credited for any individual considered an
employee for purposes of this Plan under section 414(n) of the
Code;
1.28 Investment Fund. A portion of the Trust Fund which is separately
invested, as provided in Section 4.5.
1.29 Matched Contributions. (a) For periods prior to January 1, 1984,
"Employee Contributions" (as that term was defined in the Plan immediately
prior to January 1, 1984) and (b) for periods on or after January 1, 1984, the
aggregate Pre-Tax Contributions and Post-Tax Contributions to a Participant's
Basic Account for any month not in excess of six percent (6%) of the
Participant's Compensation for that month.
1.30 Matching Contributions. (a) "Employer Contributions" (as that
term was defined in the Plan immediately prior to January 1, 1984) made under
the Plan for periods prior to January 1, 1984 and (b) contributions made by an
Employer under Section 3.6 of this Plan for months ending after December 31,
1983, based on the amount of Matched Contributions made for or by the
Participant for any such month.
1.31 Matching Contributions Account. A separate account maintained for
each Participant which reflects his share of the Trust Fund attributable to
Matching Contributions. The Matching Contributions Account shall consist of
three sub-accounts: the Pre-IPO Matching Contributions Account, the Post-IPO
Matching Contributions Account and the Company Stock Mastching Contributions
Account.
1.32 '96 IPO. The date of the 1996 initial public offering of the
Class A common stock of Revlon, Inc., which for purposes of this Plan shall be
deemed to be March 1, 1996.
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1.33 New Profit Share Account. Employer Contributions made on behalf
of a Participant for Plan Years beginning after December 31, 1992.
1.34 Normal Retirement Age. A Participant's sixty-fifth (65th)
birthday.
1.35 Old Profit Share Account. Employer contributions made on behalf
of a Participant for Plan Years beginning prior to January 1, 1993.
1.36 Participant. Any present Eligible Employee who has become a
Participant in this Plan in accordance with Article 2, and any former Eligible
Employee who (or whose Beneficiary) has an undistributed Account under the
Plan.
1.37 Participation Agreement. An agreement by an Eligible Employee in
an Appropriate Form (a) to reduce his cash base pay in order to share in
Pre-Tax Contributions under the Plan, as provided in Section 3.1, and/or (b) to
make Post-Tax Contributions to the Plan, in accordance with the provisions of
Section 3.2.
1.38 Plan. The Cosmetic Center Employee Retirement Plan.
1.39 Plan Year. January 1 through December 31.
1.40 Post-IPO Matching Contributions. Matching Contributions which are
attributable to payroll periods ending on or after the first day of the
calendar month coincident with or next following the date of the '96 IPO.
1.41 Post-IPO Matching Contributions Account. A separate sub-account
maintained for each Participant which reflects his share of the Trust Fund
attributable to Post-IPO Matching Contributions made on behalf of such
Participant.
1.42 Post-Tax Contributions. Basic Contributions made by a Participant
in accordance with the, provisions of Section 3.2.
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1.43 Post-Tax Contributions Account. A subaccount of a Participant's
Basic Account which reflects his share of the Trust Fund attributable to his
(a) Post-Tax Contributions and (b) Employee Contributions (as that term was
defined in the Plan immediately prior to January 1, 1984) for periods prior to
1984.
1.44 Pre-IPO Matching Contributions. Matching Contributions which are
attributable to payroll periods ending before the first day of the calendar
month coincident with or next following the date of the '96 IPO.
1.45 Pre-IPO Matching Contributions Account. A separate sub-account
maintained for each Participant which reflects his share of the Trust Fund
attributable to Pre-IPO Matching Contributions made on behalf of such
Participant.
1.46 Pre-Tax Contributions. Basic Contributions made by an Employer
for the benefit of a Participant in accordance with the provisions of Section
3.1.
1.47 Reemployment Date. The date on which an employee first completes
an Hour of Service after a Termination of Employment.
1.48 Revlon Stock. The Class A common stock of Revlon, Inc., par value
$.01 per share.
1.49 Rollover Account. A separate account maintained for a Participant
which reflects his share of the Trust Fund attributable to his prior
participation in another plan from which assets were transferred to this Plan.
1.50 Savings Fund. The Investment Fund described in Section 4.5.1.
1.51 Service. Subject to Sections 2.2 and 5.3, the aggregate of the
following:
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1.51.1 Each period from an employee's Employment Date (or
Reemployment Date) to his next Termination of Employment, and
1.51.2 If any employee shall perform an Hour of Service within
twelve (12) months of his Termination of Employment, the period from
such Termination of Employment to such Hour of Service. Service shall
be measured in whole years and fractions of a year in months. Any
fraction of a month remaining shall be rounded up to the nearest
whole month.
1.52 Severance Period. Each period from an employee's Termination of
Employment to his next Reemployment Date.
1.53 Spouse. A Participant's legal spouse. A former spouse will be
treated as the Participant's spouse to the extent provided in a qualified
domestic relations order (as defined in section 414(p) of the Code).
1.54 Spousal Consent. A written consent, on the Appropriate Form, by a
Participant's Spouse to an election, Beneficiary designation or similar action
by the Participant which meets the requirements of section 417(a)(2) of the
Code. If the Committee is satisfied that such Spousal Consent cannot be
obtained because the Spouse cannot be located, or because of other
circumstances which may be permitted under applicable law, Spousal Consent
shall be deemed to have been given. Any consent or deemed consent with respect
to a Spouse shall be effective only with respect to such Spouse. A consent that
permits designations by the Participant without any requirement of further
consent by such Spouse must acknowledge that the Spouse has the right to limit
consent to a specific beneficiary, and a specific form of benefit where
applicable, and that the Spouse voluntarily elects to relinquish either or both
of such rights. A
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revocation of a prior waiver may be made by a Participant without the consent
of the Spouse at any time before the commencement of benefits.
1.55 Supplemental Investment Fund. The Investment Fund or Funds
described in Section 4.5.2.
1.56 Taxable Year. A taxable year of an Employer (or its predecessor)
applicable for Federal income tax purposes.
1.57 Termination of Employment. An Employee's ceasing to be employed
by an Employer or Affiliate for any reason (including, without limitation,
death, disability, quit, discharge, layoff, retirement, resignation or entrance
into military service); provided, however, that:
1.57.1 If an Employee is transferred to employment with another
Employer or Affiliate or a series of Employers or Affiliates, he
shall not be deemed to have terminated employment for purposes of the
Plan until such time as he is employed neither by any Employer nor by
any Affiliate.
1.57.2 If an Employee leaves employment with an Employer or
Affiliate to enter into military service with the Armed Forces of the
United States, he shall not be deemed to have terminated employment
if (a) the Employee has reemployment rights under applicable law
throughout the entire period of such service, (b) upon discharge from
such service he retains such reemployment rights (determined after
taking into account the terms of such discharge), and (c) he returns
to the employ of an Employer or Affiliate within ninety (90) days
after the date of his completion of such service (or within such
longer period during which his reemployment rights are protected by
law). If the
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requirements of this Section 1.57.2 are not met he shall be deemed to
have terminated employment as of his last day of employment prior to
the date of entry into such service.
References in the Plan to an individual's Termination of Employment,
termination or being terminated shall have the meaning ascribed to Termination
of Employment as provided in this Section 1.57.2. For purposes of applying the
provisions of Section 9.2.4, a Participant shall not be deemed to have
terminated employment unless he has incurred a "separation from service" within
the meaning of section 401(k) of the Code.
1.58 Trust Agreement. The trust agreement or agreements referred to in
Article 12.
1.59 Trust Fund. All of the assets at any time held under the Plan by
the Trustee as provided for in Article 12.
1.60 Trustee. The corporation or corporations, individual,
individuals, or combination thereof which may at any time be acting as trustee
or trustees under the Trust Agreement.
1.61 Unmatched Contributions. With respect to any monthly Pre-Tax
Contributions made by an Employer for the benefit of a Participant and/or
Post-Tax Contributions made by a Participant, which when aggregated are in
excess of six percent (6%) of the Participants' Compensation for such month.
1.62 Valuation Date. The last day of a calendar month, or any other
date or dates so designated by the Administrative Committee in a uniform and
nondiscriminatory manner. Elective July 1, 1993, the plan administration was
simplified and enhanced by allowing investment in Investment Funds comprised of
publicly traded mutual funds that allow for daily valuations and withdrawals.
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1.63 Value. Except as otherwise expressly set forth in the Plan, as of
any date, the value of a Participant's interest in any Investment Fund shall be
determined on a reasonable and consistent basis by the Administrative Committee
or its agent designated for the determination of the value of such interest.
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ARTICLE 2
Participation
2.1 Participation Rules Effective April 25, 1997.
2.1.1 Continuing Participation. An individual who was a
Participant in the Plan on April 24, 1997 shall continue as a
Participant in the Plan if he still has an undistributed Account as
of such date. In addition, any individual whose employment with
Prestige Fragrances and Cosmetics, Inc. who was transferred to the
Employer effective April 25, 1997 and who was either a Participant or
eligible to participate in the Revlon Savings, Investment and Profit
Sharing Plan on April 24, 1997 shall be eligible to participate in
the Plan as of April 25, 1997.
2.1.2 Participation Based on Eligible Employment After April 24,
1997. An Employee who was not a Participant in the Plan on April 24,
1997 may elect to become a Participant on any Entry Date on which he
meets both of the following requirements: (i) he has completed at
least one Year of Service, and (ii) he is an Eligible Employee. For
these purposes, an Eligible Employee shall be deemed to have
completed a Year of Service if he is credited with 1,000 Hours of
Service during the twelve month period starting on his Employment
Date or during any Plan Year which begins after his Employment Date.
2.1.3 Determination of Hours of Service. Hours of Service shall
be determined in accordance with Section 1.21; provided, however,
that in determining the Hours of Service to be credited to an
Employee an Employer may either actually count the
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Hours of Service to be credited to each of its Employees or such
Employer may apply the following equivalency method:
2.1.3.1 Salaried Employees. Any salaried Employee who would
be required to be credited with at least one Hour of Service in
any month shall be credited with one-hundred ninety (190) hours
for such month.
2.1.3.2 Hourly Paid Employees. In the case of hourly paid
Employees the Employer shall determine the number of Hours of
Service by dividing the Employee's total earnings for the
applicable 12-month computation period by his lowest hourly rate
of pay during the relevant computation period, provided,
however, that for any such Employee for whom the method
specified in this subsection 2.1.3.2 is applied eight hundred
seventy (870) Hours of Service shall be deemed to be the
equivalent of one thousand (1,000) Hours of Service.
2.2 Re-Employment. If a Participant or other Employee who has
terminated employment shall be rehired as an Eligible Employee, he shall be
eligible to commence or resume participation under the Plan on the later of (a)
the date of rehire or (b) the first Entry Date on which he could have become a
Participant if his prior employment by the Employer or Affiliate had been in a
position eligible for participation in the Plan.
2.3 Transfer to Eligible Employment. If an Employee transfers to
employment as an Eligible Employee from employment with an Affiliate or from
employment with an Employer other than as an Eligible Employee, he shall become
a Participant on the later of (a) the date of transfer or (b) the first Entry
Date on which he could have become a Participant if his prior
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employment by the Employer or Affiliate had been in a position eligible for
participation in the Plan.
2.4 Completion of Participation Agreement. Except as otherwise
provided herein, in order to receive the benefit of Pre-Tax Contributions or to
make Post-Tax Contributions a Participant must complete and return the
Participation Agreement to the Administrative Committee not later than the
fifteenth (15th) day of the month prior to such date (or within such other
period as the Administrative Committee may prescribe). If a rehired Eligible
Employee, or an Eligible Employee transferred from ineligible employment,
commences or resumes participation on his date of rehire (or date of transfer
to employment as an Eligible Employee) pursuant to clause (a) of Section 2.2
(or of Section 2.3), he shall become eligible to share in or make contributions
under Article 3 effective as of the first day of the first month following his
rehire or transfer, upon execution and filing of an appropriate Participation
Agreement at least fifteen (15) days prior to such "first day" (or within such
other period as the Administrative Committee may prescribe). If a Participant
fails to complete and return a Participation Agreement within the required time
set forth above, he may begin to share in or make contributions under Section
3.1 of Article 3 as of any subsequent Entry Date as of which he is an Eligible
Employee, by completing and returning such a Participation Agreement to the
Administrative Committee not later than the fifteenth (15th) day of the month
prior to such Entry Date (or within such other period as the Administrative
Committee may prescribe).
2.5 Suspension on Transfer to Ineligible Employment. If a Participant
ceases to be an Eligible Employee but continues in the employ of an Employer or
Affiliate, his Participation Agreement shall be suspended. No Basic or Company
Contributions (if any) shall be made for a
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Participant with respect to the period of such suspension. If and when the
suspended Participant again becomes an Eligible Employee, he may execute a new
Participation Agreement, to be effective as provided in Section 2.4.
2.6 Transfers Between Employers. If a Participant transfers from
employment as an Eligible Employee with one Employer to employment as an
Eligible Employee with another Employer, his Participation Agreement shall be
deemed to apply to his second Employer in the same manner as it applied to the
prior Employer.
2.7 Right of Discharge Reserved. The establishment of the Plan shall
not be construed to confer upon a Participant any legal right to be retained in
the employ of any Employer or Affiliate, or to give any Employee, Spouse,
Beneficiary or estate of any Employee, or any other person any right to any
share of the Trust Fund or payment whatsoever, except to the extent of the
benefits provided for hereunder. All Employees shall remain subject to
discharge to the same extent as if the Plan had never been adopted and may be
treated without regard to the effect such treatment might have upon them under
the Plan. Nothing in the Plan shall be deemed to be an agreement,
consideration, inducement or condition of employment.
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ARTICLE 3
Basic and Matching Contributions
Basic Contributions and Matching Contributions shall be made in
accordance with the following provisions of this Article 3:
3.1 Pre-Tax Contributions. In order to share in contributions under
this Section 3.1, a Participant must complete the Participation Agreement
referred to in Section 1.27 and elect to reduce the cash Compensation otherwise
payable to him in any month by a specified dollar amount (not to exceed 16% of
Compensation) or by any whole or fractional percentage not to exceed 16%,
whichever he shall specify in such Participation Agreement; provided, however,
that for any Plan Year the Administrative Committee may, for any subsequent
Plan Year, establish a maximum percentage of 16% or some lesser percentage, but
not less than 6%; and provided, further, that the Administrative Committee may
allow all Participants, or one or more selected groups of Participants, to
elect to reduce the cash Compensation otherwise payable to each of them by a
specified dollar amount rather than a specified percentage of Compensation. No
Participant shall be permitted to make Pre-Tax contributions in any taxable
year in excess of limitations provided under section 402(g) of the Code, as
adjusted under section 415(d) of the Code. The Participant's Employer shall
contribute to the Plan, during or as soon as reasonably practicable after the
close of each month, an amount equal to the elected reduction in the
Participant's cash Compensation for that month as Pre-Tax Contributions to the
Employee 401(k) Account of his Basic Account.
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3.2 Post-Tax Contributions. In lieu of or in addition to any reduction
in cash Compensation agreed to in accordance with the provisions of Section
3.1, a Participant may elect in his Participation Agreement to contribute 1%,
2%, 3%, 4%, 5% or 6% of his Compensation for any month to the Plan; provided,
however, for any Plan Year the Administrative Committee may establish a maximum
percentage of up to 16% or some lesser percentage but not less than 6%; and
provided, further, that the Administrative Committee may allow all
Participants, or one or more selected groups of Participants, to elect to
reduce the cash Compensation otherwise payable to each of them by a specified
dollar amount rather than a specified percentage of Compensation.
