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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 31, 1996
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 33-99558
REVLON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3662955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 527-4000
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 A COMMON STOCK NEW YORK STOCK EXCHANGE, INC.
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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 FEBRUARY 12, 1997, 19,875,000 SHARES OF CLASS A COMMON STOCK AND
31,250,000 SHARES OF CLASS B COMMON STOCK WERE OUTSTANDING. 11,250,000 SHARES
OF CLASS A COMMON STOCK AND ALL OF THE SHARES OF CLASS B COMMON STOCK WERE HELD
BY REVLON WORLDWIDE CORPORATION, AN INDIRECTLY WHOLLY OWNED SUBSIDIARY OF MAFCO
HOLDINGS INC. THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S CLASS A COMMON
STOCK HELD BY NON-AFFILIATES (USING NEW YORK STOCK EXCHANGE, INC. CLOSING PRICE
AS OF FEBRUARY 12, 1997) WAS APPROXIMATELY $307,266,000.
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ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
REVLON, Inc. (and together with its subsidiaries, the "Company")
operates in a single business segment with many different products, which
include an extensive array of glamorous, exciting and innovative cosmetics and
skin care, fragrance, personal care and professional products. REVLON is one of
the world's best known names in cosmetics and is a leading mass market
cosmetics brand. The Company's vision is to provide glamour, excitement and
innovation through quality products at affordable prices. To pursue this
vision, the Company's management team combines the creativity of a cosmetics
and fashion company with the marketing, sales and operating discipline of a
consumer packaged goods company. The Company believes that its global brand
name recognition, product quality and marketing experience have enabled it to
create one of the strongest consumer brand franchises in the world, with
products sold in approximately 175 countries and territories. The Company's
products are marketed under such well-known brand names as REVLON, COLORSTAY,
REVLON AGE DEFYING, ALMAY and ULTIMA II in cosmetics; MOON DROPS, ETERNA 27,
REVLON RESULTS, ALMAY TIME-OFF, ULTIMA II, JEANNE GATINEAU and NATURAL HONEY in
skin care; CHARLIE, FIRE & ICE, CIARA, CHERISH, and JONTUE in fragrances; FLEX,
OUTRAGEOUS, AQUAMARINE, MITCHUM, COLORSILK, JEAN NATE, BOZZANO and COLORAMA in
personal care products; and ROUX FANCI-FULL, REALISTIC, CREME OF NATURE,
FERMODYL, VOILA, COLOMER, CREATIVE NAIL DESIGN SYSTEMS and AMERICAN CREW in
professional products. To further strengthen its consumer brand franchises, the
Company markets each core brand with a distinct and uniform global image
including packaging and advertising, while retaining the flexibility to tailor
products to local and regional preferences.
The Company was founded by Charles Revson, who revolutionized the
cosmetics industry by introducing nail enamels matched to lipsticks in fashion
colors 65 years ago. Today, the Company has leading market positions in many of
its principal product categories in the United States self-select distribution
channel. The Company's leading market positions for its REVLON brand products
include the number one positions in the United States self-select distribution
channel in lip makeup and nail enamel (which the Company has occupied for the
past 20 years) for 1996. The Company has the number two position in face makeup
in the United States self-select distribution channel for 1996. Propelled by
the success of its new product launches and share gains in its existing product
lines, the Company has captured the number one position overall in color
cosmetics (consisting of lip, eye and face makeup and nail enamel) in the
United States self-select distribution channel, where its market share was
21.5% for 1996. The Company also has leading market positions in several
product categories in certain markets outside of the United States, including
in Brazil, Canada, South Africa and Australia.
The self-select distribution channel, in which consumers select their
own purchases without the assistance of an in-store demonstrator, includes in
the United States independent drug stores and chain drug stores (such as
Walgreens, CVS Drug stores, Eckerd Drug stores and Revco), mass volume
retailers (such as Wal-Mart, Target Stores and Kmart) and supermarkets and
combination supermarket/drug stores (such as Pathmark, Albertson's, Kroger's
and Smith's) and, internationally, Boots in the United Kingdom and Western
Europe, and Shoppers Drug Mart in Canada.
The Company operates in a single business segment with many different
products, which include cosmetics and skin care, fragrance and personal care
products ("consumer products"), and hair and nail care products principally for
use in and resale by professional salons ("professional products"). To reflect
the integration of management reporting responsibilities culminating in the
third quarter of 1996, the Company presents its business geographically as its
United States operation, which comprise the Company's business in the United
States, and its International operation, which comprise its business outside of
the United States. The Company previously presented its business as the
Consumer Group, which comprised the Company's consumer products operations
throughout the world (except principally Spain, Portugal, and Italy) and
professional products operations in certain markets, principally in South
Africa and Argentina, and the Professional Group, which comprised the Company's
professional products operations throughout the world (except principally South
Africa and Argentina) and consumer products operations in Spain, Portugal and
Italy.
On March 5, 1996, the Company completed an initial public offering
(the "Offering") in which it issued and sold 8,625,000 shares of its Class A
Common Stock for $24.00 per share. The proceeds, net of underwriter's discount
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and related fees and expenses, of $187.8 million were contributed to Revlon
Consumer Products Corporation ("Products Corporation") and used to repay
borrowings outstanding under the credit agreement in effect at that time (the
"Former Credit Agreement") and to pay fees and expenses related to the credit
agreement which became effective on March 5, 1996 (the "Credit Agreement").
In January 1996, Products Corporation entered into the Credit
Agreement which became effective upon consummation of the Offering on March 5,
1996. The Credit Agreement includes the following changes from the Former
Credit Agreement, among other things: (i) an extension of the term of the
facilities from June 30, 1997 to December 31, 2000 (subject to earlier
termination in certain circumstances), (ii) a reduction of the interest rates,
(iii) an increase in the amount of the credit facilities from $500 million to
$600 million and (iv) the release of security interests in assets of certain
foreign subsidiaries of Products Corporation which were previously pledged. The
Credit Agreement is comprised of four senior secured facilities: a $130 million
term loan facility, a $220 million multi-currency facility, a $200 million
revolving acquisition facility and a $50 million standby letter of credit
facility.
On June 24, 1992, the Company succeeded to assets and liabilities of
the cosmetics and skin care, fragrance and personal care products business of
Revlon Holdings Inc. ("Holdings"). Holdings retained certain small brands that
historically had not been profitable (the "Retained Brands") and certain other
assets and liabilities. Unless the context otherwise requires, references to
the Company or Revlon relating to dates or periods prior to the formation of
the Company mean the cosmetics and skin care, fragrance and personal care
products business of Holdings to which the Company has succeeded. The Company's
business is conducted through its wholly owned subsidiary Products Corporation.
Unless the context otherwise requires, all references in this Form 10-K to the
Company or Revlon mean Revlon, Inc. and its subsidiaries.
All United States market share and market position data herein for the
Company's brands are based upon retail dollar sales which are derived from A.C.
Nielsen data. A.C. Nielsen measures retail sales volume of products sold in the
United States self-select distribution channel. Such data represent A.C.
Nielsen's estimates based upon data gathered by A.C. Nielsen from market
samples. Such data are therefore subject to some degree of variance.
BUSINESS STRATEGY
The Company's business strategy, which implements its vision and is
intended to continue to improve operating performance, is to:
o Strengthen and broaden its core brands through globalization of marketing
and advertising, product development and manufacturing and through
increasing its emphasis on advertising and promotion.
o Lead the industry in the development and introduction of technologically
advanced innovative products that set new trends.
o Expand the Company's presence in all markets in which the Company
competes and enter new and emerging markets.
o Continue to reduce costs and improve operating efficiencies, customer
service and product quality by reducing overhead, rationalizing factory
operations, upgrading management information systems, globally sourcing
raw materials and components and carefully managing working capital.
o Continue to expand market share and product lines through possible
strategic acquisitions or joint ventures.
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PRODUCTS
The Company manufactures and markets a variety of products worldwide.
The following table sets forth the Company's principal brands.
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BRAND COSMETICS SKIN CARE FRAGRANCES PERSONAL CARE PROFESSIONAL
PRODUCTS PRODUCTS
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<S> <C> <C> <C> <C> <C>
Revlon Revlon, ColorStay, Moon Drops, Charlie, Charlie Red, Flex, Flex Balsam, Revlon
Revlon Age Defying, Revlon Results, Charlie White, Outrageous, Professional, Roux
Super Lustrous, Moon Eterna 27 Charlie Sunshine, Aquamarine, Fanci-full,
Drops, Velvet Touch, Fire & Ice, Fire & Mitchum, Lady Realistic, Creme of
New Complexion, Ice Cool, Cherish, Mitchum, Hi & Dri, Nature, Arosci,
Touch & Glow, Lasting, Jontue, Colorsilk, Frost & Sensor Perm,
Lashful, Lengthwise, StreetWear Scents, Glow, Revlon Perfect Perm,
Naturally Glamorous, Ciara Shadings, Jean Fermodyl, Perfect
Custom Eyes, Nate, Roux Touch, Salon
Softstroke Fanci-full, Perfection,
Timeliner, Realistic, Creme Revlonissimo,
StreetWear, Revlon of Nature, Herba Voila, Young Color,
Implements Rich, Fabu-laxer Creative Nail
Design Systems,
Contours, American
Crew, R PRO,
True Cystem
Almay Almay, Time-Off, Time-Off, Almay
Almay Clear Moisture
Complexion Makeup, Balance,
Amazing, One Coat Moisture Renew,
Almay Clear
Complexion
SkinCare
Ultima II Ultima II, Ultima II, Madly, UII
Wonderwear, The Interactives,
Nakeds CHR
Significant Colorama(b), Jeanne Gatineau(b), Floid(b), Versace(a), Bozzano(b), Colomer(b),
Regional Juvena(b), Natural Honey Charlie Gold, Juvena(b), Intercosmo(b),
Brands Jeanne Gatineau(b) Myrurgia(a) Geniol(b), Personal Bio Point,
Colorama(b), Natural Wonder,
Llongueras(b), Llongueras(b)
Bain de Soleil(b),
ZP-11
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</TABLE>
(a) License held for distribution in certain countries outside the
United States.
(b) Trademark owned in certain markets outside the United States.
Cosmetics and Skin Care. The Company sells a broad range of cosmetics
and skin care products designed to fulfill specifically identified consumer
needs, principally priced in the upper range of the self-select distribution
channel, including lip makeup, nail color and nail care products, eye and face
makeup and skin care products such as lotions, cleansers, creams, toners and
moisturizers. Many of the Company's products incorporate patented,
patent-pending or proprietary technology.
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The Company markets several different lines of REVLON lip makeup
(which includes lipstick and liner). The Company's breakthrough COLORSTAY
lipcolor, which uses patented transfer-resistant technology that provides long
wear, is produced in 40 shades. SUPER LUSTROUS, the Company's flagship lipstick
brand, is produced in 57 shades. MOON DROPS, a moisturizing lipstick, is also
produced in 57 shades.
The Company's nail color and nail care lines include enamels, cuticle
preparations and enamel removers. The Company's flagship REVLON nail enamel is
produced in 85 shades and uses a patented formula that provides consumers with
improved wear, application, shine and gloss in a toluene-free and
formaldehyde-free formula. Revlon nail enamel is the number one brand in the
United States self-select distribution channel. STREETWEAR nail enamel,
launched in 1996, is produced in 19 shades targeted at the "trend" consumer.
STRONG WEAR is a patented strengthening nail enamel formula produced in 19
shades, which contains ingredients that provide protection against splitting,
chipping and breaking. The Company sells nail strengtheners, hardeners and
fortifiers and quick dry nail products, including CALCIUM GEL NAIL BUILDER
strengthener and TOP SPEED quick dry base coat and top coat.
The Company sells face makeup, including foundation, powder, blush and
concealers, under such REVLON brand names as REVLON AGE DEFYING, which is
targeted to women in the over 35 age bracket; COLORSTAY which uses proprietary
transfer-resistant technology that provides long wear; and NEW COMPLEXION, for
consumers in the 25 to 49 age bracket.
The Company's eye makeup products include mascaras, eye shadows and
liners. COLORSTAY Eyecolor, and COLORSTAY LASHCOLOR mascara, LASHFUL and
LENGTHWISE mascaras, SOFTSTROKE eyeliners and REVLON CUSTOM EYES and OVERTIME
SHADOW eye shadows are targeted towards women in the 18 to 49 age bracket, and
REVLON AGE DEFYING eye color is targeted to women over 35.
The Company's ALMAY brand consists of a complete line of
hypo-allergenic, dermatologist-tested, fragrance-free cosmetics and skin care
products targeted to consumers who want "healthy looking skin". The Company
positions the ALMAY brand as the clean, natural and healthy choice. ALMAY
products include lip makeup, nail color and nail care products, eye and face
makeup, skin care products, and sunscreen lotions and creams, including
TIME-OFF makeup and skin care, the AMAZING collection, which uses long wear
transfer-resistant technology and includes AMAZING LASH, ALMAY AMAZING eye
makeup, ALMAY AMAZING LASTING makeup, and ALMAY CLEAR COMPLEXION skin care and
makeup and ALMAY EASY-TO-WEAR eyecolor and ONE COAT mascara. The Company
targets ALMAY to value conscious consumers by offering benefits equal or
superior to higher priced products, such as Clinique, at affordable prices.
ALMAY is the leading brand in the hypo-allergenic market in the United States
self-select distribution channel.
The Company sells implements, which include nail and eye grooming
tools such as clippers, scissors, files, tweezers and eye lash curlers. The
Company's implements are sold individually and in sets under the REVLON brand
name.
The Company also sells cosmetics in international markets under
regional brand names including COLORAMA, which is the top selling popular
priced cosmetics line in Brazil, and JUVENA.
The Company's skin care products, including moisturizers, are sold
under the brand names ETERNA 27, MOON DROPS and REVLON RESULTS. In addition,
the Company sells skin care products in international markets under
internationally recognized brand names and under regional brands, including
NATURAL HONEY.
The Company's premium priced cosmetics and skin care products are sold
under the ULTIMA II brand name, which is the Company's flagship premium priced
brand sold throughout the world, and the JEANNE GATINEAU brand name, which is
sold outside the United States. The ULTIMA II line includes the WONDERWEAR
collection, which includes a long-wearing foundation that uses proprietary
technology, cheek and eyecolor products that use patented technology, and
WONDERWEAR LIPSEXXXY lipstick, which uses patented transfer-resistant
technology that provides long wear, and THE NAKEDS makeup, a trend-setting line
of makeup emphasizing neutral colors.
Fragrances. The Company sells a selection of moderately priced and
premium priced fragrances, including perfumes, eau de toilettes and colognes.
The Company's portfolio includes fragrances such as CHARLIE, FIRE & ICE, JONTUE
and CIARA; highly successful line extensions such as CHARLIE RED and CHARLIE
WHITE
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and new additions such as CHERISH, CHARLIE SUNSHINE and FIRE & ICE COOL and
STREETWEAR SCENTS. The Company's CHARLIE fragrance has been a market leader
since the mid-1970's and, the Company believes, one of the top selling
fragrances worldwide. The Company's premium priced fragrance brands include
CIARA and, in international markets, the Company distributes under license
certain brands including VERSACE, VAN GILS and MYRURGIA.
Personal Care Products. The Company sells a broad line of personal
care consumer products that complements its core cosmetics lines and enables
the Company to meet the consumer's broader beauty care needs. In the
self-select distribution channel, the Company sells haircare, anti-perspirant
and other personal care products, including the FLEX, OUTRAGEOUS and AQUAMARINE
haircare lines throughout the world and, the COLORAMA, JUVENA, LLONGUERAS and
NATURAL HONEY brands outside the United States; the COLORSILK, REVLON SHADINGS,
FROST & GLOW and ROUX FANCI-FULL hair coloring lines in the United States; and
the MITCHUM, LADY MITCHUM and HI & DRI anti-perspirant brands throughout the
world. Certain hair care products, including ROUX FANCI-FULL hair coloring and
PERFECT TOUCH and SALON PERFECTION home permanents, were originally developed
for professional use. The Company also markets hypo-allergenic personal care
products, moisturizers and anti-perspirants, under the ALMAY brand.
Professional Products. The Company sells a comprehensive line of salon
products, including permanent wave preparations, hair relaxers, temporary and
permanent hair coloring products, shampoos, conditioners, styling products and
hair conditioners, to professional salons and beauty supply stores under the
REVLON brand as well as other brand names such as ROUX FANCI-FULL, REALISTIC,
FERMODYL, VOILA, REVLONISSIMO, CREME OF NATURE, COLOMER, FABU-LAXER, LOTTABODY,
NATURAL WONDER, SENSOR and INTERCOSMO. Most of the Company's salon products in
the United States currently are distributed in the non-exclusive distribution
channels, in contrast to those products that are distributed exclusively to
professional salons. R PRO, launched in 1996, is a professionally targeted
cosmetic line being distributed through open line channels. Through Creative
Nail Design, Inc. ("Creative Nail"), which was acquired in November 1995, the
Company sells nail enhancement systems and nail color and treatment products
and services for use by the professional salon industry under the brand name of
CREATIVE NAIL DESIGN SYSTEMS. Through AMERICAN CREW, which was acquired in
April 1996 , the Company sells men's shampoos, conditioners, gels, and other
hair care products for use by professional salons. The Company also sells
retail hair care products under the LLONGUERAS, PERSONAL BIO POINT, GENIOL,
FIXPRAY and LANOFIL brands outside the United States. The Company markets in
salons, beauty supply stores and the self-select distribution channel several
lines of hair relaxers, styling products, hair conditioners and other hair care
products under such names as FABU-LAXER and CREME OF NATURE designed for the
particular needs of ethnic consumers. The Company has developed a new exclusive
line of ethnic products, AROSCI, which was successfully launched in 1996. The
Company also sells wigs and hair pieces to retail outlets and certain
professional salons under the REVLON brand and, pursuant to a license, under
the ADOLFO brand.
MARKETING
The Company's vision is to provide glamour, excitement and innovation
through quality products at affordable prices. The Company's marketing efforts
are designed to implement this vision. The Company has formed Global Marketing
Committees, consisting of managers from the Company's marketing, research and
development, operations, advertising and finance departments from the United
States and abroad, which develop strategies for the Company's current and new
brands and products. The Global Marketing Committees coordinate the Company's
globalization efforts while allowing sufficient flexibility to tailor products
to local and regional preferences.
Consumer Products. The Company markets extensive consumer product
lines at a range of retail prices primarily through the self-select
distribution channel and markets select premium lines through
demonstrator-assisted channels. Each line is distinctively positioned and is
marketed globally with consistently recognizable logos, packaging and
advertising designed to differentiate it from other brands. The Company's
existing consumer product lines are carefully segmented, and new product lines
are developed, to target specific consumer needs as measured by focus groups
and other market research techniques.
The Company uses print and television advertising and point-of-sale
merchandising, including displays and samples. The Company has shifted a
significant portion of its marketing to appeal to a broader audience and has
increased media advertising, particularly national television advertising. The
Company increased advertising expenditures by 17.3% for 1996 over 1995 levels
and by 26.2% for 1995 over 1994 levels. The Company's marketing emphasizes a
uniform global image and product for its portfolio of core brands, including
REVLON, COLORSTAY, REVLON
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AGE DEFYING, ALMAY, ULTIMA II, FLEX, CHARLIE, OUTRAGEOUS and MITCHUM. The
Company coordinates advertising campaigns with in-store promotional and other
marketing activities. The Company develops jointly with retailers carefully
tailored advertising, point-of-purchase and other focused marketing programs.
The Company has devoted greater resources to promotional sales of its
permanent line of products and reduced the number of promotional sales of
non-recurring products, which historically have had a higher cost of sales and
resulted in larger sales returns. In the self-select distribution channel, the
Company uses network and spot television advertising, national cable
advertising and print advertising in major general interest, women's fashion
and women's service magazines, as well as coupons, magazine inserts and
point-of-sale testers. In the demonstrator-assisted distribution channel, the
Company principally uses cooperative advertising programs with retailers,
supported by Company-paid or Company-subsidized demonstrators and coordinated
in-store promotions and displays.
The Company also has developed unique marketing materials such as the
"Revlon Report", a glossy, color pamphlet distributed in magazines and on
merchandising units, available in 30 countries and 16 languages, which
highlights seasonal and other fashion and color trends, describes the Company's
products that address those trends and contains coupons, rebate offers and
other promotional material to encourage consumers to try the Company's
products. The Company has created two Color Mobiles, which are on-the-road
beauty sampling and information vehicles patterned on the innovative vehicles
that launched COLORSTAY lipcolor, that travel to major retailers in the United
States, at which Company trainers educate consumers on the COLORSTAY and REVLON
AGE DEFYING collections and the latest product and shade offerings. The Color
Mobiles create consumer and retail excitement about the Company's new products
and encourage trial and purchase by consumers. Other marketing materials
designed to introduce the Company's newest products to consumers and encourage
trial and purchase include point-of-sale testers on the Company's display units
that provide information about the Company's products and permit consumers to
test the products, thereby achieving the benefits of an in-store demonstrator
without the corresponding cost, magazine inserts containing samples of the
Company's newest products, trial size products and "shade samplers," which are
collections of trial size products in different shades. Additionally, the
Company has its own website which features current product and promotional
information.
Professional Products. Professional products are marketed through
educational seminars, advertising, displays and samples to communicate to
professionals and consumers the quality and performance characteristics of such
products. The shift to exclusive line distributors will significantly reinforce
the Company's marketing and educational efforts with salon professionals. The
Company believes that its presence in the professional markets benefits its
consumer products business since the Company is able to anticipate consumer
trends in hair, nail and skin care, which often appear first in salons.
NEW PRODUCT DEVELOPMENT AND RESEARCH AND DEVELOPMENT
The Company believes that it is an industry leader in the development
of innovative and technologically advanced consumer and professional products.
The Company's marketing and research and development groups identify consumer
needs and shifts in consumer preferences in order to develop new product
introductions, tailor line extensions and promotions and redesign or
reformulate existing products to satisfy such needs or preferences. The
Company's Advanced Concept Group consists of a select group of researchers that
conducts research on a wide range of areas to develop new and innovative
technology. The Company independently develops substantially all of its new
products. The Company also has entered into joint research projects with major
universities and commercial laboratories worldwide to develop advanced
technologies.
The Company believes that its Edison, New Jersey facility is one of
the most extensive cosmetics research and development facilities in the United
States. The Edison facility is responsible for all new product research
worldwide. The Edison facility performs research for new products, ideas,
concepts and packaging. Research and development for consumer products is also
conducted at manufacturing facilities in Brazil. Research and development for
the professional products is conducted principally at the Edison facility.
The research and development group at the Edison facility performs
extensive safety and quality tests on the Company's products, including
toxicology, microbiology and package testing. Additionally, quality control
testing is performed at each manufacturing facility.
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In certain instances, proprietary technology developed for use in
products and packaging is available for licensing to third parties. The Company
received the Innovation Award from the Coalition of NorthEast Governors
("CONEG") for its ENVIRO*GLUV glass decorating technology (which resulted in
significant cost reductions in decorating REVLON AGE DEFYING and COLORSTAY
makeup bottles and REVLON nail enamel bottles in 1996 and which is being
offered for licensing to qualified glass decorators). The CONEG challenge
awards program is a nationwide competition to publicly recognize companies that
make significant contributions to environmental issues relating to packaging
and source reduction.
As of December 31, 1996, the Company employed approximately 200 people
in its research and development activities, including specialists in
pharmacology, toxicology, chemistry, microbiology, engineering, biology,
dermatology and quality control. In 1996, the Company spent approximately $26.3
million, on research and development activities.
MANUFACTURING AND RELATED OPERATIONS AND RAW MATERIALS
The Company is rationalizing its worldwide manufacturing operations
which is intended to lower costs and improve customer service and product
quality. The globalization of the Company's core brands allows it to centralize
production of some product categories for sale throughout the world within
designated facilities and shift production of certain other product categories
to more cost effective manufacturing sites to reduce production costs. Shifts
of production may result in the closing of certain of the Company's less
significant manufacturing facilities, and the Company continually reviews its
needs in this regard. In addition, as part of its efforts to continuously
improve operating efficiencies, the Company attempts to ensure that a
significant portion of its capital expenditures are devoted to improving
operating efficiencies.
In the United States, the Company manufactures REVLON brand color
cosmetics, personal care products and fragrances for sale in the United States,
Japan and most of the countries in Latin America and Southeast Asia at its
Phoenix, Arizona facility. The Company manufactures ULTIMA II cosmetics and
skin treatment products for sale in the United States and most of the countries
in Latin America and Southeast Asia, personal care products for sale in the
United States and ALMAY brand products for sale throughout the world at its
Oxford, North Carolina facility. Nail care and other implements for sale
throughout the world are manufactured at the Company's Irvington, New Jersey
facility and Vista, California facility. The Company manufactures salon and
retail professional products and personal care consumer products for sale in
the United States and Canada at the Company's Jacksonville, Florida facility.
The Phoenix facility has been ISO-9002 certified.
The Company manufactures its entire line of consumer products (except
implements) for sale in most of the countries of Europe at its Maesteg, South
Wales facility. Local production of cosmetics and personal care products
takes place at the Company's facilities in Spain, Canada, Venezuela, Mexico,
New Zealand, Brazil, Australia and South Africa. The manufacture of professional
products for sale by retailers outside the United States has been centralized
principally at the Company's facilities in Ireland, Spain and Italy. Production
of color cosmetics for Japan and Mexico has been shifted to the United States
while production of personal care products for Argentina has been centralized
in Brazil. The Maestag facility has been certified by the British equivalent
of ISO-9002.
The Company purchases raw materials and components throughout the
world. The Company continuously pursues reductions in cost of goods through the
global sourcing of raw materials and components from qualified vendors,
utilizing its large purchasing capacity to maximize cost savings. The global
sourcing of raw materials and components from accredited vendors also ensures
the quality of the raw materials and components. The Company believes that
alternate sources of raw materials and components exist and does not anticipate
any significant shortages of, or difficulty in obtaining, such materials.
The Company's improvements in manufacturing, sourcing and related
operations have contributed to improved customer service, including an
improvement in the percentage of timely order fulfillment at the Company's
manufacturing sites in Oxford, North Carolina; Phoenix, Arizona; Irvington, New
Jersey; and Maesteg, South Wales; and the timeliness and accuracy of new
product and promotion deliveries. To promote the Company's understanding of,
and responsiveness to the needs of its retail customers, the Company assigns
members of senior operations management to lead inter-departmental teams that
visit significant accounts, and has provided retail accounts with a
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designated customer service representative. As a result of these efforts,
accompanied by stronger and more customer-focused management, the Company has
developed strong relationships with its retailers.
The Company emphasizes safety and increased training of employees
resulting in an improved safety record. The Company anticipates that the
globalization of, and continued improvement in, the quality of its
manufacturing operations will result in lower manufacturing costs.
BUSINESS PROCESS ENHANCEMENTS
The Company's management information systems have been substantially
upgraded to provide comprehensive order processing, production and accounting
support for the Company's business. The Company's expenditures on improvements
to its management information systems were approximately $13 million for 1996.
The Company intends to continue to upgrade management information systems in
1997, which will include improved systems for forecasting, production,
inventory management, order processing, general and fixed asset ledgers and
others. Systems improvements have been and the Company anticipates that they
will continue to be instrumental in contributing to the reduction of the time
from order entry to shipment, improved forecasting of demand and improved
operating efficiencies.
DISTRIBUTION
As a result of its improved customer service and consumer traffic
generated by its products and innovative marketing programs, the Company
believes that its relationships with self-select distribution cosmetic
retailers are the best in the cosmetics industry.
The Company's products are sold in approximately 175 countries and
territories. The Company's worldwide sales force had approximately 2,100 people
as of December 31, 1996, including a dedicated sales force for cosmetics, skin
care and fragrance products in the self-select distribution channel, for the
demonstrator-assisted distribution channel, for personal care products
distribution and for salon distribution. In addition, the Company utilizes
sales representatives and independent distributors to serve specialized markets
and related distribution channels.
United States. The United States operation's net sales accounted for
approximately 58.0% of the Company's 1996 net sales. Of these net sales,
approximately 86% were made in the self-select distribution channel. However,
the Company intends to use premium products such as ULTIMA II to maintain its
presence in the demonstrator-assisted distribution channel. The Company also
sells a broad range of consumer and retail professional products to United
States Government military exchanges and commissaries. The Company licenses its
trademarks to select manufacturers for products that the Company believes have
the potential to extend the Company's brand names and image. As of December 31,
1996, 19 licenses were in effect relating to 23 product categories to be
marketed in the self-select distribution channel. Pursuant to the licenses, the
Company retains strict control over product design and development, product
quality, advertising and use of its trademarks. These licensing arrangements
offer opportunities for the Company to generate revenues and cash flow through
earned royalties, royalty advances and, in some cases, up-front licensing fees.
Products designed for professional use or resale by beauty salons are sold
through wholesale beauty supply distributors and directly to professional
salons. Various hair care products, such as ethnic hair relaxers, scalp
conditioners, shampoos and hair coloring products and wigs and hairpieces are
sold directly and through wholesalers to chain drug stores and mass volume
retailers. Wigs and hairpieces are also sold through mail order direct
marketing, retail outlet malls, salons and certain department stores.