3.3 Limit on Aggregate Pre-Tax And Post-Tax Contributions. In no case
shall the total amount of Pre-Tax Contributions made pursuant to Section 3.1
and Post-Tax Contributions made pursuant to Section 3.2 exceed an amount, to be
determined by the Administrative Committee but not more than 16% of the
Participant's Compensation for that month.
3.4 Voluntary Suspension. A Participant may voluntarily suspend either
his Pre-Tax Contributions, Post-Tax Contributions or both, effective as of the
first day of the next scheduled payroll period for such Participant, by filing
the Appropriate Form with the Administrative Committee at least fifteen (15)
days prior to the first day of that month (or within such other period as the
Administrative Committee may prescribe). No Basic or Matching Contributions
will be made for or by a Participant with respect to any period for which his
Participation Agreement has been so suspended. An Eligible Employee may
reinstate his Participation Agreement as of any Entry Date after the month in
which his suspension of such agreement became effective, by filing the
Appropriate Form with the Administrative Committee at least fifteen (15) days
before such Entry Date (or within such other period as the Committee may
prescribe).
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3.5 Change in Contribution Rate. A Participant who has a Participation
Agreement in effect may increase or decrease the amount of his Pre-Tax and/or
Post-Tax Contributions within the limits specified in Sections 3.1, 3.2 and
3.3, effective as of any Entry Date by filing the Appropriate Form with the
Administrative Committee not later than the fifteenth (l5th) day of the month
prior to such Entry Date (or within such other period as the Administrative
Committee may prescribe).
3.6 Matching Contributions -- Amount. Each Participant's Employer may
make a contribution to the Plan for each calendar month, on behalf of each
Participant who has a Participation Agreement in effect for such month, in cash
or Company Stock. The amount shall be as determined by the Company, less an
allocable portion of any amount forfeited pursuant to Section 5.4 then to be
applied to reduce the Employer's contributions. If the contribution is in
shares of Company Stock the amount shall have a fair market value as determined
by the Company (determined as of the last day of such month). Shares of Company
Stock contributed to the Plan may be treasury shares, authorized but unissued
shares, or any combination of the foregoing. The Company is authorized to
contribute shares of Company Stock to the Plan on behalf of any other Employer,
and to the extent that the Company makes any such contribution, such Employer
shall reimburse the Company for the value thereof.
3.7 Matching Contributions -- Payment. The contributions required for
any month under Section 5.3 shall be paid to the Trustee after the first day of
such month, but in no case later than as soon as reasonably practicable after
the close of such month.
3.8 Limit on Contributions. Notwithstanding any other provision in
this Plan to the contrary, all contributions for any Plan Year on behalf of a
Participant who is a Highly
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Compensated Employee shall be reduced if and to the extent necessary in order
that the requirements of Article 17 and Sections 20.2 and 20.6 are met.
3.9 Determination by Administrative Committee. If the Administrative
Committee shall conclude that a reduction in the Pre-Tax Contributions made for
any Participant is or may be necessary or advisable in order to comply with the
limitations of Section 3.8 for any Plan Year, the maximum percentage allowable
for Pre-Tax Contributions under Section 3.1 shall be reduced in accordance with
the direction of the Administrative Committee, and the Committee may, in its
sole discretion, take the following action:
3.9.1 The Committee may direct that the Participation Agreement
of each Participant affected by such determination be modified
accordingly, with respect to Pre-Tax Contributions not yet paid into
the Plan, so as to (i) reduce the elected percentage (or dollar
amount, if applicable) of payroll reduction and (ii) to
recharacterize the Participant's election in accordance with Section
3.1.
3.9.2 The Committee shall notify each affected Participant and
his Employer of any such reduction or recharacterization. Any such
reduction or recharacterization may apply either to all Participants,
to a relevant group of Participants or to individual Participants
determined by the Committee, whichever the Administrative Committee
shall determine in its sole discretion. If amounts are not paid into
the Plan as Pre-Tax Contributions or Post-Tax Contributions in
accordance with any determination pursuant to this Section 3.9, such
amounts shall instead be distributed to the affected Participant in
accordance with Article 20.
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3.10 Contributions May Not Exceed Amount Deductible. In no event shall
Employer Contributions under this Article 3 for any taxable year of an Employer
exceed the maximum amount (including amounts carried forward) deductible for
that taxable year under section 404(a)(3) of the Code. In the case of an
Employer that is a joint venture between two or more corporations or other
entities, the limitation under this Section 3.10 shall be determined by
reference to the applicable deductible limit of each corporation or other
entity which is entitled to deduct its distributable share of such
contributions for Federal income tax purposes.
3.11 Contributions Conditioned on Deductibility. Notwithstanding any
other provision of the Plan, each contribution by an Employer under this
Article 3 is conditioned on the deductibility of such contribution under
section 404 of the Code, and on the initial qualification of the Plan under
section 401(a) of the Code.
3.12 Adjustment of Contributions Based on Limit on Annual Additions.
Notwithstanding any of the foregoing provisions to the contrary, a Participant
may, at such time and in such manner as the Administrative Committee may
prescribe, suspend or change the amount of reduction in his cash Compensation
or the amount of his Post-Tax Contributions provided for under any applicable
Participation Agreement in order to avoid an allocation of contributions to his
Account which would violate the limitations of Article 17.
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ARTICLE 4
Accounts and Designation of Investment Funds
4.1 Basic Account. A Basic Account shall be maintained for each
Participant in which shall be entered to separate subaccounts: (a) the amount
of Pre-Tax Contributions made by his Employer as a result of his election to
reduce his cash Compensation as described in Section 3.1 and (b) the amount of
Post-Tax Contributions made by the Participant in accordance with the
provisions of Section 3.2.
4.2 Pre-IPO Matching Contributions Account. A Pre-IPO Matching
Contributions Account shall be maintained for each Participant in which shall
be entered the amount of Pre-IPO Matching Contributions made for his benefit
under Section 3 .6.
4.3 Post-IPO Matching Contributions Account. A Post-IPO Matching
Contributions Account shall be maintained for each Participant in which shall
be entered the amount of Post-IPO Matching Contributions made for his benefit
under Section 3.6.
4.4 Company Stock Matching Contributions Account. A Company Stock
Matching Contributions Account shall be maintained for each Participant in
which shall be entered the amount of Company Matching Contributions made for
his benefit under Section 3.6.
4.5 Investment Funds. The Investment Committee shall direct that the
Trust Fund be subdivided into three or more Investment Funds which shall be
separately invested, which shall include but need not be limited to the
following:
4.5.1 Savings Fund. A Savings Fund which shall be invested and
reinvested in interest-bearing and/or similar securities, which may
include bonds, short and
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medium term notes, or other obligations, certificates of deposit,
commercial paper, or part interests therein, obligations issued or
guaranteed as to interest and principal by the United States
Government or any instrumentality or agency thereof, a guaranteed
investment contract or contracts between the Trustee and an insurance
company or companies containing such terms and conditions with
respect to payment of principal and interest as shall be agreed upon
by the parties to such contract or contracts, and/or any common,
collective or commingled trust fund which is invested virtually
exclusively in property of the kind specified in this Section 4.5.1.
In the discretion of the Investment Committee, the Savings Fund shall
be subdivided into such two or more sub-funds as the Investment
Committee shall specify, each to be separately invested in property
of the kind described in this Section 4.5.1 having such
characteristics as the Investment Committee shall specify. Except as
the Investment Committee shall otherwise direct each such sub-fund
shall not constitute a separate Investment Fund for purposes of this
Plan.
4.5.2 Supplemental Investment Fund. One or more Supplemental
Investment Funds which shall be invested and reinvested principally
in securities or other property, real or personal, directly or
through the medium of any insurance company, separate account, any
mutual fund or family of mutual funds, or any common, collective or
commingled trust fund which is invested principally in property of
any kind. In the discretion of the Investment Committee, any
Supplemental Investment Fund shall be subdivided into such two or
more sub-funds as the Investment Committee shall specify, each to be
separately invested as the Investment Committee shall specify. Except
as the
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Investment Committee shall otherwise direct each such sub-fund shall
constitute a separate Investment Fund for purposes of this Plan.
4.5.3 Revlon Stock Fund. A Revlon Stock Fund invested solely in
Revlon Stock as more fully described in the Trust Agreement, except
that to the extent necessary to effect distributions (or to meet
other administrative requirements of the Plan), amounts held in the
Revlon Stock Fund may be held in cash or such other short term
investments as the Investment Committee deems suitable.
Notwithstanding any other provision of the Plan, the Post-IPO
Matching Contribution Account is the only Plan Account that may be
invested in the Revlon Stock Fund.
4.5.4 Company Stock Fund. A Company Stock Fund invested solely
in Company Stock as more fully described in the Trust Agreement,
except that to the extent necessary to effect distributions (or to
meet other administrative requirements of the Plan), amounts held in
the Company Stock Fund may be held in cash or such other short term
investments as the Investment Committee deems suitable.
Notwithstanding any other provision of the Plan to contrary, the
Company Stock Matching Contributions Account is the only Plan Account
that may be invested in the Company Stock Fund.
4.6 Direction as to Basic Contributions. A Participant may, by giving
notice on the Appropriate Form or as the Administrative Committee may otherwise
prescribe and within such time as the Administrative Committee may prescribe,
designate the proportion of the future Basic Contributions made for his behalf
for periods on and after January 1, 1993, which shall be allocated to and
invested in any Investment Fund (other than the Revlon Stock Fund); provided,
however, that the percentage of such contributions to be invested in any such
Fund shall be either
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10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 55%, 60%, 65%, 70%, 75%, 80%, 85%,
90%, 95% or 100% thereof; provided, further, however, that from and after July
1, 1993, such percentage shall be any whole percentage as approved by the
Administrative Committee and designated by the Participant. Such designation
shall apply equally to his Matched Contributions and Unmatched Contributions,
if any. Any election under this Section 4.6 shall continue in effect until
changed by a new designation. A Participant may change his election as of any
Entry Date, by filing a new designation on the Appropriate Form with the
Administrative Committee or as the Administrative Committee may otherwise
prescribe not later than the fifteenth (15th) day of the month prior to such
date or within such other period as the Administrative Committee may prescribe.
The Administrative Committee may refuse to accept any Participation Agreement
that is deficient in respect of any election as to the designation of the
investment of Basic Contributions; or, the Administrative Committee may accept
such deficient form provided, however, that in such case all of the
Participant's Basic Contributions shall be deemed to have been designated by
the Participant for investment in the Savings Fund.
4.7 Matching Contributions.
4.7.1 General Rule. All Pre-IPO Matching Contributions shall be
invested in the same Investment Funds (and in the same proportions)
which the Participant has designated under Section 4.6 with respect
to his Basic Contributions, together with all dividends and other
distributions resulting from such investments. All Post-IPO Matching
Contributions shall be invested in the Revlon Stock Fund, without
regard to the investment direction of the Participant, together with
all dividends and other distributions resulting from such
investments. Company Matching Contributions may be invested in
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cash or in shares of Company Stock, without regard to the investment
direction of the Participant . If such Company Matching Contributions
are invested in Company Stock, they shall include all dividends and
other distributions resulting from such investments.
4.7.2 Special Rule for Post-IPO Matching Contributions and
Company Matching Contributions. If the Investment Committee
determines that legal or contractual restrictions and/or blockage
and/or other market considerations would make the Plan's purchase or
sale of Company Stock or the sale of Revlon Stock from or to the
public markets illegal, impracticable or inadvisable, the Investment
Committee shall direct the Trustee to suspend all future purchase or
sale of Company Stock in the Company Stock Matching Contributions
Account or sales of Revlon Stock in the Revlon Stock Fund until
further notice.
4.7.3 Redesignation of Amounts in Revlon Stock Fund. A
Participant who has attained age 65 or has attained age 55 and has 10
years of Service may, by giving notice on the Appropriate Form to the
Administrative Committee, or as the Administrative Committee may
otherwise prescribe, direct the Trustee to transfer all or a portion
of his interest in the Revlon Stock Fund to any other Investment Fund
and to have the amount transferred invested, in the future, only in
Investment Funds other than the Revlon Stock Fund or the Company
Matching Contributions Account.. A Participant shall be permitted to
make only two elections under this Section 4.7.3, each of which shall
be irrevocable.
4.7.4 Redesignation of Amounts in Company Matching Contributions
Account. A Participant who has attained age 65 or has attained age 55
with 5 years of Service may, by giving notice on the Appropriate Form
to the Administrative Committee,
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or as the Administrative Committee may otherwise prescribe, direct
the Trustee to transfer all or a portion of his interest in the
Company Stock Matching Contributions Account to any other Investment
Fund and to have the amount transferred invested, in the future, only
in Investment Funds other than the Revlon Stock Fund or the Company
Stock Matching Contributions Fund. A Participant shall only make two
elections under this Section 4.7.4, each of which shall be
irrevocable.
4.8 Reallocation Permitted. A Participant may elect to reallocate the
investment of his Accounts (other than his Post-IPO Matching Contributions
Account) among the Investment Funds (other than the Revlon Stock Fund);
provided, however, that reallocation among the Investment Funds shall only be
made in increments of 5% of the value of the Participant's aggregate Accounts,
or any other increments that the Administrative Committee in its sole
discretion shall prescribe. Each Participant may reallocate his Accounts as of
the end of any month, or on a more frequent basis as the Administrative
Committee shall prescribe, based on the balance of such Participant's Accounts
as of the end of such month (or such other date), as determined after giving
effect to all other adjustments made to such Account as of that date. Any such
reallocation shall be effected in such manner permitted by the Administrative
Committee not later than the fifteenth (15th) day of such month (or within such
other period as the Administrative Committee shall prescribe). Each Participant
shall be permitted to make such changes as frequently as the Administrative
Committee in its sole discretion shall prescribe, and shall be permitted to
make at least one such change in any three-month period.
4.9 Account Adjustments.
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4.9.1 Subject to the provisions of Section 4.9.2, as of each
Valuation Date the Administrative Committee shall adjust
appropriately each Participant's Accounts to reflect, with respect to
each Investment Fund in which each such Account is invested, (i) his
proportionate share (based on the prior value of his Account in the
applicable Investment Fund) of income, expenses (if any) payable from
the Trust Fund, and any increase or decrease in the fair market value
of Trust Fund assets since the preceding Valuation Date, (ii) any
contributions made on his behalf, including for this purpose
contributions made after such Valuation Date but credited as of such
Valuation Date, (iii) forfeiture allocations in lieu of Company
Contributions, (iv) withdrawals, (v) distributions and (vi) transfers
between Investment Funds. For this purpose:
4.9.1.1 Allocation of Basic Contributions. Basic
Contributions for the benefit of a Participant made during any
month shall be credited to his Basic Account as of the day
immediately following the date on which such contribution was
made.
4.9.1.2 Allocation of Matching Contributions. Matching
Contributions, if any, (and forfeitures in lieu thereof) made on
behalf of a Participant made during any month shall be credited
to his Company Account pursuant to Sections 4.2, 4.3 and 4.4
hereof, as of the day immediately following the date on which
such contribution was made.
4.9.1.3 Adjustment for Withdrawals. Withdrawals from a
Participant's Accounts shall be charged against his Basic and
Matching
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Contributions and Rollover Accounts as of the date on which such
withdrawal is effective pursuant to Article 7 or 8.