The Company also operates through Prestige Fragrance & Cosmetics, Inc.
("PFC"), a subsidiary of Products Corporation, approximately 200 retail outlet
stores throughout the United States in factory outlet malls, rural areas and
other similar locations that are not disruptive to the Company's principal
distribution channels. In these stores, the Company sells first quality, first
quality excess, returned and refurbished, and discontinued consumer products
and retail professional products, as well as similar products of competing
cosmetics companies. On November 27, 1996, Products Corporation and PFC entered
into an Agreement and Plan of Merger with The Cosmetic Center, Inc. ("Cosmetic
Center") pursuant to which PFC will merge with and into Cosmetic Center, with
Cosmetic Center surviving the merger (the "Merger"). In the Merger, Products
Corporation would receive newly issued Class C common stock of Cosmetic Center
constituting between 74% and 84% of the outstanding common stock. The Merger is
subject to a
9
<PAGE>
number of significant conditions, including obtaining financing for Cosmetic
Center and approval of the transaction by Cosmetic Center stockholders, among
other conditions. Subject to satisfaction of these conditions, the transaction
is expected to close during the first quarter of 1997.
International. The International operation's net sales accounted for
approximately 42.0% of the Company's 1996 net sales. The International
operation's ten largest countries in terms of these sales, which include
Brazil, Japan, the United Kingdom, Australia, South Africa, Canada and Spain,
accounted for approximately 30.7% of the Company's net sales in 1996, with
Brazil accounting for approximately 6.1% of the Company's net sales. The
International operation is increasing distribution through the expanding
self-select distribution channels outside the United States, such as drug
stores/chemists, hypermarkets/mass volume retailers and variety stores, as
these channels gain importance. The International operation also distributes
through department stores and specialty stores such as perfumeries. The
International operation's professional products are sold directly to beauty
salons by the Company's direct sales force in Spain, France, Germany, Portugal,
Italy, Mexico and Ireland and through distributors in other countries. The
Company actively sells its products through wholly owned subsidiaries in 26
countries outside of the United States, through joint ventures in India and
Indonesia, and through a large number of distributors and licensees elsewhere
around the world. The Company continues to pursue strategies to establish its
presence in new emerging markets. Such new and emerging markets include Eastern
Europe; South Korea; Southeast Asia; Chile; the Middle East; India; and China,
where in 1996 the Company established a subsidiary with a local minority
partner. In addition, the Company is building a franchise through local
distributorships in northern and central Africa, where the Company intends to
expand the distribution of its products by capitalizing on its market strengths
in South Africa.
CUSTOMERS
The Company's principal customers include chain drug stores and large
mass volume retailers, including such well known retailers as Wal-Mart,
Walgreens, Kmart, Target, CVS Drug Stores, Drug Emporium, American Drug Stores,
Eckerd Drug stores, Revco and Thrifty Payless in the self-select distribution
channel, J.C. Penney in the demonstrator-assisted distribution channel, Sally's
Beauty Company for professional products, Shoppers Drug Mart in Canada and
Boots in the United Kingdom and Western Europe. The foregoing customers are
representative of the Company's customers, and for 1996, each of the foregoing
customers accounted for 1% or more of the Company's net sales. Wal-Mart and its
affiliates accounted for approximately 10.1% of the Company's 1996 consolidated
net sales. Although the loss of Wal-Mart as a customer could have an adverse
effect on the Company, the Company believes that its relationship with Wal-Mart
is satisfactory and the Company has no reason to believe that Wal-Mart will not
continue as a customer.
COMPETITION
The cosmetics and skin care, fragrance, personal care and professional
products business is characterized by vigorous competition throughout the
world. Brand recognition, together with product quality, performance and price
and the extent to which consumers are educated on product benefits, have a
marked influence on consumers' choices among competing products and brands.
Advertising, promotion, merchandising and packaging, and the timing of new
product introductions and line extensions, also have a significant impact on
buying decisions, and the structure and quality of the sales force affect
product reception, in-store position, permanent display space and inventory
levels in retail outlets. The Company competes in most of its product
categories against a number of companies, some of which have substantially
greater resources than the Company. In addition to products sold in the
self-select and demonstrator-assisted distribution channels, the Company's
products also compete with similar products sold door-to-door or through mail
order or telemarketing by representatives of direct sales companies. The
Company's principal competitors include L'Oreal S.A., The Procter & Gamble
Company, Helene Curtis Industries, Inc., and Joh A. Benckiser GmbH in the
self-select distribution channel; L'Oreal S.A., Unilever N.V., Estee Lauder,
Inc. and Joh A. Benckiser GmbH in the demonstrator-assisted distribution
channel; and L'Oreal S.A. and Matrix Essentials, Inc., which is owned by
Bristol-Myers Squibb Company, in professional products.
10
<PAGE>
SEASONALITY
The Company's business is subject to certain seasonal fluctuations,
with net sales in the second half of the year generally benefiting from
increased retailer purchases in the United States for the back-to-school and
Christmas selling seasons.
PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY
The Company's major trademarks are registered in the United States and
in many other countries, and the Company considers trademark protection to be
very important to its business. Significant trademarks include REVLON,
COLORSTAY, REVLON AGE DEFYING, FLEX, MITCHUM, ETERNA 27, ULTIMA II, ALMAY,
CHARLIE, JEAN NATE, REVLON RESULTS, COLORAMA, FIRE & ICE, MOON DROPS, SUPER
LUSTROUS and WONDERWEAR LIPSEXXXY for consumer products and REVLON, ROUX
FANCI-FULL, REALISTIC, FERMODYL, COLOMER, CREATIVE NAIL, AMERICAN CREW, R PRO
and INTERCOSMO for
professional products.
The Company utilizes certain proprietary or patented technologies in
the formulation or manufacture of a number of the Company's products, including
COLORSTAY lipcolor and cosmetics, FLEX & GO shampoo, LENGTHWISE mascara, REVLON
nail enamel, REVLON AGE DEFYING foundation and cosmetics, NEW COMPLEXION
makeup, WONDERWEAR foundation, WONDERWEAR LIPSEXXXY lipstick, DAY INTO NIGHT
eyeshadows, ALMAY TIME-OFF skin care and makeup, OUTRAGEOUS shampoo, FLEX
hairspray and various professional products, including FERMODYL shampoo and
conditioners. The Company also protects certain of its packaging and component
concepts through design patents. The Company considers its proprietary
technology and patent protection to be important to its business.
GOVERNMENT REGULATION
The Company is subject to regulation by the Federal Trade Commission
and the Food and Drug Administration (the "FDA") in the United States, as well
as various other federal, state, local and foreign regulatory authorities. The
Phoenix, Arizona and Oxford, North Carolina manufacturing facilities are
registered with the FDA as drug manufacturing establishments, permitting the
manufacture of cosmetics that contain over-the-counter drug ingredients such as
sunscreens. Compliance with federal, state, local and foreign laws and
regulations pertaining to discharge of materials into the environment, or
otherwise relating to the protection of the environment, has not had, and is
not anticipated to have, a material effect upon the capital expenditures,
earnings or competitive position of the Company. State and local regulations in
the United States that are designed to protect consumers or the environment
have an increasing influence on product claims, contents and packaging.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain information
concerning geographic segments of the Company is set forth in Note 15 of the
Notes to Consolidated Financial Statements of the Company.
EMPLOYEES
As of December 31, 1996, the Company employed the equivalent of
approximately 14,300 full-time persons. Approximately 2,100 of such employees
in the United States at the end of 1996 were covered by collective bargaining
agreements. The agreements covering employees in Phoenix, Arizona and
Jacksonville, Florida expire in 1997. In addition, the Company will be
negotiating collective bargaining agreements or portions thereof covering
employees in twelve countries outside the United States during 1997. The
Company expects that such agreements will be renewed in the ordinary course of
negotiations, and further believes that its employee relations are
satisfactory.
11
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth as of December 31, 1996 the Company's
major manufacturing, research and warehouse/distribution facilities all of
which are owned except where otherwise noted.
<TABLE>
<CAPTION>
APPROXIMATE FLOOR
LOCATION USE SPACE SQ. FT.
- -------- --- ------------------
<S> <C> <C>
Oxford, North Carolina..... Manufacturing, warehousing, distribution and office 1,012,000
Phoenix, Arizona .......... Manufacturing, warehousing, distribution and office 706,000
(partially leased)
Holmdel, New Jersey ....... Warehousing, distribution and office 540,000
Jacksonville, Florida ..... Manufacturing, warehousing, distribution, research and 526,000
office
Mississauga, Canada ....... Manufacturing, warehousing, distribution and office 245,000
Edison, New Jersey ........ Research and office (leased) 133,000
Irvington, New Jersey ..... Manufacturing, warehouse and office 96,000
Sao Paulo, Brazil ......... Manufacturing, warehousing, distribution, office and 408,000
research
Maesteg, South Wales,
United Kingdom ............ Manufacturing, distribution and office 316,000
Santa Maria, Spain ........ Manufacturing and warehousing 173,000
Barcelona, Spain .......... Manufacturing, warehousing, research and office 152,000
Caracas, Venezuela Manufacturing, distribution and office 145,000
Argenteuil, France ........ Warehousing and distribution (leased) 73,000
Kempton Park, South Africa. Warehousing, distribution and office (leased) 127,000
Canberra, Australia ....... Warehousing, distribution and office (leased) 125,000
Isando, South Africa ...... Manufacturing, warehousing, distribution and office 94,000
Rydalmere, Australia ...... Manufacturing, warehousing, distribution and office 93,000
Bologna, Italy ............ Manufacturing, warehousing, distribution, office and 60,000
research
</TABLE>
In addition to the facilities described above, additional facilities
are owned and leased in various areas throughout the world, including the lease
for the Company's executive offices in New York, New York (345,000 square feet,
of which 85,000 square feet are currently sublet to affiliates of the Company).
Management considers the Company's facilities to be well-maintained and
satisfactory for the Company's operations, and believes that the Company's
facilities provide sufficient capacity for its current and expected production
requirements. Products Corporation leases from Holdings on arms' length terms
its research and development facility located in Edison, New Jersey.
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 the fiscal year covered by this report.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MacAndrews & Forbes Holdings Inc. ("MacAndrews & Forbes"), which is
wholly owned by Ronald O. Perelman, which through Revlon Worldwide Corporation
("Revlon Worldwide"), beneficially owns 11,250,000 shares of the Class A Common
Stock (representing 56.6% of the outstanding shares of Class A Common Stock) and
all of the outstanding 31,250,000 shares of Class B Common Stock, which together
represent 83.1% of the outstanding shares of Common Stock, and the remaining
8,625,000 shares of Class A Common Stock are owned by the public. No dividends
were declared or paid during 1996. The terms of the Credit Agreement and
Products Corporation's 10 1/2 % Senior Subordinated Notes Due 2003 (the "Senior
Subordinated Notes"), 9 3/8% Senior Notes Due 2001 (the "Senior Notes") and 9
1/2% Senior Notes Due 1999 (the "1999 Notes") currently restrict the ability of
Products Corporation to pay dividends or make distributions to Revlon, Inc. See
the Consolidated Financial Statements of the Company and the Notes thereto.
The table below shows the Company's high and low quarterly stock
prices for the year ended December 31, 1996.
1996 QUARTERLY STOCK PRICES (1)
-------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
High $28 1/4 $31 3/8 $31 1/8 $36 1/2
Low 25 1/2 24 3/4 23 1/2 28 5/8
(1) Represents the closing price on the New York Stock exchange
(NYSE), which is the market in which shares of the Company's stock are traded.
The Company's symbol is REV.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The statements of Operations Data for each of the years in the
five-year period ended December 31, 1996 and the Balance Sheet Data as of
December 31, 1996, 1995, 1994, 1993 and 1992 are derived from the Consolidated
Financial Statements of the Company, which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The Selected
Consolidated Financial Data should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes to the Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995(A) 1994(A) 1993(A) 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales ......................................... $ 2,167.0 $ 1,937.8 $ 1,732.5 $ 1,588.3 $ 1,632.2
=========== =========== =========== =========== ===========
Operating income (loss) ........................... $ 200.2 $ 146.6 $ 108.4 $ 49.9 $ (82.6)(d)
=========== =========== =========== =========== ===========
Income (loss) before extraordinary items and
cumulative effect of accounting changes .......... $ 24.4 $ (40.2) $ (74.0) $ (130.8) $ (224.0)
Extraordinary items -early extinguishments of debt (6.6) -- -- (9.5) (2.9)
Cumulative effect of accounting changes ........... -- -- (28.8)(b) (6.0)(c) --
----------- ----------- ----------- ----------- -----------
Net income (loss) ................................. $ 17.8 $ (40.2) $ (102.8) $ (146.3) $ (226.9)
=========== =========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary items and
cumulative effect of accounting changes .......... $ 0.49 $ (0.95) $ (1.74) $ (3.08) $ (5.27)
Extraordinary items ............................... (0.13) -- -- (0.22) (0.07)
Cumulative effect of accounting changes ........... -- -- (0.68) (0.14) --
----------- ----------- ----------- ----------- -----------
Net income (loss) ................................. $ 0.36 $ (0.95) $ (2.42) $ (3.44) $ (5.34)
=========== =========== =========== =========== ===========
Weighted average common shares outstanding (e) .... 49,687,500 42,500,000 42,500,000 42,500,000 42,500,000
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1996 1995(A) 1994(A) 1993(A) 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ...................................... $1,621.3 $1,535.3 $1,418.1 $1,548.7 $1,438.3
Long-term debt, excluding current portion ......... 1,352.2 1,467.5 1,327.5 1,203.8 969.0
Total stockholders' deficiency .................... (496.7) (702.0) (656.5) (555.3) (443.1)
</TABLE>
(a) Effective January 1, 1996, Products Corporation acquired from Holdings
substantially all of the assets of the Tarlow Advertising Division ("Tarlow")
in consideration for the assumption of substantially all of the liabilities and
obligations of Tarlow. Net liabilities assumed were approximately $3.4 million.
The assets acquired and liabilities assumed were accounted for at historical
cost in a manner similar to that of a pooling of interests and, accordingly,
prior period financial statements beginning with January 1, 1993 have been
restated as if the acquisition took place at the beginning of such period.
Products Corporation paid $4.1 million to Holdings which was accounted for as
an increase to capital deficiency.
(b) Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." The Company recognized a charge of
$28.8 million in the first quarter of 1994 to reflect the cumulative effect of
the accounting change, net of income tax benefit.
(c) Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," for its retiree
benefit plan in the United States. Accordingly, the Company recognized a charge
of $6.0 million in the 1993 first quarter to reflect the cumulative effect of
the accounting change.
(d) Includes restructuring charges of $162.7 million in 1992, which included
(i) consolidation of certain worldwide manufacturing and warehouse facilities,
(ii) consolidation in management information systems, (iii) vacating premises
under lease, (iv) personnel reductions and (v) discontinuance of certain
product lines.
(e) Represents the weighted average common shares outstanding for the period.
See Note 1 to the Consolidated Financial Statements.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
OVERVIEW
The Company operates in a single business segment with many different
products, which include an extensive array of glamorous, exciting and
innovative cosmetics and skin care, fragrance and personal care products, and
professional products, consisting of hair and nail care products principally
for use in and resale by professional salons. In addition, the Company also
operates retail outlet stores and has a licensing group.
To reflect the integration of management reporting responsibilities
culminating in the third quarter of 1996, the Company presents its business
geographically as its United States operation, which comprises the Company's
business in the United States, and its International operation, which comprises
its business outside of the United States. The Company previously presented its
business as the Consumer Group, which comprised the Company's consumer products
operations throughout the world (except principally Spain, Portugal and Italy)
and professional products operations in certain markets, principally in South
Africa and Argentina, and the Professional Group, which comprised the Company's
professional products operations throughout the world (except principally South
Africa and Argentina) and consumer products operations in Spain, Portugal and
Italy. The Company has restated the management's discussion and analysis data
for prior periods to conform to the presentation for 1996.
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales by operation
for each of the last three years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Net sales:
United States .............................. $1,257.2 $1,113.2 $ 983.2
International .............................. 909.8 824.6 749.3
---------- ---------- ---------
$2,167.0 $1,937.8 $1,732.5
========== ========== =========
</TABLE>
The following sets forth certain statements of operations data as a
percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cost of sales ............................... 33.5% 33.7% 34.5%
Gross profit ................................ 66.5 66.3 65.5
Selling, general and administrative expenses 57.3 58.8 59.3
Operating income ............................ 9.2 7.5 6.2
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
NET SALES
Net sales were $2,167.0 and $1,937.8 for 1996 and 1995, respectively,
an increase of $229.2, or 11.8%, primarily as a result of successful new
product introductions worldwide, increased demand in the United States,
acquisitions of certain exclusive line professional product businesses,
increased distribution internationally into the expanding self-select
distribution channel and the further development of new international markets.
United States. The United States operation's net sales increased to
$1,257.2 for 1996 from $1,113.2 for 1995, an increase of $144.0, or 12.9%. Net
sales improved for 1996 primarily as a result of continued consumer acceptance
of new product offerings, general improvement in consumer demand for the
Company's color cosmetics in the United States and acquisitions of certain
exclusive line professional product businesses, partially offset by overall
softness in the fragrance industry and lower sales of one of the Company's
prestige brands. The Company improved the dollar
15
<PAGE>
share of its Revlon branded cosmetics in the color cosmetics business in the
United States self-select distribution channel to 21.5% for 1996 from 19.8%
for 1995, moving into the leading position in market share. Market share,
which is subject to a number of conditions, can vary from quarter to quarter
as a result of such things as timing of new product introductions and
advertising and promotional spending. New product introductions (including, in
1996, certain products launched during 1995) generated incremental net sales
in 1996, principally as a result of launches of products in the COLORSTAY
collection, including COLORSTAY foundation, lip makeup, eye makeup and
COLORSTAY LASHCOLOR mascara, launches of products in the ALMAY AMAZING
collection, including lip makeup, eye makeup, face makeup and concealer, and
launches of Cherish fragrance and MITCHUM CLEAR and ALMAY CLEAR COMPLEXION
line extensions.
International. The International operation's net sales increased to
$909.8 for 1996 from $824.6 for 1995, an increase of $85.2, or 10.3% on a
reported basis or 12.6% on a constant U.S. dollar basis. Net sales improved
principally as a result of successful new product introductions, including the
continued roll-out of the COLORSTAY cosmetics collection and REVLON AGE DEFYING
makeup, increased distribution into the expanding self-select distribution
channel, the further development of new international markets, partially
offset, on a reported basis, by the unfavorable effect on sales of a stronger
U.S. dollar against certain foreign currencies, primarily the South African
rand, Japanese yen, and several European currencies. The International
operation's sales are divided into the following geographic areas: Europe,
which is comprised of Europe, the Middle East and Africa (in which net sales
increased to $404.0 for 1996 from $374.6 for 1995, an increase of $29.4, or
7.8%); the Western Hemisphere, which is comprised of Canada, Mexico, Central
America, South America and Puerto Rico (in which net sales increased to $311.9
for 1996 from $275.4 for 1995, an increase of $36.5, or 13.3%); and the Far
East (in which net sales increased to $193.9 for 1996 from $174.6 for 1995, an
increase of $19.3, or 11.1%).
The Company's operations in Brazil are significant and, along with
operations in certain other countries, have been subject to, and may continue
to be subject to, significant political and economic uncertainties. In Brazil,
net sales, operating income and income before taxes were $132.7, $25.1 and
$20.0, respectively, for 1996 compared to $118.6, $22.8 and $19.8,
respectively, for 1995. In Mexico, net sales for 1996 and 1995 were adversely
affected by the December 1994 devaluation of the Mexican peso and related
economic weakness. Additionally, Mexico will be considered a hyperinflationary
economy beginning in 1997. In Venezuela, net sales and income before taxes for
1996 and 1995 were adversely affected by high inflation and in the 1996 period
by a currency devaluation.
Cost of sales
As a percentage of net sales, cost of sales was 33.5% for 1996
compared to 33.7% for 1995, respectively. The improvement for 1996 resulted
from the benefits of improved overhead absorption against higher production
volumes and more efficient global production and purchasing. This improvement
was partially offset by changes in product mix involving an increase in sales
of the Company's higher cost technology-based products, an increase in export
sales, lower margin products (such as those products sold in Brazil), the
effect of weaker local currencies on the cost of imported purchases and
competitive pressures on the Company's toiletries business in certain
international markets. The aforementioned increases in sales that negatively
impacted cost of sales were, however, more profitable to the Company's overall
operating results.
Selling, general and administrative ("SG&A") expenses
As a percentage of net sales, SG&A expenses were 57.3% for 1996, an
improvement from 58.8% for 1995. SG&A expenses other than advertising expense,
as a percentage of net sales, improved to 40.9% for 1996 compared with 43.2%
for 1995 primarily as a result of reduced general and administrative expenses,
improved productivity and lower distribution costs in 1996 compared with 1995.
In accordance with its business strategy, the Company increased advertising and
consumer-directed promotion in 1996 compared with 1995 to support growth in
existing product lines, new product launches and increased distribution in the
self-select distribution channel in many of the Company's markets in the
International operation. Advertising expense increased by 17.3% to $355.2, or
16.4% of net sales, for 1996 compared to $302.7, or 15.6% of net sales, for
1995.
16
<PAGE>
Operating income
As a result of the foregoing, operating income increased by $53.6, or
36.6%, to $200.2 for 1996 from $146.6 for 1995.
Other expenses/income
Interest expense was $133.4 for 1996 compared to $142.6 for 1995. The
reduction in interest expense is attributable to lower average outstanding
borrowings as a result of the paydown of debt under the Credit Agreement and
under the Former Credit Agreement with the use of proceeds from the Company's
Offering in the 1996 period and lower interest rates under the Credit Agreement
than under the Former Credit Agreement.
Foreign currency losses, net, were $5.7 for 1996 compared to $10.9 for
1995. The reduction in the foreign currency loss in 1996 as compared to 1995
was due to lower foreign currency losses primarily in Mexico and Venezuela and
the Company's simplification of its international corporate structure, which
resulted in $2.1 of gains, previously deferred in the currency translation
account, partially offset by the strengthening of the U.S. dollar against the
Spanish peseta and the strengthening of the U.K. pound against several European
currencies.
Miscellaneous, net, was $6.3 for 1996 compared to $1.8 for 1995. The
increase relates primarily to the Company's continued investment in certain
emerging markets.
Extraordinary item
The extraordinary item resulted from the write-off recorded in the
first quarter of 1996 of deferred financing costs associated with the
extinguishment of the Former Credit Agreement prior to its maturity with the
net proceeds from the Offering and borrowings under the Credit Agreement.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Net sales
Net sales were $1,937.8 and $1,732.5 for 1995 and 1994, respectively,
an increase of $205.3, or 11.8%, primarily as a result of successful new
product introductions worldwide, increased demand in the United States,
increased distribution internationally into the expanding self-select
distribution channel, the development of new international markets and a weaker
U.S. dollar versus most foreign currencies.
United States. The United States operation's net sales increased to
$1,113.2 for 1995 from $983.2 for 1994, an increase of $130.0, or 13.2%. Net
sales improved primarily as a result of continued consumer acceptance of new
product offerings and general improvement in consumer demand for the Company's
color cosmetics in the United States, contributing to the Company's improved
share of the color cosmetics business in the United States self-select
distribution channel, as well as increased net sales at the retail outlet
stores. New product introductions (including, in 1995, certain products
launched during 1994) generated incremental net sales in 1995, principally as a
result of the June 1994 launch of COLORSTAY lipcolor, the 1994 first quarter
launch of REVLON AGE DEFYING makeup, the 1995 second and third quarter launches
of COLORSTAY lip makeup line extensions and eye and face makeup, respectively,
which are part of the COLORSTAY collection, the 1995 second quarter launches of
REVLON AGE DEFYING line extensions, CHARLIE WHITE fragrance and ALMAY CLEAR
COMPLEXION makeup, and the 1995 third quarter launches of ALMAY TIME-OFF line
extensions and LASTING fragrance.
International. The International operation's net sales increased to
$824.6 for 1995 from $749.3 for 1994, an increase of $75.3, or 10.0%. Net sales
improved principally as a result of successful new product introductions,
increased distribution into the expanding self-select distribution channel, the
development of new international markets and the favorable effect on sales of a
weaker U.S. dollar versus most foreign currencies, partially offset by lower
unit volume in Mexico and Argentina resulting from recessionary conditions. Net
sales were also favorably affected by the continued roll-out of COLORSTAY
lipcolor, REVLON AGE DEFYING makeup and CHARLIE WHITE fragrance into various
international markets, the continued expansion during the third quarter of 1994
of the ALMAY cosmetics line outside the
17
<PAGE>
United States and the expansion during the third quarter of 1994 of the
CHARLIE RED fragrance outside the United States. Introduction of the COLORSTAY
cosmetics collection began in the fourth quarter of 1995 and continued in the
first part of 1996. The International operation's sales are divided into the
following geographic areas: Europe, which is comprised of Europe, the Middle
East and Africa (in which net sales increased to $374.6 for 1995 from $334.8
for 1994, an increase of $39.8, or 11.9%); the Western Hemisphere, which is
comprised of Canada, Mexico, Central America, South America and Puerto Rico
(in which net sales increased to $275.4 for 1995 from $269.7 for 1994, an
increase of $5.7, or 2.1%); and the Far East (in which net sales increased to
$174.6 for 1995 from $144.8 for 1994, an increase of $29.8, or 20.6%).
The Company's operations in Brazil and Mexico have been subject to
significant political and economic uncertainties. Operations in Brazil were
significantly improved for 1995 over 1994 primarily as a result of higher unit
volume in the first half of 1995. Unit volume in the second half of 1995
declined from the unit volume for the second half of 1994 due to the strong
unit volume in the second half of 1994 as a result of the Brazilian
government's July 1, 1994 introduction of a new economic and monetary policy,
which resulted in increased consumer purchasing. In Brazil, net sales,
operating income and income before taxes were $118.6, $22.8 and $19.8,
respectively, for 1995 compared with $108.1, $29.5 and $14.9, respectively, for
1994. However, net sales and operating income for 1994 benefited from the
hyperinflationary pricing component included in these accounts until the
Brazilian government's July 1, 1994 introduction of a new economic and monetary
policy and related issuance of a new currency, which significantly reduced
inflation. The Company's income before taxes and cash flow from operations in
Brazil for 1994 were not affected to the same extent as operating income
because of a corresponding charge in the foreign currency translation account.
In Mexico, net sales and operating income were $20.5 and $1.6, respectively,
for 1995 compared with $31.1 and $3.2, respectively, for 1994. While the
December 1994 devaluation of the Mexican peso did not have a significant
adverse effect on 1994 operating results in Mexico, 1995 operating results in
Mexico were, and future operating results may continue to be, adversely
affected by this devaluation and other factors such as decreases in unit
volume, limitations on price increases and higher relative costs of products
sourced outside of Mexico. The Company has taken measures to mitigate the
effect of these conditions by increasing prices in line with inflation, where
possible, and efficiently managing its working capital levels.
Cost of sales
As a percentage of net sales, cost of sales was 33.7% for 1995, an
improvement from 34.5% for 1994. This improvement resulted from the benefits on
overhead absorption of higher production volumes allocated over a fixed
manufacturing base, and globalization benefits such as more efficient
production and purchasing performance in 1995 compared with 1994, partially
offset by changes in the product mix involving increases in 1995 compared to
1994 in sales of lower margin products sold in Brazil and by the Company's
retail outlet stores. The first half of 1994 included the benefit of the
inflationary component of pricing in Brazil, partially offset by the adverse
impact of higher transition costs associated with factory consolidations
charged to cost of sales for inventory produced in 1993 and sold during 1994.
Selling, general and administrative expenses
As a percentage of net sales, SG&A expenses were 58.8% for 1995 and
59.3% for 1994. SG&A expenses, other than advertising expense, as a percentage
of net sales improved to 43.2% for 1995 compared with 45.4% for 1994, primarily
as a result of reduced general and administrative expenses and improved
productivity in 1995 compared with 1994, partially offset by higher European
regional headquarters expenses and severance costs in 1995. The Company
increased advertising and consumer directed promotion during 1995 compared with
1994, principally in the United States and Europe, to support growth in
existing product lines, new product launches and increased distribution in the
self-select distribution channel in Europe in 1995. Advertising expense
increased by 26.2% to $302.7, or 15.6% of net sales, for 1995 from $239.9, or
13.8% of net sales, for 1994.
18
<PAGE>
Operating income
As a result of the foregoing, operating income increased by $38.2, or
35.2%, to $146.6 for 1995 from $108.4 for 1994.
Other expenses/income
Interest expense was $142.6 for 1995 and $136.7 for 1994, an increase
of $5.9, or 4.3%. The increase in 1995 was due to higher outstanding borrowings
under the Company's credit facilities.
Foreign currency losses, net, were $10.9 for 1995 and $18.2 for 1994.
Results improved in 1995 primarily as a result of reduced inflation associated
with the Brazilian government's July 1, 1994 introduction of a new economic and
monetary policy and related issuance of a new currency and the January 1995
repayment of approximately $26.9 under the Company's Japanese yen-denominated
credit agreement (the "Yen Credit Agreement"), partially offset by the adverse
effect of currency devaluation in Venezuela primarily in the fourth quarter of
1995.
Provision for income taxes
The provision for income taxes was $25.4 and $22.8 for 1995 and 1994,
respectively. The increase in the provision for income taxes was primarily
attributable to higher taxable earnings of certain foreign operations.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $10.1, $51.7 and $1.1 for
1996, 1995 and 1994, respectively. The decrease in net cash used for operating
activities for 1996 compared with 1995 resulted primarily from higher operating
income, lower restructuring payments ($13.3 for 1996 compared with $24.2 for
1995) and improved management of inventory relative to business growth,
partially offset by higher trade receivable balances as a result of higher net
sales and increased spending on merchandise display units in connection with
the Company's continued expansion into the self-select distribution channel.
The increase in net cash used for operating activities for 1995 compared with
1994 resulted primarily from an increase in inventories associated with
expected sales volume, higher trade receivable balances, increased spending on
merchandise display units in connection with the Company's continued expansion
into the self-select distribution channel and higher income taxes paid, net of
refunds, offset in part by higher operating income, lower restructuring
payments ($24.2 for 1995 compared with $37.2 for 1994) and lower severance
payments.
Net cash used for investing activities was $65.1, $72.5 and $51.0 for
1996, 1995 and 1994, respectively. Net cash used for investing activities for
1996, 1995 and 1994 consisted primarily of capital expenditures and in 1996 and
1995 included $7.1 and $21.2, respectively, used for acquisitions. The
Company's capital expenditures for 1996, 1995 and 1994 were $58.0, $54.3 and
$52.5, respectively. The increase in capital expenditures through 1996 was
primarily attributable to significant information system enhancements in
accordance with the Company's business strategy.
Net cash provided by (used for) financing activities was $78.4, $125.2
and $(49.0) for 1996, 1995 and 1994, respectively. Net cash provided by
financing activities for 1996 included the net proceeds from the Offering, cash
drawn under the Former Credit Agreement and under the Credit Agreement,
partially offset by the repayment of borrowings under the Former Credit
Agreement, the payment of fees and expenses related to the Credit Agreement and
repayment of approximately $5.2 under the Yen Credit Agreement. Net cash
provided by financing activities for 1995 consisted primarily of borrowings
under the credit agreement of Products Corporation in effect at that time and
borrowings under the Former Credit Agreement, partially offset by repayments of
cash drawn under those credit agreements, repayment of $26.9 under the Yen
Credit Agreement and payment of debt issuance costs under the Former Credit
Agreement. Net cash used for financing activities for 1994 consisted primarily
of repayments of borrowings under the credit agreement of Products Corporation
in effect at that time and a repayment of $12.0 under the Yen Credit Agreement.
In February 1995, Products Corporation entered into the Former Credit
Agreement, which provided up to $500.0 comprised of three senior secured
facilities: a $100.0 term loan facility, a $225.0 revolving credit facility and
a $175.0 multi-currency facility. Borrowings under the Former Credit Agreement
were used to refinance
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<PAGE>
Products Corporation's previous $150.0 credit agreement, refinance then
existing lines of credit outside of the United States and refinance
approximately $26.9 paid under the Yen Credit Agreement in January 1995. The
Former Credit Agreement was scheduled to terminate on June 30, 1997. The net
proceeds of $187.8 from the Offering were contributed to Products Corporation
and were used to repay borrowings under the Former Credit Agreement and to pay
fees and expenses related to the Credit Agreement.
In January 1996, Products Corporation entered into the Credit
Agreement, which became effective upon consummation of the Offering on March 5,
1996. The Credit Agreement provides, among other things, (i) an extension of
the term of the facilities from June 30, 1997 to December 31, 2000, subject to
earlier termination in certain circumstances, (ii) a reduction of the interest
rates, (iii) an increase in the aggregate amount of the credit facilities from
$500 to $600 and (iv) the release of security interests in assets of certain
foreign subsidiaries of Products Corporation which were then pledged. The
Credit Agreement is comprised of four senior secured facilities: a $130.0 term
loan facility, a $220.0 multi-currency facility, a $200.0 revolving acquisition
facility and a $50.0 special standby letter of credit facility. As of December
31, 1996, Products Corporation had approximately $130.0 outstanding under the
term loan facility, $57.2 outstanding under the multi-currency facility,
nothing outstanding under the revolving acquisition facility and $33.5
outstanding under the special standby letter of credit facility. In January
1997, the Credit Agreement was amended to, among other things, permit the
Merger of PFC into Cosmetic Center and to generally exclude Cosmetic Center (as
the survivor of the Merger) from the definition of "subsidiary" under the
Credit Agreement. See Note 7(a) to the Consolidated Financial Statements.
A subsidiary of Products Corporation is the borrower under the Yen
Credit Agreement, which had a principal balance of approximately Y4.8
billion as of December 31, 1996 (approximately $41.7 U.S. dollar equivalent as
of December 31, 1996). In accordance with the terms of the Yen Credit
Agreement, approximately Y2.7 billion (approximately $26.9 U.S. dollar
equivalent) was paid in January 1995 and approximately Y539 million
(approximately $5.2 U.S. dollar equivalent) was paid in January 1996. A payment
of approximately Y539 million (approximately $4.6 U.S. dollar equivalent
as of December 31, 1996) was paid in January 1997 and the balance of the Yen
Credit Agreement of approximately Y4.3 billion (approximately $37.1 U.S.
dollar equivalent as of December 31, 1996) is currently due on December 31,
1997. The Company is currently renegotiating an extension of the term of the
terms of the Yen Credit Agreement. In the event that such extension is not
obtained, the Company is able and intends to refinance the Yen Credit Agreement
under existing long-term credit facilities. Accordingly, the Company's
obligation under the Yen Credit Agreement has been classified as long-term as
of December 31, 1996.
The $61.0 aggregate principal amount of Products Corporation's 10 7/8%
Sinking Fund Debentures due 2010 previously purchased on the open market by
Products Corporation (which was not previously used for sinking fund payments,
including the payment in July 1996) and no longer outstanding will be used to
meet future sinking fund requirements of such issue. $9.0 aggregate principal
amount of previously purchased debentures was used for the sinking fund payment
due July 15, 1996.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings at interest rates more
favorable to Products Corporation than interest rates under the Credit
Agreement. No such borrowings were outstanding as of December 31, 1996.
In June 1996, $10.9 in notes due to Products Corporation from Holdings
under the Financing Reimbursement Agreement (See "Certain Relationships and
Related Transactions") was offset against an $11.7 demand note payable by
Products Corporation to Holdings.
The Company's principal sources of funds are expected to be cash flow
generated from operations and borrowings under the Credit Agreement and other
existing working capital lines. The Company's principal uses of funds are
expected to be the payment of operating expenses, working capital and capital
expenditure requirements and debt service payments.
The Company estimates that capital expenditures for 1997 will be
approximately $60, including approximately $10 for upgrades to the Company's
management information systems. In addition, cash payments related to the 1991
and 1992 restructuring charges are estimated to be approximately $9 for 1997.
Pursuant to a tax sharing agreement (See "Certain Relationships and Related
Party Transactions - Tax Sharing Agreement"), the
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Company may be required to make tax sharing payments to Mafco Holdings Inc. as
if the Company were filing separate income tax returns, except that no
payments are required by the Company if and to the extent that Products
Corporation is prohibited under the Credit Agreement from making tax sharing
payments to the Company. The Credit Agreement prohibits Products Corporation
from making any cash tax sharing payments other than in respect of state and
local income taxes. The Company anticipates that, as a result of net operating
tax losses and prohibitions under the Credit Agreement, no federal tax
payments or payments in lieu of taxes pursuant to the tax sharing agreement
will be required for 1997.
As of December 31, 1996, Products Corporation was party to a series of
interest rate swap agreements (which expire at various dates through December
2001) totaling a notional amount of $225.0 in which Products Corporation agreed
to pay on such notional amount a variable interest rate equal to the six month
London Inter-Bank Offered Rate (5.602% per annum at February 11, 1997) to its
counterparties and the counterparties agreed to pay on such notional amounts
fixed interest rates averaging approximately 6.03% per annum. Products
Corporation entered into these agreements in 1993 and 1994 (and in the first
quarter of 1996 extended a portion equal to a notional amount of $125.0 through
December 2001) to convert the interest rate on $225.0 of fixed-rate
indebtedness to a variable rate. If Products Corporation had terminated these
agreements, which Products Corporation considers to be held for other than
trading purposes, on December 31, 1996, a loss of approximately $3.5 would have
been realized. Certain other swap agreements were terminated in 1993 for a gain
of $14.0. The amortization of the realized gain on these agreements for 1996
and 1995 was approximately $3.2 in each of the years. The remaining unamortized
gain, which is being amortized over the original lives of the agreements, is
$3.1 as of December 31, 1996. Although cash flow from the presently outstanding
agreements was positive for 1996, future positive or negative cash flows from
these agreements will depend upon the trend of short-term interest rates during
the remaining lives of such agreements. Based on current interest rate levels,
Products Corporation expects to have a positive cash flow of $0.6 from these
agreements in 1997, although no assurances can be given. In the event of
nonperformance by the counterparties at any time during the remaining lives of
the agreements, Products Corporation could lose some or all of any possible
future positive cash flows from these agreements. However, Products Corporation
does not anticipate nonperformance by such counterparties, although no
assurances can be given.
Products Corporation enters into forward foreign exchange contracts
from time to time to hedge certain cash flows denominated in foreign
currencies. At December 31, 1996, Products Corporation had forward foreign
exchange contracts denominated in various currencies, predominantly the U.K.
pound, of approximately $62.0 (U.S. dollar equivalent). If Products Corporation
had terminated these contracts on December 31, 1996, no material gain or loss
would have been realized.
Based upon the Company's current level of operations and anticipated
growth in net sales and earnings as a result of its business strategy, the
Company expects that cash flows from operations and funds from currently
available credit facilities and refinancings of existing indebtedness will be
sufficient to enable the Company to meet its anticipated cash requirements for
the foreseeable future on a consolidated basis, including for debt service. 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, restructuring indebtedness, selling assets or operations,
seeking capital contributions or loans from affiliates of the Company or
issuing additional shares of capital stock of the Company. The Company, as a
holding company, will be dependent on the earnings and cash flow of, and
dividends and distributions from, Products Corporation to pay its expenses and
to pay any cash dividends or distributions on the Class A Common Stock that may
be authorized by the Board of Directors of the Company. The terms of the Credit
Agreement, the Senior Subordinated Notes, the 1999 Senior Notes and the Senior
Notes generally restrict Products Corporation from paying dividends or making
distributions, except that Products Corporation is permitted to pay dividends
and make distributions to the Company, among other things, to enable the
Company to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Commission filing fees and other miscellaneous expenses
related to being a public holding company and to pay dividends or make
distributions up to $5.0 per annum in certain circumstances to finance the
purchase by the Company of its Class A Common Stock in connection with the
delivery of such Class A Common Stock to grantees under the Revlon, Inc. 1996
Stock Plan. However, there can be no assurance that cash flow from operations
and funds from existing credit facilities and refinancing of existing
indebtedness will be sufficient to meet the Company's cash requirements on a
consolidated basis.
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FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K for the year ended December 31, 1996
as well as other public documents of the Company contains 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, the Company's expectation and
estimates as to future financial performance, including growth in net sales and
earnings, cash flows from operations, capital expenditures and the availability
of funds from refinancings of indebtedness. Readers are urged to consider
statements which use the terms "believes," "no reason to believe," "expects,"
"plans," "intends," "estimates," "anticipated" or "anticipates" to be uncertain
and forward-looking. In addition to factors that may be described in the
Company's Commission filings, 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)
difficulties or delays in developing and introducing new products or failure of
customers to accept new product offerings; (ii) changes in consumer
preferences, including reduced consumer demand for the Company's color
cosmetics and other current products; (iii) difficulties or delays in the
Company's continued expansion into the self-select distribution channel and
development of new markets; (iv) unanticipated costs or difficulties or delays
in completing projects associated with the Company's strategy to improve
operating efficiencies, including information system upgrades; (v) effects of
and changes in economic conditions, including inflation and monetary
conditions, and in trade, monetary, fiscal and tax policies in countries
outside of the U.S. in which the Company operates, including Brazil; (vi)
actions by competitors, including business combinations, technological
breakthroughs, new product offerings and marketing and promotional successes;
and (vii) combinations among significant customers or the loss, insolvency or
failure to pay its debts by a significant customer or customers.
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 in the United States or foreign
non-hyperinflationary countries. The Company operates in certain countries
around the world, such as Brazil, that have experienced hyperinflation in the
past three years. This hyperinflation has had a material effect on the
Company's results of operations in Brazil and may, in the future, have a
material effect on results of operations in Mexico. In hyperinflationary
foreign countries, the Company attempts to mitigate the effects of inflation by
increasing prices in line with inflation, where possible, and efficiently
managing its working capital levels.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index on page F-1 of the Consolidated
Financial Statements of the Company and the Notes thereto contained herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
Directors and executive officers of the Company. Each Director holds office
until his successor is duly elected and qualified or until his resignation or
removal, if earlier.
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Ronald O. Perelman Chairman of the Executive Committee of the Board and Director
Jerry W. Levin Chairman of the Board and Director
George Fellows President, Chief Executive Officer and Director
William J. Fox Senior Executive Vice President, Chief Financial Officer and
Director
Carlos Colomer Executive Vice President
Ronald H. Dunbar Senior Vice President, Human Resources
M. Katherine Dwyer Senior Vice President
Wade H. Nichols III Senior Vice President and General Counsel
Donald G. Drapkin Director
Meyer Feldberg Director
Howard Gittis Director
Vernon E. Jordan Director
Henry A. Kissinger Director
Edward J. Landau Director
Linda G. Robinson Director
Terry Semel Director
Martha Stewart Director
</TABLE>
The name, age, principal occupation for the last five years and
selected biographical information for each of the directors and for the
executive officers of the Company are set forth below. Information is as of
February 13, 1997.
Mr. Perelman (54) has been Chairman of the Executive Committee of the
Board of the Company and of Products Corporation since November 1995, and a
Director of the Company and of Products Corporation since their respective
formations in 1992. Mr. Perelman was Chairman of the Board of the Company and
of Products Corporation from their respective formations in 1992 to November
1995. Mr. Perelman has been Chairman of the Board and Chief Executive Officer
of MacAndrews & Forbes and various of its affiliates for more than the past five
years. Mr. Perelman also is Chairman of the Board of Andrews Group Incorporated
("Andrews Group"), Consolidated Cigar Holdings Inc. ("Cigar Holdings Inc."),
Mafco Consolidated Group Inc. ("Mafco Consolidated"), Meridian Sports
Incorporated ("Meridian"), Power Control Technologies, Inc. ("PCT") and Toy
Biz, Inc. ("Toy Biz") and Chairman of the Executive Committee of the Board of
Marvel Entertainment Group, Inc. ("Marvel"). Mr. Perelman is a Director of the
following corporations which file reports pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"): Andrews Group, California Federal
Bank, a Federal Savings Bank ("Cal Fed"), The Coleman Company, Inc. ("Coleman"),
Coleman Holdings Inc. ("Coleman Holdings"), Coleman Worldwide Corporation
("Coleman Worldwide"), Cigar Holdings, Consolidated Cigar Corporation
("Consolidated Cigar"), First Nationwide (Parent) Holdings Inc. ("First
Nationwide
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<PAGE>
Parent"), First Nationwide Holdings Inc. ("FN Holdings"), Mafco Consolidated,
Marvel, Marvel Holdings Inc. ("Marvel Holdings"), Marvel (Parent) Holdings
Inc. ("Marvel Parent"), Marvel III Holdings Inc. ("Marvel III"), Meridian,
PCT, Pneumo Abex Corporation ("Pneumo Abex"), Products Corporation, Revlon
Worldwide and Toy Biz. On December 27, 1996, Marvel Holdings, Marvel Parent,
Marvel III and Marvel and several of its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.
Mr. Levin (52) has been Chairman of the Board of the Company and of
Products Corporation since November 1995 and a Director of the Company and of
Products Corporation since their respective formations in 1992. Mr. Levin was
Chief Executive Officer of the Company and of Products Corporation from their
respective formations in 1992 to January 1997 and President of the Company and
of Products Corporation from their respective formations in 1992 to November
1995. He has been the President and a Director of Holdings since 1991 and Chief
Executive Officer since March 1992. Mr. Levin has been Executive Vice President
of MacAndrews Holdings since March 1989. Mr. Levin has been Chairman and Acting
Chief Executive Officer of Coleman since February 1997. For 15 years prior to
joining MacAndrews Holdings, he held various senior executive positions with
The Pillsbury Company. Mr. Levin is a Director of the following corporations
which file reports pursuant to the Exchange Act: Coleman, Coleman Holdings,
Coleman Worldwide, Ecolab, Inc., First Bank System, Inc., Meridian, Products
Corporation and Revlon Worldwide.
Mr. Fellows (54) has been President and Chief Executive Officer of the
Company and of Products Corporation since January 1997. He was President and
Chief Operating Officer of the Company and Products Corporation from November
1995 until January 1997, and has been a Director of the Company since November
1995 and a Director of Products Corporation since 1994. Mr. Fellows was Senior
Executive Vice President of the Company and of Products Corporation and
President and Chief Operating Officer of the Company's Consumer Group from
February 1993 to November 1995. From 1989 through January 1993, he was a senior
executive officer of Mennen Corporation and then Colgate-Palmolive Company,
which acquired Mennen Corporation in 1992. From 1986 to 1989 he was Senior Vice
President of Holdings. Prior to 1986, he was President of Holdings' Domestic
Beauty Group.
Mr. Fox (40) has been Senior Executive Vice President and Chief
Financial Officer of the Company and of Products Corporation since January 1997
and was Executive Vice President and Chief Financial Officer of the Company and
of Products Corporation from their respective formations in 1992 until January
1997. Mr. Fox was elected as a Director of the Company in November 1995 and of
Products Corporation in September 1994. He has been Executive Vice President
and Chief Financial Officer of Holdings since November 1991 and prior to such
time had been a Vice President of Holdings since 1987. He has been Senior Vice
President of MacAndrews Holdings since August 1990. He was Vice President of
MacAndrews Holdings from February 1987 to August 1990 and was Treasurer of
MacAndrews Holdings from February 1987 to September 1992. Prior to February
1987, he was Vice President and Assistant Treasurer of MacAndrews Holdings. Mr.
Fox joined MacAndrews & Forbes Group, Incorporated in 1983 as Assistant
Controller prior to which time he was a certified public accountant at the
international auditing firm of Coopers & Lybrand. Mr. Fox is a Director of The
Hain Food Group, Inc., which files reports pursuant to the Exchange Act.
Mr. Colomer (52) has been Executive Vice President of the Company and
of Products Corporation since August 1993. Prior to August 1993, he served as
President and General Manager of various of the Company's and Holdings'
international subsidiaries. Mr. Colomer joined Holdings in 1979 when Henry
Colomer, S.A., the haircare and cosmetics company that was founded by his
father, was acquired by Holdings, and has held positions of increasing
responsibility since that date.
Mr. Dunbar (59) has been Senior Vice President, Human Resources of the
Company and of Products Corporation since their respective formations in 1992.
He was elected Senior Vice President, Human Resources of Holdings in July 1991.
Mr. Dunbar was Vice President and General Manager of Arnold Menn and
Associates, a career management consulting and executive outplacement firm,
from 1989 to 1991 and Executive Vice President and Chief Human Resources
Officer of Ryder System Inc., a highway transportation firm, from 1978 to 1989.
Prior to that, Mr. Dunbar served in senior executive human resources positions
at Xerox Corporation and Ford Motor Company.
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<PAGE>
Ms. Dwyer (47) was elected as Senior Vice President of the Company and
of Products Corporation in November 1996. Prior to that she served in various
appointed officer positions for the Company and for Products Corporation,
including President of Products Corporation's United States Cosmetics Unit from
November 1995 to November 1996 and Executive Vice President and General Manager
of Products Corporation's Mass Cosmetics Unit from June 1993 to November 1995.
From 1991 to 1993, Ms. Dwyer was Executive Vice President and General Manager
for Victoria Creations. Prior to 1991, she served in various senior positions
for Avon Products Inc., Cosmair, Inc.
and Gillette.
Mr. Nichols (54) has been Senior Vice President and General Counsel
of the Company and of Products Corporation since their respective formations
in 1992. He was elected Senior Vice President and General Counsel of Holdings
in March 1992. He was Vice President and Secretary of Holdings from 1984 to
1992 and Secretary from 1981 to 1984. He joined Holdings in 1978. Mr. Nichols
has been Vice President-Law of MacAndrews Holdings since 1988.
Mr. Drapkin (48) has been a Director of the Company and of Products
Corporation since their respective formations in 1992 and of Holdings since
January 1992. He has been Vice Chairman of MacAndrews Holdings and various of
its affiliates since March 1987. Mr. Drapkin was a partner in the law firm of
Skadden, Arps, Slate, Meagher & Flom for more than five years prior to March
1987. Mr. Drapkin is a Director of the following corporations which file
reports pursuant to the Exchange Act: Algos Pharmaceutical Corporation, Andrews
Group, Coleman, Coleman Holdings, Coleman Worldwide, Cigar Holdings,
Consolidated Cigar, Marvel, Marvel Holdings, Marvel Parent, Marvel III,
Products Corporation, Revlon Worldwide, Toy Biz, and VIMRx Pharmaceuticals Inc.
On December 27, 1996, Marvel Holdings, Marvel Parent, Marvel III and Marvel and
several of its subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code.
Dr. Feldberg (54) has been a Director of the Company since February
1997. Dr. Feldberg has been the Dean of Columbia University Business School
for more than the past five years. Dr. Feldberg is a Director of the following
corporations which file reports pursuant to the Exchange Act: Federated
Department Stores, Inc., Paine Webber Group, Inc. (certain funds) and KIII
Communications Corporation.
Mr. Gittis (62) has been a Director of the Company and of Products
Corporation since their respective formations in 1992 and of Holdings since
1985. He has been Vice Chairman of MacAndrews Holdings and various of its
affiliates for more than five years. Mr. Gittis is a Director of the following
corporations which file reports pursuant to the Exchange Act: Andrews Group,
Cal Fed, Cigar Holdings, Consolidated Cigar, FN Holdings, First Nationwide
Parent, Mafco Consolidated, PCT, Pneumo Abex, Products Corporation, Revlon
Worldwide, Jones Apparel Group, Inc., Loral Space & Communications Ltd. and
Rutherford-Moran Oil Corporation.
Dr. Kissinger (73) has been a Director of the Company since June
1996. Dr. Kissinger has been Chairman of the Board and Chief Executive Officer
of Kissinger Associates, Inc., an international consulting firm since 1982.
Dr. Kissinger is an Advisor to the Board of Directors of American Express
Company, serves as Counselor to the Chase Manhattan Bank and is a member of
its International Advisory Committee. He is Chairman of the International
Advisory Board of American International Group, Inc. and is a Director of
Continental Grain Company, Hollinger International Inc. and Freeport-McMoran,
Inc., all of which file reports pursuant to the Exchange Act.
Mr. Jordan (61) has been a Director of the Company since June 1996.
Mr. Jordan is a Senior Partner in the Washington, D.C. law firm of Akin, Gump,
Strauss, Hauer & Feld, LLP where he has practiced law since 1982. He is a
Director of the following corporations which file reports pursuant to the
Exchange Act: American Express Company, Bankers Trust Company, Bankers Trust
New York Company, Corning Incorporated, Dow Jones & Company, Inc., J.C. Penney
Company, Inc., Ryder System, Inc., Sara Lee Corporation, Union Carbide
Corporation and Xerox Corporation. He is also trustee of the Ford Foundation
and Howard University.
Mr. Landau (67) has been a Director of the Company since June 1996.
Mr. Landau has been a Senior Partner in the New York law firm of Lowenthal,
Landau, Fischer & Bring, P.C. for more than the past five years. He has been a
Director of Products Corporation since June 1992 and was a director of
Holdings from 1989 until April 1993. Mr. Landau is a director of Offitbank
Investment Fund, Inc., which files reports pursuant to the Exchange Act.
25
<PAGE>
Ms. Robinson (44) has been a Director of the Company since June 1996.
Ms. Robinson has been Chairman and Chief Executive Officer of Robinson Lerer &
Montgomery, LLC, a strategic communications consulting firm, since May 1996.
For more than five years prior to that she was Chairman and Chief Executive
Officer of Robinson Lerer Sawyer Miller Group, or its predecessors. Ms. Robinson
is a director of VIMRx Pharmaceuticals, Inc. which files reports pursuant to
the Exchange Act, and is a trustee of New York University Medical Center.
Mr. Semel (53) has been a Director of the Company since June 1996.
Mr. Semel has been Chairman and Co-Executive Officer of the Warner Bros.,
Division of Time Warner Entertainment LP ("Warner Brothers") since March 1994
and of Warner Music Group since November 1995. For more than ten years prior
to that he was President of Warner Brothers or its predecessor Warner Bros.
Inc.
Ms. Stewart (55) has been a Director of the Company since June 1996.
Ms. Stewart is the Chairman of Martha Stewart Living Omnimedia LLC. She has
been an author, founder of the magazine Martha Stewart Living, creator of a
syndicated television series, a syndicated newspaper column and a catalog
company and a lifestyle consultant and lecturer for more than the past five
years.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Executive Committee, an Audit Committee
and a Compensation and Stock Plan Committee (the "Compensation Committee").
The Executive Committee consists of Messrs. Perelman, Gittis and
Levin. The Executive Committee may exercise all of the powers and authority of
the Board, except as otherwise provided under the Delaware General Corporation
Law ("DGCL"). The Audit Committee, consisting of Messrs. Landau and Ms.
Robinson and, effective February 13, 1997, Dr. Feldberg, makes recommendations
to the Board of Directors regarding the engagement of the Company's independent
auditors, reviews the plan, scope and results of the audit, reviews with the
auditors and management the Company's policies and procedures with respect to
internal accounting and financial controls, changes in accounting policy and
the scope of the non-audit services which may be performed by the Company's
independent auditors, among other things. The Audit Committee also monitors
policies to prohibit unethical, questionable or illegal activities by the
Company's employees. The Compensation Committee, consisting of Messrs. Gittis
and Drapkin and effective June 5, 1996, Mr. Semel, makes recommendations to the
Board regarding compensation and incentive arrangements (including
performance-based arrangements) for the Chief Executive Officer, other
Executive Officers, officers and other key managerial employees of the Company.
The Compensation Committee also considers and recommends awards of stock
options to purchase shares of Common Stock pursuant to the Revlon, Inc. 1996
Stock Plan (the "Stock Plan") and administers the Stock Plan.
During 1996, the Board of Directors held four meetings and acted two
times by unanimous written consent of all members thereof in accordance with
the Company's By-Laws and the DGCL, and the Executive Committee acted two times
by unanimous written consent of all members thereof in accordance with the
Company's By-Laws and the DGCL. The Audit Committee held two meetings in 1996.
During 1996, the Compensation Committee acted five times by unanimous written
consent of all members thereof in accordance with the Company's By-Laws and the
DGCL. During 1996, all Directors attended 75% or more of the meetings of the
Board of Directors and of the Committees of which they were members.
26
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information for the years indicated
concerning the compensation awarded to, earned by or paid to the Chief
Executive Officer of the Company and the four most highly paid executive
officers, other than the Chief Executive Officer, who served as executive
officers of the Company as of December 31, 1996, for services rendered in all
capacities to the Company and its subsidiaries during such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
------------------------------- --------- --------------------------------------- ------------ -------------
LONG-TERM
ANNUAL COMPENSATION (A) COMPENSATION
------------- ------------- ----------- AWARDS
------------
OTHER SECURITIES
ANNUAL UNDER- ALL OTHER
NAME AND COMPEN- LYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION OPTIONS SATION
($) ($) ($) ($)
------------------------------- --------- ------------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry W. Levin (b) 1996 1,500,000 1,500,000 93,801 170,000 307,213
Chairman of the Board 1995 1,450,000 1,450,000 42,651 0 308,002
1994 1,300,000 1,300,000 39,184 0 540,177
------------------------------- --------- ------------- ------------- ----------- ------------ -------------
George Fellows (c) 1996 1,025,000 870,000 15,242 120,000 4,500
President and Chief Executive 1995 841,667 531,700 68,559 0 4,500
Officer 1994 745,833 449,200 11,625 0 104,500
------------------------------- --------- ------------- ------------- ----------- ------------ -------------
William J. Fox (d) 1996 750,000 598,600 50,143 50,000 56,290
Senior Executive Vice 1995 660,000 455,000 54,731 0 56,290
President and Chief Financial 1994 601,333 329,900 59,143 0 56,290
Officer
------------------------------- --------- ------------- ------------- ----------- ------------ -------------
Carlos Colomer 1996 700,000 192,600 ---------- 37,000 ----------
Executive Vice President 1995 600,000 135,200 ---------- 0 ----------
1994 550,000 280,200 ---------- 0 ----------
------------------------------- --------- ------------- ------------- ----------- ------------ -------------
M. Katherine Dwyer (e) 1996 500,000 326,100 90,029 45,000 4,500
Senior Vice President
------------------------------- --------- ------------- ------------- ----------- ------------ -------------
</TABLE>
(a) The amounts shown in Annual Compensation for 1996, 1995 and 1994 reflect
salary and bonus and other annual compensation awarded to, earned by or
paid to the persons listed for services rendered to the Company and its
subsidiaries. The Company has a bonus plan (the "Executive Bonus Plan")
in which executives participate (including the Chief Executive Officer
and the other Named Executive Officers). The Executive Bonus Plan
provides for payment of cash compensation upon the achievement of
predetermined individual and corporate performance goals during the
calendar year (with the opportunity for higher awards based upon
overachievement of such goals but in no event higher than 100%).