4.9.2 Notwithstanding any other provision of the Plan, to the
extent that Participants' Accounts are invested in mutual funds or
other assets for which daily pricing is available ("Daily Pricing
Media"), all amounts contributed to the Trust Fund will be invested
at the time of their actual receipt by the Daily Pricing Media, and
the balance of each Account shall reflect the results of such daily
pricing from the time of actual receipt until the time of
distribution. Participant investment elections and changes made
pursuant to the Plan shall be effective upon receipt by the Daily
Pricing Media, and Basic Contributions and Matching Contributions
(and forfeitures in lieu thereof) made on behalf of a Participant to
the extent invested in Daily Pricing Media shall be credited to such
Participant's Basic Contributions or Matching Contributions Account,
as appropriate, on the business day such contributions are so
invested. References elsewhere in the Plan to the investment of
contributions "as off' a date other than that described in this
Section 4.9.2 shall apply only to the extent, if any, that assets of
the Trust Fund are not invested in Daily Pricing Media.
4.10 Unit Accounting for the Revlon Stock Fund and the Company Stock
Matching Contributions Account. The Committee may, for administrative purposes,
establish unit values for the Revlon Stock Fund and the Company Stock Fund (or
any portion thereof) and maintain the accounts setting forth each Participant's
interest in Revlon Stock or Company Stock (or portion thereof), in terms of
such units, all in accordance with such rules and procedures as such Committee
shall deem to be fair, equitable and administratively practicable. In the event
that unit
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accounting is thus established for the Revlon Stock Fund or the Company Stock
Fund (or portion thereof), the value of a Participant's interest in the Revlon
Stock Fund or Company Stock Fund (or portion thereof) at any time shall be an
amount equal to the then value of a unit in such Revlon Stock Fund or Company
Stock Fund (or portion thereof) multiplied by the number of units then credited
to the Participant.
4.11 Correction of Error. The Administrative Committee may adjust the
Accounts of any or all Participants and Beneficiaries in order to correct
errors or rectify omissions, in such manner as such Committee believes will
best result in the efficient administration of the Plan on an equitable and
nondiscriminatory basis.
4.12 Allocation Shall Not Vest Title. The fact that allocation is made
and amounts are credited to an Account of a Participant shall not vest in such
Participant any right, title or interest in or to any assets except at the time
or times and upon the terms and conditions expressly set forth in this Plan,
nor shall the Trustee be required to segregate physically the assets of the
Trust Fund by reason thereof.
4.13 Statement of Accounts. At least twice within each calendar year,
the Administrative Committee shall distribute to each Participant a statement
showing the balance in each of his Accounts. Such statement may be distributed,
in the discretion of the Administrative Committee, in connection with or as a
part of a general statement of employee benefits given to Employees on a
regular or periodic basis.
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ARTICLE 5
Vesting
5.1 Vesting.
5.1.1 Company Contributions and Company Match. A Participant's
entire Company Contributions Account and Company Match Contributions
Account shall be fully vested on the earliest of (a) Early Retirement
Age, (b) Normal Retirement Age, (c) Termination of Employment on
account of Disability, or (d) death. Prior to the occurrence of any
of the foregoing events, a Participant shall be vested in his Company
Contribution Account as follows
In the case of a Participant who has five (5) or more
consecutive 1 year Breaks in Service all Service after such
Breaks in Service will be disregarded for the purpose of vesting
the Company Contributions Account balance that accrued before
such Breaks in Service. Such Participant's pre-Break Service
will count in vesting his post-Break Matching Contributions
Account balance only if either:
(i) such Participant has any nonforfeitable interest in
such account balance at the time of Termination of Employment;
or
(ii) upon returning to Service the number of consecutive
1-year Breaks in Service is less than the number of years of
Service. A Participant's interest in his Basic Account, Matching
and Rollover Account shall at all times be fully vested, and
shall not be subject to forfeiture pursuant to any provision of
this Plan.
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5.2 Forfeiture of Non-Vested Account Balances upon Termination of
Employment. If, upon Termination of Employment, a Participant's vested Account
balance is less than or equal to $3,500 (or such other amount prescribed by
applicable law), the Participant shall receive a distribution of the vested
portion of such Accounts as set forth in Article 9, and the non-vested portion
will be treated as a forfeiture. If on Termination of Employment the balance of
the Participant's vested Accounts is greater than $3,500 (or such other amount
prescribed by applicable law), and the Participant elects to receive the
balance of his vested Accounts, the non-vested portion will be treated as a
forfeiture under Section 5.4. For purposes of this Section 5.2 if the value of
a Participant's vested Account balance is zero, the Participant shall be deemed
to have received a distribution of such vested account balance upon Termination
of Employment.
5.3 Reinstatement of Forfeited Balances. If subsequent to the
Termination of Employment of a Participant such Participant is rehired by an
Employer or any Affiliate prior to the end of the Plan Year in which his
employment was terminated or prior to the time when such Participant's
pre-Break Service would be disregarded for vesting purposes under Section 5.2,
any non-vested balance in such Participant's Matching Contributions Account
shall be restored to him, as follows:
5.3.1 If not previously forfeited, such nonvested balance shall
not be forfeited, except as may be otherwise provided for in the
event of his subsequent Termination of Employment or pursuant to
Section 9.3 hereof.
5.3.2 If previously forfeited, such balance shall be restored
out of contributions for the month of rehire made by the Employer
formerly employing such
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Participant, and such Employer shall make Matching Contributions for
such month in amounts sufficient to effect such restoration.
5.4 Application of Forfeitures. All forfeitures shall be applied first
to reduce future Company Contributions, if any, and if there are no such
contributions, then as if such Company Contributions had been made, allocated
in the ratio which a Participant's Compensation bears to the total Compensation
of all Participants (calculated to the nearest dollar).
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ARTICLE 6
Normal Withdrawals During Employment
6.1 Withdrawal Options. No more frequently than the Administrative
Committee may allow, and subject to such procedures as the Administrative
Committee may prescribe, a Participant who is an Employee may elect, with the
approval of the Administrative Committee, by filing the Appropriate Form as
directed by the Administrative Committee, to withdraw (a) all or any portion of
his Post-Tax Contribution Account, (b) if the maximum withdrawal permitted
under clause (a) has been made, all or any portion of his vested Post-IPO
Matching Contributions Account, (c) if the maximum withdrawal under clause (b)
has been made, all or any portion of his Company Stock Matching Contributions
Account and (d) if the maximum withdrawal under clause (c) has been made, all
or any portion of his Rollover Account.
6.2 Values. The amount withdrawn pursuant to Section 6.1 shall be
based on the Value of the Participant's Accounts as of the Valuation Date on
which the Appropriate Form filed by the Participant was received by the
Administrative Committee or its designee for a withdrawal effective prior to
July 1, 1993, and shall be based on the Value of the Participant's Accounts as
of the withdrawal date for a withdrawal effective on or after July 1, 1993.
6.3 No Replacement of Withdrawn Amounts. A Participant may not replace
any amounts withdrawn hereunder.
6.4 Payment of Withdrawals. Any amounts withdrawn pursuant to this
Article 6 shall be paid or distributed as soon as administratively practicable
after the Valuation Date as of
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which the withdrawal election is effective. Except as the Administrative
Committee shall otherwise direct, all withdrawals shall be paid in cash.
6.5 Accounts to Which Withdrawals to be Charged. Any withdrawals under
this Article 6 shall be charged first to a Participant's Post-Tax Contributions
Account and then, after such Account has been exhausted, to his Pre-IPO
Matching Contributions Account, then, after such Account has been exhausted, to
his Post-IPO Matching Contributions Account, then after such Account has been
exhausted, to his Company Match Account, then, after such Account has been
exhausted, to his Old Profit Share Account, then, after such Account has been
exhausted, to his New Profit Share Account, then, after such Account has been
exhausted, to his Company Stock Matching Contributions Account and finally, to
his Rollover Account. No withdrawals may be made under this Article from a
Participant's Employee 401(k) Account.
6.6 Values and Allocation Among Investment Funds. All withdrawals
pursuant to this Article 6 shall be based upon the value of the relevant
Account(s) on the Valuation Date as of which the withdrawal is effective. If
the Participant's Basic Account, Pre-IPO Matching Contributions Account,
Company Match Account, Old Profit Share Account and New Profit Share Account
are invested in more than one Investment Fund, such withdrawal shall be
allocated pro rata among such Funds unless the Administrative Committee shall
otherwise direct. Any amounts withdrawn pursuant to this Article 6 shall be
paid to a Participant in cash as soon as administratively practicable after the
Valuation Date as of which such withdrawal is effective.
6.7 Participant Loans. The Administrative Committee may instruct the
Trustee to make one or more loans to a Participant from the Trust Fund, in
accordance with the terms and
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conditions of a participant loan program established by such Committee for the
Plan and as may be modified by such Committee from time to time.
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ARTICLE 7
Withdrawals for Hardship
7.1 Definition of Hardship. Upon the occurrence of hardship a
Participant who is an Employee may withdraw, effective as of such Valuation
Date as the Administrative Committee shall designate, amounts from his Post-Tax
Contributions Account, the vested portion of his Pre-IPO Matching Contributions
Account, Post-IPO Matching Contributions Account, Company Match Account, Old
Profit Share Account, New Profit Share Account, the vested portion of his
Company Stock Matching Contributions Account, his Rollover Account and his
Employee 401(k) Account. For purposes of this Article 7, the term "hardship"
shall mean immediate and substantial financial need arising out of any one or
more of the following:
7.1.1 Expenses or debts incurred or assumed by a Participant,
and not covered by insurance, arising out of an accident to or the
death, illness, disability, or other medical or dental needs of a
Participant, his dependent, or a member of his family;
7.1.2 Sudden and unexpected losses, not covered by insurance,
through casualty, theft or a judgment against Participant or a
dependent;
7.1.3 Expenses of education of a Participant, his dependent, or
of a member of his family;
7.1.4 Severe curtailment of income of a Participant due to
reasons beyond his control;
7.1.5 Substantial expenditures required in connection with a
Participant's primary residence; or
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7.1.6 Any other emergency condition in the financial affairs of
a Participant. Distribution pursuant to this Section 7.1 shall be
made from and charged to, first, his Post-Tax Contributions Account,
second, his Rollover Account, third, his Pre-IPO Matching
Contributions Account, fourth, his Post-IPO Matching Contributions
Account, fifth, his Company Match Account, sixth, his Old Profit
Share Account, seventh, his New Profit Share Account eighth, his
Company Stock Matching Contributions Account and, last, his Employee
401(k) Account, except as the Administrative Committee shall
otherwise direct. The withdrawal request shall be made on the
Appropriate Form within such time as the Administrative Committee may
prescribe.
7.2 Distribution Deemed Necessary to Satisfy Financial Need. A
distribution pursuant to this Article 7 shall be deemed necessary to satisfy an
immediate and heavy financial need of an Employee if both of the following
requirements are satisfied:
7.2.1 The distribution is not in excess of the amount of the
immediate and heavy financial need of the Employee (after taking into
account the Employee's other reasonably available resources, based on
such representations or other information as the Administrative
Committee may, in its discretion, request); and
7.2.2 The Employee has obtained all distributions, and all
nontaxable loans currently available under all employee benefit plans
maintained by the Employer, including under this Plan in accordance
with Section 6.7 and the participant loan program thereunder.
7.3 Values and Allocation Among Investment Funds. All
withdrawals pursuant to this Article 7 shall be based upon the value
of the relevant Account(s) on the Valuation Date as
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of which the Administrative Committee directs the withdrawal to be
effective. If the Participant's Basic Account is invested in more
than one Investment Fund, such withdrawal shall be allocated pro rata
among such Funds unless the Administrative Committee shall otherwise
direct. Any amounts withdrawn pursuant to this Article 7 shall be
paid to a Participant in cash (except as the Administrative Committee
shall otherwise direct), as soon as administratively practicable
after the Valuation Date as of which such withdrawal is effective.
7.4 Post-1988 Earnings on Pre-Tax Contributions. Notwithstanding
anything to the contrary in this Article 7, post-1988 earnings on Pre-Tax
Contributions may not be withdrawn on account of financial hardship.
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ARTICLE 8
Distributions on Termination of Employment
8.1 Distribution on Termination of Employment. Upon a Participant's
Termination of Employment, the entire balance of his vested Accounts shall be
distributed to him or, if he dies prior to distribution, to his Beneficiary.
Such distribution shall be made in accordance with the provisions of Article 9.
Any portion of a Participant's Accounts in which he does not have a vested
interest, in accordance with Section 5.1, at the time of Termination of
Employment shall be forfeited as provided in Section 5.2 and shall be applied
to reduce future Company Contributions, if any.
8.2 Valuation. The balance of a Participant's vested Accounts for
purposes of Section 8.1 shall be determined as of the distribution date for a
distribution made on or after July 1, 1993.
8.3 Delay of Distributions or Withdrawals.
(a) Notwithstanding any other provision of this Plan, the
Administrative Committee may, in its discretion, defer the
making of all or any part of a distribution or withdrawal to
which any person may otherwise be entitled under this Plan until
receipt of a favorable determination letter with respect to the
qualification of the Plan under sections 401(a) of the Code.
(b) Notwithstanding the provisions of Section 8.1, the
Administrative Committee shall not be required to make the
distributions otherwise required under this Article 8 until
after filing of the Appropriate Form by the Participant or his
Beneficiary) with the
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Administrative Committee; provided, that the Administration Committee
may, in its sole discretion, waive such filing requirement and
proceed to make distribution accordingly.
8.4 30-Notice Requirement: Waiver.
8.4.1 30-Day Notice Requirement. Subject to Section 8.4.2, a
distribution under the Plan may not commence less than 30 days after
notice (if applicable) is given to the Participant (or his
Beneficiary, if applicable) pursuant to Section 1.41 l(a)-1 l(c) of
the Income Tax Regulations.
8.4.2 Waiver. If a distribution is one to which sections
401(a)(11) and 417 of the Code do not apply, such distribution may
commence less than 30 days after the notice required under section
1.411(a)-ll(c) of the Income Tax Regulations is given, provided that:
(i) the Administrative Committee clearly informs the
Participant that the Participant has a right to a period of at
least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice,
affirmatively elects a distribution.
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ARTICLE 9
Payment of Benefits
9.1 In General. Subject to Section 9.5, distribution required upon
Termination of Employment for any reason shall be made promptly following
Termination of Employment by one or more payments within a single Plan Year;
provided that contributions with respect to the Plan Year in which his
employment terminates may be paid in a later year. All Accounts other than
amounts in the Post-IPO Matching Contributions Account shall be distributed in
cash based on their Value as of the distribution date pursuant to Section 8.2.
Amounts in the Post-IPO Matching Contributions Account may be distributed in
cash or stock, determined as follows: If the Participant's Post-IPO Matching
Contributions Account is credited with 100 or more shares of Revlon Stock, the
distribution from such Account shall be made in Revlon Stock. If the
Participant's Post-IPO Matching Contributions Account is credited with fewer
than 100 shares of Revlon Stock, the distribution from such Account shall be
made in cash. Distribution of partial shares of Revlon Stock shall be made in
cash.
9.2 Time of Commencement of Benefits. Notwithstanding any other
provision of the Plan, the following provisions of this Section 9.2 shall be
applicable to all benefit payments:
9.2.1 In General. All distributions under this Plan will be
effected so as to comply with section 401(a)(9) of the Code and the
regulations thereunder, which are hereby incorporated fully by
reference. The aggregate Account balance of a Participant must be
distributed or begin to be distributed no later than the
Participant's required
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beginning date. The required beginning date for a Participant shall
be determined as follows:
(a) General Rule. A Participant who is actively employed by
the employer may elect to receive distributions by the first day
of April of the calendar year following the calendar year in
which the Participant attains age 70 1/2.
(b) Transitional Rule. The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988, shall
be determined in accordance with (i) or (ii) below:
(i) Non-5-percent Owners. The required beginning date of a
Participant who is not a "5-percent owner" (as defined in (c)
below) is the first day of April of the calendar year following
the calendar year in which the later of retirement or attainment
of age 70 1/2 occurs.
(ii) 5-percent Owners. The required beginning date of a
Participant who is a 5-percent owner during any year beginning
after December 31, 1979, is the first day of April following the
later of:
(1) the calendar year in which the Participant attains age
70 1/2, or
(2) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant retires.
The required beginning date of a Participant who is not a
5-percent owner who attains age 70 1/2 during 1988 and who has
not retired as of January 1, 1989, is April 1, 1990.
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(c) 5-percent Owner. A Participant is treated as a
5-percent owner for purposes of this Section if such Participant
is a 5-percent owner as defined in section 416(i) of the Code
(determined in accordance with section 416 but without regard to
whether the Plan is top-heavy) at any time during the Plan Year
ending with or within the calendar year in which such owner
attains age 66 1/2' or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner
under this Section, they must continue to be distributed, even
if the Participant ceases to be 5-percent owner in a subsequent
year.
9.2.2 Benefit Commencement Date. Except if otherwise elected by
a Participant, the Participant's benefits will commence no later than
the 60th day after the close of the Plan Year in which the latest of
the following occurs: (a) the attainment by the Participant of Early
Retirement Age, (b) the attainment by the Participant of Normal
Retirement Age; or (c) the tenth anniversary of the year in which the
Participant commenced participation in the Plan; or (d) the
Participant's most recent Termination of Employment.
9.2.3 Retroactive Payments. If the amount of a payment required
to commence on the date determined under Section 9.2.1 or 9.2.2
cannot be ascertained by such date, or if it is not possible to make
such payment on such date because the Administrative Committee has
been unable to locate the Participant, Beneficiary or Spouse after
making reasonable efforts to do so, or if the Appropriate Form has
not been filed by the Participant, Beneficiary or Spouse with the
Administrative Committee, a payment retroactive to such date may be
made no later than sixty (60) days after the earliest date on
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which the amount of such payment can be ascertained under the Plan or
the date on which the Participant, Beneficiary or Spouse is located
(whichever is applicable).
9.2.4 Pre-Tax Contributions. Notwithstanding any other provision
of this Plan, Pre-Tax Contributions are distributable only in the
event that one of the following events occurs: (i) the Employee's
death, Disability or Termination of Employment, (ii) the Employee's
attainment of age 59 l/2, (iii) a distribution on account of hardship
as defined in Article 7, (iv) a distribution on account of Excess
Elective Deferrals, as defined in Section 20.3, (v) termination of
the Plan without establishment of a successor plan (within the
meaning of section 401 (k)(10) of the Code and the regulations
thereunder), or (vi) one of the other events specified in section
401(k)(10) of the Code.
9.3 Inability to Locate Distributee. Notwithstanding any other
provision of the Plan, if the Administrative Committee cannot locate any person
to whom a payment is due under the Plan and no other payee has become entitled
thereto pursuant to any provision of the Plan, the benefit in respect of which
such payment is to be made shall be forfeited at such time as the Committee
shall determine in its sole discretion (but in all events prior to the time
such benefit would otherwise escheat under any applicable state law); provided,
however, that any benefit so forfeited shall be reinstated if such person
subsequently makes a valid claim for such benefit and shall be paid out of any
forfeited amounts and, if and to the extent necessary, out of other Employer
contributions made for this purpose.
9.4 Distribution to Beneficiary. Distribution to a Participant's
Beneficiary in accordance with the provisions of this Article 9 shall be made
as soon as administratively
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practicable after the Participant's death, except as otherwise provided in the
following provisions of this Section 9.4. Notwithstanding anything in Section
9.1 to the contrary:
9.4.1 A Participant may elect to cause any distribution due to
his Beneficiary to be made over a period of two or more calendar
years (provided, that such period shall end not later than the fifth
anniversary of the Participant's death), in such manner as the
Participant shall designate in such election.
9.4.2 If no election by a Participant becomes effective under
Section 9.4.1, his Beneficiary may make such an election.
9.5 Limitation on Distribution. Notwithstanding any other provision of
this Plan, but subject to Article 14, if a Participant's employment terminates
and his vested interest under the Plan exceeds $3,500 as calculated under
section 41 l(a)(11) of the Code (or such other amount prescribed by applicable
law), such vested interest shall not be "immediately distributed" (within the
meaning of section 411(a)(11) of the Code) without his written consent, except
as otherwise permitted by law.
9.6 Benefits Deemed Offered. Notwithstanding any other provision of
this Article 9 any optional form of benefit, form of distribution or joint and
survivor annuity required to be offered in this Plan to meet the requirements
of sections 411(d)(6), 401(a)(11) or 417 of the Code is deemed offered to those
Participants to whom such requirements apply.
9.7 GCM 39824 Clarification. It is the intention of this Plan not to
make distributions to any individual whose employment with an Employer (or an
Affiliate) has terminated unless a "severance of employment" has occurred, in
accordance with GCM 39824 (Aug. 15, 1990).
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ARTICLE 10
Beneficiary Designation
10. 1 Beneficiary.
10.1.1 Designation of Beneficiary. Notwithstanding any other
provision of this Plan, but subject to the further provisions of this
Section 10.1, each Participant may designate, at such time and in
such manner as the Administrative Committee shall prescribe, a
Beneficiary or Beneficiaries (who may be any one or more members of
his family or any other persons, executor, administrator, any trust,
foundation or other entity) to receive any benefits distributable
hereunder after the death of the Participant as provided herein. Such
designation of a Beneficiary or Beneficiaries shall not be effective
for any purpose unless and until it has been filed by the Participant
with the Administrative Committee, provided, however, that a
designation mailed by the Participant to the Committee prior to death
and received by it after his death shall take effect upon such
receipt, but prospectively only and without prejudice to any payor or
payee on account of any payments made before receipt by the
Committee.
10.1.2 Spouse as Presumptive Beneficiary. Notwithstanding
Section 10.1.1, a Participant's sole Beneficiary shall be his
surviving Spouse (if the Participant has a surviving Spouse) unless
the Participant has designated another Beneficiary with Spousal
Consent.
10.1.3 Change of Beneficiary. A Participant may, from time to
time in such manner as the Administrative Committee shall prescribe,
revoke any prior designation of
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Beneficiary (without Spousal Consent) and make a new designation of
Beneficiary; provided that any such new designation which has the
effect of naming a person other than the Participant's surviving
Spouse as sole Beneficiary is subject to the Spousal Consent
requirement of Section 10.1.2.
10.1.4 Failure to Designate. If a Participant has failed to
designate effectively a Beneficiary to receive the Participant's
death benefits under the Plan, or if a Beneficiary previously
designated has predeceased the Participant and no alternative
designation has become effective, such benefits shall be distributed
to the Participant's surviving Spouse, if any, or if no Spouse
survives the Participant, to the Participant's estate.
10.1.5 Proof of Death. The Administrative Committee may, as a
condition precedent to making payment to any Beneficiary, require
that a death certificate, burial certificate or other evidence of
death acceptable to it be furnished.
10.1.6 Discharge of Liability. If distribution in respect of a
Participant is made under this Plan in a form, or to a person
reasonably believed by the Administrative Committee or its delegate
to be proper (taking into account any document purporting to be a
valid consent of the Participant's Spouse, or any representation by
the Participant that he is not married or any election or revocation
with respect to form of payment or designation of Beneficiary), the
Plan shall have no further liability with respect to the Participant
(or his Spouse or Beneficiary) to the extent of such distribution.
10.2 Common Disaster. If a Participant and any of his Spouse or
Beneficiary shall die in a manner such that there is no sufficient evidence (as
determined by the Administrative
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Committee, without regard to any presumption of law otherwise applicable) that
the persons have died otherwise than through a common disaster or if a
Participant's Beneficiary (other than his Spouse) died within five days after
the Participant, it shall be presumed for all purposes of the Plan that the
Participant died last.
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ARTICLE 11
Administration
11.1 Appointment of Committees.
11.1.1 There are hereby created an Administrative Committee and
an Investment Committee, each of which shall consist of not less than
two members to be appointed by the Board of Directors of the Company.
Each member of a Committee may resign, or may be removed at any time
by the Board of Directors of the Company (with or without cause),
and, in the event of the removal, death or resignation of any member,
his successor shall be appointed by such Board. In the event that a
vacancy or vacancies shall occur on a Committee, the remaining member
or members shall act as the Committee until the Board of Directors of
the Company fills such vacancy or vacancies. The members of each
Committee shall serve without compensation for their services as such
members.
11.1.2 No person shall be ineligible to be a member of a
Committee because he is, was or may become entitled to benefits under
the Plan or because he is a director and/or officer of an Employer or
Affiliate; provided, that no member of a Committee shall participate
in any determination by the Committee relating specifically to his
own benefits under the Plan.
11.1.3 The members of each Committee shall serve without bond
except to the extent required by applicable law.
11.2 Powers and Authority: Action Conclusive. Except as otherwise
expressly provided in the Plan or in the Trust Agreement, or by the Board of
Directors of the Company:
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11.2.1 The Administrative Committee shall be responsible for the
administration of the Plan and shall have the exclusive right,
responsibility and authority with respect to the construction,
interpretation, application or administration of the Plan and
eligibility for Plan benefits except for those matters which are the
responsibility of the Investment Committee.
11.2.2 The Investment Committee shall be responsible for making
appropriate provision for the investment and reinvestment of the
Trust Fund and shall have the exclusive right, responsibility and
authority with respect thereto.
11.2.3 Each Committee shall have all powers necessary or helpful
for the carrying out of its responsibilities, and the decisions or
actions of such Committee in good faith in respect of any matter
hereunder shall be final, conclusive and binding upon all parties
concerned, including, without limitation, any and all Employees,
Participants, Spouses, Beneficiaries, heirs, distributees, estates,
executors, administrators and assignees. Any determination made by a
Committee shall be given deference in the event it is subject to
judicial review and shall be overturned ordy if it is arbitrary and
capricious.
11.2.4 Each Committee may delegate to one or more of its the
right to act on its behalf in any one or more matters connected with
the administration of the Plan.
11.2.5 Without limiting the generality of the foregoing, the
Administrative Committee shall have the power:
11.2.5.1 To make rules and regulations for the
administration of the Plan which are not inconsistent with the
terms and provisions of the Plan;
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11.2.5.2 To construe all terms, provisions, conditions and
limitations of the Plan, or determine eligibility for benefits;
11.2.5.3 To determine all questions arising out of or in
connection with the provisions of the Plan or its administration
in any and all cases in which the Administrative Committee deems
such a determination advisable, including, without limitation,
the power to resolve ambiguities, to rectify errors, and to
supply omissions;
11.2.5.4 To establish procedures for determining the
validity of any qualified domestic relations order and for
complying with any such valid order.
The foregoing list of powers is not intended to be either complete or
exclusive, and each Committee shall, in addition, have such powers as it may
determine to be necessary for the performance of its duties under the Plan and
the Trust Agreement.
11.3 Liability Limited and Indemnification. Except as otherwise
provided by law, no person who is a member of a Committee or who is an
employee, officer and/or director of an Employer or Affiliate, shall incur any
liability whatsoever on account of any matter connected with or related to the
Plan or the administration of the Plan, unless such person shall have acted in
bad faith, or have willfully neglected his duties, in respect of the Plan. The
Company shall indemnify and save each such person harmless against any and all
loss, liability, claim, damage, cost and expense which may arise by reason of,
or be based upon, any matter connected with or related to the Plan or the
administration of the Plan (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any
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litigation, commenced or threatened, or in settlement of any such claim
whatsoever) to the fullest extent permitted under the Certificate of
Incorporation and By-laws of the Company.
11.4 Quorum and Voting, Procedures. A majority of the members of a
Committee at the time in office shall constitute a quorum for the transaction
of business. Each Committee shall select from among its members a Chairman, and
shall appoint (from its members or otherwise) a Secretary. Each Committee may
act by vote or consent of the majority of its members then in office and may
establish its own procedures. Each Committee may authorize any one or more of
its members or the Secretary of the Committee to sign and deliver any
instrument, certificate or other paper or document on its behalf.
11.5 Subcommittees. Counsel and Agents. Each Committee may appoint
from its members such subcommittees (of one or more such members), with such
powers, as such Committee shall determine. Each Committee may employ such
counsel (including legal counsel, who may be counsel for an Employer or
Affiliate) and agents and such clerical and other services as it may require in
carrying out the provisions of the Plan, and may charge the fees, charges and
costs resulting from such employment as an expense to the Company. Unless
otherwise required by law, persons employed by a Committee as counsel, or as
its agents or otherwise, may include members of either Committee, or of the
Board or Boards of Directors of an Employer or Affiliate, or firms with which
members of either Committee or Board or Boards of Directors of any Employer or
Affiliate are associated as partners, employees or otherwise. Persons serving
on a Committee or on any such subcommittee shall be fully protected in acting
or refraining from acting in accordance with the advice of legal or other
counsel.
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11.6 Reliance on Information. The members of each Committee and any
Employer and Affiliate and their respective officers, directors and employees,
shall be entitled to rely upon all tables, valuations, certificates, opinions
and reports furnished by any actuary, accountant, trustee, insurance company,
counsels physician or other expert who shall be engaged by either Committee, an
Employer or Affiliate, and the members of each Committee and any Employer and
Affiliate and their respective officers, directors and employees, shall be
fully protected in respect of any action taken or suffered by them in good
faith in reliance thereon, and all action so taken or suffered shall be
conclusive upon all persons affected thereby.
11.7 Instructions to Trustee. The Administrative Committee shall
provide appropriate written instructions in accordance with the Trust Agreement
to enable the Trustee to make the distributions provided for in the Plan.
11.8 Fiduciaries. The provisions of this Section 11.8 shall apply
notwithstanding any contrary provisions of the Plan or of the Trust Agreement.
11.8.1 Named Fiduciaries. The named fiduciaries under the Plan
shall be (a) the Administrative Committee, which shall have authority
to control and manage the operation and administration of the Plan,
except with respect to those matters which under the Plan or the
Trust Agreement are the responsibility, or subject to the authority,
of the Investment Committee, and (b) the Investment Committee, which
shall be the named fiduciary with respect to control or management of
the assets of the Plan.
11.8.2 Allocation of Fiduciary and Other Responsibilities. Each
Committee shall have the right, which shall be exercised in
accordance with the procedures set forth in the Plan or in the Trust
Agreement for action by such Committee, to allocate
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responsibilities (fiduciary or otherwise) among it and the other
Committee, and each Committee shall have the right to designate
persons other than such Committees to carry out responsibilities
(fiduciary or otherwise) under the Plan.
11.8.3 Funding Policy. The funding policy and method for this
Plan shall consist of the making of contributions, the making of
investments and reinvestments in respect thereof, and the making of
withdrawals and distributions, as provided in the provisions of the
Plan.
11.8.4 Service in Multiple Capacities. Any person or group of
persons may serve in more than one fiduciary capacity with respect to
the Plan.
11.8.5 Advisers. Each Committee, and any fiduciary designated by
a Committee pursuant to Section 11.8.2 above to whom such power is
granted by a Committee, may employ one or more persons to render
advice with regard to any responsibility such fiduciary has under the
Plan.
11.8.6 Investment Manager. The Investment Committee may appoint
an investment manager or managers, as defined in ERISA, to manage
(including the power to acquire, invest and dispose of) any assets of
the Plan.
11.8.7 Limitation of Liability. Except to the extent otherwise
provided by law, if any duty or responsibility of a named fiduciary
has been allocated or delegated to any other person in accordance
with any provision of this Plan or of the Trust Agreement, then such
named fiduciary shall not be liable for any act or omission of such
person in carrying out such duty or responsibility.