(b) Mr. Levin was Chief Executive Officer of the Company during 1994, 1995
and 1996. The amount shown for Mr. Levin under Other Annual
Compensation for 1996 includes $26,400 in respect of personal use of a
Company provided automobile and payments in respect of gross ups for
taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising out
of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Levin under All Other
27
<PAGE>
Compensation for 1996 reflects $302,713 in respect of life insurance
premiums and $4,500 in respect of matching contributions under the
Revlon Employees' Savings and Investment Plan (the "401(k) Plan"). The
amount shown for Mr. Levin under Other Annual Compensation for 1995
reflects payments in respect of gross ups for taxes on imputed income
arising out of personal use of a Company-provided automobile and for
taxes on imputed income arising out of premiums paid or reimbursed by
the Company in respect of life insurance. The amount shown for Mr.
Levin under All Other Compensation for 1995 reflects $303,502 in
respect of life insurance premiums and $4,500 in respect of matching
contributions under the 401(k) Plan. The amount shown for Mr. Levin
under Other Annual Compensation for 1994 reflects payments in respect
of gross ups for taxes on imputed income arising out of personal use of
a Company-provided automobile and for taxes on imputed income arising
out of premiums paid or reimbursed by the Company in respect of life
insurance. The amounts shown for Mr. Levin under All Other Compensation
for 1994 reflect payments in respect of life insurance premiums and
certain relocation expenses and matching contributions under the 401(k)
Plan. In connection with such relocation, the Company purchased for
face value a $525,000 purchase money note made by the purchaser of Mr.
Levin's home secured by a mortgage on such home.
(c) Mr. Fellows became Chief Executive Officer of the Company in January
1997. The amount shown for Mr. Fellows under Other Annual Compensation
for 1996 reflects payments in respect of gross ups for taxes on imputed
income arising out of personal use of a Company-provided automobile and
for taxes on imputed income arising out of premiums paid or reimbursed
by the Company in respect of life insurance. The amount shown for Mr.
Fellows under All Other Compensation for 1996 reflects matching
contributions under the 401(k) Plan. The amount shown for Mr. Fellows
under Other Annual Compensation for 1995 includes $43,251 in respect of
membership fees and related expenses for personal use of a health and
country club and $9,458 in respect of gross up for taxes on imputed
income arising out of personal use of a Company-provided automobile.
The amount shown for Mr. Fellows under All Other Compensation for 1995
reflects matching contributions under the 401(k) Plan. The amount shown
for Mr. Fellows under Other Annual Compensation for 1994 reflects
payments in respect of gross up for taxes on imputed income arising out
of personal use of a Company-provided automobile. The amounts shown for
Mr. Fellows under All Other Compensation for 1994 reflect matching
contributions under the 401(k) Plan and reimbursement for long-term
compensation and other benefits under plans of his prior employer,
which Mr. Fellows forfeited by accepting employment with the Company.
(d) Mr. Fox became Senior Executive Vice President of the Company in
January 1997. The amount shown for Mr. Fox under Other Annual
Compensation for 1996 reflects payments in respect of gross ups for
taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising out
of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Fox under All Other Compensation
for 1996 reflects $51,790 in respect of life insurance premiums and
$4,500 in respect of matching contributions under the 401(k) Plan. The
amount shown for Mr. Fox under Other Annual Compensation for 1995
reflects payments in respect of gross ups for taxes on imputed income
arising out of personal use of a Company-provided automobile and for
taxes on imputed income arising out of premiums paid or reimbursed by
the Company in respect of life insurance. The amount shown for Mr. Fox
under All Other Compensation for 1995 reflects $51,790 in respect of
life insurance premiums and $4,500 in respect of matching contributions
under the 401(k) Plan. The amount shown for Mr. Fox under Other Annual
Compensation for 1994 reflects payments in respect of gross ups for
taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising out
of premiums paid or reimbursed by the Company in respect of life
insurance for Mr. Fox. The amounts shown for Mr. Fox under All Other
Compensation for 1994 reflect payments in respect of life insurance
premiums and matching contributions under the 401(k) Plan.
(e) Ms. Dwyer became an executive officer of the Company on December 17,
1996. The amount shown for Ms. Dwyer under Other Annual Compensation for
1996 reflects $57,264 in expense reimbursements and payments in respect
of gross up for taxes on imputed income arising out of personal use of a
Company-provided automobile. The amount shown for Ms. Dwyer under All
Other Compensation for 1996 reflects matching contributions under the
401(k) Plan.
28
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
During 1996, the following grants of stock options were made pursuant to
the Stock Plan to the executive officers named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------- --------------
Grant Date
Value
Individual Grants (a) (b)
----------------------------------------------------------------------------------- --------------
Percent
of Total
Options
Number of Granted
Securities To Exercise Grant Date
Underlying Employees Of Base Present
Option In Fiscal Price Value $
Name Granted (#) Year ($/Sh) Expiration
Date
----------------------------- ------------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Jerry W. Levin
Chairman (c) 170,000 17% 24.00 2/28/06 1,885,079
----------------------------- ------------- ------------ ------------ ------------- --------------
George Fellows
President and Chief 120,000 12% 24.00 2/28/06 1,330,644
Executive Officer (c)
----------------------------- ------------- ------------ ------------ ------------- --------------
William J. Fox
Senior Executive Vice
President and Chief 50,000 5% 24.00 2/28/06 554,435
Financial Officer (c)
----------------------------- ------------- ------------ ------------ ------------- --------------
Carlos Colomer
Executive Vice President 37,000 4% 24.00 2/28/06 410,282
----------------------------- ------------- ------------ ------------ ------------- --------------
M. Katherine Dwyer
Senior Vice President 45,000 5% 24.00 2/28/06 498,992
----------------------------- ------------- ------------ ------------ ------------- --------------
</TABLE>
(a) Prior to the consummation of the Offering, the Board of Directors
made initial grants under the Stock Plan of non-qualified options having a term
of 10 years to purchase shares of Class A Common Stock at an exercise price
equal to the initial public offering price. The grants to Messrs. Levin,
Fellows, Fox and Colomer and Ms. Dwyer will not vest as to any portion until
the third anniversary of the grant date and will thereupon become 100% vested,
except that upon termination of employment by the Company other than for
"cause", death or "disability" under the applicable employment agreement, such
options will vest with respect to 50% of the shares subject thereto (if the
termination is between the second and third anniversaries of the grant).
(b) Present values were calculated using the Black-Scholes option
pricing model. The model as applied used the grant date of February 29, 1996
and the exercise price per share specified in the table above was equal to the
fair market value per share of Common Stock on the date of grant. The model
also assumes (i) risk-free rate of return of 5.99% which was the rate as of the
grant date for the U.S. Treasury Zero Coupon Bond issues with a remaining term
similar to the expected term of the option, (ii) stock price volatility of .31
based upon the peer group average, (iii) a constant dividend rate of zero
percent and (iv) that the options normally would be exercised on the final day
of the seventh year after grant. No discount from the theoretical value was
taken to reflect the waiting period, if any, prior to vesting of the stock
options, the restrictions on the transfer of the stock options and the
likelihood that the stock options will be exercised in advance of the final day
of their term.
(c) Mr. Levin served as Chief Executive Officer during 1996. Mr.
Fellows was elected Chief Executive Officer in January 1997. Mr. Fox was
elected Senior Executive Vice President in January 1997.
29
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following chart shows the number of stock options exercised during
1996 and the 1996 year-end value of the stock options held by the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
--------------------------- --------------- ------------ -------------------------- -------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options At
Options At Fiscal Fiscal Year-End ($)
Shares Value Year-End (#) Exercisable/
Acquired on Realized Exercisable/ Unexercisable
Name Exercise (#) ($) Unexercisable (a)
--------------------------- --------------- ------------ -------------------------- -------------------------
<S> <C> <C> <C> <C>
Jerry W. Levin
Chairman (b)
0 0 0 / 170,000 0 / 998,750
--------------------------- --------------- ------------ -------------------------- -------------------------
George Fellows
President and
Chief Executive Officer 0 0 0 / 120,000 0 / 705,000
(b)
--------------------------- --------------- ------------ -------------------------- -------------------------
William J. Fox
Senior Executive Vice
President and
Chief Financial Officer 0 0 0 / 50,000 0 / 293,750
(b)
--------------------------- --------------- ------------ -------------------------- -------------------------
Carlos Colomer
Executive Vice President 0 0 0 / 37,000 0 / 217,375
--------------------------- --------------- ------------ -------------------------- -------------------------
M. Katherine Dwyer
Senior Vice President 0 0 0 / 45,000 0 / 264,375
--------------------------- --------------- ------------ -------------------------- -------------------------
</TABLE>
(a) Amounts shown represent the market value of the underlying shares of
Class A Common Stock at year-end calculated using the December 31, 1996 New
York Stock Exchange (the "NYSE") closing price per share of Class A Common
Stock of $29.875 minus the exercise price of the stock option. The actual
value, if any, an executive may realize is dependent upon the amount by which
the market price of shares of Common Stock exceeds the exercise price per share
when the stock options are exercised. The actual value realized may be greater
or less than the value shown in the table.
(b) Mr. Levin served as Chief Executive Officer during 1996. Mr.
Fellows was elected Chief Executive Officer in January 1997. Mr. Fox was
elected Senior Executive Vice President in January 1997.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Each of the Named Executive Officers has entered into an Executive
Employment Agreement with the Company's wholly owned subsidiary, Products
Corporation (except in the case of Mr. Colomer, who has entered into an
Executive Employment Agreement with a subsidiary of Products Corporation),
which became effective upon consummation of the Offering, providing for their
continued employment. At any time on or after the second anniversary of the
effective date of the relevant Executive Employment Agreement, the Company may
terminate the term by 12 months prior notice of non-renewal. The agreements
provide for base salary of not less than $1,500,000, $1,650,000 and $1,800,000
during 1996, 1997 and 1998 and thereafter, respectively, in the case of Mr.
Levin, and not less than $1,000,000, $750,000, $700,000 and $500,000 (or any
greater amount to which such base salary amounts may be increased) in the case
of Messrs. Fellows, Fox and Colomer and Ms. Dwyer, respectively, participation
in the Executive Bonus Plan, continuation of life insurance and executive
medical insurance coverage in the event of permanent disability, the provision
of post-retirement life insurance coverage in the amount of two times base
salary in certain circumstances, and participation in other executive benefit
plans on a basis equivalent to senior executives of the
30
<PAGE>
Company generally. The agreements with Messrs. Fellows and Colomer and
Ms. Dwyer provide for Company-paid supplemental term life insurance
during employment in the amount of three times base salary, while the
agreements with Messrs. Levin and Fox provide that, in lieu of any
participation in Company-paid pre-retirement life insurance coverage,
Products Corporation will pay premiums and gross up for taxes thereon
in respect of, in the case of Mr. Levin, whole life insurance policies
on his life in the amount of $14,100,000 under a split dollar
arrangement pursuant to which Products Corporation would be repaid the
amount of premiums it paid up to the cash surrender value of the
policies from insurance proceeds payable under the policies and, in the
case of Mr. Fox, a whole life insurance policy on his life in the
amount of $5,000,000 under an arrangement providing for all insurance
proceeds to be paid to the designated beneficiary under such policy.
The agreements also require that management recommend to the
Compensation Committee that Messrs. Levin, Fellows, Fox and Colomer and
Ms. Dwyer be granted options to purchase 170,000, 120,000, 50,000,
37,000, and 45,000 (in first year and 30,000 thereafter) shares of
Class A Common Stock, respectively, each year during the term of the
relevant Executive Employment Agreement. The agreements provide that in
the event of termination of the term of the relevant Executive
Employment Agreement by Products Corporation otherwise than for "good
reason" as defined in the Executive Severance Policy or failure of the
Compensation Committee to adopt and implement the recommendations of
management with respect to stock option grants, the executive would be
entitled to severance pursuant to the Executive Severance Policy as in
effect on January 1, 1996 (see -"Executive Severance Policy"). In
addition, the employment agreement with Mr. Fellows provides that if he
remains continuously employed with Products Corporation or its
affiliates until age 60, then upon any subsequent retirement he will be
entitled to a supplemental pension benefit in a sufficient amount so
that his annual pension benefit from all qualified and non-qualified
pension plans of Products Corporation and its affiliates (expressed as
a straight life annuity) equals $500,000. Upon any earlier retirement
with Products Corporation's consent or any earlier termination of
employment by Products Corporation otherwise than for "good reason" (as
defined in the Executive Severance Policy), Mr. Fellows will be
entitled to a reduced annual payment in an amount equal to the product
of multiplying $28,540 by the number of anniversaries, as of the date
of retirement or termination, of Mr. Fellows' fifty-third birthday (but
in no event more than would have been payable to Mr. Fellows under the
foregoing provision had he retired at age 60). In each case, Products
Corporation reserves the right to treat Mr. Fellows as having deferred
payment of pension for purposes of computing such supplemental
payments.
As of December 31, 1996, 1995, and 1994, Mr. Colomer had a loan
outstanding from the Company's subsidiary in Spain in the amount of 25.0
million Spanish pesetas (approximately $205,000 U.S. dollar equivalent as of
December 31, 1996) dating from 1991 pursuant to a management retention program
grandfathered under a 1992 change in the Spanish tax law which currently covers
certain executives of such subsidiary, including Mr. Colomer. Pursuant to this
management retention program, outstanding loans do not bear interest but an
amount equal to the one-year government bond interest rate in effect at the
beginning of the year is deducted from the executives' annual compensation, and
loans must be repaid in full upon termination of employment. The amount
deducted from Mr. Colomer's compensation was 2.15 million Spanish pesetas
(approximately $16,988 U.S. dollar equivalent as of December 31, 1996) for
1996; 2.25 million Spanish pesetas (approximately $18,097 U.S. dollar
equivalent as of December 31, 1995) for 1995 and 2.25 million Spanish pesetas
(approximately $17,094 U.S. dollar equivalent as of December 31, 1994) for
1994.
EXECUTIVE SEVERANCE POLICY
Products Corporation's Executive Severance Policy, as amended
effective January 1, 1996, provides that upon termination of employment of
eligible executive employees, including the Named Executive Officers, other
than voluntary resignation, retirement or termination by Products Corporation
for good reason, in consideration for the execution of a release and
confidentiality agreement and the Company's standard Employee Agreement as to
Confidentiality and Non-Competition (the "Non-Competition Agreement"), the
eligible executive will be entitled to receive, in lieu of severance under any
employment agreement then in effect or under Products Corporation's basic
severance plan, a number of months of severance pay in semi-monthly
installments based upon such executive's grade level and years of service
reduced by the amount of any compensation from subsequent employment,
unemployment compensation or statutory termination payments received by such
executive during the severance period, and, in certain circumstances, by the
actuarial value of enhanced pension benefits received by the executive as well
as continued participation in medical and certain other benefit plans for the
severance period (or in lieu thereof, upon commencement of subsequent
employment, a lump sum payment equal to the then present value of 50% of the
amount of base salary then remaining payable through the balance of the
severance period, not to exceed
31
<PAGE>
six months' base salary). Pursuant to the Executive Severance Policy,
upon meeting the conditions set forth therein, Messrs. Levin, Fellows,
Colomer and Fox and Ms. Dwyer would be entitled to severance pay equal
to two years of base salary at the rate in effect on the date of
employment termination plus continued participation in the medical and
dental plans for two years on the same terms as active employees.
DEFINED BENEFIT PLANS
The following table shows the estimated annual retirement benefits
payable (as of December 31, 1996) at normal retirement age (65) to a person
retiring with the indicated average compensation and years of credited service,
on a straight life annuity basis, after Social Security offset, under the
Revlon Employees' Retirement Plan (the "Retirement Plan"), including amounts
attributable to the Pension Equalization Plan, each as described below:
<TABLE>
<CAPTION>
HIGHEST CONSECUTIVE
FIVE-YEAR AVERAGE
COMPENSATION ESTIMATED ANNUAL STRAIGHT LIFE BENEFITS AT RETIREMENT
DURING FINAL TEN YEARS WITH INDICATED YEARS OF CREDITED SERVICE (A)
- ---------------------- ----------------------------------------------------------
15 20 25 30 35
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$600,000 $152,022 $202,696 $253,370 $304,044 $304,044
700,000 178,022 237,363 296,703 356,044 356,044
800,000 204,022 272,029 340,037 408,044 408,044
900,000 230,022 306,696 383,370 460,044 460,044
1,000,000 256,022 341,363 426,703 500,000 500,000
1,100,000 282,022 376,029 470,037 500,000 500,000
1,200,000 308,022 410,696 500,000 500,000 500,000
1,300,000 334,022 445,363 500,000 500,000 500,000
1,400,000 360,022 480,029 500,000 500,000 500,000
1,500,000 386,022 500,000 500,000 500,000 500,000
2,000,000 500,000 500,000 500,000 500,000 500,000
2,500,000 500,000 500,000 500,000 500,000 500,000
</TABLE>
(a) The normal form of benefit for the Retirement Plan and the Pension
Equalization Plan is a life annuity.
The Retirement Plan is intended to be a tax qualified defined benefit
plan. Retirement Plan benefits are a function of service and final average
compensation. The Retirement Plan is designed to provide an employee having 30
years of credited service with an annuity generally equal to 52% of final
average compensation, less 50% of estimated individual Social Security
benefits. Final average compensation is defined as average annual base salary
and bonus (but not any part of bonuses in excess of 50% of base salary) during
the five consecutive calendar years in which base salary and bonus (but not any
part of bonuses in excess of 50% of base salary) were highest out of the last
10 years prior to retirement or earlier termination. Except as otherwise
indicated, credited service only includes all periods of employment with the
Company or a subsidiary prior to retirement. The base salaries and bonuses of
each of the Named Executive Officers are set forth in the Summary Compensation
Table under columns entitled "Salary" and "Bonus," respectively.
The Employee Retirement Income Security Act of 1974, as amended,
places certain maximum limitations upon the annual benefit payable under all
qualified plans of an employer to any one individual. In addition, the Omnibus
Budget Reconciliation Act of 1993 limits the annual amount of compensation that
can be considered in determining the level of benefits under qualified plans.
The Pension Equalization Plan, as amended effective January 1, 1996, is a
non-qualified benefit arrangement designed to provide for the payment by the
Company of the difference, if any, between the amount of such maximum
limitations and the annual benefit that would be payable under the Retirement
Plan but for such limitations, up to a combined maximum annual straight life
annuity benefit at age 65 under the Retirement Plan and the Pension
Equalization Plan of $500,000. Benefits provided under the Pension Equalization
Plan are conditioned on the participant's compliance with his or her
Non-Competition Agreement and, in any case, on the participant not competing
with Products Corporation for one year after termination of employment.
The number of years of credited service under the Retirement Plan and
the Pension Equalization Plan as of January 1, 1997 for Mr. Levin is seven
years (which includes credit for service with MacAndrews Holdings), for Mr.
32
<PAGE>
Fellows is eight years (which includes credit for prior service with Holdings),
for Mr. Fox is 13 years (which includes credit for service with MacAndrews
Holdings) and for Ms. Dwyer is 3 years. Mr. Colomer does not participate in the
Retirement Plan or the Pension Equalization Plan. Mr. Colomer participates in
the Revlon Foreign Service Employees Pension Plan (the "Foreign Pension Plan").
The Foreign Pension Plan is a non-qualified defined benefit plan. The plan is
designed to provide an employee with 2% of final average salary for each year
of credited service, up to a maximum of 30 years, reduced by the sum of all
other Company provided retirement benefits and social security or other
government provided retirement benefits. Credited service includes all periods
of employment with the Company or a subsidiary prior to retirement. Final
average salary is defined as average annual base salary during the five
consecutive calendar years in which base salary was highest out of the last 10
years prior to retirement. The normal form of payment under the Foreign Pension
Plan is a life annuity. Mr. Colomer's credited service as of January 1, 1997
under the Foreign Pension Plan is 17 years (which includes credit for service
with Holdings).
COMPENSATION OF DIRECTORS
Directors who currently are not receiving compensation as officers or
employees of the Company or any of its affiliates are paid an annual retainer
fee of $25,000, payable in monthly installments, and a fee of $1,000 for each
meeting of the Board of Directors or any committee thereof they attend.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company conducts its business through Products Corporation and
Products Corporation's subsidiaries. For 1996, the Company's executive officers
were compensated by Products Corporation for services rendered to the Company
and its subsidiaries, participated in benefit plans sponsored by Products
Corporation and did not receive compensation from the Company other than grants
of options under the Stock Plan. The Compensation Committee (made up of Messrs.
Gittis and Drapkin effective February 22, 1996 and Mr. Semel effective June 6,
1996) determined compensation of executive officers of the Company from and
after the Offering.
During 1996, the Company has used an airplane which was owned by a
corporation of which Messrs. Gittis, Drapkin and Levin were the sole
stockholders. As of December 31, 1996, Mr. Levin no longer holds an ownership
interest in the corporation that owns the airplane. See "Certain Relationships
and Related Transactions - Other."
33
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 1, 1996, the number of
shares of Common Stock beneficially owned, and the percent so owned, by (i)
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common stock, (ii) each director of the Company who
is a beneficial owner of any shares of Common Stock, (iii) the chief executive
officer and each of the four most highly compensated executive officers of the
Company during 1996 and (iv) all directors and executive officers of the
Company as a group. The number of shares owned are those beneficially owned, as
determined under the rules of the Securities and Exchange Commission (the
"SEC"), and such information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares of Common Stock as to which a person has sole or shared
voting power or investment power and any shares of Common Stock which the
person has the right to acquire within 60 days through the exercise of any
option, warrant or right, through conversion of any security or pursuant to the
automatic termination of a power of attorney or revocation of a trust,
discretionary account or similar arrangement.
34
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
Ronald O. Perelman 11,250,000 (Class A) (1) 56.6%
35 E. 62nd St. 31,250,000 (Class B) (1) 100%
New York, NY 10021
Carlos Colomer 0
Donald Drapkin 12,000 (Class A) (2) *
M. Katherine Dwyer 3,000 (Class A) *
Meyer Feldberg 0
George Fellows 10,000 (Class A) *
William J. Fox 10,000 (Class A) (3) *
Howard Gittis 15,000 (Class A) *
Vernon E. Jordan 0
Henry A. Kissinger 0 *
Edward J. Landau 0
Jerry W. Levin 26,000 (Class A) (4) *
Linda Gosden Robinson 0 *
Terry Semel 5,000 (Class A) (5) *
Martha Stewart 0
- ------------
All Nominees and Executive Officers as a
Group (18 Persons) (6) 11,352,250 (Class A) 57.1%
31,250,000 (Class B) 100%
</TABLE>
- ------------
* Less than one percent
(1) Mr. Perelman through Mafco Holdings Inc. (which through Revlon Worldwide)
beneficially owns 11,250,000 shares of Class A Common Stock (representing 56.6%
of the outstanding shares of Class A Common Stock) and all of the outstanding
31,250,000 shares of Class B Common Stock, which together represent 83.1% of
the outstanding shares of Common Stock and has approximately 97.4% of the
combined voting power of the outstanding shares of Common Stock. All of the
shares of Common Stock owned by Revlon Worldwide are pledged by Revlon
Worldwide to secure its obligations under certain indebtedness, and shares of
intermediate holding companies are or may from time to time be pledged to
secure obligations of Mafco Holdings Inc. or its affiliates.
(2) All of such shares are held by trusts for Mr. Drapkin's children and
beneficial ownership is disclaimed.
(3) Includes 5,800 shares owned by Mr. Fox's wife and 4,200 shares owned by
his children as to which beneficial ownership is disclaimed.
34
<PAGE>
(4) Includes 1,000 shares owned by Mr. Levin's daughter as to which beneficial
ownership is disclaimed.
(5) Includes 2,000 shares owned by Mr. Semel's children as to which beneficial
ownership is disclaimed.
(6) Includes 16,500 shares owned by executive officers not listed in the table
as to which beneficial ownership is disclaimed for 2,350 shares. Also includes
4,750 shares which may be acquired under options which vest on February 28,
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through Revlon Worldwide, MacAndrews & Forbes beneficially owns shares
of Common Stock having approximately 97.4% of the combined voting power of the
outstanding shares of Common Stock. As a result, MacAndrews & Forbes is able to
elect the entire Board of Directors of the Company and control the vote on all
matters submitted to a vote of the Company's stockholders. MacAndrews & Forbes
is wholly owned by Ronald O. Perelman, who is Chairman of the Executive
Committee of the Board and a Director of the Company.
TRANSFER AGREEMENTS
In June 1992, the Company and Products Corporation entered into an
asset transfer agreement with Holdings and certain of its wholly owned
subsidiaries (the "Asset Transfer Agreement"), and the Company and Products
Corporation entered into a real property asset transfer agreement with Holdings
(the "Real Property Transfer Agreement" and, together with the Asset Transfer
Agreement, the "Transfer Agreements"), and pursuant to such agreements on June
24, 1992, Holdings transferred assets to Products Corporation and Products
Corporation assumed all the liabilities of Holdings, other than certain
specifically excluded assets and liabilities (the liabilities excluded are
referred to as the "Excluded Liabilities"). Holdings retained certain small
brands that historically had not been profitable ("Retained Brands"). Holdings
agreed to indemnify the Company and Products Corporation against losses arising
from the Excluded Liabilities, and the Company and Products Corporation agreed
to indemnify Holdings against losses arising from the liabilities assumed by
Products Corporation. The amounts reimbursed by Holdings to Products
Corporation for the Excluded Liabilities for 1996 was $1.4 million.
BENEFIT PLANS ASSUMPTION AGREEMENT
Holdings, Products Corporation and the Company entered into a benefit
plans assumption agreement dated as of July 1, 1992 pursuant to which Products
Corporation assumed all rights, liabilities and obligations under all of
Holdings' benefit plans, arrangements and agreements, including obligations
under the Revlon Employees' Retirement Plan and the Revlon Employees' Savings
and Investment Plan. Products Corporation was substituted for Holdings as
sponsor of all such plans theretofore sponsored by Holdings.
OPERATING SERVICES AGREEMENT
In June 1992, the Company, Products Corporation and Holdings entered
into an operating services agreement (as amended and restated, and as
subsequently amended, the "Operating Services Agreement") pursuant to which
Products Corporation manufactures, markets, distributes, warehouses and
administers, including the collection of accounts receivable, the Retained
Brands for Holdings. Pursuant to the Operating Services Agreement, Products
Corporation is reimbursed an amount equal to all of its and the Company's
direct and indirect costs incurred in connection with furnishing such services,
net of the amounts collected by Products Corporation with respect to the
Retained Brands, payable quarterly. The net amount reimbursed by Holdings to
the Company for such direct and indirect costs for 1996 was $5.1 million.