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11.9 Genuineness of Documents. Each Committee, and any Employer and
Affiliate and their respective officers, directors and employees, shall be
entitled to rely upon any notice, request, consent, letter, telegram or other
paper or document believed by them or any of them to be genuine, and to have
been signed or sent by the proper person, and shall be fully protected in
respect of any action taken or suffered by them in good faith in reliance
thereon.
11.10 Proper Proof. In any case in which an Employer or any Committee
shall be required under the Plan to take action upon the occurrence of any
event, they shall be under no obligation to take such action unless and until
proper and satisfactory evidence of such occurrence shall have been received by
them.
11.11 Claims Procedure. The Administrative Committee shall establish a
claims procedure in accordance with applicable law and shall afford a
reasonable opportunity to any Participant whose claim for benefits has been
denied for a full and fair review of the decision denying such claim.
11.12 Filing with Committee. For all purposes of this Plan, the date
on which an Appropriate Form, Participation Agreement, or any other document is
deemed to be returned to or filed with the Administrative Committee shall be
the date on which such Appropriate Form, Participation Agreement or other
document is actually received by the Administrative Committee or its designated
agent.
11.13 Plan Administrator. The Company shall be the administrator of
the Plan, as defined in section 3(16)(A) of ERISA.
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ARTICLE 12
Trust Agreement
12.1 Trust Agreement. As part of the Plan, the Company shall enter
into a Trust Agreement or agreements under which the Trustee shall receive the
contributions of the Employers and Participants to the Trust Fund and shall
hold, invest and distribute the Trust Fund in accordance with the terms and
provisions of the Trust Agreement. Any and all rights or benefits which may
accrue to any person under the Plan shall be subject to all the terms and
provisions of the Trust Agreement.
12.2 Investment in Interest-Bearing Deposits. If the Trustee shall be
a bank or similar financial institution supervised by the United States or any
State thereof, the Investment Committee, in its discretion, may authorize the
Trustee to invest all or a part of the Plan's assets in deposits which bear a
reasonable interest rate in such bank or financial institution.
12.3 Company as Agent. The Company is hereby authorized to act as
agent for all other Employers in dealings with the Trustee under the Plan.
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ARTICLE 13
Amendment or Merger
13.1 Right Reserved. Subject to the further provisions of this Article
13 the Company may, by resolution of the Board of Directors, amend the Plan in
whole or in part at any time or from time to time, by resolution of the
Company's Board of Directors or action by its Executive Committee. Any such
amendment shall be evidenced in writing. No amendment shall divest any
Participant of any amount credited to him under the Plan except as provided in
Section 13.2 or as otherwise permitted by law. No amendment shall vest in an
Employer, directly or indirectly, any interest in or ownership or control of
any part of the Trust Fund.
13.2 Amendments Required for Qualification. etc. All provisions of the
Plan and all benefits and rights granted under the Plan are subject to any
amendments, modifications or alterations that may be necessary or advisable
from time to time to qualify the Plan under the Code, to continue the Plan as
so qualified, or to comply with any other provision of law. Accordingly,
notwithstanding any other provision of the Plan, the Company may, by resolution
of the Board of Directors, amend, modify or alter the Plan with retroactive
effect in any respect or manner necessary or advisable to qualify the Plan
under the Code or to continue the Plan as so qualified, or to comply with any
other provision of applicable law.
13.3 Contributions Following Amendment. If the Plan is amended in any
respect, no Employer shall have any liability or obligation to make any
contribution or payment to the Trust Fund except in such manner and amounts as
may be specifically provided for in the Plan as so amended.
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13.4 Merger. Subject to the provisions of this Section 13.4, the Plan
may be amended to provide for the merger of the Plan, in whole or in part, or a
transfer of all or a part of its assets, to any other qualified plan within the
meaning of section 401(a) or 403(a) of the Code, including such a merger or
transfer in lieu of a distribution which might otherwise be required under the
Plan. The Plan shall not be merged or consolidated with, nor may its assets or
liabilities be transferred to, any other plan in whole or in part, unless each
Participant would be entitled to a benefit immediately after the merger,
consolidation or transfer (if such other plan then terminated) which is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
been terminated).
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ARTICLE 14
Termination of the Plan
14.1 Right Reserved. The Company reserves the right at any time, by
resolution of its Board of Directors, to terminate the Plan, in whole or in
part, by resolution of the Company's Board of Directors or action by its
Executive Committee. Any such termination shall be evidenced in writing. If the
Plan is terminated, no Employer shall have any liability or obligation to make
any contribution or payment to the Trust Fund with respect to any period after
the date of such termination. Any such termination shall be evidenced in
writing.
14.2 Vesting Upon Termination. Upon the termination or partial
termination of the Plan (within the meaning of section 41 l(d)(3) of the Code)
or the complete discontinuance of all contributions under the Plan, the rights
of all affected employees to their Accounts as of the date of such termination
or partial termination shall be nonforfeitable.
14.3 Termination of Trust. If the Plan is terminated pursuant to
Section 14.1 and the Board of Directors determines that the Trust Fund shall be
terminated, the Trust Fund shall be revalued as if the termination date were a
Valuation Date, and the current value of all Accounts shall be distributed in
accordance with Articles 8 and 9, as if such Plan termination were a
Termination of Employment; provided, however, that the value of such Accounts
shall be adjusted to reflect the expenses of termination to the extent such
expenses are not paid by the Company. Until all Accounts are fully distributed,
any remaining Accounts held in the Trust Fund shall continue to be adjusted in
accordance with Article 4, and to reflect the expenses of termination.
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14.4 Continuation of Trust. If the Plan is terminated by the Board of
Directors but the Board of Directors determines that the Trust Fund shall be
continued, no further contributions shall be made by the Employers, but the
Trust Fund shall be administered as though the Plan were otherwise in fill
force and effect. If the Trust Fund is subsequently terminated, the provisions
of Section 14.3 shall then apply.
14.5 Withdrawal of Subsidiary or Affiliate. The withdrawal of an
Affiliate as an Employer by reason of a sale or other disposition of the stock
or assets of such Affiliate shall not be deemed a complete or partial
termination or a complete discontinuance of contributions if following such
sale or disposition the successor to such Employer adopts or maintains a
comparable plan.
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ARTICLE 15
Miscellaneous
15.1 Payment to a Minor or Incompetent. If any amount is payable
hereunder to a minor or other legally incompetent person, such amount may be
paid in any one or more of the following ways, as the Administrative Committee
in its sole discretion shall determine:
15.1.1 To the legal representative of such minor or other
incompetent person, if the Administrative Committee has been notified
of the appointment of such representative; or
15.1.2 To a parent or guardian of such minor or other
incompetent person, or to the person with whom such minor or other
incompetent person resides; or
15.1.3 To a custodian for such minor under the Uniform Gifts to
Minors Act (or similar statute) of any jurisdiction; or
15.1.4 If none, directly to such minor or other incompetent
person. Payment to any person in accordance with the foregoing
provisions of this Section 15.1 shall, to that extent, discharge all
Employers, the members of the Administrative Committee, the Trustee
and any person or corporation making such payment pursuant to the
direction of the Administrative Committee, and none of the foregoing
shall be required to see to the proper application of any such
payment to such person pursuant to the provisions of this Section
15.1. Without in any manner limiting or qualifying the provisions of
this Section 15.1, if any amount is payable hereunder to a minor or
any other legally
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incompetent person, the Administrative Committee may in its
discretion institute the procedures which are available to it under
Section 15.2.
15.2 Doubt as to Right to Payment. If at any time any doubt exists as
to the right of any person to any payment under the Plan or as to the amount or
time of such payment (including, without limitation, any case of doubt as to
identity and any case in which any notice has been received from any other
person claiming any interest in amounts payable under the Plan or a claim for
other persons may exist by reason of community property or similar laws), the
Administrative Committee shall be entitled, in its discretion, to direct the
Trustee to hold such sum as a segregated amount in trust until such right or
amount or time is determined or an order of a court of competent jurisdiction
is obtained, to pay such sum into court in accordance with appropriate rules of
law in such case then provided, or to make payment only upon receipt of a bond
or similar indemnification (in such amount and in such form as is satisfactory
to the Administrative Committee).
15.3 Spendthrift Clause. Except as may be other- wise required by law,
or provided by this Plan, no benefit or payment under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, whether voluntary or involuntary, and no attempt so to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the
same shall be valid, nor shall any such benefit or payment be in any way liable
for or subject to the debts, contracts, liabilities, engagements or torts of
any person entitled to such benefit or payment, or subject to attachment,
garnishment, levy, execution or other legal or equitable process.
Notwithstanding the foregoing, benefits under the Plan shall be subject to the
provisions of a qualified domestic relations order.
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15.4 Voting and Disposition of Revlon Stock. Each Participant shall
have the right to direct the Trustee as to the manner in which to vote and to
exercise tender, exchange offer or similar rights as to any shares of Revlon
Stock allocated to his Post-IPO Matching Contributions Account. The Company
shall furnish the Trustee and the Participants with notices and information
statements when voting, tender or such other rights are to be exercised, in
such time and manner as may be required by applicable law and the Certificate
of Incorporation and By-Laws of Revlon, Inc. Such statements shall be
substantially the same for Participants as for holders of Revlon Stock in
general. The Trustee shall vote, tender or exercise such rights with respect to
such Revlon Stock in accordance with the direction of the Participant. If no
direction is received from the Participant by the Trustee within an
administratively practicable time prior to the date on which action is
required, the Trustee shall take action with respect to those shares in
accordance with the direction of the Investment Committee.
15.5 Additional Action. Notwithstanding any other provision of the
Plan or the Trust Agreement, the Investment Committee shall be the sole named
fiduciary with respect to the control and management of the Revlon Stock Fund,
except as provided in Section 15.4; and the Trustee shall have no authority or
responsibility with respect to such control or management. Without limiting the
generality of the foregoing, if for any reason the provisions of Section 15.4
can no longer be validly applied, the Investment Committee shall direct the
Trustee with respect to all matters and all actions affecting the assets of the
Revlon Stock Fund.
15.6 Benefits Payable Only from Trust Fund. All benefits under the
Plan shall be paid or provided for solely from the Trust Fund, and neither the
Employers, their directors or employees nor any member of any Committee shall
have any liability or responsibility therefor. Except as otherwise provided by
law, no Employer assumes any obligations under the Plan except those
specifically set forth in the Plan.
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15.7 Estoppel of Participants and Their Beneficiaries. The Employers,
the Committees and Trustee may rely upon any certificate, statement or other
representation made to them by any Employee, Participant, Spouse, or
Beneficiary with respect to age, length of service, leave of absence, date of
cessation of employment or other fact required to be determined under any of
the provisions of the Plan and shall not be liable on account of the payment of
any moneys or the doing of any act in reliance upon any such certificate,
statement or other representation. Any such certificate, statement or other
representation made by an Employee, Participant or Spouse of a Participant or
Employee shall be conclusively binding upon such Employee, Participant and
Spouse and the Beneficiary of such Participant; and such Employee, Participant,
Spouse or Beneficiary shall thereafter and forever be estopped for disputing
the truth and correctness of such certificate, statement or other
representation. Any such certificate, statement or other representation made by
a Participant's Beneficiary shall be conclusively binding upon such
Beneficiary, and such Beneficiary shall thereafter and forever be estopped from
disputing the truth and correctness of such certificate, statement or other
representation.
15.8 Plan to Be Available for Inspection. A copy of the Plan and of
all amendments thereto, if any, shall be available for inspection at all
reasonable times by Eligible Employees and Participants at the office of the
Company and at such other locations (if any) as may be required by law.
15.9 No Diversion of Trust Fund. At no time prior to the satisfaction
of all liabilities with respect to Participants and their Spouses and
Beneficiaries under the Plan shall any part of
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the Trust Fund be (within the taxable year or thereafter) used for or diverted
to purposes other than the exclusive benefit of the Participants and their
Spouses and Beneficiaries or the payment of the expenses of the administration
of the Plan and of the Trust; provided, however, that:
15.9.1 A contribution that is made by an Employer by a mistake
of fact shall be returned to such Employer upon its request within
one year after the payment of the contribution;
15.9.2 A contribution that is conditioned upon its deductibility
under section 404 of the Code shall be returned to the contributing
Employer upon its request, to the extent that the contribution is
disallowed as a deduction, within one year after such disallowance;
and
15.9.3 A contribution that is conditioned on initial
qualification of the Plan under section 401 of the Code may, if the
Plan does not qualify, be returned (along with any earnings thereon)
to the contributing Employer within one year after the date of denial
of qualification of the Plan.
15.10 Limitation of Liability. Subject to Section 11.3, no liability
shall attach to or be incurred by any stockholder, officer or director of an
Employer or any Affiliate under or by reason of the terms, conditions and
provisions contained in the Plan or in the Trust Agreement or for the acts or
decisions taken or made thereunder or in connection therewith; and as a
condition precedent to his participation in the Plan or the receipt of benefits
thereunder, or both, such liability, if any, is expressly waived and released
by each Participant, Spouse or Beneficiary, and by any and all persons claiming
under or through such persons, such waiver and release to be
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conclusively evidenced by any act or participation in or the acceptance of
benefits or the making of elections under the Plan.
15.11 Usage. Whenever applicable the masculine gender, when used in
the Plan, shall include the feminine gender, and the singular shall include the
plural.
15.12 Separability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included herein.
15.13 Captions. The captions contained herein and in the table of
contents prefixed thereto are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or intent
of the Plan, and they shall not in any way affect the Plan or the construction
of any provision thereof.
15.14 Statutory References. References in this Plan to a section or
other provision of the Code or ERISA shall be deemed to refer to such section
or provision as it may be amended from time to time, or to equivalent
provisions of subsequent law.
15.15 Governing Law. This Plan shall be governed in all respects under
the laws of the State of Maryland (without regard to its laws on conflict of
laws) to the extent not governed by ERISA.
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ARTICLE 16
Leased Employees
16.1 Definitions. For purposes of this Article 16, the term "Leased
Employee" means any person performing services for an Employer or Affiliate
(hereinafter referred to as the "Recipient") pursuant to an Agreement between
the Recipient and any other person (hereinafter referred to as the "Leasing
Organization"), who has performed such services for the Recipient (including
persons related to the Recipient within the meaning of section 414(n)(6)(A) of
the Code) on a substantially full- time basis for a period of at least one
year, if such services are of a type historically performed by employees in the
business field of the Recipient. For this purpose, a person is considered to
have performed services on a substantially full-time basis for a period of at
least one year if: (1) during any consecutive 12-month period such person has
performed at least 1,500 hours of service for the Recipient, or (2) during any
consecutive 12-month period such person performs services for the Recipient for
a number of hours of service at least equal to seventy-five percent (75%) of
the average number of hours that are customarily performed by an employee of
that Recipient in the particular position.
16.2 Treatment of Leased Employees. For purposes of this Plan, a
Leased Employee's service for the Recipient (including Service during the
one-year period referred to in Section 16.1 and Service prior to the effective
date of this Article 16) is to be taken into account in determining compliance
with the Service requirements of the Plan relating to participation and
vesting. However, the Leased Employee shall not be entitled to share in
contributions (or forfeitures applied in lieu thereof) under the Plan with
respect to any Service or Compensation
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attributable to the period during which he is a Leased Employee, and shall not
be eligible to become a Participant eligible to receive contributions under the
Plan unless and except to the extent that he shall at some time, either before
or after his Service as a Leased Employee, qualify as an Eligible Employee
without regard to the provisions of this Article 16.