Holdings also pays Products Corporation a fee equal to 5% of the net sales of
the Retained Brands, payable quarterly. The fees paid by Holdings to Products
Corporation pursuant to the Operating Services Agreement for services with
respect to the Retained Brands for 1996 was approximately $.6 million
35
<PAGE>
REIMBURSEMENT AGREEMENTS
The Company, Products Corporation and MacAndrews Holdings have entered
into reimbursement agreements (the "Reimbursement Agreements") pursuant to
which (i) MacAndrews Holdings is obligated to provide certain professional and
administrative services, including employees, to the Company and its
subsidiaries, including Products Corporation, and purchase services from third
party providers, such as insurance and legal and accounting services, on behalf
of the Company and its subsidiaries, including Products Corporation, to the
extent requested by Products Corporation, and (ii) Products Corporation is
obligated to provide certain professional and administrative services,
including employees, to MacAndrews Holdings and purchase services from third
party providers, such as insurance and legal and accounting services, on behalf
of MacAndrews Holdings to the extent requested by MacAndrews Holdings, provided
that in each case the performance of such services does not cause an
unreasonable burden to MacAndrews Holdings or Products Corporation, as the case
may be. The Company reimburses MacAndrews Holdings for the allocable costs of
the services purchased for or provided to the Company and for reasonable
out-of-pocket expenses incurred in connection with the provision of such
services. MacAndrews Holdings reimburses the Company for the allocable costs of
the services purchased for or provided to MacAndrews Holdings and for the
reasonable out-of-pocket expenses incurred in connection with the purchase or
provision of such services. In addition, in connection with certain insurance
coverage provided by MacAndrews Holdings, Products Corporation obtained letters
of credit under the standby letter of credit facility (which aggregated
approximately $26.4 million as of December 31, 1996) to support certain
self-funded risks of MacAndrews Holdings and its affiliates, including the
Company, associated with such insurance coverage. The costs of such letters of
credit are allocated among, and paid by, the affiliates of MacAndrews Holdings,
including the Company, which participate in the insurance coverage to which the
letters of credit relate. The Company expects that these self-funded risks will
be paid in the ordinary course and, therefore, it is unlikely that such letters
of credit will be drawn upon. MacAndrews Holdings has agreed to indemnify the
Company to the extent amounts are drawn under any of such letters of credit
with respect to claims for which the Company is not responsible. The net amount
reimbursed by MacAndrews Holdings to the Company for the services provided
under the Reimbursement Agreements for 1996 was $2.2 million. Each of the
Company and Products Corporation, on the one hand, and MacAndrews Holdings, on
the other, has agreed to indemnify the other party for losses arising out of
the provision of services by it under the Reimbursement Agreements other than
losses resulting from its willful misconduct or gross negligence. The
Reimbursement Agreements may be terminated by either party on 90 days' notice.
The Company does not intend to request services under the Reimbursement
Agreements unless their costs would be at least as favorable to the Company as
could be obtained from unaffiliated third parties.
TAX SHARING AGREEMENT
The Company, for federal income tax purposes, is included in the
affiliated group of which Mafco Holdings is the common parent, and the
Company's federal taxable income and loss is included in such group's
consolidated 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. In June 1992, Holdings, the Company and certain of its
subsidiaries, and Mafco Holdings entered into a tax sharing agreement (as
subsequently amended, the "Tax Sharing Agreement"), pursuant to which Mafco
Holdings has agreed to indemnify the Company 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 the Company or its
subsidiaries) is the common parent for taxable periods beginning on or after
January 1, 1992 during which the Company or a subsidiary of the Company is a
member of such group. Pursuant to the Tax Sharing Agreement, for all taxable
periods beginning on or after January 1, 1992, the Company will pay to Holdings
amounts equal to the taxes that the Company 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 the Company), except that the Company
will not be entitled to carry back any losses to taxable periods ending prior
to January 1, 1992. No payments are required by the Company if and to the
extent Products Corporation is prohibited under the Credit Agreement from
making cash tax sharing payments to the Company. The Credit Agreement prohibits
Products Corporation from making such cash tax sharing payments other than in
respect of state and local income taxes. Since the payments to be made by the
Company under the Tax Sharing Agreement will be determined by the amount of
taxes that the Company would otherwise have to pay if it were to file separate
federal, state or local income tax returns, the Tax Sharing Agreement will
benefit Mafco Holdings to the extent Mafco Holdings can offset the taxable
income generated by the
36
<PAGE>
Company against losses and tax credits generated by Mafco Holdings and its
other subsidiaries. There were no cash payments by the Company pursuant to the
Tax Sharing Agreement for 1996.
FINANCING REIMBURSEMENT AGREEMENT
Holdings and Products Corporation entered into a financing
reimbursement agreement (the "Financing Reimbursement Agreement") in 1992
pursuant to which Holdings agreed to reimburse Products Corporation for
Holdings' allocable portion of (i) the debt issuance cost and advisory fees
related to the capital restructuring of Holdings and (ii) interest expense
attributable to the higher cost of funds paid by Products Corporation under the
credit agreement in effect at that time as a result of additional borrowings
for the benefit of Holdings in connection with the assumption of certain
liabilities by Products Corporation under the Asset Transfer Agreement and the
repurchase of Old Senior Subordinated Notes from affiliates. In February 1995,
the Financing Reimbursement Agreement was amended and extended to provide that
Holdings would reimburse Products Corporation for a portion of the debt
issuance costs and advisory fees related to the Former Credit Agreement and 1
1/2 % per annum of the average balance outstanding under the Former Credit
Agreement and the average balance outstanding under working capital borrowings
from affiliates through June 30, 1996 and such amounts were evidenced by a
noninterest-bearing promissory note payable on June 30, 1996. In June 1996,
$10.9 million in notes due to Products Corporation, which included $2.0 million
of interest reimbursement in 1996, under the Financing Reimbursement Agreement
from Holdings was offset against a $11.7 million demand note payable by
Products Corporation to Holdings. The Financing Reimbursement Agreement expired
on June 30, 1996.
REGISTRATION RIGHTS AGREEMENT
Prior to the consummation of the Offering, the Company and Revlon
Worldwide, the direct parent of the Company entered into the Registration
Rights Agreement pursuant to which Revlon Worldwide and certain transferees of
Common Stock held by Revlon Worldwide (the "Holders") have the right to require
the Company to register all or part of the Class A Common Stock owned by such
Holders and the Class A Common Stock issuable upon conversion of the Class B
Common Stock owned by such Holders under the Securities Act (a "Demand
Registration"); provided that the Company may postpone giving effect to a
Demand Registration up to a period of 30 days if the Company believes such
registration might have a material adverse effect on any plan or proposal by
the Company with respect to any financing, acquisition, recapitalization,
reorganization or other material transaction, or the Company is in possession
of material non-public information that, if publicly disclosed, could result in
a material disruption of a major corporate development or transaction then
pending or in progress or in other material adverse consequences to the
Company. In addition, the Holders have the right to participate in
registrations by the Company of its Class A Common Stock (a "Piggyback
Registration"). The Holders will pay all out-of-pocket expenses incurred in
connection with any Demand Registration. The Company will pay any expenses
incurred in connection with a Piggyback Registration, except for underwriting
discounts, commissions and expenses attributable to the shares of Class A
Common Stock sold by such Holders.
OTHER
Pursuant to a lease dated April 2, 1993 (the "Edison Lease"), Holdings
leases to Products Corporation the Edison research and development facility for
a term of up to 10 years with an annual rent of $1.4 million and certain shared
operating expenses payable by Products Corporation which, together with the
annual rent are not to exceed $2.0 million per year. Pursuant to an assumption
agreement dated February 18, 1993, Holdings agreed to assume all costs and
expenses of the ownership and operation of the Edison facility as of January 1,
1993, other than (i) the operating expenses for which Products Corporation is
responsible under the Edison Lease and (ii) environmental claims and compliance
costs relating to matters which occurred prior to January 1, 1993 up to an
amount not to exceed $8.0 million (the amount of such claims and costs for
which Products Corporation is responsible, the "Environmental Limit"). In
addition, pursuant to such assumption agreement, Products Corporation agreed to
indemnify Holdings for environmental claims and compliance costs relating to
matters which occurred prior to January 1, 1993 up to an amount not to exceed
the Environmental Limit and Holdings agreed to indemnify Products Corporation
for environmental claims and compliance costs relating to matters which
occurred prior to January 1, 1993 in excess of the Environmental Limit and all
such claims and costs relating to matters occurring on or after January 1,
1993. Pursuant to an occupancy agreement, during 1996 Products Corporation
rented a portion of the administration building located at the Edison
37
<PAGE>
facility and space for a retail store of the Company. Products Corporation
provides certain administrative services, including accounting, for Holdings
with respect to the Edison facility pursuant to which Products Corporation
pays on behalf of Holdings costs associated with the Edison facility and is
reimbursed by Holdings for such costs, less the amount owed by Products
Corporation to Holdings pursuant to the Edison Lease and the occupancy
agreement. The net amount reimbursed by Holdings to Products Corporation
for such costs with respect to the Edison facility for 1996 was $1.1 million.
Effective January 1, 1996, Products Corporation acquired from Holdings
substantially all of the assets of Tarlow in consideration for the assumption
of substantially all of the liabilities and obligations of Tarlow. Net
liabilities assumed were approximately $3.4 million. Products Corporation paid
$4.1 million to Holdings which was accounted for as an increase in capital
deficiency. A nationally recognized investment banking firm rendered its
written opinion that the terms of the purchase are fair from a financial
standpoint to Products Corporation.
During 1996, Products Corporation leased certain facilities to
MacAndrews & Forbes or its affiliates pursuant to occupancy agreements and
leases including space at Products Corporation's New York headquarters and at
Products Corporation's offices in London and Tokyo. The rent paid by MacAndrews
& Forbes or its affiliates to Products Corporation for 1996 was $4.6 million.
The Credit Agreement is supported by, among other things, guarantees
from Holdings and certain of its subsidiaries. The obligations under such
guarantees are secured by, among other things, (i) the capital stock and
certain assets of certain subsidiaries of Holdings and (ii) a mortgage on
Holdings' Edison, New Jersey facility.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings. No such borrowings were
outstanding as of December 31, 1996. The interest rates for such borrowings are
more favorable to Products Corporation than interest rates under the Credit
Agreement and, for borrowings occurring prior to the execution of the Credit
Agreement, the credit facility in effect at the time of such borrowing. The
amount of interest paid by Products Corporation for such borrowings for 1996
was $0.5 million.
In November 1993, Products Corporation assigned to Holdings a lease
for warehouse space in New Jersey (the "N.J. Warehouse") between Products
Corporation and a trust established for the benefit of certain family members
of the Chairman of the Executive Committee. The N.J. Warehouse had become
vacant as a result of divestitures and restructuring of Products Corporation.
The lease has annual lease payments of approximately $2.3 million and
terminates on June 30, 2005. In consideration for Holdings assuming all
liabilities and obligations under the lease, Products Corporation paid
Holdings $7.5 million (for which a liability was previously recorded) in
three installments of $2.5 million each in January 1994, January 1995 and
January 1996. A nationally recognized investment banking firm rendered its
written opinion that the terms of the lease transfer were fair from a financial
standpoint to Products Corporation. During 1996, Products Corporation paid
$0.2 million associated with the N.J. Warehouse on behalf of Holdings and was
reimbursed by Holdings for such amount.
During 1996, the Company used an airplane which was owned by a
corporation of which Messrs. Gittis, Drapkin and Levin were the sole
stockholders. In 1996, the Company paid approximately $0.2 million for the
usage of the airplane. As of December 31, 1996, Mr. Levin no longer holds an
ownership interest in the corporation that owned the airplane.
Consolidated Cigar, an affiliate of the Company, assembles lipstick
cases for Products Corporation. Products Corporation paid approximately $1.0
million for such services in 1996.
In the fourth quarter of 1996, Products Corporation and certain of its
subsidiaries purchased an inactive subsidiary from an affiliate for net cash
consideration of approximately $3.0 million in a series of transactions in
which the Company expects to realize certain tax benefits in future years.
The law firm of which Mr. Jordan is a senior partner provided legal
services to the Company and its subsidiaries during 1996 and it is anticipated
that it will provide legal services to the Company and its subsidiaries during
1997.
38
<PAGE>
The Company believes that the terms of the foregoing transactions are
at least as favorable to the Company or Products Corporation, as applicable, as
those that could be obtained from unaffiliated third parties.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
(1) Consolidated Financial Statements and Independent Auditors'
Report included herein:
See Index on page F-1
(2) Financial Statement Schedule:
See Index on page F-1
All other schedules are omitted as they are inapplicable or the
required information is furnished in the Consolidated Financial
Statements of the Company or the Notes thereto.
(3) List of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Amended and Restated Certificate of Incorporation of Revlon, Inc. dated March 4, 1996.
(Incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1996 of Revlon, Inc. (the "Revlon 1996 First Quarter 10-Q")).
*3.2 Amended and Restated By-Laws of Revlon, Inc. dated January 30, 1997.
4. INSTRUMENTS DEFINING THE RIGHT OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of July 15, 1980, between Holdings and The Chase Manhattan Bank, N.A., as
Trustee, relating to the 10 7/8 % Sinking Fund Debentures due
2010 (the "Debentures Indenture"). (Incorporated by reference
to Exhibit 4.1 to the Form S-1 of Revlon, Inc. filed with the
Securities and Exchange Commission on May 22, 1992, File No.
33-47100 (the "Revlon 1992 Form S-1")).
4.2 First Supplemental Indenture, dated as of August 15, 1986, to the Debentures Indenture.
(Incorporated by reference to Exhibit 4.2 to the Revlon 1992 Form S-1).
4.3 Instrument of Appointment and Acceptance of Successor Trustee and Appointment of Agent dated as
of November 19, 1987, to appoint First National Bank of Minneapolis, as Trustee, relating to the
Debentures Indenture. (Incorporated by reference to Exhibit 4.3 to the Revlon 1992 Form S-1).
4.4 Second Supplemental Indenture, dated as of June 24, 1992, among Holdings, Revlon, Inc. and First
National Bank of Minneapolis, as Trustee, to the Debentures Indenture. (Incorporated by reference
to Exhibit 4.4 to the Amendment No. 1 to the Revlon Form S-1 filed with the Securities and
Exchange Commission on June 29, 1992, File No. 33-47100 (the "Revlon 1992 Amendment No. 1")).
4.5 Third Supplemental Indenture, dated as of June 24, 1992, among Revlon, Inc., Products Corporation
and First National Bank of Minneapolis, as Trustee, to the Debentures Indenture. (Incorporated by
reference to Exhibit 4.5 to the Revlon 1992 Amendment No. 1).
4.6 Indenture, dated as of February 15, 1993, between Products Corporation and The Bank of New York,
as Trustee, relating to Products Corporation's 10 1/2% Series B Senior Subordinated Notes Due
2003. (Incorporated by reference to Exhibit 4.31 to the Registration Statement on Form S-1 of
Products Corporation filed with the Securities and Exchange Commission on March 17, 1993, File
No. 33-59650).
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.7 Indenture, dated as of April 1, 1993, between Products Corporation and NationsBank of Georgia,
National Association, as Trustee, relating to the Products Corporation's 9 3/8 % Senior Notes Due
2001 and Products Corporation's 9 3/8 % Series B Senior Notes Due 2001. (Incorporated by
reference to Exhibit 4.28 to the Amendment No. 1 to the Registration Statement on Form S-1 of
Products Corporation as filed with the Securities and Exchange Commission on April 13, 1993, File
No. 33-59650).
4.8 Indenture dated as of June 1, 1993, between Products Corporation and NationsBank of Georgia,
National Association, as Trustee, relating to Products Corporation's 91/2% Senior Notes Due 1999.
(Incorporated by reference to Exhibit 4.31 to the Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1993 of Products Corporation).
4.9 Financing Reimbursement Agreement by and between Holdings and Products Corporation dated February
28, 1995. (Incorporated by reference to Exhibit 4.30 to the Annual Report on Form 10-K for the
year ended December 31, 1994 of Products Corporation (the "Products Corporation 1994 10-K")).
*4.10 Amendment to the Financing Reimbursement Agreement by and between Holdings and Products
Corporation dated May 3, 1996.
4.11 Second Amended and Restated Credit Agreement dated as of December 22, 1994, between Pacific
Finance & Development Corp. and the Long-Term Credit Bank of Japan, Ltd. (the "Yen Credit
Agreement") (Incorporated by reference to Exhibit 4.32 to the Products Corporation 1994 10-K).
4.12 Credit Agreement, dated as of February 28, 1995 among Products Corporation, Chemical Bank,
Citibank N.A. and the lenders party thereto (the "Former Credit Agreement"). (Incorporated by
reference to Exhibit 4.33 to the Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995 of Products Corporation (the "Products Corporation First Quarter 10-Q")).
4.13 First Amendment, dated as of February 28, 1995, with respect
to the Former Credit Agreement. (Incorporated by reference to
Exhibit 4.34 to the Products Corporation First Quarter 10-Q).
4.14 Second Amendment, dated as of February 28, 1995, with respect to the Former Credit Agreement.
(Incorporated by reference to Exhibit 4.35 to the Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995 of Products Corporation).
4.15 Third Amendment, dated as of October 30, 1995, with respect to the Former Credit Agreement.
(Incorporated by reference to Exhibit 4.17 to the Registration Statement on Form S-1 of Revlon,
Inc. filed with the Securities and Exchange Commission on November 17, 1995 (File No. 33-99558)
(the "Revlon 1995 Form S-1").)
4.16 Amended and Restated Credit Agreement, dated as of January 24, 1996, among Products Corporation,
Chemical Bank, Citibank N.A., Chemical Securities Inc. and the lenders party thereto.
(Incorporated by reference to Exhibit 4.18 to the Amendment No. 3 to the Revlon 1995 Form S-1
filed with the Securities and Exchange Commission on February 5, 1996 (the "Revlon 1995 Amendment
No. 3").
*4.17 First Amendment and Consent Number 1 dated as of January 9, 1997 to the Credit Agreement.
10. MATERIAL CONTRACTS.
10.1 Purchase and Sale Agreement and Amendment thereto by and between Products Corporation and
Holdings, each dated as of February 18, 1993, relating to the Edison, New Jersey facility.
(Incorporated by reference to Exhibit 4.22 to the Products Corporation 1992 10-K).
10.2 Asset Transfer Agreement, dated as of June 24, 1992, among Holdings, National Health Care Group,
Inc., Charles of the Ritz Group Ltd., Products Corporation and Revlon, Inc. (Incorporated by
reference to Exhibit 10.1 to the Revlon 1992 Amendment No. 1).
40
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.3 Real Property Asset Transfer Agreement, dated as of June 24, 1992, among Holdings, Revlon, Inc.
and Products Corporation. (Incorporated by reference to Exhibit 10.2 to the Revlon 1992 Amendment
No. 1).
10.4 Assumption Agreement relating to the Edison facility by and between Products Corporation and
Holdings, each dated as of February 18, 1993, relating to the Edison, New Jersey facility.
(Incorporated by reference to Exhibit 4.23 to the Products Corporation 1992 10-K).
10.5 Tax Sharing Agreement, dated as of June 24, 1992, among Mafco Holdings, Revlon, Inc., Products
Corporation and certain subsidiaries of Products Corporation (the "Tax Sharing Agreement").
(Incorporated by reference to Exhibit 10.5 to the Revlon 1992 Amendment No. 1).
10.6 First Amendment, dated as of February 28, 1995, to the Tax Sharing Agreement. (Incorporated by
reference to Exhibit 10.5 to the Products Corporation 1994 10-K).
*10.7 Second Amendment, dated as of January 1, 1997, to the Tax Sharing Agreement.
*10.8 Second Amended and Restated Operating Services Agreement by and among Holdings, Revlon, Inc. and
Products Corporation, as of January 1, 1996.
10.9 Employment Agreement dated as of January 1, 1996 between Products Corporation and Jerry W. Levin
(Incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K for the year ended
December 31, 1995 of Products Corporation (the "Products Corporation 1995 10-K").
10.10 Employment Agreement dated as of January 1, 1996 between
Products Corporation and George Fellows (Incorporated by
reference to Exhibit 10.11 to the Products Corporation 1995
10-K).
10.11 Employment Agreement dated as of January 1, 1996 between Products Corporation and William J. Fox
(Incorporated by reference to Exhibit 10.12 to the Products Corporation 1995 10-K).
10.12 Employment Agreement dated as of January 1, 1996 between
RIROS Corporation and Carlos Colomer Casellas (Incorporated
by reference to Exhibit 10.13 to the Products Corporation
1995 10-K).
*10.13 Employment Agreement dated as of January 1, 1996 between Products Corporation and M. Katherine
Dwyer.
10.14 Revlon Employees' Savings and Investment Plan effective as of January 1, 1996 (Incorporated by
reference to Exhibit 10.15 to the Products Corporation 1995 10-K).
10.15 Revlon Employees' Retirement Plan as amended and restated December 19, 1994. (Incorporated by
reference to Exhibit 10.15 to the Products Corporation 1994 10-K).
10.16 Amended and Restated Revlon Pension Equalization Plan, effective January 1, 1996. (Incorporated
by reference to Exhibit 10.17 to the Revlon 1995 Amendment No. 4).
10.17 Executive Supplemental Medical Expense Plan Summary dated July 1991. (Incorporated by reference
to Exhibit 10.18 to the Revlon 1992 Form S-1).
10.18 Description of Post Retirement Life Insurance Program for Key Executives. (Incorporated by
reference to Exhibit 10.19 to the Revlon 1992 Form S-1).
10.19 Benefit Plans Assumption Agreement dated as of July 1, 1992, by and among Holdings, Revlon, Inc.
and Products Corporation. (Incorporated by reference to Exhibit 10.25 to the Products Corporation
1992 10-K).
*10.20 Revlon Executive Bonus Plan effective January 1, 1997.
41
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.21 Revlon Executive Deferred Compensation Plan, amended as of
October 15, 1993. (Incorporated by reference to Exhibit 10.25
to the Products Corporation 1993 10-K).
10.22 Revlon Executive Severance Policy effective January 1, 1996. (Incorporated by reference to
Exhibit 10.23 to the Revlon 1995 Amendment No. 3).
*10.23 Revlon, Inc. 1996 Stock Plan, amended and restated as of December 17, 1996.
21. SUBSIDIARIES.
*21.1 Subsidiaries of the Registrant.
23. Consents of Experts and Counsel.
*23.1 Consent of KPMG Peat Marwick LLP.
24. POWERS OF ATTORNEY.
*24.1 Power of Attorney of Ronald O. Perelman.
*24.2 Power of Attorney of Donald G. Drapkin.
*24.3 Power of Attorney of Jerry W. Levin.
*24.4 Power of Attorney of Howard Gittis.
*24.5 Power of Attorney of Vernon E. Jordan, Jr. Esq.
*24.6 Power of Attorney of Henry A. Kissinger.
*24.7 Power of Attorney of Edward J. Landau, Esq.
*24.8 Power of Attorney of Linda G. Robinson.
*24.9 Power of Attorney of Terry Semel.
*24.10 Power of Attorney of Martha Stewart.
*24.11 Power of Attorney of Meyer Feldberg.
</TABLE>
- --------------------
*Filed herewith.
(b) Reports on Form 8-K
Revlon, Inc. filed no reports on Form 8-K during the fiscal year ended
December 31, 1996.
42
<PAGE>
REVLON, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report..............................................................................F-2
AUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1996 and 1995..........................................F-3
Consolidated Statements of Operations for each of the years in the three-year
period ended December 31, 1996.....................................................................F-4
Consolidated Statements of Stockholders' Deficiency for each of the years in
the three-year period ended December 31, 1996.....................................................F-5
Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31, 1996....................................................................F-6
Notes to Consolidated Financial Statements............................................................F-7
FINANCIAL STATEMENT SCHEDULE:
Schedule II-- Valuation and Qualifying Accounts.......................................................F-30
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Revlon, Inc.:
We have audited the accompanying consolidated balance sheets of Revlon, Inc.
and its subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, cash flows and stockholders' deficiency
for each of the years in the three-year period ended December 31, 1996. In
connection with our audits of the consolidated financial statements we have
also audited the financial statement schedule as listed on the index on page
F-1. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Revlon, Inc. and
its subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated finical statements taken as a
whole, presents fairly in all material respects, the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, in 1994 the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits."
KPMG PEAT MARWICK LLP
New York, New York
January 28, 1997
F-2
<PAGE>
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1996 1995
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38.6 $ 36.3
Trade receivables, less allowances of $24.9
and $23.7, respectively 426.3 363.1
Inventories 281.0 277.8
Prepaid expenses and other 74.5 62.4
---------- ----------
Total current assets 820.4 739.6
Property, plant and equipment, net 381.1 367.1
Other assets 139.2 142.9
Intangible assets related to businesses acquired, net 280.6 285.7
========== ===========
Total assets $ 1,621.3 $ 1,535.3
========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings - third parties $ 27.1 $ 22.7
Current portion of long-term debt - third parties 8.8 9.2
Accounts payable 161.9 151.6
Accrued expenses and other 365.2 370.6
---------- ----------
Total current liabilities 563.0 554.1
Long-term debt - third parties 1,321.8 1,426.2
Long-term debt - affiliates 30.4 41.3
Other long-term liabilities 202.8 215.7
Stockholders' deficiency:
Preferred stock, par value $.01 per share, 20,000,000
shares authorized, 546 shares of Series A Preferred Stock
issued and outstanding 54.6 54.6
Class A Common Stock, par value $.01 per share; 350,000,000
shares authorized, 19,875,000 and 11,250,000 issued and
outstanding, respectively 0.2 0.1
Class B Common Stock, par value $.01 per share; 200,000,000
shares authorized, 31,250,000 issued and outstanding 0.3 0.3
Capital deficiency (233.2) (416.8)
Accumulated deficit since June 24, 1992 (300.4) (318.2)
Adjustment for minimum pension liability (12.4) (17.0)
Currency translation adjustment (5.8) (5.0)
---------- ----------
Total stockholders' deficiency (496.7) (702.0)
---------- ----------
Total liabilities and stockholders' deficiency $ 1,621.3 $ 1,535.3
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales ...................................................... $ 2,167.0 $ 1,937.8 $ 1,732.5
Cost of sales .................................................. 725.7 652.1 597.3
------------ ------------ -------------
Gross profit .................................................. 1,441.3 1,285.7 1,135.2
Selling, general and administrative expenses ................... 1,241.1 1,139.1 1,026.8
------------ ------------ -------------
Operating income ............................................. 200.2 146.6 108.4
------------ ------------ -------------
Other expense (income):
Interest expense .............................................. 133.4 142.6 136.7
Interest and net investment income ............................ (3.4) (4.9) (6.3)
Amortization of debt issuance costs ........................... 8.3 11.0 8.4
Foreign currency losses, net .................................. 5.7 10.9 18.2
Miscellaneous, net ............................................ 6.3 1.8 2.6
------------ ------------ -------------
Other expenses, net .......................................... 150.3 161.4 159.6
------------ ------------ -------------
Income (loss) before income taxes .............................. 49.9 (14.8) (51.2)
Provision for income taxes ..................................... 25.5 25.4 22.8
------------ ------------ -------------
Income (loss) before extraordinary item and cumulative
effect of accounting change ................................... 24.4 (40.2) (74.0)
Extraordinary item -early extinguishment of debt ............... (6.6) -- --
Cumulative effect of accounting change:
Postemployment benefits, net of income tax benefit of $1.3 ... -- -- (28.8)
------------ ------------ -------------
Net income (loss) .............................................. $ 17.8 $ (40.2) $ (102.8)
============ ============ =============
Income (loss) per common share:
Income (loss) before extraordinary item and cumulative effect
of accounting change ......................................... $ 0.49 $ (0.95) $ (1.74)
Extraordinary item ............................................ (0.13) -- --
Cumulative effect of accounting change ........................ -- -- (0.68)
------------ ------------ -------------
Net income (loss) ............................................. $ 0.36 $ (0.95) $ (2.42)
============ ============ =============
Weighted average common shares outstanding .................... 49,687,500 42,500,000 42,500,000
============ ============ =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
CURRENCY
PREFERRED COMMON CAPITAL ACCUMULATED OTHER TRANSLATION
STOCK STOCK DEFICIENCY DEFICIT (a) ADJUSTMENTS ADJUSTMENT
--------------- -------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 ........ $54.6 $0.4 $(416.8) $(175.2) $(4.4)
Net loss ....................... (102.8 )(b)
Adjustment for minimum pension
liability ..................... $(10.9)
Currency translation adjustment (1.4)
--------------- -------- ------------ ------------- ------------- -------------
Balance, December 31, 1994 ..... 54.6 0.4 (416.8) (278.0) (10.9) (5.8)
Net loss ....................... (40.2)
Adjustment for minimum pension
liability ..................... (6.1)
Currency translation adjustment 0.8
--------------- -------- ------------ ------------- ------------- -------------
Balance, December 31, 1995 ..... 54.6 0.4 (416.8) (318.2) (17.0) (5.0)
Net income ..................... 17.8
Net proceeds from initial
public offering ............... 0.1 187.7
Adjustment for minimum pension
liability ..................... 4.6
Currency translation adjustment (0.8)(d)
Acquisition of business ........ (4.1 )(c)
--------------- -------- ------------ ------------- ------------- -------------
Balance, December 31, 1996 ..... $54.6 $0.5 $(233.2) $(300.4) $(12.4) $(5.8)
=============== ======== ============ ============= ============= =============
</TABLE>
- -----------
(a) Represents net loss since June 24, 1992, the effective date of the
transfer agreements referred to in Note 12.
(b) Includes cumulative effect of change to new accounting standard for
postemployment benefits as of January 1, 1994.
(c) Represents amounts paid to Revlon Holdings Inc. for the Tarlow
Advertising Division ("Tarlow"). See Note 12.
(d) Includes $2.1 of gains related to the Company's simplification of its
international corporate structure.