16.3 Exception for Employees Covered by Plans of Leasing Organization.
Section 16.2 shall not apply to any Leased Employee if: (i) such employee is
covered by a money purchase pension plan of the Leasing Organization which
provides (a) a nonintegrated employer contribution rate of at least ten percent
(10%) of compensation as defined in section 415(c) of the Code, but including
amounts contributed by the Recipient pursuant to a salary reduction agreement
which are excludable from the Leased Employee's gross income under sections
125, 402(e)(3), section 402(h) or 403(b) of the Code, (b) immediate
participation, and (c) full and immediate vesting; and (ii) Leased Employees do
not constitute more than twenty (20) percent of the Recipient's work force who
are not Highly Compensated Employees.
16.4 Effective Date. The provisions of this Article 16 are effective
as of January 1, 1984, and no individual shall be eligible to become a
Participant or accrue benefits under this Plan for any period prior thereto by
reason of anything in this Article 16.
16.5 Construction. The purpose of this Article 16 is to comply with
the provisions of section 414(n) of the Code. All provisions of this Article
shall be construed consistently therewith, and, without limiting the generality
of the foregoing, no individual shall be treated as a Leased Employee except as
required under such Code section.
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ARTICLE 17
Limitation on Maximum Benefits and Contributions Under All Plans
17.1 Section 415 Limitations. Effective January 1, 1984, and
notwithstanding any other contrary provisions of this Plan, the "annual
additions" which may be credited to any Participant's accounts for any
"limitation year" will not exceed the permissible limitations of section 415 of
the Code. For purposes of applying such limits, section 415 of the Code and
Treasury regulations thereunder are incorporated herein by reference. It is
intended that any limitation imposed by said section 415 of the Code on the
allocation of contributions and forfeitures to a Participant under this Plan
shall be implemented in accordance with the provisions of this Article 17. The
provisions of this Article 17 shall apply notwithstanding any other contrary
provisions in this Plan.
17.2 Coverage by Defined Benefit Plan.
17.2.1 Reductions in benefits under this Article 17 arising by
reason of a Participant's participation in multiple plans shall,
except as any other such plan may otherwise expressly provide, be
effected as follows: (a) benefits and annual additions under
continuing plans shall be reduced before benefits under any
terminated plan, (b) benefits under defined benefit plans shall be
reduced before any reduction in annual additions under defined
contribution plans, and (c) annual additions under continuing defined
contribution plans shall be reduced in the reverse order in which
such annual additions would otherwise be allocated; provided, that
benefits under multiemployer plans shall be reduced last. Any
resulting required reductions under this Plan shall be made first
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to Unmatched Contributions, and second, on a pro rata basis, to
Matched Contributions, and the Matching Contribution relating
thereto.
17.2.2 In computing the denominator of the "defined contribution
plan fraction" as defined in section 415(e) of the Code for any year
ending after 1982, the Administrative Committee may elect to
determine the portion of such denominator which relates to 1982 and
prior years under the method described in section 415(e)(6) of the
Code in lieu of the method described above. Such election may be made
at such time and in such manner as may be provided in applicable
Treasury regulations.
17.2.3 In the case of a Participant who would have fewer than
ten (10) Years of Service (including service in the year with respect
to which any determination under this Section 17.2.3 is made) with an
Employer and all Affiliates at the time his retirement pension
starts, the 1.25 and 1.40 limitations referred to in sections
415(e)(2)-(3) of the Code shall be reduced proportionately.
17.3 Limitation Year. All determinations under this Article 17 shall
be made by reference to the calendar year.
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ARTICLE 18
"Top Heavy" Provisions. Etc.
18.1 Determination of "Top Heavy"
18.1.1 For purposes of this Article 18, "Applicable Plans" shall
include (i) each plan of an Employer or Affiliate in which a Key
Employee (as defined in Section 18.1.2 for this Plan, and as defined
in section 416(i) of the Code for each other Applicable Plan) is a
Participant and (ii) each other plan of an Employer or Affiliate
which enables any plan in clause (i) of this sentence to meet the
requirements of section 401(a)(4) or 410 of the Code. Any plan not
required to be included under the preceding sentence also may be
included, at the option of the Company, provided that the
requirements of section 401(a)(4) and 410 of the Code continue to be
met for the group of Applicable Plans after such inclusion.
18.1.2 For purposes of this Article 18, "Key Employee" shall
mean an employee of an Employer or Affiliate who, at any time during
a given Plan Year or any of the four (4) preceding Plan Years, is one
or more of the following:
(A) An officer of an Employer or Affiliate having annual
compensation greater than fifty percent (50%) of the dollar amount
described in section 415(b)(1)(A) of the Code for any such Plan Year;
provided, that the number of employees treated as officers shall be
no more than fifty (50) employees or, if fewer, the greater of three
(3) employees or ten percent (10%) of the employees (including
"Leased Employees" as
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defined Article 16). For purposes of this subsection, employees
described in section 414(q)(8) of the Code shall be excluded. (B) One
of the ten (10) employees (A) having annual compensation from an
Employer or Affiliate of more than the limitation in effect under
section 415(c)(1)(A), and (B) owning (or considered as owning, within
the meaning of section 318 of the Code applied by substituting five
percent (5%) for fifty percent (50%) in section 318(a)(2)(C)) the
largest interests in an Employer or Affiliate. If two employees have
the same interest in an Employer or Affiliate, the employee having
greater annual compensation from the Employer or Affiliate shall be
treated as having a larger interest.
(C) A person owning (or considered as owning, within the meaning
of section 318 applied by substituting five percent (5%) for fifty
percent (50%) in section 31 8(a)(2)(C)), more than five percent (5%)
of the outstanding stock of an Employer or Affiliate that is a
corporation, or stock possessing more than five percent (5%) of the
total combined voting power of all stock of an Employer or Affiliate
(or having more than five percent (5%) of the capital or profits
interest in any Employer or Affiliate that is not a corporation,
determined under similar principles).
(D) A one-percent (1%) owner of an Employer or Affiliate having
aggregate annual compensation from all Employers or Affiliates of
more than $150,000. "One-percent owner" means any person who would be
described in paragraph (iii) of this Section 18.1.2 if "one percent
(1%)" were substituted for "five percent (5%)" in each place where it
appears in paragraph (iii), except that such substitution shall not
be made in applying section 318(a)(2) of the Code.
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18.1.3 For the purposes of this Article 18, "annual
compensation" means compensation as defined in section 415(c)(3) of
the Code, but including amounts contributed by an Employer or an
Affiliate pursuant to a salary reduction agreement which are
excludable from the employee's gross income under sections 125,
402(e)(3), 402(h)(1)(B) or 403(b) of the Code.
18.1.4 In any Plan Year starting after 1983 or thereafter during
which the sum, for all Key Employees (as defined in Section 18.1.2
for this Plan and as defined in section 416(i) of the Code for each
other Applicable Plan) if the present value of the cumulative accrued
benefits under all Applicable Plans which are defined benefit plans
(determined based on the actuarial assumptions set forth in the "top
heavy" provisions of such plans) and the aggregate of the accounts
under all Applicable Plans which are defined contribution plans,
exceeds sixty percent (60%) of a similar sum determined for all
participants in such plans (but excluding participants who are former
Key Employees), the Plan shall be deemed "Top Heavy."
18.1.5 For the first Plan Year, the determination as to whether
this Plan is "Top Heavy" shall be made on the last day of such Plan
Year, and for each succeeding Plan Year the determination as to
whether this Plan is "Top Heavy" shall be made on the last day of the
preceding Plan Year (the "Determination Date"); and other plans shall
be included in determining whether this Plan is "Top Heavy" based on
the determination date for each such plan which occurs in the same
calendar year as such determination date for this Plan.
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18.1.6 A Participant's Accounts under this Plan as of any
determination date shall be determined without regard to amounts
allocated as of that date based on contributions made after such
date.
18.1.7 Subject to Section 18.1.8, distributions from the Plan or
any other Applicable Plan during the 5-year period ending on the
applicable Determination Date shall be taken into account in
determining whether the Plan is "Top Heavy."
18.1.8 For Plan Years beginning on or after January 1, 1985, any
accrued benefit shall not be taken into account with respect to any
individual who has not performed any service at any time during the
5-year period ending on the applicable Determination Date for an
Employer or Affiliate maintaining this Plan or any other Applicable
Plan.
18.1.9 Amounts attributable to rollover contributions or similar
transfers to this Plan or any other Applicable Plan shall not be
taken into account except to the extent provided in applicable
regulations.
18.1.10 The terms "Key Employee" and "Participant" include their
beneficiaries.
18.2 Provisions Applicable in "Top Heavy" Years. For any Plan Year in
which the Plan is deemed to be "Top Heavy," the following provisions shall
apply:
18.2.1 The amount of Employer contributions and forfeitures
which shall be allocated to the account of any active Participant who
(i) is employed by an Employer or Affiliate on the last date of the
Plan Year and (ii) is not a Key Employee shall be (x) at least three
percent (3%) of such Participant's compensation (as defined in
section 415 of
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the Code) for such Plan Year, or, (y) if less, an amount equal to
such compensation multiplied by the highest contribution rate for any
key employee. For purposes of this Section 18.2.1, the contribution
rate for each individual Key Employee shall be determined by dividing
the contributions and forfeitures allocated to such Key Employee's
account, including amounts allocated under defined contribution plans
required to be aggregated with this Plan to determine whether it is
"Top Heavy;" provided, however, that clause (y) above does not apply
if any such plan enables a defined benefit plan required to be so
aggregated to meet the requirements of section 401(a)(4) or 410 of
the Code. The minimum allocation provisions of this Section 18.2.1
shall, to the extent necessary or appropriate, be deemed satisfied in
whole or in part by benefits to the Participant provided under any
other plan maintained by an Employer or Affiliate (whether or not an
Applicable Plan).
18.2.2 For purposes of complying with the provisions of section
415(e) of the Code, the 1.25 under section 415(e) is reduced to 1.00
unless the following conditions are met:
(i) the percentage described in Section 18.1.4 does not
exceed ninety percent (90%), and
(ii) "four percent (4%)" is substituted for "three percent
(3%)" in Section 18.2.1. Notwithstanding any other provisions of
this Plan, if the sum of the fractions described in sections
415(e)(2) and (3) of the Code as applied to this Plan,
calculated by substituting "100%" for "125%" in each such
section, for any Participant exceeds 100% for the last Plan Year
before the
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Plan becomes "Top Heavy," such fractions shall be adjusted, in
accordance with applicable regulations, so that their sum does
not exceed 100% for such Plan Year.
18.2.3 Six-Year Graded Vesting. Any Participant who has at least
one Hour of Service after the Plan becomes "Top Heavy" shall be
vested in his Matching Contributions Account on a basis at least as
favorable as is provided under the following schedule:
Years of Employment Percentage Vested
------------------- ------------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
In any Plan Year in which the Plan is not deemed to be "Top Heavy," the minimum
vested percentage shall be no less than that which was determined as of the
last day of the last Plan Year in which the Plan was deemed to be "Top Heavy."
18.2.4 The provisions of Sections 18.2.1 and 18.2.2 shall not
apply to any employee included in a unit of employees covered by a
collective bargaining agreement if retirement benefits were the
subject of good faith bargaining.
18.3 Inapplicability in the Event of Change in Law. In the event that
any provision of this Article 18 is no longer required to qualify this Plan
under the Code, then such provision shall thereupon be void without the
necessity of further amendment of the Plan.
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ARTICLE 19
Termination, etc. Prior to Amendment
Notwithstanding any other provision of this Plan, but subject to any
provision hereof which has an express effective date earlier than January 1,
1989, the benefits (if any) payable in respect of any Participant in the Plan
who retired, terminated employment or died prior to January 1, 1989 shall be
determined under the applicable provisions of the Plan as in effect at the
relevant time or times prior to such date. Any such individual shall be a
Participant under this Plan solely with respect to such benefits, unless he
shall again become a Participant pursuant to the provisions of Article 2
hereof.
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ARTICLE 20
401(k) Deferral and 401(m) Contributions Tests
20.1 Definitions. For the purposes of this Article the following words
shall have the following meanings:
20.1.1 "Elective Deferrals" means elective deferrals within the
meaning of section 402(g)(3) of the Code.
20.1.2 "Excess Aggregate Contributions" means excess aggregate
contributions within the meaning of section 401(m)(6)(B) of the Code.
20.1.3 "Excess Contributions" means excess contributions within
the meaning of section 401(k)(8)(B) of the Code.
20.1.4 "Excess Elective Deferrals" means those Elective
Deferrals that are includible in a Participant's gross income under
section 402(g) of the Code to the extent such Participant's Elective
Deferrals for a taxable year exceed the dollar limitation under such
Code section.
20.2 Maximum Amount of Elective Deferrals. Notwithstanding anything to
the contrary herein, the amount of Elective Deferrals made with respect to any
individual during a calendar year under the Plan and all other plans, contracts
or arrangements of an Employer or an Affiliate may not exceed the amount of the
limitation in effect under section 402(g)(1) of the Code for taxable years
beginning in such calendar year. Such limit shall not apply to any such
Elective Deferrals made which are amounts attributable to service performed by
such Participant prior to January l, 1987.
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20.3 Distribution of Excess Elective Deferrals. A Participant may
assign to the Plan any Excess Elective Deferrals made during a taxable year of
the Participant by notifying the Committee on or before March 1 following the
close of such taxable year of the amount of the Excess Elective Deferrals to be
assigned to the Plan. A Participant is deemed to notify the Administrative
Committee of any Excess Elective Deferrals that arise by taking into account
only those Elective Deferrals made to this Plan and any other plans of his
Employer. Notwithstanding any other provision of the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15 following such taxable year to any
Participant to whose account Excess Elective Deferrals were assigned for the
preceding year and who claims Excess Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be treated as annual additions under the Plan,
unless such amounts are distributed no later than the first April 15 following
the close of the Participant's taxable year.
20.4 Actual Deferral Percentage Test. Pre-Tax Contributions hereunder
shall not exceed the limits set forth in section 401(k)(3) of the Code. For
purposes of applying such limits, section 401(k) of the Code and the Treasury
regulations thereunder are incorporated herein by reference.
20.5 Distribution of Excess Contributions: Recharacterization.
20.5.1 Notwithstanding any other provision of the Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of any Plan Year
beginning after December 31, 1987 to Participants to whose Accounts
Pre-Tax Contributions were allocated for the preceding Plan Year. The
Excess Contributions shall be adjusted for income or loss up to the
date of distribution. The income or loss allocable to Excess
Contributions shall be determined by multiplying the income or loss
allocable to the Participant's
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Pre-Tax Contributions for the Plan Year by a fraction, the numerator
of which is the Excess Contribution on behalf of the Participant for
the preceding Plan Year and the denominator of which is the sum of
the Participant's account balances attributable to Pre-Tax
Contributions on the last day of the preceding Plan Year. Amounts
distributed under this Section 20.5.1 shall be made from the
Participant's Pre-Tax Contribution Accounts in proportion to the
Participant's Pre-Tax Contributions for the Plan Year.
20.5.2 A Participant may treat his Excess Contributions as an
amount distributed to the Participant and then contributed by the
Participant to the Plan as Post-Tax Contributions. Such
recharacterized amounts will remain nonforfeitable and subject to the
same distribution requirements as Pre-Tax Contributions. Amounts may
not be recharacterized by a Highly Compensated Employee to the extent
that such amount in combination with other Post-Tax Contributions and
Matching Contributions made by or with respect to that Employee would
exceed any limit under Section 20.6 or section 402(g) of the Code.
Recharacterization must occur no later than two and one-half months
after the last day of the Plan Year in which the Excess Contributions
arose and is deemed to occur no earlier than the date the last Highly
Compensated Employee is informed in writing of the amount which may
be recharacterized and the consequences thereof.