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................... $ 17.8 $ (40.2) $(102.8)
Adjustments to reconcile net income (loss) to net cash (used for)
provided by operating activities:
Depreciation and amortization ...................................... 90.9 88.4 78.8
Extraordinary item ................................................. 6.6 -- --
Gain on sale of business interests and certain fixed assets, net .. -- (2.2) --
Cumulative effect of accounting change ............................. -- -- 28.8
Change in assets and liabilities:
Increase in trade receivables ..................................... (67.5) (44.5) (22.1)
(Increase) decrease in inventories ................................ (5.5) (15.3) 14.1
(Increase) decrease in prepaid expenses and other current assets . (7.2) 4.5 19.1
Increase in accounts payable ...................................... 10.8 10.2 23.4
Decrease in accrued expenses and other current liabilities ....... (10.2) (12.2) (22.8)
Other, net ........................................................ (45.8) (40.4) (17.6)
--------- --------- ----------
Net cash used for operating activities .............................. (10.1) (51.7) (1.1)
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (58.0) (54.3) (52.5)
Proceeds from the sale of business interests and certain fixed
assets ............................................................. -- 3.0 4.6
Acquisition of businesses, net of cash acquired ..................... (7.1) (21.2) (3.1)
--------- --------- ----------
Net cash used for investing activities .............................. (65.1) (72.5) (51.0)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings - third parties .... 5.8 (122.9) (5.8)
Proceeds from the issuance of long-term debt - third parties ........ 266.4 493.7 157.6
Repayment of long-term debt - third parties ......................... (366.6) (236.3) (197.8)
Net proceeds from initial public offering ........................... 187.8 -- --
Proceeds from the issuance of debt - affiliates ..................... 115.0 157.4 141.7
Repayment of debt - affiliates ...................................... (115.0) (151.0) (141.7)
Acquisition of business from affiliate .............................. (4.1) -- --
Payment of debt issuance costs ...................................... (10.9) (15.7) (3.0)
--------- --------- ----------
Net cash provided by (used for) financing activities ................ 78.4 125.2 (49.0)
--------- --------- ----------
Effect of exchange rate changes on cash ............................. (0.9) (0.1) 0.9
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents ............... 2.3 0.9 (100.2)
Cash and cash equivalents at beginning of period ................... 36.3 35.4 135.6
--------- --------- ----------
Cash and cash equivalents at end of period ......................... $ 38.6 $ 36.3 $ 35.4
========= ========= ==========
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest .......................................................... $ 139.0 $ 148.2 $ 138.5
Income taxes, net of refunds ...................................... 15.4 18.8 3.9
Supplemental schedule of noncash investing activities:
In connection with business acquisitions, liabilities were assumed
as follows:
Fair value of assets acquired ..................................... $ 9.7 $ 27.3 $ 3.3
Cash paid ......................................................... (7.2) (21.6) (3.1)
--------- --------- ----------
Liabilities assumed ............................................... $ 2.5 $ 5.7 $ 0.2
========= ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:
Revlon, Inc. (the "Company") is a holding company, formed in April
1992, that conducts its business exclusively through its direct subsidiary,
Revlon Consumer Products Corporation and its subsidiaries ("Products
Corporation"). The Company operates in a single business segment with many
different products, which include an extensive array of glamorous, exciting and
innovative cosmetic and skin care, fragrance and personal care products, and
professional products (products for use in and resale by professional salons).
In the United States and increasingly in international markets, the Company's
products are sold principally in the self-select distribution channel. The
Company also sells certain products in the demonstrator-assisted distribution
channel, sells consumer and professional products to United States military
exchanges and commissaries, operates retail outlet stores and has a licensing
group. Outside the United States, the Company also sells consumer products
through department stores and specialty stores, such as perfumeries.
Products Corporation was formed in April 1992 and, on June 24, 1992,
succeeded to assets and liabilities of the cosmetic and skin care, fragrance
and personal care products business of its then parent company whose name was
changed from Revlon, Inc. to Revlon Holdings Inc. ("Holdings"). Certain
consumer products lines sold in demonstrator-assisted distribution channels
considered not integral to the Company's business and which historically had
not been profitable (the "Retained Brands") and certain other assets and
liabilities are retained by Holdings. Unless the context otherwise requires,
all references to the Company mean Revlon, Inc. and its subsidiaries. Through
December 31, 1996, the Company has essentially had no business operations of
its own and its only material asset has been all of the outstanding capital
stock of Products Corporation. As such its net income (loss) has historically
consisted predominantly of its equity in the net income (loss) of Products
Corporation and in 1996 included $0.8 in expenses incidental to being a public
holding company and the Company has had no cash flows of its own.
The Consolidated Financial Statements of the Company presented herein
relate to the business to which the Company succeeded and include the assets,
liabilities and results of operations of such business. Assets, liabilities,
revenues, other income, costs and expenses which were identifiable specifically
to the Company are included herein and those identifiable specifically to the
retained and divested businesses of Holdings have been excluded. Amounts which
were not identifiable specifically to either the Company or Holdings are
included herein to the extent applicable to the Company pursuant to a method of
allocation generally based on the respective proportion of the business of the
Company to the applicable total of the businesses of the Company and Holdings.
The operating results of the Retained Brands and divested businesses of
Holdings have not been reflected in the Consolidated Financial Statements of
the Company. Management of the Company believes that the basis of allocation
and presentation is reasonable.
Although the Retained Brands were not transferred to the Company when
the cosmetic and skin care, fragrance and personal care products business of
Holdings was transferred to Products Corporation, Products Corporation's bank
lenders required that all assets and liabilities relating to such Retained
Brands existing on the date of transfer (June 24, 1992), other than the brand
names themselves and certain other intangible assets, be transferred to
Products Corporation. Any assets and liabilities that had not been disposed of
or satisfied by December 31 of the applicable year have been reflected in the
Company's consolidated financial position as of such dates. However, any new
assets or liabilities generated by such Retained Brands since the transfer date
and any income or loss associated with inventory that has been transferred to
Products Corporation relating to such Retained Brands have been and will be for
the account of Holdings. In addition, certain assets and liabilities relating
to divested businesses were transferred to Products Corporation on the transfer
date and any remaining balances as of December 31 of the applicable year have
been reflected in the Company's Consolidated Balance Sheets as of such dates.
At December 31, 1996 and 1995, the amounts reflected in the Company's
Consolidated Balance Sheets aggregated a net liability of $23.6 and $31.2,
respectively, of which $5.2 and $6.8, respectively, are included in accrued
expenses and other and $18.4 and $24.4, respectively, are included in other
long-term liabilities, respectively.
F-7
<PAGE>
The Consolidated Financial Statements include the accounts of the
Company and its subsidiaries after elimination of all material intercompany
balances and transactions. Further, the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities, the
disclosure of liabilities and the reporting of revenues and expenses to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
The Company is an indirect majority owned subsidiary of MacAndrews &
Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned
through Mafco Holdings Inc. ("Mafco Holdings" and, together with MacAndrews
Holdings, "MacAndrews & Forbes") by Ronald O. Perelman.
CASH AND CASH EQUIVALENTS:
Cash equivalents (primarily investments in time deposits which have
original maturities of three months or less) are carried at cost, which
approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market value. Cost is
principally determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost and is depreciated
on a straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 20 to 40 years; buildings and improvements, 5 to 50
years; machinery and equipment, 3 to 17 years; and office furniture and
fixtures, 2 to 12 years. Leasehold improvements are amortized over their
estimated useful lives or the terms of the leases, whichever is shorter.
Repairs and maintenance are charged to operations as incurred, and expenditures
for additions and improvements are capitalized.
INTANGIBLE ASSETS RELATED TO BUSINESSES ACQUIRED:
Intangible assets related to businesses acquired principally represent
goodwill, which is 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 image, market share and business plans. Accumulated amortization
aggregated $94.2 and $84.2 at December 31, 1996 and 1995, respectively.
REVENUE RECOGNITION:
The Company recognizes net sales upon shipment of merchandise. Net
sales comprise gross revenues less expected returns, trade discounts and
customer allowances. Cost of sales is reduced for the estimated net realizable
value of expected returns.
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 is the common parent, and the Company's federal taxable income and
loss will be included in such group's consolidated 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. For all periods presented,
federal, state and local income taxes are provided as if the Company filed its
own income tax returns. On June 24, 1992, Holdings, the Company and certain of
its subsidiaries and Mafco Holdings entered into a tax sharing agreement which
is described in Note 9.
F-8
<PAGE>
PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
The Company sponsors pension and other retirement plans in various
forms covering substantially all employees who meet eligibility requirements.
For plans in the United States, the minimum amount required pursuant to the
Employee Retirement Income Security Act, as amended, is contributed annually.
Various subsidiaries outside the United States have retirement plans under
which funds are deposited with trustees or reserves are provided.
Effective January 1, 1994, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires the
Company to accrue for benefits such as severance, disability and health
insurance provided to former employees prior to their retirement, if estimable.
The cumulative effect of this change was an after-tax charge of $28.8
principally for severance related to benefits previously recorded on an as and
when paid basis. Such benefits generally are vested and accumulate over
employees' service periods. Effective January 1, 1994, the Company accounts for
such benefits on a terminal basis in accordance with the provisions of SFAS No.
5, "Accounting for Contingencies," as amended by SFAS No. 112, which requires
companies to accrue for postemployment benefits when it is probable that a
liability has been incurred and the amount of such liability can be reasonably
estimated, which is generally when an employee is terminated. The Company does
not believe such liabilities can be reasonably estimated prior to termination.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The
amounts charged against earnings in 1996, 1995 and 1994 were $26.3, $22.3 and
$19.7, respectively.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally translated
into United States dollars at the rates of exchange in effect at the balance
sheet date. Income and expense items are generally translated at the weighted
average exchange rates prevailing during each period presented. Gains and
losses resulting from foreign currency transactions are included in the results
of operations. Gains and losses resulting from translation of financial
statements of foreign subsidiaries and branches operating in non-highly
inflationary economies are recorded as a component of stockholders' deficiency.
Foreign subsidiaries and branches operating in highly inflationary economies
translate nonmonetary assets and liabilities at historical rates and include
translation adjustments in the results of operations.
INCOME (LOSS) PER SHARE AND SUPPLEMENTAL FINANCIAL DATA:
Income (loss) per share is calculated assuming that 42,500,000 shares
of Common Stock (as defined below) had been outstanding for the periods
presented prior to the consummation of the Company's initial public equity
offering on March 5, 1996 (the "Offering"), as a result of the conversion of
the outstanding shares of the Company's common stock into approximately .1215
of a share of its newly created Class A Common Stock, par value $.01 per share
(the "Class A Common Stock") (totaling 11,250,000 shares of Class A Common
Stock), and approximately .3376 of a share of its newly created Class B Common
Stock, par value $.01 per share (totaling 31,250,000 shares of Class B Common
Stock) (collectively with the Class A Common Stock, the "Common Stock"), upon
consummation of the Company's Offering. Basic income (loss) per share is
presented as dilution thereof from common stock equivalents amounts to less
than three percent.
The following supplemental financial data give effect to 51,125,000
shares of common stock outstanding after the Offering and the application of
the net proceeds from the Offering to repay debt and reduce interest expense by
an estimated $2.6 as if such transactions had occurred at the beginning of the
period presented.
YEAR ENDED
DECEMBER 31, 1996
-----------------
Supplemental financial data:
Income before extraordinary item ..... $27.0
Income before extraordinary item
per share .......................... $0.53
F-9
<PAGE>
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 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.
DERIVATIVE FINANCIAL INSTRUMENTS:
Derivative financial instruments are utilized by the Company to reduce
interest rate and foreign exchange risks. The Company maintains a control
environment which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue derivative financial instruments
for trading purposes.
The differentials to be received or paid under interest rate contracts
designated as hedges are recognized in income over the life of the contracts as
adjustments to interest expense. Gains and losses on terminations of interest
rate contracts designated as hedges are deferred and amortized into interest
expense over the remaining life of the original contracts. Unrealized gains and
losses on outstanding contracts designated as hedges are not recognized.
Gains and losses on contracts to hedge identifiable foreign currency
commitments are deferred and accounted for as part of the related foreign
currency transaction. Gains and losses on all other forward exchange contracts
are included in income currently. Transaction gains and losses have not been
material.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- -------
<S> <C> <C>
Raw materials and supplies $ 76.6 $ 84.8
Work-in-process ........... 19.4 27.9
Finished goods ............ 185.0 165.1
-------- -------
$281.0 $277.8
======== =======
</TABLE>
F-10
<PAGE>
3. PREPAID EXPENSES AND OTHER
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Prepaid expenses $43.1 $36.5
Other ........... 31.4 25.9
------- -------
$74.5 $62.4
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Land and improvements ........ $ 37.5 $ 39.4
Buildings and improvements .. 207.6 203.2
Machinery and equipment ..... 194.9 192.8
Office furniture and fixtures 59.4 47.8
Leasehold improvements ....... 37.5 33.6
Construction-in-progress .... 43.7 41.4
--------- ---------
580.6 558.2
Accumulated depreciation .... (199.5) (191.1)
--------- ---------
$ 381.1 $ 367.1
========= =========
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and
1994 was $39.1, $38.6 and $34.7, respectively.
5. ACCRUED EXPENSES AND OTHER
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Advertising and promotional costs and accrual for sales
returns ............................................... $136.4 $127.8
Compensation and related benefits ...................... 95.5 100.7
Interest ............................................... 36.7 37.9
Taxes, other than federal income taxes ................. 35.0 33.8
Restructuring costs .................................... 6.9 15.2
Net liabilities assumed from Holdings .................. 5.2 6.8
Other .................................................. 49.5 48.4
-------- --------
$365.2 $370.6
======== ========
</TABLE>
6. SHORT-TERM BORROWINGS
Products Corporation maintained short-term bank lines of credit at
December 31, 1996 and 1995 aggregating approximately $72.7 and $69.0,
respectively, of which approximately $27.1 and $22.7 were outstanding at
December 31, 1996 and 1995, respectively. Compensating balances at December 31,
1996 and 1995 were approximately $7.4 and $7.2, respectively. Interest rates on
amounts borrowed under such short-term lines at December 31, 1996 and 1995
varied from 2.2% to 12.1% and 2.0% to 13.4%, respectively.
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<PAGE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Working capital lines (a) ......................... $ 187.2 $ 277.5
Bank mortgage loan agreement due 1997 (b) ........ 41.7 52.4
9 1/2% Senior Notes due 1999 (c) .................. 200.0 200.0
9 3/8% Senior Notes due 2001 (d) .................. 260.0 260.0
10 1/2% Senior Subordinated Notes due 2003 (e) ... 555.0 555.0
10 7/8% Sinking Fund Debentures due 2010 (f) ..... 79.6 79.2
Advances from Holdings (g) ........................ 30.4 41.3
Other mortgages and notes payable (8.6%-13.0%) due
through 2001 ..................................... 7.1 11.3
---------- ---------
1,361.0 1,476.7
Less current portion .............................. (8.8) (9.2)
---------- ---------
$1,352.2 $1,467.5
========== =========
</TABLE>
(a) The credit agreement in effect at December 31, 1995 (the "Former
Credit Agreement"), which was subsequently amended, provided up to $500.0
comprised of three senior secured facilities: a $100.0 term loan facility, a
$225.0 revolving credit facility and a $175.0 multi-currency facility. Products
Corporation complied with each of the financial covenants contained in the
Former Credit Agreement, as of and for the defined measurement periods ended
December 31, 1995. The Former Credit Agreement was scheduled to expire on June
30, 1997.
In connection with repayments of indebtedness under the Former Credit
Agreement in 1996, the commitments thereunder were extinguished, representing
an early extinguishment of a portion of such facilities. Consequently, in 1996,
the Company recognized a loss of approximately $6.6 representing the then
unamortized debt issuance costs, which have been reported in the Consolidated
Statements of Operations as an extraordinary item.
Loans that were outstanding under the Former Credit Agreement's
revolving credit facility and term loan facility bore interest initially at a
rate equal to, at Products Corporation's option, either (A) the alternate base
rate, defined to mean the highest of (i) the prime rate, (ii) the secondary
market rate for certificates of deposit plus 1% and (iii) the federal funds
rate plus 1/2%; in each case plus 2 1/2% or (B) the Eurodollar Rate plus 3
1/2%. The multi-currency facility bore interest at a rate equal to the
Eurocurrency Rate, the local lender rate or the alternate base rate, in each
case plus 3 1/2%.
In January 1996, Products Corporation entered into a credit agreement
(the "Credit Agreement"), which became effective upon consummation of the
Offering on March 5, 1996. The Credit Agreement includes, among other things,
(i) an extension of the term of the facilities from June 30, 1997 to December
31, 2000 (subject to earlier termination in certain circumstances), (ii) a
reduction of the interest rates, (iii) an increase in the amount of the credit
facilities from $500.0 to $600.0 (subject to reduction as described below) and
(iv) the release of security interests in assets of certain foreign
subsidiaries of Products Corporation which were then pledged.
The Credit Agreement is comprised of four senior secured facilities: a
$130.0 term loan facility (the "Term Loan Facility"), a $220.0 multi-currency
facility (the "Multi-Currency Facility"), a $200.0 revolving acquisition
facility (the "Acquisition Facility") and a $50.0 standby letter of credit
facility (the "Special LC Facility" and together with the Term Loan Facility,
the Multi-Currency Facility and the Acquisition Facility, the "Credit
Facilities"). The Multi-Currency Facility is available (i) to Products
Corporation, in revolving credit loans denominated in U.S. dollars (the
"Revolving Credit Loans"), (ii) to Products Corporation, in standby and
commercial letters of credit denominated in U.S. dollars (the "Operating
Letters of Credit") and (iii) to Products Corporation and certain of its
international subsidiaries designated from time to time in revolving credit
loans and bankers' acceptances denominated in U.S. dollars and other currencies
(the "Local Loans"). The Credit Facilities (other than loans in foreign
currencies) bear interest at a rate equal to, at Products Corporation's option,
either (A) the Alternate Base Rate plus 1.5% (or 2.5% for Local Loans); or (B)
the Eurodollar Rate plus 2.5%. Loans in foreign currencies bear interest at a
rate equal to the Eurocurrency Rate or, in the case of Local Loans, the local
lender rate, in each case plus 2.5%. The applicable margin is reduced (or
increased, but not above 2% for Alternate Base Rate Loans not constituting
Local Loans and 3% for
F-12
<PAGE>
other loans) in the event Products Corporation attains (or fails to attain)
certain leverage ratios. Products Corporation pays the Lender a commitment fee
of 1/2 of 1% of the unused portion of the Credit Facilities. Products
Corporation also paid certain facility and other fees to the lenders and
agents upon closing of the Credit Agreement. Prior to its termination date,
the commitments under the Credit Facilities will be reduced by: (i) the net
proceeds in excess of $10.0 each year received during such year from sales of
assets by Holdings (or certain of its subsidiaries), Products Corporation or
any of its subsidiaries (and $25.0 with respect to certain specified
dispositions), subject to certain limited exceptions, (ii) certain proceeds
from the sales of collateral security granted to the lenders, (iii) the net
proceeds from the issuance by Holdings, Products Corporation or any of its
subsidiaries of certain additional debt, (iv) 50% of the excess cash flow of
Products Corporation and its subsidiaries and (v) certain scheduled reductions
in the case of the Term Loan Facility, which commence on January 31, 1997 in
the amount of $1.0 annually over the remaining life of the Credit Agreement,
and the Acquisition Facility, which will commence on December 31, 1997 in the
amount of $20.0, $50.0 in 1998, $60.0 in 1999 and $70.0 in 2000. In addition,
the Credit Agreement requires that the net proceeds from any sale of equity
securities of any parent of Products Corporation which has the assets of
Products Corporation or certain of its subsidiaries as its only substantial
assets be contributed to Products Corporation (except to the extent that such
proceeds are applied to repay or refinance the Senior Secured Discount Notes
due 1998 (the "Senior Secured Discount Notes") of Revlon Worldwide Corporation
or are deposited with the trustee under the indenture covering such notes) and
that Products Corporation use 50% of such proceeds, in certain circumstances,
to reduce commitments under the Credit Agreement. The Credit Agreement will
terminate on December 31, 2000 (subject to earlier termination on March 31,
1999 if Products Corporation has not refinanced its 9 1/2% Senior Notes due
1999 (the "1999 Senior Notes") before March 31, 1999 or if an alternative plan
for the refinancing of the 1999 Senior Notes has not been approved by the
majority lenders prior to March 15, 1999). As of December 31, 1996, Products
Corporation had approximately $130.0 outstanding under the Term Loan Facility,
$57.2 outstanding under the Multi-Currency Facility, none outstanding under
the Acquisition Facility and $33.5 outstanding under the Special LC Facility.
The Credit Facilities, subject to certain exceptions and limitations,
are supported by guarantees from Holdings and certain of its subsidiaries, the
Company and the domestic subsidiaries of Products Corporation. The obligations
of Products Corporation under the Credit Facilities and the obligations under
the aforementioned guarantees are secured, subject to certain limitations, by
(i) mortgages on Holdings' Edison, New Jersey and Products Corporation's
Phoenix, Arizona facilities; (ii) the capital stock of Products Corporation and
its domestic subsidiaries and 66% of the capital stock of its first tier
foreign subsidiaries and the capital stock of certain subsidiaries of Holdings;
(iii) domestic intellectual property and certain other domestic intangibles of
(x) Products Corporation and its domestic subsidiaries and (y) certain
subsidiaries of Holdings; (iv) domestic inventory and accounts receivable of
(x) Products Corporation and its domestic subsidiaries and (y) certain
subsidiaries of Holdings; and (v) the assets of certain foreign subsidiary
borrowers under the Multi-Currency Facility (to support their borrowings only).
The Credit Agreement provides that the liens on the stock and personal property
referred to above may be shared from time to time with specified types of other
obligations incurred or guaranteed by Products Corporation that were not
included in the Former Credit Agreement, such as interest rate hedging
obligations, working capital lines and the yen credit agreement (as defined
below).
The Credit Agreement contains various restrictive covenants
prohibiting Products Corporation and its subsidiaries from, among other things,
(i) incurring additional indebtedness, with certain exceptions, (ii) making
dividend, tax sharing (see Note 9 "Income Taxes") and other payments or loans
to the Company or other affiliates, with certain exceptions, including among
others, permitting Products Corporation to pay dividends and make distributions
to the Company, among other things, to enable the Company to pay expenses
incidental to being a public holding company, including, among other things,
professional fees such as legal and accounting, regulatory fees such as
Securities and Exchange Commission ("Commission") filing fees and other
miscellaneous expenses related to being a public holding company, and to pay
dividends or make distributions up to $5.0 per annum in certain circumstances
to finance the purchase by the Company of its common stock in connection with
the delivery of such common stock to grantees under any stock option plan,
(iii) creating liens or other encumbrances on their assets or revenues,
granting negative pledges or selling or transferring any of their assets except
in the ordinary course of business, all subject to certain limited exceptions,
(iv) with certain exceptions, engaging in merger or acquisition transactions,
(v) prepaying indebtedness, subject to certain limited exceptions, (vi) making
investments, subject to certain limited exceptions and (vii) entering into
transactions with affiliates of Products Corporation other than upon terms no
less favorable to Products Corporation or its subsidiaries than it would obtain
in an arms' length transaction. In addition to the foregoing, the Credit
Agreement contains certain financial covenants including,
F-13
<PAGE>
among other things, covenants requiring Products Corporation and its
subsidiaries to maintain minimum consolidated adjusted net worth, minimum
EBITDA (defined as earnings before interest, taxes, depreciation and
amortization and certain other charges), minimum interest coverage, and
covenants which limit the amount of total indebtedness of Products Corporation
and the amount of capital expenditures.
In January 1997, the Credit Agreement was amended to, among other
things, (i) permit the merger of Prestige Fragrance & Cosmetics, Inc. ("PFC"),
a wholly owned subsidiary of Products Corporation, into The Cosmetic Center,
Inc. ("Cosmetic Center") and to generally exclude Cosmetic Center (as the
survivor of the merger) from the definition of "subsidiary" under the Credit
Agreement, (ii) increase the amount of permitted dividends and distributions to
finance the purchase by the Company if its common stock in connection with the
delivery of such common stock to grantees under any stock option plan to $6.0
per annum, and (iii) permit Products Corporation to purchase capital stock of
the Company for purposes of making matching contributions under a proposed
Non-Qualified Excess Savings Plan for Key Executives.
(b) The Pacific Finance & Development Corp., a subsidiary of the
Company, is the borrower under a yen denominated credit agreement (the "Yen
Credit Agreement"), which had a principal balance of approximately Y4.8
billion as of December 31, 1996 (approximately $41.7 U.S. dollar equivalent as
of December 31, 1996). In accordance with the terms of the Yen Credit
Agreement, approximately Y2.7 billion (approximately $26.9 U.S. dollar
equivalent) was paid in January 1995 and approximately Y539 million
(approximately $5.2 U.S. dollar equivalent) was paid in January 1996. A payment
of approximately Y539 million (approximately $4.6 U.S. dollar equivalent
as of December 31, 1996) was paid in January 1997. The balance of the Yen
Credit Agreement of approximately Y4.3 billion (approximately $37.1 U.S.
dollar equivalent as of December 31, 1996) is currently due on December 31,
1997. The Company is currently renegotiating an extension of the term of the
Yen Credit Agreement. In the event that such extension is not obtained, the
Company is able and intends to refinance the Yen Credit Agreement under
existing long-term credit facilities. Accordingly, the Company's obligation
under the Yen Credit Agreement has been classified as long-term as of December
31, 1996. The applicable interest rate at December 31, 1996 under the Yen
Credit Agreement was the Euro-Yen rate plus 2.5% which approximated 3.1%. The
interest rate at December 31, 1995, applicable to the remaining balance, was
the Euro-Yen rate plus 3.5%, which approximated 4.1%.
(c) The 1999 Senior Notes are senior unsecured obligations of Products
Corporation and rank pari passu in right of payment to all existing and future
Senior Debt (as defined in the indenture relating to the 1999 Senior Notes (the
"1999 Senior Note Indenture")). The 1999 Senior Notes bear interest at 9 1/2%
per annum. Interest is payable on June 1 and December 1.
The 1999 Senior Notes may not be redeemed prior to maturity. Upon a
Change of Control (as defined in the 1999 Senior Note Indenture) and subject to
certain conditions, each holder of 1999 Senior Notes will have the right to
require Products Corporation to repurchase all or a portion of such holder's
1999 Senior Notes at 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase. In addition, under certain
circumstances in the event of an Asset Disposition (as defined in the 1999
Senior Note Indenture), Products Corporation will be obligated to make offers
to purchase the 1999 Senior Notes.
The 1999 Senior Note Indenture contains various restrictive covenants
that, among other things, limit (i) the issuance of additional debt and
redeemable stock by Products Corporation, (ii) the issuance of debt and
preferred stock by Products Corporation's subsidiaries, (iii) the incurrence of
liens on the assets of Products Corporation and its subsidiaries which do not
equally and ratably secure the 1999 Senior Notes, (iv) the payment of dividends
on and redemption of capital stock of Products Corporation and its subsidiaries
and the redemption of certain subordinated obligations of Products Corporation,
except that the 1999 Senior Note Indenture permits Products Corporation to pay
dividends and make distributions to the Company, among other things, to enable
the Company to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Commission filing fees and other miscellaneous expenses
related to being a public holding company, and to pay dividends or make
distributions up to $5.0 per annum in certain circumstances to finance the
purchase by the Company of its Class A Common Stock in connection with the
delivery of such Class A Common Stock to grantees under any stock option plan,
(v) the sale of assets and subsidiary stock, (vi) transactions with affiliates
and (vii) consolidations, mergers and transfers of all or substantially all of
Products Corporation's assets. The 1999
F-14
<PAGE>
Senior Note Indenture also prohibits certain restrictions on distributions
from subsidiaries. All of these limitations and prohibitions, however, are
subject to a number of important qualifications.
(d) The 9 3/8% Senior Notes due 2001 (the "Senior Notes") are senior
unsecured obligations of Products Corporation and rank pari passu in right of
payment to all existing and future Senior Debt (as defined in the indenture
relating to the Senior Notes (the "Senior Note Indenture")). The Senior Notes
bear interest of 9 3/8% per annum. Interest is payable on April 1 and October
1.
The Senior Notes may be redeemed at the option of Products Corporation
in whole or in part at any time on or after April 1, 1998 at the redemption
prices set forth therein, plus accrued and unpaid interest, if any, to the date
of redemption. Upon a Change of Control (as defined in the Senior Note
Indenture), Products Corporation will have the option to redeem the Senior
Notes in whole or in part at a redemption price equal to the principal amount
thereof plus the Applicable Premium (as defined in the Senior Note Indenture),
plus accrued and unpaid interest, if any, to the date of redemption, and,
subject to certain conditions, each holder of Senior Notes will have the right
to require Products Corporation to repurchase all or a portion of such holder's
Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. In addition, under certain
circumstances in the event of an Asset Disposition (as defined in the Senior
Note Indenture), Products Corporation will be obligated to make offers to
purchase the Senior Notes.