20.6 Actual Contributions Percentage Test.
20.6.1 Matching Contributions and Post-Tax Contributions
hereunder shall not exceed the limits set forth in section 401 (m) of
the Code. For purposes of applying such limits, section 401(m) of the
Code and the regulations thereunder are incorporated herein by
reference.
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20.6.2 Contributions made by or on behalf of Highly Compensated
Employees shall not exceed the limits imposed upon multiple use of
the alternative limitation by section 401(m)(9) of the Code. For this
purpose, section 401(m)(9) of the Code and Treasury regulation
section 401(m)-2(b) are incorporated herein by reference. If one or
more Highly Compensated Employees' contributions exceed the multiple
use limit, then the actual contribution ratio ("ACR") of Highly
Compensated Employees shall be reduced (starting with such Highly
Compensated Employee whose ACR is the highest) so that the limit is
not exceeded. The amount of any such reduction shall be treated as an
Excess Aggregate Contribution. The actual deferral ratio ("ADR") and
ACR of Highly Compensated Employees shall be determined hereunder
after any adjustments required to pass the tests described in
Sections 20.4 and 20.6.1. Multiple use shall not occur if the actual
deferral percentage ("ADP") and the actual contributions percentage
("ACP") (as such terms are defined in the regulations under sections
401(k) and 401(m) of the Code, respectively) of Highly Compensated
Employees is not greater than 125 percent of the ADP and ACP of
Employees who are not Highly Compensated Employees.
20.7 Distribution of Excess Aggregate Contributions. Notwithstanding
any other provision of this Plan, Excess Aggregate Contributions, plus any
income and minus any loss allocable thereto, shall be forfeited, if
forfeitable, or if not forfeitable, distributed no later than the last day of
each Plan Year beginning after December 31, 1987, to Participants to whose
accounts Post-Tax or Company Contributions were allocated for the preceding
Plan Year. The Excess Aggregate Contributions shall be adjusted for income or
loss. The income or loss allocable to Excess Aggregate Contributions shall be
determined by multiplying the income or loss allocable to the Participant's
Post-Tax and Company Contributions for the Plan Year by a fraction, the
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numerator of which is the Excess Aggregate Contributions on behalf of the
Participant for the preceding Plan Year and the denominator of which is the sum
of the Participant's account balance attributable to Post-Tax and Company
Contributions, and any other employee and matching contributions within the
meaning of section 401(m) of the Code, on the last day of the preceding Plan
Year. Excess Aggregate Contributions shall be distributed from the
Participant's Post-Tax Contribution Account, and forfeited if otherwise
forfeitable under the terms of the Plan (or, if not forfeitable, distributed)
from the Participant's Company Account in proportion to the Participant's
Post-Tax and Company Contributions for the Plan Year. The determination of the
Excess Aggregate Contributions shall be made after first determining the Excess
Elective Deferrals and then determining the Excess Contributions.
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ARTICLE 21
Rollover Contributions
21.1 Rollover Contributions. This Article applies to rollover
contributions made by a Participant to the Plan. The Administrative Committee
may authorize, in its sole discretion, a Participant to contribute any portion
of an "eligible rollover contribution" from another "eligible retirement plan"
(as such terms are defined in Article 22) on the Appropriate Form and in such
manner as the Administrative Committee may prescribe.
21.2 Rollover Account. Any such contribution by a Participant (and any
earnings, losses and expenses attributable thereto) shall be credited to a
separate "Rollover Account" on behalf of such Participant which reflects his
share of the Trust Fund attributable to such rollover contributions.
21.3 Investment Elections. A Participant may, by giving notice on the
Appropriate Form and within such time as the Administrative Committee may
prescribe designate the proportion of his Rollover Account, in any whole
percentage, which shall be allocated to and invested in any Investment Fund.
Any such election shall continue in effect until changed by a new designation
in accordance with the same procedures then in effect for any change in a
Participant's election as to Basic Contributions under Section 4.4, and may be
reallocated by the Participant in accordance with the provisions of Section
4.6.
21.4 Vesting: Withdrawals. Loans. Amounts in each Rollover Account
shall at all times be fully vested and shall not be subject to forfeiture
pursuant to any provision of this Plan. A Participant may withdraw the entire
balance of his Rollover Account in accordance with the
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provisions of Articles 6 and 7 as applicable to a Participant's Post-Tax
Contribution Account. Amounts in a Participant's Rollover Account shall be
taken into account for all purposes of any loan made to the Participant in
accordance with Section 6.7 and the participant loan program established
thereunder.
21.5 Suspension. The Administrative Committee may suspend the
authorization contained in this Article as to future rollover contributions,
provided, however that any such suspension shall not affect any Participant
rollover contribution to the Plan made prior to such suspension date.
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ARTICLE 22
Direct Rollover
22.1 This Article applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Article, a distributed may
elect, at the time and in the manner prescribed by the Administrative
Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributed in a
direct rollover.
22.2 Definitions.
22.2.1 Eligible Rollover Distribution. An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributed, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributed or the joint lives (or joint life expectancies) of the
distributed and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code;
and the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
22.2.2 Eligible Retirement Plan. An eligible retirement plan is
an individual retirement account described in section 408(a) of the
Code, an individual retirement
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annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of
an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
22.2.3 Distributee. A distributed includes an employee or former
employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
22.2.4 Direct Rollover. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributed.
IN WITNESS WHEREOF, and as evidence of the adoption of this amended
and restated Plan, the Company has caused this instrument to be executed by its
duly authorized officer this 10th day of November, 1997.
THE COSMETIC CENTER, INC.
By: /s/ I. HOWARD DIENER
-------------------------------
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SCHEDULE OF EMPLOYERS
The Cosmetic Center, Inc.
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THE COSMETIC CENTER RETIREMENT PLAN
Participant Loan Program
1. Participant Loans Authorized. Upon the application of a Participant at any
time prior to the Participant's termination of employment, the Administrative
Committee may, in its sole discretion, instruct the Trustee to make one or more
loans to such Participant from the Trust Fund, effective as soon as practicable
after the Administrative Committee shall receive such application (or in
accordance with such other procedures as the Administrative Committee may
prescribe); provided that such loan meets the requirements of this Program.
Loans made pursuant to this Program and payments thereof, including loan
expenses, as described below, shall be appropriately charged and credited
against first, the Participant's Basic Account, second, his Pre-IPO Matching
Contributions Account third, his Post-IPO Matching Contributions Account
fourth, his Company Matching Account fifth, his Company Stock Matching
Contributions Account and sixth, his Rollover Account. The loan request shall
be made on an Appropriate Form and within such time and pursuant to such manner
as the Administrative Committee may prescribe. The Administrative Committee
shall notify the Participant in writing within a reasonable time of the
approval or denial of such loan request. If a Participant obtains a loan under
this Program, his status as a Participant in the Plan and his rights with
respect to his Plan benefits shall not be affected, except to the extent that
the Participant has assigned his interests in his Accounts pursuant to Section
2. A Participant taking a loan pursuant to this Program shall not be eligible
to take another such loan more than once within any full twelve (12) calendar
month period following the date that such loan is approved; provided, however,
that the Administrative Committee may Adopt rules
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permitting more frequent loans, for example, where the Participant certifies in
writing to the Administrative Committee that the loan proceeds are to be used
to acquire a dwelling unit which, within a reasonable period of time, is to be
used as the principal residence of such Participant. A Participant shall not be
eligible to have more than two loans under this Program outstanding at any
time. All loans shall be granted according to rules applicable to all
participants on a uniform and nondiscriminatory basis.
2. Loan Requirements. A loan shall not be made to a Participant
pursuant to Section 1 unless such loan meets all of the following requirements:
2.1 Amount. Such loan must be in an amount that is not less than
one thousand dollars ($1,000), and not more than the lesser of (a)
fifty thousand dollars ($50,000), or (b) fifty percent (50%) of the
sum of the Participant's Basic Account and vested Pre-IPO Matching
Contributions Account, Post-IPO Matching Contributions Account,
Company Matching Account, Company Stock Matching Contributions
Account and Rollover Account at the time of the loan. In determining
the maximum amount of a loan under this Section 2.1, there shall be
added to any loan amount requested, the excess (if any) of the
highest outstanding balance of loans during the one-year period
ending on the day before the date on which such loan is made over the
outstanding balance on that date of all loans made to the Participant
from this Plan and from all other "qualified employer plans" (as
described in section 72(p)(4) of the Code) which are maintained by
the Company or any Employer or Affiliate referred to in section
72(p)(2)(D) of the Code. If any outstanding balance of a loan (other
than a loan made under this Program) is required to be taken into
account under the preceding sentence, the value of the Participant's
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vested interest under the plan from which such loan was made shall
also be taken into account under clause (b) of the first sentence of
this Section 2. 1.
2.2 Adequate Security. Such loan must be adequately secured by
an amount equal to fifty percent (50%) of the present value of the
Participant's vested interest in the Plan at the time of the loan and
such other or additional security as the Administrative Committee may
in its sole discretion require. The loan shall be secured first by
amounts in the Participant's Basic Account, second, by his Pre-IPO
Matching Contributions Account and, third, by his Post-IPO Matching
Contributions Account.
2.3 Interest. Such loan must bear interest, payable at annual
intervals (or more frequent intervals, if the Administrative
Committee so requires), at a reasonable rate as determined by the
Investment Committee from time to time in a nondiscriminatory manner
for such loans entered into for the relevant period and shall
otherwise conform to the repayment terms set forth in this Program.
2.4 Repayment Terms. The principal amount of any loan made
pursuant to this Program must be payable upon the earlier of the
following dates: (a) the expiration of a fixed term to be determined
by the Administrative Committee but not to exceed five (5) years from
the date of the loan, unless the Participant certifies in writing to
the Administrative Committee that the loan proceeds are to be used to
acquire a dwelling unit which, within a reasonable period of time, is
to be used as the principal residence of such Participant, in which
case, the loan shall be repaid over a period not to exceed ten years
from the date of such loan; and (b) the date on which distribution is
made or otherwise commences following the Participant's Termination
of Employment. Such repayment shall be made in substantially level
installments of principal and
94
<PAGE>
interest which the Participant shall authorize to be paid, to the
extent practicable, by payroll deductions, which payroll deductions
shall not exceed 15% of the Participant's salary per pay period.
Notwithstanding the foregoing, a Participant shall have the right to
repay all of such principal and/or interest amount without penalty at
any time. In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable event
occurs in the Plan.
2.5 Promissory Note and Loan Agreement. A loan granted pursuant
to this Program shall be evidenced by a promissory note as contained
in an Appropriate Form executed by the Participant and containing
such terms and provisions as the Committees shall determine. Such
loan must also be made pursuant to a loan agreement executed by the
Participant on an Appropriate Form containing such terms and
provisions as the Committees shall determine. The occurrence of any
event of default under the loan note shall entitle the Trustee of the
Plan to reduce the balance of the Participant's Accounts up to the
amount of the Plan's security interest therein. The loan note shall
be an asset solely of the borrowing Participant's Accounts and
interest on the loan shall be credited to his Accounts.
3. Loan Expenses. Any fees, taxes, charges or other expenses
(including without limitation any asset liquidation charge or similar
extraordinary expense) incurred in connection with a loan shall be charged
against the Accounts of the Participant obtaining such loan.
4. Loan Fund. Prior to receiving the proceeds of a loan, the
Participant shall direct that funds in an amount equal to the loan amount be
transferred from the Participant's Accounts in which it is invested, in a
proportion elected by the Participant, to a special loan fund established by
the Investment Committee (consisting solely of that Participant's loans)
established for
95
<PAGE>
purposes of disbursing the loan amount to the Participant. Any such transfer
shall be disregarded for purposes of any transfer limitations under Program of
the Plan.
5. Source of Funds. Any Participant who enters into an agreement to
effect a Participant loan shall be deemed to have redesignated his existing
Accounts balances in a manner similar to that provided for in Section 5.6 of
the Plan, so that an amount equal to the initial amount of any such Participant
loan is invested in the Participant's loan fund immediately coincident with the
effective date of such Participant loan. Amounts redesignated in accordance
with the preceding sentence shall be charged against each Investment Fund (to
the extent available) that the Participant's Accounts are then invested in on a
pro rata basis, except as the Participant may otherwise direct.
6. Reallocation to Other Investment Funds. Payments of principal and
interest on a Participant's loan shall be initially deposited in the
Participant's loan fund for allocation to such Participant's Accounts and shall
be reallocated as soon as administratively practicable following such deposit
to such other Investment Fund or Funds as the Participant shall have then
designated for investment of his Basic Account in accordance with the
provisions of Section 5.4 of the Plan or as otherwise directed by the
Participant.
7. Suspension. Notwithstanding any other provision of this Plan, the
Administrative Committee may suspend the authorization contained in this
Program as to future Participant loans, provided, however that any such
suspension shall not affect any Participant loan then outstanding.
96
<PAGE>
8. Compliance with Applicable Laws. The Committees shall take actions
as they, upon the advice of counsel, may deem appropriate in order to assure
full compliance with all applicable laws and regulations relating to
Participant loans and the granting and repayment thereof.
9. Loans Available on Nondiscriminatory Basis.
(a) All loans made pursuant to this Program shall be made
available to all Participants on a reasonably equivalent,
nondiscriminatory basis.
(b) Notwithstanding the preceding provisions of this Program,
loans may be made to a Participant who is, at the time of the loan,
both a former employee and a "party in interest" as defined in
section 3(14) of ERISA with respect to the Plan. In the case of any
such loan, the preceding provisions of this Program dealing with
payment by payroll deduction and acceleration on termination of
employment shall not be applicable. The provisions of this Section
9(b) shall apply only if and to the extent required by ERISA section
408 or Code section 4975.
(c) Loans shall not be made available to highly compensated
employees (as defined in Code section 414(q)) in an amount greater
than the amount made available to other employees.
97
<PAGE>
EXHIBIT 10.17
-------------
THE COSMETIC CENTER, INC. EXECUTIVE DEFERRED COMPENSATION PLAN
Effective January 1, 1998
1. PURPOSE
-------
The purpose of The Cosmetic Center, Inc. Executive Deferred
Compensation Plan (the "Plan") is to enable a select group of management and
highly compensated executives of The Cosmetic Center, Inc. (or any successor
thereof) (the "Company") and its subsidiaries and affiliates (individually and
collectively, as the context may require, the "Company"), to defer compensation
in accordance with the terms and conditions set forth herein.
2. ADMINISTRATION
--------------
(a) The Plan shall be administered by the Board of Directors
of the Company or by a committee of two or more persons appointed by such Board
(the Board serving in such function, or such committee, hereinafter called the
"Committee").
(b) The Committee shall have full power and authority to
administer the Plan and otherwise to perform the duties and responsibilities
specified hereunder. Without limitation by way of specification, the Committee
shall have the following specific powers and duties:
(i) to determine the employees who, from time to
time, shall be eligible to participate in the Plan in accordance with Section 4;
(ii) to interpret the provisions of the Plan and make
any and all determinations arising thereunder;
(iii) to maintain such records as it shall deem
necessary or appropriate for the proper administration of the Plan; and
(iv) to establish such rules and procedures not
inconsistent with the terms of the Plan as it shall deem necessary or
appropriate to effectuate the purpose of the Plan.
3. PLAN YEAR
---------
The Plan Year shall be each calendar year.
<PAGE>
4. ELIGIBLE EMPLOYEES
------------------
The Committee shall determine, during the Plan Year and prior to the
Deferral Election Date (as defined in Section 5(e)), the employees who shall be
eligible to participate in the Plan for each such Plan Year and shall notify
such employees in writing at such time during each such Plan Year as the
Committee may determine. Initially, as of the effective date of January 1,
1998, eligible employees shall consist of those employees identified by the
Company, who are actively employed as of August 1, 1997, and who have been
notified in writing of their eligibility to participate in the Plan.
5. COMPENSATION DEFERRALS
----------------------
(a) Subject to such restrictions and limitations as the
Committee may impose, each participant may elect, in writing on a form or forms
prescribed by the Committee ("Election Form") and at the time prescribed below,
to have the participant's employer defer payment of a maximum of 10% of their
annual base salary otherwise payable to the participant with respect to the
calendar year that would otherwise be payable to the participant but for the
participant's election hereunder.
(b) Each Election Form filed by the participant shall
specify, with respect to the compensation deferred thereby, the form in which
such deferred payments are to be made.
(c) A participant shall receive the payment of the deferred
amount upon termination of employment or Retirement (as defined in Section 7(b)
hereof)
(d) Except as otherwise provided herein, the form of payment
may be (i) a lump sum payment or (ii) any other form requested by the
participant and to which the Committee consents. If no form of payment is
specified on the Election Form, payment shall be made in a lump sum.
(e) For purposes of the Plan, the Deferral Election Date for
a Plan Year shall be the date established by the Committee, provided such date
is no later than the last day of the calendar year immediately preceding the
year for which such election is effective.
6. DEFERRED COMPENSATION ACCOUNT
-----------------------------
The Committee shall establish a memorandum account ("Deferred
Compensation Account") for each participant in the Plan. A participant's
Deferred Compensation Account shall be (i) credited with all amounts deferred
by the participant under the Plan as of the date such amounts would otherwise
have become payable to such participant, (ii)
<PAGE>
increased to reflect the applicable interest rate, as described in Section 7,
and (iii) charged with any distributions made with respect to the participant
pursuant to Section 7.
7. PAYMENT OF DEFERRED COMPENSATION
--------------------------------
(a) Except as otherwise provided in paragraphs (b) and (c)
below, the portion of a participant's Deferred Compensation Account relating to
any year's deferral of annual base salary, plus interest thereon computed in
accordance with paragraph (b) or (c) below, as applicable, shall be paid to the
participant by the Company at the time and in the manner specified in the
election form executed and filed by the participant with respect to such
deferral. Amounts remaining unpaid at the participant's death shall be paid to
the participant's beneficiary in accordance with Section 8.
(b) A participant's Deferred Compensation Account shall be
paid to the participant upon the earlier of Retirement (as defined below) or
upon termination of employment with the Company. Such portion shall be paid
together with interest accrued thereon, determined as if the funds had been
invested in shares of mutual funds selected by the Company or, in the
discretion of the Company, as if invested in shares of common stock of the
Company. "Retirement" shall occur when a participant leaves employment with the
Company and is eligible to receive an early or a normal retirement benefit
under The Cosmetic Center Employee Retirement Plan at the time that the
participant departs from the Company.
(c) If any portion of a participant's Deferred Compensation
Account is paid to the participant on account of the participant's voluntary
termination of employment other than for Retirement, or termination of
employment by the participant's employer for "misconduct" then such portion
shall be paid together with interest accrued thereon as provided in Section
7(b) of this Plan.
(d) For purposes of Sections 7(b) and (c) hereof "misconduct"
shall be defined as any action taken by a Participant (whether during active
employment or following retirement or termination of employment with the
Company) which is inimical to the Company's interests, as determined by the
Company in its sole discretion.
(e) In the event that a participant incurs an unforeseeable
emergency the Committee, in its sole discretion and upon written application of
such participant to the Committee, may authorize immediate payment of all or a
portion of such participant's Deferred Compensation Account, including interest
accrued thereon, as provided in Section 7(b) of this Plan, provided that such
payment shall in no event exceed the amount necessary to alleviate such
unforeseeable emergency. For purposes of this Plan, an unforeseeable emergency
is an unanticipated emergency that is caused by an event beyond the control of
the participant and that would result in severe financial hardship to the
participant if early withdrawal were not permitted.
<PAGE>
8. DESIGNATION OF BENEFICIARY
--------------------------
A participant may designate a beneficiary or beneficiaries to receive
after the participant's death any amount due to the participant hereunder by
executing a form prescribed by the Committee and delivering it to the Committee
at any time prior to the participant's death, and providing on such form the
manner in which any such death benefits are to be paid. A participant may
revoke or change the participant's beneficiary designation without the
beneficiary's consent by executing a new form and delivering it to the
Committee at any time and from time to time prior to the participant's death.
If a participant shall have failed to designate a beneficiary, or if no such
beneficiary shall survive the participant, then such amounts shall be paid to
the participant's estate. Payment shall be made in a lump sum as soon as
practicable following the participant's death.
9. OTHER EMPLOYEE BENEFITS
-----------------------
Any compensation deferred and any interest thereon paid under this
Plan shall not be includable in creditable compensation in computing benefits
under any employee benefit plan of the Company or its affiliates or
subsidiaries, except to the extent expressly provided for thereunder.
10. NO RIGHT TO EMPLOYMENT
----------------------
Nothing contained herein shall be construed as conferring upon any
participant the right to continue in the employ of the Company.
11. DEFERRED COMPENSATION AS AN UNSECURED PROMISE; INSOLVENCY
---------------------------------------------------------
(a) The Company shall not be required to segregate
any funds representing the Deferred Compensation Accounts of participants
hereunder, and nothing in this Plan shall be construed as providing for such
segregation.
(b) Nothing in this Plan, and no action taken
pursuant to its terms, shall create or be construed to create a trust or escrow
account of any kind, or a fiduciary relationship between the Committee or the
Company and any participant, beneficiary or any other person. The participants
and their beneficiaries and any other persons entitled to payment hereunder
shall rely solely on the unsecured promise of the Company to make the payments
required hereunder, but shall have the right to enforce such a claim as an
unsecured general creditor of the Company.
(c) No Plan participant (or a beneficiary) shall
have any preferred claim on, or any beneficial ownership interest in, any
assets of the Company. Any rights created under this Plan shall be mere
unsecured contractual rights of Plan participants (or their beneficiaries)
against the Company. Any assets held by the Company will be subject
<PAGE>
to the claims of the Company's general creditors under federal and state law if
the Company is insolvent (as defined in paragraph (d) below).
(d) If at any time the Committee has determined that
the Company is insolvent, the Committee shall discontinue payments to the Plan
participants (or their beneficiaries). The Company shall be considered
"insolvent" for purposes of this Plan if (I) the Committee determines that the
Company is unable to pay its debts as they become due, (ii) the Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code, or (iii) the Company is determined to be insolvent by the applicable
federal and /or state regulatory agency. At all times during the continuance of
the Plan, all amounts deferred under the Plan including any applicable interest
shall be subject to the claims of the general creditors of the Company under
federal and state law. The Committee shall resume payments to Plan participants
(or their beneficiaries) in accordance with the terms of this Plan only after
the Committee has determined that the Company is not insolvent (or is no longer
insolvent). Provided that there are sufficient assets, if the Committee
discontinues payments to Plan participants and subsequently resumes such
payments, the first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or their
beneficiaries under the terms of this Plan for the period of such
discontinuance, less the aggregate amount of any payment made to Plan
participants (or their beneficiaries ) by the Company or any employer in lieu
of the payments provided for hereunder during any such period of
discontinuance.
12. WITHHOLDING
-----------
The Committee shall make provision for the reporting and withholding
of any U.S. federal, state or local taxes that may be required to be withheld
with respect to the payments or the amounts deferred by a participant under
this Plan and shall pay amounts withheld to the appropriate taxing authorities
or determine that such amounts have been reported, withheld and paid by the
company.
13. NO ASSIGNMENT
-------------
Amounts payable to any participant, beneficiary, or any other person
entitled to any payment hereunder may not be transferred, assigned (either at
law or in equity), anticipated, mortgaged, alienated, pledged, or otherwise
encumbered or subject to attachment, garnishment, levy, execution or other
legal or equitable process, whether or not voluntary, in advance of any such
payment and any attempt to do any of the foregoing shall be void. Except to the
extent required by law, no payment shall be subject to seizure for the payment
of public or private debts, judgments, alimony or separate maintenance, or be
transferable by operation of law in event of bankruptcy, insolvency or
otherwise.
<PAGE>
14. OBLIGATIONS TO THE COMPANY
--------------------------
If a participant or beneficiary becomes entitled to a payment under
this Plan, and if at such time the participant has outstanding any debt,
obligation, or other liability representing an amount owed to the Company, the
amount of such indebtedness or claim may be set off against the amounts
remaining to be paid to the participant or the participant's beneficiary.
Consent to such reduction or set off shall be evidenced by the participant's
signature on the Election Form.
15. AMENDMENT AND TERMINATION
-------------------------
The Company reserves the absolute right to amend or terminate the
Plan, in whole or in part, at any time and from time to time without prior
notice to any participant or beneficiary; provided that unless otherwise agreed
to by the participant no such amendment or termination shall affect the right
of any participant or beneficiary hereunder to receive payment of any amounts
deferred hereunder, together with interest thereon, prior to the date of such
amendment or termination, in accordance with the previously applicable
provisions of the Plan. Notwithstanding any other provision of this Plan, upon
termination of the Plan, the Company may, in its sole discretion, make
distribution of payments to all participants in such manner as the Company
shall determine.
16. NO THIRD PARTY RIGHTS
---------------------
Nothing in this Plan shall be construed to create any rights hereunder
in favor of the beneficiary of any participant prior to the participant's death
or in favor of any other person (other than the Company and any participant) or
to limit the Company's right to amend or terminate the Plan in any manner to
the extent provided in Section 15, notwithstanding that such amendment or
termination might adversely affect potential rights of beneficiaries under the
Plan.
17. CLAIMS PROCEDURE
----------------
The Committee establishes the following claims procedures in
accordance with applicable law in order to afford a reasonable opportunity to
any participant or beneficiary whose claim for payments under the Plan has been
denied for a full and fair review of the decision denying such claim. If a
claim for payments under the Plan is denied in whole or in part, the
participant (or beneficiary in the case the participant's death) will receive
written notification from the Committee. The notification will include the
specific reasons for the denial, a description of any additional information
needed to perfect the claim and an explanation of the claim review procedure.
Within 90 days after receiving the denial, the participant or beneficiary or a
duly authorized representative may submit a written request for reconsideration
of the claim to the Committee in accordance with Section 18. Any such request
should be accompanied by documents or records in support of the
<PAGE>
appeal. The participant or beneficiary may review pertinent documents and
submit issues and documents in writing. If more time is needed, the Committee
may allow more than 90 days to file the request for review. The Committee will
review the claim and by its next scheduled meeting will provide a written
response to the appeal, explaining the reasons for the decision and the
specific provision(s) on which the decision was based. If the appeal is filed
within 30 days of the next scheduled Committee meeting, and there is not
sufficient time for review, the Committee will notify the participant or
beneficiary that the decision will be delayed until the next scheduled meeting.
The Committee shall have the exclusive right to determine any questions arising
in connection with the interpretation, application or administration of the
Plan, and its determination shall be conclusive and binding upon all parties
concerned including, without limitation, any participant or beneficiary.
18. NOTICE
------
Any notice required or permitted to be made under this Plan shall be
sufficient if in writing and delivered, or sent by registered or certified
mail, to (i) in the case of notice to the Company or the Committee, the
principal office of the Company, directed to the attention of the Secretary of
the Committee, and (ii) in the case of a participant or the participant's
beneficiary, the participant's (or such beneficiary's) mailing address
maintained in the Company's personnel records. Such notice shall be deemed
given as of the date of delivery or, if delivery is made by mail, as of the
date shown on the postmark or on the receipt for registration certification.
19. VALIDITY
--------
In the event any provision of this Plan is held invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Plan.
20. DISTRIBUTION OF PLAN AND AMENDMENTS: ACKNOWLEDGMENTS
-----------------------------------------------------
(a) The Committee shall furnish each participant with a copy of this
Plan prior to the participant's initial deferral election hereunder. In
addition, the Committee shall furnish each participant, or in the case of a
deceased participant, the participant's beneficiary, with a copy of any
amendment of this Plan.
(b) Each participant, prior to or simultaneously with the
participant's initial deferral election, shall acknowledge receipt of a copy of
the Plan. Such acknowledgment shall constitute an agreement by the participant
that the participant, the participant's beneficiary and any representatives
shall be bound by all of the terms and conditions of the Plan.
<PAGE>
21. GOVERNING LAW
-------------
Except to the extent preempted by Federal law, this Plan shall be
governed by and construed in accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the Company has caused this The Cosmetic Center,
Inc. Executive Deferred Compensation Plan to be adopted on this 10th day of
December, 1997.
THE COSMETIC CENTER, INC.
BY: /s/ I. HOWARD DIENER
------------------------------
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 13
day of February, 1998.
/s/ JERRY W. LEVIN
--------------------------
JERRY W. LEVIN
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 13
day of February, 1998.
/s/ DAVID N. DINKINS
----------------------------
DAVID N. DINKINS
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 17
day of March, 1998.
/s/ DONALD G. DRAPKIN
-------------------------------
DONALD G. DRAPKIN
<PAGE>
EXHIBIT 24.4
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 17
day of March, 1998.
/s/ GEORGE FELLOWS
--------------------------------
GEORGE FELLOWS
<PAGE>
EXHIBIT 24.5
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form
10-K for the year ended December 27, 1997 (the "Form 10-K") under the
Securities Exchange Act of 1934, as amended, including, without limiting the
generality of the foregoing, to sign the Form 10-K in the name and on behalf of
the Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 18
day of February, 1998.
/s/ WILLIAM J. FOX
------------------------------
WILLIAM J. FOX
<PAGE>
EXHIBIT 24.6
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 17
day of March, 1998.
/s/ RICHARD E. HALPERIN
---------------------------------
RICHARD E. HALPERIN
<PAGE>
EXHIBIT 24.7
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 17
day of February, 1998.
/s/ WADE H. NICHOLS III
--------------------------------
WADE H. NICHOLS III
<PAGE>
EXHIBIT 24.8
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Beverly L. Brown, Robert K. Kretzman, Lawrence
E. Kreider and Joram C. Salig or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
his name, place and stead, in any and all capacities, in connection with the
THE COSMETIC CENTER, INC. (the "Corporation") Annual Report on Form 10-K for
the year ended December 27, 1997 (the "Form 10-K") under the Securities
Exchange Act of 1934, as amended, including, without limiting the generality of
the foregoing, to sign the Form 10-K in the name and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument, contract,
document or other writing, of or in connection with the Form 10-K or amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
17th day of February, 1998.
/s/ HARVEY ROSENTHAL
------------------------------------
HARVEY ROSENTHAL
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Cosmetic Center, Inc.'s December 27, 1997 financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 5,359
<SECURITIES> 0
<RECEIVABLES> 1,320
<ALLOWANCES> 2
<INVENTORY> 88,976
<CURRENT-ASSETS> 98,713
<PP&E> 14,172
<DEPRECIATION> (9,832)
<TOTAL-ASSETS> 118,410
<CURRENT-LIABILITIES> 29,449
<BONDS> 52,209
0
0
<COMMON> 100
<OTHER-SE> 34,587
<TOTAL-LIABILITY-AND-EQUITY> 118,410
<SALES> 159,045
<TOTAL-REVENUES> 159,045
<CGS> 109,891
<TOTAL-COSTS> 109,891
<OTHER-EXPENSES> 50,164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,722
<INCOME-PRETAX> (4,732)
<INCOME-TAX> 115
<INCOME-CONTINUING> (4,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,847)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