The Senior Note Indenture contains various restrictive covenants that,
among other things, limit (i) the issuance of additional indebtedness and
redeemable stock by Products Corporation, (ii) the issuance of indebtedness and
preferred stock by Products Corporation's subsidiaries, (iii) the incurrence of
liens on the assets of Products Corporation and its subsidiaries which do not
equally and ratably secure the Senior Notes, (iv) the payment of dividends on
capital stock of Products Corporation and its subsidiaries and the redemption
of capital stock and certain subordinated obligations of Products Corporation,
except that the Senior Note Indenture permits Products Corporation to pay
dividends and make distributions to the Company, among other things, to enable
the Company to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Commission filing fees and other miscellaneous expenses
related to being a public holding company, and to pay dividends or make
distributions up to $5.0 per annum in certain circumstances to finance the
purchase by the Company of its Class A Common Stock in connection with the
delivery of such Class A Common Stock to grantees under any stock option plan,
(v) the sale of assets and subsidiary stock, (vi) transactions with affiliates
and (vii) consolidations, mergers and transfers of all or substantially all of
Products Corporation's assets. The Senior Note Indenture also prohibits certain
restrictions on distributions from subsidiaries of Products Corporation. All of
these limitations and prohibitions, however, are subject to a number of
important qualifications.
(e) The Senior Subordinated Notes are unsecured obligations of
Products Corporation and are subordinated in right of payment to all existing
and future Senior Debt (as defined in the indenture relating to the Senior
Subordinated Notes (the "Senior Subordinated Note Indenture")). The Senior
Subordinated Notes bear interest of 10 1/2% per annum. Interest is payable on
February 15 and August 15.
The Senior Subordinated Notes may be redeemed at the option of
Products Corporation in whole or in part at any time on or after February 15,
1998 at the redemption prices set forth therein, plus accrued and unpaid
interest, if any, to the date of redemption. Upon a Change of Control (as
defined in the Senior Subordinated Note Indenture), Products Corporation will
have the option to redeem the Senior Subordinated Notes in whole or in part at
a redemption price equal to the principal amount thereof plus the Applicable
Premium (as defined in the Senior Subordinated Note Indenture), plus accrued
and unpaid interest, if any, to the date of redemption, and, subject to certain
conditions, each holder of Senior Subordinated Notes will have the right to
require Products Corporation to repurchase all or a portion of such holder's
Senior Subordinated Notes at 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase. In addition, under
certain circumstances in the event of an Asset Disposition (as defined in the
Senior Subordinated Note Indenture), Products Corporation will be obligated to
make offers to purchase the Senior Subordinated Notes.
The Senior Subordinated Note Indenture contains various restrictive
covenants that, among other things, limit (i) the issuance of additional
indebtedness and redeemable stock by Products Corporation, (ii) the issuance of
indebtedness and preferred stock by Products Corporation's subsidiaries, (iii)
the incurrence of liens on the assets of
F-15
<PAGE>
Products Corporation and its subsidiaries to secure debt other than Senior
Debt (as defined in the Senior Subordinated Note Indenture) or debt of a
subsidiary, unless the Senior Subordinated Notes are equally and ratably
secured, (iv) the payment of dividends on capital stock of Products
Corporation and its subsidiaries and the redemption of capital stock and
certain subordinated obligations of Products Corporation, except that the
Senior Subordinated Note Indenture permits Products Corporation to pay
dividends and make distributions to the Company, among other things, to enable
the Company to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Commission filing fees and other miscellaneous
expenses related to being a public holding company, and to pay dividends or
make distributions up $5.0 per annum in certain circumstances to finance the
purchase by the Company of its Class A Common Stock in connection with the
delivery of such Class A Common Stock to grantees under any stock option plan,
(v) the sale of assets and subsidiary stock, (vi) transactions with affiliates
and (vii) consolidations, mergers and transfers of all or substantially all of
Products Corporation's assets. The Senior Subordinated Note Indenture also
prohibits certain restrictions on distributions from subsidiaries of Products
Corporation. All of these limitations and prohibitions, however, are subject
to a number of important qualifications.
(f) Holdings' 10 7/8% Sinking Fund Debentures due 2010 (face value of
$85.0, net of repurchases) (the "Sinking Fund Debentures") are redeemable, in
whole or in part, at 101.96% of the principal amount for the year beginning
July 15, 1996, decreasing evenly each year on July 15, to par by July 15, 2000.
Mandatory sinking fund redemptions of $9.0 per year commenced in 1991. Optional
sinking fund redemptions of up to an additional $13.5 per year may be made
annually and may be applied to reduce any subsequent mandatory sinking fund
redemption. Interest is payable on January 15 and July 15. Holdings purchased
$115.0 of the Sinking Fund Debentures in the open market prior to 1985, $9.0 of
which had been used in each of the years 1991 through 1996 to satisfy sinking
fund payment obligations and approximately $61.0 of which is creditable to
future sinking fund requirements. The indenture relating to the Sinking Fund
Debentures contains various restrictive covenants prohibiting Products
Corporation and its subsidiaries from (i) incurring indebtedness in excess of
5% of the consolidated net tangible assets, where such indebtedness is secured
by any manufacturing plant in the United States owned or leased by Products
Corporation, the book value of which exceeds 2% of the consolidated net
tangible assets of Products Corporation, unless the Sinking Fund Debentures are
equally and ratably secured, (ii) entering into certain sale and leaseback
transactions or (iii) consolidating or merging with or into, or selling or
transferring all or substantially all of their properties and assets to,
another corporation, unless certain conditions are satisfied.
(g) During 1992, Holdings made an advance of $25.0 to Products
Corporation. This advance was evidenced by a noninterest-bearing demand note
payable by Products Corporation, the payment of which was subordinated to the
obligations of Products Corporation under the credit agreement in effect at
that time. Holdings agreed not to demand payment under the note so long as any
indebtedness remained outstanding under the credit agreement in effect at that
time. In February 1995, the $13.3 in notes due to Products Corporation under
the Financing Reimbursement Agreement, referred to in Note 12, was offset
against the $25.0 note and Holdings agreed not to demand payment under the
resulting $11.7 note so long as indebtedness remains outstanding under the
Credit Agreement. In October 1993, Products Corporation borrowed from Holdings
approximately $23.2 (as adjusted and subject to further adjustment for certain
expenses) representing amounts received by Holdings from an escrow account
relating to divestiture by Holdings of certain of its predecessor businesses.
In July 1995, Products Corporation borrowed from Holdings approximately $0.8,
representing certain amounts received by Holdings relating to an arbitration
arising out of the sale by Holdings of certain of its businesses. In 1995,
Products Corporation borrowed from Holdings approximately $5.6, representing
certain amounts received by Holdings from the sale by Holdings of certain of
its businesses. In June 1996, $10.9 in notes due to Products Corporation under
the Financing Reimbursement Agreement from Holdings was offset against the
$11.7 demand note (referred to above) payable by Products Corporation to
Holdings. In accordance with the Credit Agreement, such amounts, as adjusted,
are evidenced by noninterest-bearing promissory notes payable to Holdings that
are subordinated to Products Corporation's obligations under the Credit
Agreement.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings at interest rates more
favorable to Products Corporation than the rate under the Credit Agreement. No
such borrowings were outstanding at December 31, 1996 or 1995.
The aggregate amounts of long-term debt maturities and sinking fund
requirements (at December 31, 1996), in the years 1997 through 2001 are $8.8,
$40.6, $201.2, $214.9 and $260.9, respectively, and $634.6 thereafter.
F-16
<PAGE>
8. FINANCIAL INSTRUMENTS
As of December 31, 1996, Products Corporation was party to a series of
interest rate swap agreements (which expire at various dates through December
2001) totaling a notional amount of $225.0 in which Products Corporation agreed
to pay on such notional amount a variable interest rate equal to the six month
London Inter-Bank Offered Rate (5.6875% per annum at January 24, 1997) to its
counterparties and the counterparties agreed to pay on such notional amounts
fixed interest rates averaging approximately 6.03% per annum. Products
Corporation entered into these agreements in 1993 and 1994 (and in the first
quarter of 1996 extended a portion equal to a notional amount of $125.0 through
December 2001) to convert the interest rate on $225.0 of fixed-rate
indebtedness to a variable rate. If Products Corporation had terminated these
agreements, which Products Corporation considers to be held for other than
trading purposes, on December 31, 1996, a loss of approximately $3.5 would have
been realized. Certain other swap agreements were terminated in 1993 for a gain
of $14.0. The amortization of the realized gain on these agreements for 1996
and 1995 was approximately $3.2 in each of the years. The remaining unamortized
gain, which is being amortized over the original lives of the agreements, is
$3.1 as of December 31, 1996. Although cash flow from the presently outstanding
agreements was positive for 1996, future positive or negative cash flows from
these agreements will depend upon the trend of short-term interest rates during
the remaining lives of such agreements. In the event of nonperformance by the
counterparties at any time during the remaining lives of the agreements,
Products Corporation could lose some or all of any possible future positive
cash flows from these agreements. However, Products Corporation does not
anticipate nonperformance by such counterparties, although no assurances can be
given.
Products Corporation enters into forward foreign exchange contracts
from time to time to hedge certain cash flows denominated in foreign
currencies. At December 31, 1996, Products Corporation had forward foreign
exchange contracts denominated in various currencies, predominantly the U.K.
pound of approximately $62.0 (U.S. dollar equivalent). If Products Corporation
had terminated these contracts on December 31, 1996, no material gain or loss
would have been realized. Products Corporation had similar contracts
outstanding at December 31, 1995 in the amount of $8.0 (U.S. dollar
equivalent).
The fair value of the Company's long-term debt is estimated based on
the quoted market prices for the same issues or on the current rates offered to
the Company for debt of the same remaining maturities. The estimated fair value
of long-term debt at December 31, 1996 was approximately $37.3 more than the
carrying value of $1,361.0. Because considerable judgment is required in
interpreting market data to develop estimates of fair value, the estimates are
not necessarily indicative of the amounts that could be realized or would be
paid in a current market exchange. The effect of using different market
assumptions or estimation methodologies may be material to the estimated fair
value amounts.
Products Corporation also maintains standby and trade letters of
credit with certain banks for various corporate purposes under which Products
Corporation is obligated, of which approximately $40.9 were outstanding at
December 31, 1996. Included in this amount are $26.4 in standby letters of
credit which support Products Corporation's self-insurance programs. See Note
12. The estimated liability under such programs is accrued by Products
Corporation.
The carrying amounts of cash and cash equivalents, trade receivables,
accounts payable and short-term borrowings approximate their fair values.
F-17
<PAGE>
9. INCOME TAXES
In June 1992, Holdings, the Company and certain of its subsidiaries,
and Mafco Holdings entered into a tax sharing agreement (as subsequently
amended, the "Tax Sharing Agreement"), pursuant to which Mafco Holdings has
agreed to indemnify the Company 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 the Company or its subsidiaries) is the
common parent for taxable periods beginning on or after January 1, 1992 during
which the Company or a subsidiary of the Company is a member of such group.
Pursuant to the Tax Sharing Agreement, for all taxable periods beginning on or
after January 1, 1992, the Company will pay to Holdings amounts equal to the
taxes that the Company 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 the Company), except that the Company will not be entitled to
carry back any losses to taxable periods ending prior to January 1, 1992. No
payments are required by the Company if and to the extent that Products
Corporation is prohibited under the Credit Agreement from making tax sharing
payments to the Company. The Credit Agreement prohibits Products Corporation
from making any cash tax sharing payments other than in respect of state and
local income taxes. Since the payments to be made by the Company under the Tax
Sharing Agreement will be determined by the amount of taxes that the Company
would otherwise have to pay if it were to file separate federal, state or local
income tax returns, the Tax Sharing Agreement will benefit Mafco Holdings to
the extent Mafco Holdings can offset the taxable income generated by the
Company against losses and tax credits generated by Mafco Holdings and its
other subsidiaries. As a result of net operating tax losses and prohibitions
under the Credit Agreement, no federal tax payments or payments in lieu of
taxes pursuant to the Tax Sharing Agreement were required for 1996, 1995 or
1994.
Pursuant to the asset transfer agreement referred to in Note 12,
Products Corporation assumed all tax liabilities of Holdings other than (i)
certain income tax liabilities arising prior to January 1, 1992 to the extent
such liabilities exceeded reserves on Holdings' books as of January 1, 1992 or
were not of the nature reserved for and (ii) other tax liabilities to the
extent such liabilities are related to the business and assets retained by
Holdings.
The Company's income (loss) before income taxes and the applicable
provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- --------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic ....................................... $ 9.4 $(38.4) $(68.0)
Foreign ........................................ 40.5 23.6 16.8
------- --------- ---------
$49.9 $(14.8) $(51.2)
======= ========= =========
Provision (benefit) for income taxes:
Federal ........................................ $ -- $ -- $ --
State and local ................................ 1.2 3.4 2.8
Foreign ........................................ 24.3 22.0 20.0
------- --------- ---------
$25.5 $ 25.4 $ 22.8
======= ========= =========
Current ........................................ $22.7 $ 37.1 $ 40.5
Deferred ....................................... 6.6 3.0 1.4
Benefits of operating loss carryforwards ...... (4.7) (15.4) (18.1)
Carryforward utilization applied to goodwill .. 1.0 0.8 --
Effect of enacted change of tax rates ......... (0.1) (0.1) --
Beginning-of-year valuation allowance
adjustment .................................... -- -- (1.0)
------- --------- ---------
$25.5 $ 25.4 $ 22.8
======= ========= =========
</TABLE>
F-18
<PAGE>
The effective tax rate on income (loss) before income taxes is
reconciled to the applicable statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate ....................... 35.0% (35.0)% (35.0)%
State and local taxes, net of federal income tax benefit 1.6 14.9 3.6
Foreign and U.S. tax effects attributable to operations
outside the U.S. ....................................... 36.2 92.8 27.6
Nondeductible amortization expense ...................... 5.9 16.8 4.8
U.S. loss without benefit ............................... -- 82.1 43.5
Change in valuation allowance ........................... (24.2) -- --
Other ................................................... (3.4) -- --
-------- --------- ---------
Effective rate .......................................... 51.1% 171.6% 44.5%
======== ========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to doubtful
accounts ........................................ $ 3.9 $ 3.7
Inventories ...................................... 12.5 12.8
Net operating loss carryforwards ................. 269.5 270.3
Restructuring and related reserves ............... 10.2 13.4
Employee benefits ................................ 31.7 36.3
State and local taxes ............................ 12.8 12.8
Self-insurance ................................... 3.6 3.9
Advertising, sales discounts and returns and
coupon redemptions .............................. 23.6 19.1
Other ............................................ 23.9 19.7
--------- ---------
Total gross deferred tax assets ................. 391.7 392.0
Less valuation allowance ........................ (347.3) (357.2)
--------- ---------
Net deferred tax assets ......................... 44.4 34.8
Deferred tax liabilities:
Plant, equipment and other assets ................ (43.0) (34.6)
Inventories ...................................... (0.2) (0.2)
Other ............................................ (7.2) (6.3)
--------- ---------
Total gross deferred tax liabilities ............ (50.4) (41.1)
--------- ---------
Net deferred tax liability ...................... $ (6.0) $ (6.3)
========= =========
</TABLE>
The valuation allowance for deferred tax assets at January 1, 1996 was
$357.2. The valuation allowance decreased by $9.9 during the year ended
December 31, 1996 and increased by $19.2 during the year ended December 31,
1995.
During 1996, 1995 and 1994, certain of the Company's foreign
operations generated taxable income as to which the related tax liability was
offset by the utilization of operating loss carryforwards generated in prior
years. Accordingly, credits of $4.7, $15.4 and $18.1 representing the reduction
of current foreign taxes payable for the years ended December 31, 1996, 1995
and 1994, respectively, have been recognized in the Consolidated Statements of
Operations. Certain other foreign operations generated losses during the years
1996, 1995 and 1994 for which the potential tax benefit was reduced by a
valuation allowance as it is more likely than not that such benefit will not be
realized. At December 31, 1996, the Company had foreign tax loss carryforwards
of approximately $332.2 which expire in future years as follows: 1997-$53.3;
1998-$30.0; 1999-$33.0; 2000-$12.1; 2001 and beyond-$30.4; unlimited-$173.4.
The Company will receive a benefit only to the extent it has taxable income
during the carryforward periods in the applicable foreign jurisdictions.
F-19
<PAGE>
Appropriate United States and foreign income taxes have been accrued
on foreign earnings that have been or are expected to be remitted in the near
future. Unremitted earnings of foreign subsidiaries which have been, or are
currently intended to be, permanently reinvested in the future growth of the
business aggregated approximately $16.1 at December 31, 1996, excluding those
amounts which, if remitted in the near future, would not result in significant
additional taxes under tax statutes currently in effect.
10. POSTRETIREMENT BENEFITS
PENSIONS:
The Company uses a September 30 date for measurement of plan
obligations and assets.
The following tables reconcile the funded status of all of the
Company's significant pension plans with the respective amounts recognized in
the Consolidated Balance Sheets at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------
OVERFUNDED UNDERFUNDED
PLANS PLANS TOTAL
------------ ------------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation as of Septmber 30, 1996,
includes vested benefits of $286.9 ..................... $(163.7) $(131.4) $(295.1)
============ ============= ==========
Projected benefit obligation as of September 30, 1996
for service rendered to date ........................... $(198.1) $(141.4) $(339.5)
Fair value of plan assets as of September 30, 1996 ...... 173.3 81.6 254.9
------------ ------------- ----------
Plan assets less than projected benefit obligation ...... (24.8) (59.8) (84.6)
Amounts contributed to plans during fourth quarter 1996 . 0.2 0.5 0.7
Unrecognized net (assets) obligation ..................... (1.5) 0.2 (1.3)
Unrecognized prior service cost .......................... 5.2 3.9 9.1
Unrecognized net loss .................................... 20.2 20.5 40.7
Adjustment to recognize additional minimum liability .... -- (15.3) (15.3)
------------ ------------- ----------
Accrued pension cost ................................. $ (0.7) $ (50.0) $ (50.7)
============ ============= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
OVERFUNDED UNDERFUNDED
PLANS PLANS TOTAL
------------ ------------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation as of Septmber 30, 1995,
includes vested benefits of $269.1 ..................... $(18.8) $(257.2) $(276.0)
============ ============= ==========
Projected benefit obligation as of September 30, 1995
for service rendered to date ........................... $(21.9) $(294.1) $(316.0)
Fair value of plan assets as of September 30, 1995 ...... 26.3 185.0 211.3
------------ ------------- ----------
Plan assets in excess of (less than) projected
benefit obligation .................................... 4.4 (109.1) (104.7)
Amounts contributed to plans during fourth quarter 1995 . 0.2 0.9 1.1
Unrecognized net (assets) obligation ..................... (1.3) 0.2 (1.1)
Unrecognized prior service cost .......................... 0.3 9.9 10.2
Unrecognized net loss .................................... 1.9 45.2 47.1
Adjustment to recognize additional minimum liability .... -- (19.9) (19.9)
------------ ------------- ----------
Prepaid (accrued) pension cost ....................... $ 5.5 $ (72.8) $ (67.3)
============ ============= ==========
</TABLE>
F-20
<PAGE>
The weighted-average discount rate assumed was 7.75% for 1996 and 1995
for domestic plans. For foreign plans, the weighted-average discount rate was
7.9% and 7.6% for 1996 and 1995, respectively. The rate of future compensation
increases was 5.25% for 1996 and 1995 for domestic plans and was a
weighted-average of 5.05% and 4.81% for 1996 and 1995, respectively, for
foreign plans. The expected long-term rate of return on assets was 9.0% for
1996 and 1995 for domestic plans and a weighted-average of 10.4% for 1996 and
1995 for foreign plans.
Plan assets consist primarily of common stock, mutual funds and fixed
income securities, which are stated at fair market value and cash equivalents
which are stated at cost, which approximates fair market value.
In accordance with the provisions of SFAS No. 87, "Employers'
Accounting for Pensions," the Company recorded an additional liability to the
extent that, for certain U.S. plans, the unfunded accumulated benefit
obligation exceeded recorded liabilities. At December 31, 1996, the additional
liability was recognized by recording an intangible asset to the extent of
unrecognized prior service costs of $1.8, a due from affiliates of $1.1 and a
charge to stockholders' deficiency of $12.4. At December 31, 1995, the
additional liability was recognized by recording an intangible asset to the
extent of unrecognized prior service costs of $1.6, a due from affiliates of
$1.3, and a charge to stockholders' deficiency of $17.0.
Net periodic pension cost for the pension plans consisted of the
following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 10.6 $ 8.2 $ 9.1
Interest cost on projected benefit obligation . 24.3 21.7 20.8
Actual (return) loss on plan assets ............ (30.4) (27.3) 2.7
Net amortization and deferrals ................. 15.1 13.4 (14.4)
-------- -------- --------
19.6 16.0 18.2
Portion allocated to Holdings .................. (0.3) (0.3) (0.3)
-------- -------- --------
Net periodic pension cost of the Company ...... $ 19.3 $ 15.7 $ 17.9
======== ======== ========
</TABLE>
A substantial portion of the Company's employees in the United States
are covered by defined benefit retirement plans. To the extent that aggregate
pension costs could be identified as relating to the Company or to Holdings,
such costs have been so apportioned. The components of the net periodic pension
cost applicable solely to the Company are not presented as it is not practical
to segregate such information between Holdings and the Company. In 1996 and
1995, there was a settlement loss of $0.3 and $0.1, respectively, and a
curtailment loss of $1.0 and $0.1, respectively, resulting from workforce
reductions.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
During 1996, 1995 and 1994, the Company sponsored an unfunded retiree
benefit plan, which provides death benefits payable to beneficiaries of certain
key employees. Participation in this plan is limited to participants enrolled
as of December 31, 1993. Net periodic postretirement benefit cost for each of
the years ended December 31, 1996, 1995 and 1994 was $0.7 which consists
primarily of interest on the accumulated postretirement benefit obligation. The
Company's date of measurement of Plan obligations is September 30. At December
31, 1996 and 1995, the portion of accumulated benefit obligation attributable
to retirees was $6.9 and $6.7, respectively, and to other fully eligible
participants, $1.3 and $1.0, respectively. The amount of unrecognized gain at
December 31, 1996 and 1995 was $1.2 and $1.7, respectively. At December 31,
1996 and 1995, the accrued postretirement benefit obligation recorded on the
Company's Consolidated Balance Sheets was $9.4. Of these amounts, $2.0 and $2.2
was attributable to Holdings and was recorded as a receivable from affiliates
at December 31, 1996 and 1995, respectively. The weighted average discount rate
used in determining the accumulated postretirement benefit obligation at
September 30, 1996 and 1995 was 7.75%.
F-21
<PAGE>
11. STOCK COMPENSATION PLAN
At December 31, 1996, the Company has a stock-based compensation plan
(the "Plan"), which is described below. The Company applies APB Opinion No. 25
and related Interpretations in accounting for the 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 Plan been
determined consistent with SFAS No. 123, the Company's net income and net
income per share for 1996 of $17.8 and $.36, respectively, would have been
reduced to the pro forma amounts of $14.6 and $.29, respectively. The effects
of applying SFAS No. 123 in this pro forma disclosure are not necessarily
indicative of future amounts.
Under the Plan, the Company may grant options to its employees for up
to an aggregate of 5.0 million shares of Class A Common Stock. Non-qualified
options granted under the Plan have a term of 10 years during which the holder
can purchase shares of Class A Common Stock at an exercise price which must be
not less than the market price on the date of the grant. Options granted in
1996 to certain executive officers will not vest as to any portion until the
third anniversary of the grant date and will thereupon become 100% vested,
except that upon termination of employment by the Company other than for
"cause", death or "disability" under the applicable employment agreement, such
options will vest with respect to 25% of the shares subject thereto (if the
termination is between the first and second anniversaries of the grant) and 50%
of the shares subject thereto (if the termination is between the second and
third anniversaries of the grant). All other initial option grants 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. 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 1996: no dividend yield; expected
volatility of 31%; risk-free interest rate of 5.99%; and an expected average
life of seven years for the Plan's options. At December 31, 1996 there were no
options exercisable under the Plan.
A summary of the status of the Plan as of December 31, 1996 and
changes during the year then ended is presented below:
<TABLE>
<CAPTION>
SHARES WEIGHTED AVERAGE
(000) EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at beginning of year -- --
Granted .......................... 1,010.2 $24.33
Exercised ........................ -- --
Forfeited ........................ (119.1) 24.00
---------
Outstanding at end of year ...... 891.1 24.37
=========
</TABLE>
The weighted average fair value of each option granted during 1996
approximated $11.00.
The following table summarizes information about the Plan's options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
RANGE NUMBER AVERAGE WEIGHTED
OF OUTSTANDING YEARS AVERAGE
EXERCISE PRICES (000) REMAINING EXERCISE PRICE
- ----------------- ------------- ----------- --------------
<S> <C> <C> <C>
$24.00 to $29.88 855.1 9.16 $24.06
31.00 to 33.88 .. 36.0 9.79 31.88
-------------
24.00 to 33.88 .. 891.1 9.19 24.37
=============
</TABLE>
F-22
<PAGE>
12. RELATED PARTY TRANSACTIONS
TRANSFER AGREEMENTS
In June 1992, the Company and Products Corporation entered into an asset
transfer agreement with Holdings and certain of its wholly owned subsidiaries
(the "Asset Transfer Agreement"), and the Company and Products Corporation
entered into a real property asset transfer agreement with Holdings (the "Real
Property Transfer Agreement" and, together with the Asset Transfer Agreement,
the "Transfer Agreements"), and pursuant to such agreements on June 24, 1992,
Holdings transferred assets to Products Corporation and Products Corporation
assumed all the liabilities of Holdings, other than certain specifically
excluded assets and liabilities (the liabilities excluded are referred to as
the "Excluded Liabilities"). Holdings retained certain small brands that
historically had not been profitable ("Retained Brands"). Holdings agreed to
indemnify the Company and Products Corporation against losses arising from the
Excluded Liabilities, and the Company and Products Corporation agreed to
indemnify Holdings against losses arising from the liabilities assumed by
Products Corporation. The amounts reimbursed by Holdings to the Company for the
Excluded Liabilities for 1996, 1995 and 1994 were $1.4, $4.0 and $7.4,
respectively.
BENEFIT PLANS ASSUMPTION AGREEMENT
Holdings, Products Corporation and the Company entered into a benefit
plans assumption agreement dated as of July 1, 1992 pursuant to which Products
Corporation assumed all rights, liabilities and obligations under all of
Holdings' benefit plans, arrangements and agreements, including obligations
under the Revlon Employees' Retirement Plan and the Revlon Employees' Savings
and Investment Plan. Products Corporation was substituted for Holdings as
sponsor of all such plans theretofore sponsored by Holdings.
OPERATING SERVICES AGREEMENT
In June 1992, the Company, Products Corporation and Holdings entered
into an operating services agreement (as amended and restated, and as
subsequently amended, the "Operating Services Agreement") pursuant to which
Products Corporation manufactures, markets, distributes, warehouses and
administers, including the collection of accounts receivable, the Retained
Brands for Holdings. Pursuant to the Operating Services Agreement, Products
Corporation is reimbursed an amount equal to all of its and the Company's
direct and indirect costs incurred in connection with furnishing such services,
net of the amounts collected by Products Corporation with respect to the
Retained Brands, payable quarterly. The net amounts reimbursed by Holdings to
the Company for such direct and indirect costs for 1996, 1995 and 1994 were
$5.1, $8.6 and $11.5, respectively. Holdings also pays Products Corporation a
fee equal to 5% of the net sales of the Retained Brands, payable quarterly. The
fees paid by Holdings to Products Corporation pursuant to the Operating
Services Agreement for services with respect to the Retained Brands for 1996,
1995 and 1994 were approximately $0.6, $1.7 and $1.9, respectively.
REIMBURSEMENT AGREEMENTS
The Company, Products Corporation and MacAndrews Holdings have entered
into reimbursement agreements (the "Reimbursement Agreements") pursuant to
which (i) MacAndrews Holdings is obligated to provide certain professional and
administrative services, including employees, to the Company and its
subsidiaries, including Products Corporation, and purchase services from third
party providers, such as insurance and legal and accounting services, on behalf
of the Company and its subsidiaries, including Products Corporation, to the
extent requested by Products Corporation, and (ii) Products Corporation is
obligated to provide certain professional and administrative services,
including employees, to MacAndrews Holdings and purchase services from third
party providers, such as insurance and legal and accounting services, on behalf
of MacAndrews Holdings to the extent requested by MacAndrews Holdings, provided
that in each case the performance of such services does not cause an
unreasonable burden to MacAndrews Holdings or Products Corporation, as the case
may be. The Company reimburses MacAndrews Holdings for the allocable costs of
the services purchased for or provided to the Company and for reasonable
out-of-pocket expenses incurred in connection with the provision of such
services. MacAndrews Holdings reimburses the Company for the allocable costs of
the services purchased for or provided to MacAndrews Holdings and for the
reasonable out-of-pocket expenses incurred in connection with the purchase or
provision of such services. In addition, in connection with certain insurance
coverage provided by MacAndrews Holdings, Products Corporation obtained letters
of credit under the
F-23
<PAGE>
Special LC Facility (which aggregated approximately $26.4 as of December 31,
1996) to support certain self-funded risks of MacAndrews Holdings and its
affiliates, including the Company, associated with such insurance coverage.
The costs of such letters of credit are allocated among, and paid by, the
affiliates of MacAndrews Holdings, including the Company, which participate in
the insurance coverage to which the letters of credit relate. The Company
expects that these self-funded risks will be paid in the ordinary course and,
therefore, it is unlikely that such letters of credit will be drawn upon.
MacAndrews Holdings has agreed to indemnify the Company to the extent amounts
are drawn under any of such letters of credit with respect to claims for which
the Company is not responsible. The net amounts reimbursed by MacAndrews
Holdings to the Company for the services provided under the Reimbursement
Agreements for 1996, 1995 and 1994 were $2.2, $3.0 and $1.6, respectively.
Each of the Company and Products Corporation, on the one hand, and MacAndrews
Holdings, on the other, has agreed to indemnify the other party for losses
arising out of the provision of services by it under the Reimbursement
Agreements other than losses resulting from its willful misconduct or gross
negligence. The Reimbursement Agreements may be terminated by either party on
90 days' notice. The Company does not intend to request services under the
Reimbursement Agreements unless their costs would be at least as favorable to
the Company as could be obtained from unaffiliated third parties.
TAX SHARING AGREEMENT
The Company, for federal income tax purposes, is included in the
affiliated group of which Mafco Holdings is the common parent, and the
Company's federal taxable income and loss is included in such group's
consolidated 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. In June 1992, Holdings, the Company and certain of its
subsidiaries, and Mafco Holdings entered into the Tax Sharing Agreement
pursuant to which Mafco Holdings has agreed to indemnify the Company 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 the
Company or its subsidiaries) is the common parent for taxable periods beginning
on or after January 1, 1992 during which the Company or a subsidiary of the
Company is a member of such group. Pursuant to the Tax Sharing Agreement, for
all taxable periods beginning on or after January 1, 1992, the Company will pay
to Holdings amounts equal to the taxes that the Company 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 the Company),
except that the Company will not be entitled to carry back any losses to
taxable periods ending prior to January 1, 1992. No payments are required by
the Company if and to the extent Products Corporation is prohibited under the
Credit Agreement from making cash tax sharing payments to the Company. The
Credit Agreement prohibits Products Corporation from making such cash tax
sharing payments other than in respect of state and local income taxes. Since
the payments to be made by the Company under the Tax Sharing Agreement will be
determined by the amount of taxes that the Company would otherwise have to pay
if it were to file separate federal, state or local income tax returns, the Tax
Sharing Agreement will benefit Mafco Holdings to the extent Mafco Holdings can
offset the taxable income generated by the Company against losses and tax
credits generated by Mafco Holdings and its other subsidiaries. There were no
cash payments by the Company pursuant to the Tax Sharing Agreement for 1996,
1995 or 1994.
F-24
<PAGE>
FINANCING REIMBURSEMENT AGREEMENT
Holdings and Products Corporation entered into a financing
reimbursement agreement (the "Financing Reimbursement Agreement") in 1992
pursuant to which Holdings agreed to reimburse Products Corporation for
Holdings' allocable portion of (i) the debt issuance cost and advisory fees
related to the capital restructuring of Holdings, and (ii) interest expense
attributable to the higher cost of funds paid by Products Corporation under the
credit agreement in effect at that time as a result of additional borrowings
for the benefit of Holdings in connection with the assumption of certain
liabilities by Products Corporation under the Asset Transfer Agreement and the
repurchase of Old Senior Subordinated Notes from affiliates. The amount of
interest to be reimbursed by Holdings for 1994 was approximately $0.8 and was
evidenced by noninterest-bearing promissory notes originally due and payable on
June 30, 1995. In February 1995, the $13.3 in notes then payable by Holdings to
Products Corporation under the Financing Reimbursement Agreement was offset
against a $25.0 note payable by Products Corporation to Holdings and Holdings
agreed not to demand payment under the resulting $11.7 note payable by Products
Corporation so long as any indebtedness remained outstanding under the Former
Credit Agreement. In February 1995, the Financing Reimbursement Agreement was
amended and extended to provide that Holdings would reimburse Products
Corporation for a portion of the debt issuance costs and advisory fees related
to the Former Credit Agreement (which portion was approximately $4.7 and was
evidenced by a noninterest-bearing promissory note payable on June 30, 1996)
and 1 1/2 % per annum of the average balance outstanding under the Former
Credit Agreement and the average balance outstanding under working capital
borrowings from affiliates through June 30, 1996 and such amounts were
evidenced by a noninterest-bearing promissory note payable on June 30, 1996.
The amount of interest to be reimbursed by Holdings for 1995 was approximately
$4.2. As of December 31, 1995, the aggregate amount of notes payable by
Holdings under the Financing Reimbursement Agreement was $8.9. In June 1996,
$10.9 in notes due to Products Corporation, which included $2.0 of interest
reimbursement in 1996, under the Financing Reimbursement Agreement from
Holdings was offset against a $11.7 demand note payable by Products Corporation
to Holdings. The Financing Reimbursement Agreement expired on June 30, 1996.
REGISTRATION RIGHTS AGREEMENT
Prior to the consummation of the Offering, the Company and Revlon
Worldwide Corporation("Revlon Worldwide"), the direct parent of the Company,
entered into the Registration Rights Agreement pursuant to which Revlon
Worldwide and certain transferees of Common Stock held by Revlon Worldwide
(the "Holders") have the right to require the Company to register all or part
of the Class A Common Stock owned by such Holders and the Class A Common Stock
issuable upon conversion of the Class B Common Stock owned by such Holders
under the Securities Act (a "Demand Registration"); provided that the Company
may postpone giving effect to a Demand Registration up to a period of 30 days
if the Company believes such registration might have a material adverse effect
on any plan or proposal by the Company with respect to any financing,
acquisition, recapitalization, reorganization or other material transaction,
or the Company is in possession of material non-public information that, if
publicly disclosed, could result in a material disruption of a major corporate
development or transaction then pending or in progress or in other material
adverse consequences to the Company. In addition, the Holders have the right
to participate in registrations by the Company of its Class A Common Stock (a
"Piggyback Registration"). The Holders will pay all out-of-pocket expenses
incurred in connection with any Demand Registration. The Company will pay any
expenses incurred in connection with a Piggyback Registration, except for
underwriting discounts, commissions and expenses attributable to the shares of
Class A Common Stock sold by such Holders.
OTHER
Pursuant to a lease dated April 2, 1993 (the "Edison Lease"),
Holdings leases to Products Corporation the Edison research and development
facility for a term of up to 10 years with an annual rent of $1.4 and certain
shared operating expenses payable by Products Corporation which, together with
the annual rent are not to exceed $2.0 per year. Pursuant to an assumption
agreement dated February 18, 1993, Holdings agreed to assume all costs and
expenses of the ownership and operation of the Edison facility as of January
1, 1993, other than (i) the operating expenses for which Products Corporation
is responsible under the Edison Lease and (ii) environmental claims and
compliance costs relating to matters which occurred prior to January 1, 1993
up to an amount not to exceed $8.0 (the amount of such claims and costs for
which Products Corporation is responsible, the "Environmental Limit"). In
addition, pursuant to such assumption agreement, Products Corporation agreed
to indemnify Holdings for environmental claims and
F-25
<PAGE>
compliance costs relating to matters which occurred prior to January 1, 1993
up to an amount not to exceed the Environmental Limit and Holdings agreed to
indemnify Products Corporation for environmental claims and compliance costs
relating to matters which occurred prior to January 1, 1993 in excess of the
Environmental Limit and all such claims and costs relating to matters
occurring on or after January 1, 1993. Pursuant to an occupancy agreement,
during 1996 and 1995 the Company rented a portion of the administration
building located at the Edison facility and space for a retail store of the
Company. The Company provides certain administrative services, including
accounting, for Holdings with respect to the Edison facility pursuant to which
the Company pays on behalf of Holdings costs associated with the Edison
facility and is reimbursed by Holdings for such costs, less the amount owed by
Products Corporation to Holdings pursuant to the Edison Lease and the
occupancy agreement. The net amount reimbursed by Holdings to the Company for
such costs with respect to the Edison facility for 1996, 1995 and 1994 was
$1.1, $1.2 and $2.1, respectively.
In the fourth quarter of 1996, Products Corporation and certain of
its subsidiaries purchased an inactive subsidiary from an affiliate for net
cash consideration of approximately $3.0 in a series of transactions in which
the Company expects to realize foreign tax benefits in future years.
Effective January 1, 1996, Products Corporation acquired from
Holdings substantially all of the assets of Tarlow in consideration for the
assumption of substantially all of the liabilities and obligations of Tarlow.
Net liabilities assumed were approximately $3.4. The assets acquired and
liabilities assumed were accounted for at historical cost in a manner similar
to that of a pooling of interests and, accordingly, prior period financial
statements have been restated as if the acquisition took place at the
beginning of the earliest period. Products Corporation paid $4.1 to Holdings
which was accounted for as an increase in capital deficiency. A nationally
recognized investment banking firm rendered its written opinion that the terms
of the purchase are fair from a financial standpoint to Products Corporation.
Effective January 1, 1994, Products Corporation sold the inventory,
contracts, dedicated tools, dies and molds, intellectual property and a
license agreement relating to the NEW ESSENTIALS brand to Holdings for $2.2
(representing the net book value of such brand which Products Corporation
believes approximated its fair market value at the time of sale), and the
Operating Services Agreement was amended to include NEW ESSENTIALS as a
"Retained Brand."
During 1996, 1995 and 1994, Products Corporation leased certain
facilities to MacAndrews & Forbes or its affiliates pursuant to occupancy
agreements and leases including space at Products Corporation's New York
headquarters and at Products Corporation's offices in London and Tokyo. The
rent paid by MacAndrews & Forbes or its affiliates to Products Corporation for
1996, 1995 and 1994 was $4.6, $5.3 and $4.1, respectively.
In July 1995, Products Corporation borrowed from Holdings
approximately $0.8, representing certain amounts received by Holdings relating
to an arbitration arising out of the sale by Holdings of certain of its
businesses. In 1995, Products Corporation borrowed from Holdings approximately
$5.6, representing certain amounts received by Holdings from the sale by
Holdings of certain of its businesses. Such amounts are evidenced by
noninterest-bearing promissory notes. Holdings agreed not to demand payment
under such notes so long as any indebtedness remains outstanding under the
Credit Agreement.
The Credit Agreement is supported by, among other things, guarantees
from Holdings and certain of its subsidiaries. The obligations under such
guarantees are secured by, among other things, (i) the capital stock and
certain assets of certain subsidiaries of Holdings and (ii) a mortgage on
Holdings' Edison, New Jersey facility.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings. No such borrowings were
outstanding as of December 31, 1996, 1995 or 1994. The interest rates for such
borrowings are more favorable to Products Corporation than interest rates
under the Credit Agreement and, for borrowings occurring prior to the
execution of the Credit Agreement, the credit facility in effect at the time
of such borrowing. The amount of interest paid by the Company for such
borrowings for 1996, 1995 and 1994 was $0.5, $1.2 and $1.1, respectively.
In November 1993, Products Corporation assigned to Holdings a lease
for warehouse space in New Jersey (the "N.J. Warehouse") between Products
Corporation and a trust established for the benefit of certain family members
of the Chairman of the Executive Committee. The N.J. Warehouse had become
vacant as a result of divestitures and
F-26
<PAGE>
restructuring of Products Corporation. The lease has annual lease payments of
approximately $2.3 and terminates on June 30, 2005. In consideration for
Holdings assuming all liabilities and obligations under the lease, Products
Corporation paid Holdings $7.5 (for which a liability was previously recorded)
in three installments of $2.5 each in January 1994, January 1995 and January
1996. A nationally recognized investment banking firm rendered its written
opinion that the terms of the lease transfer were fair from a financial
standpoint to Products Corporation. During 1996, 1995 and 1994, Products
Corporation paid certain costs associated with the N.J. Warehouse on behalf of
Holdings and was reimbursed by Holdings for such amounts. The amounts
reimbursed by Holdings to the Company for such costs were $0.2, $0.2 and $0.3
for 1996, 1995 and 1994, respectively.
During 1996, 1995 and 1994, the Company used an airplane which was
owned by a corporation of which Messrs. Gittis, Drapkin and Levin were the
sole stockholders. The Company paid approximately $0.2, $0.4 and $0.5 for the
usage of the airplane for 1996, 1995 and 1994, respectively. As of December
31, 1996, Mr. Levin no longer holds an ownership interest in the corporation
that owned the airplane.
Consolidated Cigar, an affiliate of the Company, assembles lipstick
cases for Products Corporation. Products Corporation paid approximately $1.0,
$1.0 and $0.6 for such services for 1996, 1995 and 1994, respectively.
During 1994, the Company was retained by an affiliate, Meridian, to
act as licensing agent for Meridian's trademarks. The Company will receive a
percentage of any royalties generated by such licenses. No royalties were
earned by Meridian for 1994, 1995 or 1996. However, Meridian paid the Company
approximately $0.1 in 1994 for reimbursement of expenses incurred in
connection with such licensing activities.
In January 1995, the Company agreed to license certain of its
trademarks to Guthy-Renker Corporation ("Guthy-Renker"), a corporation in
which an affiliate of MacAndrews & Forbes held a 37.5% equity interest, to be
used by Guthy-Renker in connection with the marketing and sale of hair
extensions and hair pieces. The amount paid by Guthy-Renker to the Company
pursuant to such license for 1995 was less than $0.1. In connection with this
licensing arrangement, Guthy-Renker agreed to use the Company as its exclusive
supplier of hair extensions and hair pieces. Guthy-Renker purchased $1.1 of
wigs from the Company during 1995. The Company terminated the license with
Guthy-Renker during 1995.
13. COMMITMENTS AND CONTINGENCIES
The Company currently leases manufacturing, executive, including
research and development, and sales facilities and various types of equipment
under operating lease agreements. Rental expense was $51.7, $49.3 and $51.0
for the years ended December 31, 1996, 1995 and 1994, respectively. Minimum
rental commitments under all noncancelable leases, including those pertaining
to idled facilities and the Edison research and development facility, with
remaining lease terms in excess of one year from December 31, 1996 aggregated
$230.0; such commitments for each of the five years subsequent to December 31,
1996 are $37.9, $36.4, $31.2, $28.6 and $25.6, respectively. Such amounts
exclude the minimum rentals to be received in the future under noncancelable
subleases of $16.1.
The Company and its subsidiaries are defendants in litigation and
proceedings involving various matters. In the opinion of the Company's
management, based upon advice of its counsel handling such litigation and
proceedings, adverse outcomes, if any, will not result in a material effect on
the Company's consolidated financial condition or results of operations.
F-27
<PAGE>
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ................................ $ 464.3 $517.9 $571.1 $613.7
Gross profit ............................. 311.4 347.2 378.1 404.6
(Loss) income before extraordinary item . (29.1) 1.5 21.1 30.9
Net (loss) income ........................ (35.7)(a) 1.5 21.1 30.9
Income (loss) per common share:
Income (loss) before extraordinary item (0.64) 0.03 0.41 0.60
Extraordinary item ...................... (0.15) -- -- --
----------- --------- --------- ---------
Net (loss) income ....................... $ (0.79) $ 0.03 $ 0.41 $ 0.60
=========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995(b)
------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ................... $412.2 $452.6 $514.6 $558.4
Gross profit ................ 270.6 299.1 346.8 369.2
Net (loss) income ........... (33.4) (14.0) 3.4 3.8
Net (loss) income per share (0.79) (0.33) 0.08 0.09
</TABLE>
(a) Includes a charge of $6.6 resulting from the write-off of
deferred financing costs associated with the extinguishment of the Former
Credit Agreement prior to maturity.
(b) Effective January 1, 1996, Products Corporation acquired from
Holdings substantially all of the assets of Tarlow in consideration for the
assumption of substantially all of the liabilities and obligations of Tarlow.
Net liabilities assumed were approximately $3.4. The assets acquired and
liabilities assumed were accounted for at historical cost in a manner similar
to that of a pooling of interests and, accordingly, prior period financial
statements presented have been restated as if the acquisition took place at
the beginning of the earliest period. Products Corporation paid $4.1 to
Holdings which was accounted for as an increase to capital deficiency.
15. GEOGRAPHIC SEGMENTS
The Company operates in a single business segment. The Company has
operations based in 26 foreign countries and its products are sold throughout
the world. The Company is exposed to the risk of changes in social, political
and economic conditions inherent in foreign operations and the Company's
results of operations and the value of its foreign assets are affected by
fluctuations in foreign currency exchange rates. The Company enters into
forward foreign exchange contracts to hedge certain cash flows denominated in
foreign currency. In addition, the Company's operations in Brazil (which
accounted for approximately 6.1% of the Company's net sales for 1996) are
subject to hyperinflationary conditions. There can be no assurance as to the
future effect of changes in social, political and economic conditions on the
Company's business or financial condition. During 1996, one customer accounted
for approximately 10.1% of the Company's consolidated net sales. Information
related to the Company's geographic segments for each of the years in the
three-year period ended December 31, 1996 with respect to operating results,
and as of December 31, 1996 and 1995 with respect to identifiable assets, is
presented below.
Operating profit (loss), as presented below, is operating income, net
foreign currency translation (gains) losses and identifiable miscellaneous
income and expense; it excludes general corporate income and expenses, net
interest and investment income and expense, including amortization of debt
issuance costs, and income taxes. Export sales, including those to affiliates,
are not significant. Export sales to non-affiliates and related operating
profits are reflected in their geographic area of origin.
F-28
<PAGE>
Identifiable assets, as presented below, are those assets used in
each geographic area. Corporate assets are principally cash and cash
equivalents, certain property and equipment and nonoperating assets.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
GEOGRAPHIC AREAS
Net sales:
United States .................................... $1,282.2 $1,155.8 $ 1,019.8
Europe, Middle East and Africa ................... 404.1 357.1 320.7
Latin America, Canada and Puerto Rico ............ 297.2 259.5 253.4
Far East, Australia and other areas of the world 183.5 165.4 138.6
---------- ---------- ----------
$2,167.0 $1,937.8 $1,732.5
========== ========== ==========
Operating profit (loss):
United States .................................... $ 163.9 $ 121.7 $ 85.7
Europe, Middle East and Africa ................... 9.9 7.6 16.2
Latin America, Canada and Puerto Rico ............ 23.3 14.9 18.3
Far East, Australia and other areas of the world 7.5 7.8 (3.7)
---------- ---------- ----------
204.6 152.0 116.5
Unallocated expenses (income):
Interest expense ................................. 133.4 142.6 136.7
Interest and net investment income ............... (3.4) (4.9) (6.3)
Amortization of debt issuance costs .............. 8.3 11.0 8.4
Corporate expenses and miscellaneous, net ....... 16.4 18.1 28.9
---------- ---------- ----------
Income (loss) before income taxes ................ $ 49.9 $ (14.8) $ (51.2)
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Identifiable assets:
United States .................................... $ 944.1 $ 897.6
Europe, Middle East and Africa ................... 287.6 268.3
Latin America, Canada and Puerto Rico ............ 198.7 167.8
Far East, Australia and other areas of the world 130.6 127.0
Corporate ........................................ 60.3 74.6
---------- ---------
$1,621.3 $1,535.3
========== =========
</TABLE>
<TABLE>
<CAPTION>
SKIN CARE,
PERSONAL CARE
COSMETICS AND
AND FRAGRANCES PROFESSIONAL TOTAL
-------------- --------------- ----------
<S> <C> <C> <C>
CLASSES OF SIMILAR PRODUCTS (UNAUDITED):
1996 ................................... $1,263.9 $903.1 $ 2,167.0
% of net sales ......................... 58% 42% 100%
1995 ................................... $1,075.2 $862.6 $ 1,937.8
% of net sales ......................... 55% 45% 100%
1994 ................................... $ 884.8 $847.7 $ 1,732.5
% of net sales ......................... 51% 49% 100%
</TABLE>
16. PENDING ACQUISITION
On November 27, 1996, Products Corporation and PFC entered into an
Agreement and Plan of Merger with Cosmetic Center pursuant to which PFC will
merge with and into Cosmetic Center, with Cosmetic Center surviving the merger
(the "Merger"). In the Merger, Products Corporation would receive newly issued
common stock of Cosmetic Center constituting between 74% and 84% of the
outstanding common stock. The Merger is subject to a number of significant
conditions, including obtaining financing for Cosmetic Center and approval of
the transaction by Cosmetic Center stockholders, among other conditions.
F-29
<PAGE>
SCHEDULE II
REVLON, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
BA.ANCE AT CHARGED TO BALANCE
BEGINNING COST AND OTHER AT END
OF YEAR EXPENSES DEDUCTIONS OF YEAR
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Applied against asset accounts:
Allowance for doubtful accounts ...... $13.6 $ 7.1 $ (7.8)(1) $12.9
Allowance for volume and early payment
discounts ............................ $10.1 $43.8 $(41.9)(2) $12.0
YEAR ENDED DECEMBER 31, 1995:
Applied against asset accounts:
Allowance for doubtful accounts ...... $11.1 $ 5.5 $ (3.0)(1) $13.6
Allowance for volume and early payment
discounts ............................ $10.6 $33.3 $(33.8)(2) $10.1
YEAR ENDED DECEMBER 31, 1994:
Applied against asset accounts:
Allowance for doubtful accounts ...... $14.6 $ 4.6 $ (8.1)(1) $11.1
Allowance for volume and early payment
discounts ............................ $ 9.7 $26.0 $(25.1)(2) $10.6
</TABLE>
- ------------
Notes:
(1) Doubtful accounts written off, less recoveries, reclassifications and
foreign currency translation adjustments.
(2) Discounts taken, reclassifications and foreign currency translation
adjustments.
F-30
<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.
Revlon, Inc.
(Registrant)
<TABLE>
<CAPTION>
By: /s/ George Fellows By: /s/ William J. Fox By: /s/ Lawrence E. Kreider
---------------------------------------- ---------------------------------------- ----------------------------------------
<S> <C> <C>
George Fellows William J. Fox Lawrence E. Kreider
President, Senior Executive Vice Senior Vice
Chief Executive Officer President, President,
and Director Chief Financial Officer Controller and
and Director Chief Accounting Officer
</TABLE>
Dated: February 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant on
February 14, 1997 and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
* Chairman of the Executive Committee of the Board and
- ----------------------------------- Director
(Ronald O. Perelman)
* Chairman of the Board and Director
- -----------------------------------
(Jerry W. Levin)
/s/ George Fellows President, Chief Executive Officer and Director
- -----------------------------------
(George Fellows)
/s/ William J. Fox Senior Executive Vice President, Chief Financial
- ----------------------------------- Officer and Director
(William J. Fox)
* Director
- -----------------------------------
(Donald G. Drapkin)
* Director
- -----------------------------------
(Howard Gittis)
<PAGE>
* Director
- -----------------------------------
(Edward J. Landau)
* Director
- -----------------------------------
(Vernon E. Jordan)
* Director
- -----------------------------------
(Henry A. Kissinger)
* Director
- -----------------------------------
(Meyer Feldberg)
* Director
- -----------------------------------
(Linda G. Robinson)
* Director
- -----------------------------------
(Terry Semel)
* Director
- -----------------------------------
(Martha Stewart)
</TABLE>
o 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>
AS OF JANUARY 30, 1997
----------------------
AMENDED AND RESTATED
BY-LAWS
OF
REVLON, INC.
<PAGE>
AS OF JANUARY 30, 1997
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I OFFICES
<S> <C> <C>
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..................................................2
Section 4. Quorum............................................................2
Section 5. Proxies...........................................................3
Section 6. Voting............................................................3
Section 7. Organization and Order of Business................................3
Section 8. Consent of Stockholders in Lieu of Meeting........................4
Section 9. List of Stockholders Entitled to Vote.............................4
Section 10. Stock Ledger......................................................5
Section 11. Record Date.......................................................5
Section 12. Inspectors of Election............................................6
ARTICLE III DIRECTORS
Section 1. Number and Election of Directors..................................7
Section 2. Vacancies.........................................................7
Section 3. Duties and Powers.................................................7
Section 4. Organization......................................................8
Section 5. Resignations and Removals of Directors............................8
Section 6. Meetings..........................................................8
Section 7. First Yearly Meeting..............................................9
Section 8. Quorum and Manner of Acting.......................................9
Section 9. Action by Written Consent.........................................9
Section 10. Meetings by Means of Conference Telephone........................10
Section 11. Compensation.....................................................10
Section 12. Interested Directors.............................................10
ARTICLE IV COMMITTEES
Section 1. How Constituted and Powers.......................................11
Section 2. Executive Committee..............................................12
Section 3. Organization.....................................................12
Section 4. Meetings.........................................................12
Section 5. Quorum and Manner of Acting......................................12
Section 6. General..........................................................12
<PAGE>
AS OF JANUARY 30, 1997
----------------------
ARTICLE V OFFICERS
Section 1. Officers.........................................................13
Section 2. Term of Office and Qualifications................................13
Section 3. Subordinate Officers.............................................13
Section 4. Removal..........................................................13
Section 5. Resignations.....................................................13
Section 6. Vacancies........................................................14
Section 7. Compensation.....................................................14
Section 8. Chairman of the Board of Directors...............................14
Section 9. President........................................................15
Section 10. Vice Presidents..................................................15
Section 11. Treasurer........................................................16
Section 12. Controller.......................................................17
Section 13. Secretary........................................................18
Section 14. Duties of Assistant Treasurers, Assistant Secretaries and Other
Subordinate Officers.............................................19
Section 15. Appointed Officers...............................................19
ARTICLE VI CONTRACTS, VOTING OF STOCK HELD, CHECKS,
DRAFTS, BANK ACCOUNTS, ETC.
Section 1. Execution of Contracts...........................................20
Section 2. Loans and Loan Guarantees........................................20
Section 3. Voting of Stock Held.............................................21
Section 4. Checks, Drafts, etc..............................................21
Section 5. Deposits.........................................................22
ARTICLE VII STOCK AND DIVIDENDS
Section 1. Form of Certificates.............................................22
Section 2. Signatures.......................................................23
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates................23
Section 4. Transfers........................................................23
Section 5. Transfer and Registry Agents.....................................24
Section 6. Beneficial Owners................................................24
Section 7. Dividends........................................................24
Section 8. Limitations on Transfer..........................................25
ARTICLE VIII NOTICES
Section 1. Notices..........................................................25
Section 2. Waivers of Notice................................................26
ARTICLE IX BOOKS
Section 1. Books............................................................26
Section 2. Form of Books....................................................27
<PAGE>
AS OF JANUARY 30, 1997
----------------------
ARTICLE X INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation......................27
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation.........................................28
Section 3. Authorization of Indemnification.................................28
Section 4. Good Faith Defined...............................................29
Section 5. Indemnification by a Court.......................................30
Section 6. Expenses Payable in Advance......................................30
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses....31
Section 8. Insurance........................................................31
Section 9. Certain Definitions..............................................31
Section 10. Survival of Indemnification and Advancement of Expenses..........32
Section 11. Limitation on Indemnification....................................32
Section 12. Indemnification of Appointed Officers, Employees and Agents......33
ARTICLE XI AMENDMENT OF BY-LAWS
Section 1. Amendment of By-Laws.............................................33
Section 2. Entire Board of Directors........................................33
ARTICLE XII GENERAL PROVISIONS
Section 1. Seal.............................................................34
Section 2. Fiscal Year......................................................34
</TABLE>
<PAGE>
BY-LAWS
(as restated and amended)
OF
REVLON, 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 any 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
<PAGE>
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, (iii) the Chairman of the Executive
Committee of the Board of Directors or (iv) the President. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting of Stockholders stating the 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
-2-
<PAGE>
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, the Chairman of the Executive Committee of the Board of Directors or,
in such person's absence, the President, or in the absence of the three of
them, such person as shall have been designated by the Board of Directors or,
if none, by the Chairman of the Board of Directors, or, if none, by the
Chairman of the Executive Committee of the Board of Directors or, if none, by
the President, 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
-3-
<PAGE>
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, 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
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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 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.
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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,
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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.
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.
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Section 4. Organization. At each meeting of the Board of Directors,
the Chairman of the Executive Committee of the Board of Directors or the
Chairman of the Board of Directors, or, in the absence of both of them, 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, 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.
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, or a majority of directors then in office. Notice
thereof stating the place, date and hour of
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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 Certificate 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.
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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 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
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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
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of the Board of Directors in the management of the business and affairs of the
Corporation as provided in the resolution establishing such committee.
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.
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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.
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
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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 ByLaws 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.
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Section 9. 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, 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 and
chief executive officer and chief operating officer 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 or by
the Chairman of the Board of Directors. The President shall, at the request or
in the absence or disability of the Chairman of the Board of Directors, perform
the duties and exercise the powers of such officer.
Section 10. Vice Presidents. The Vice Presidents shall have
supervision over the operations of the Corporation within their respective
areas of special competence or responsibility
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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 Chairman of the Board of Directors, perform the
duties and exercise the powers of such officer and at the request or in the
absence or disability of the President, perform the duties and exercise the
powers of such officer and at the request or in the absence or disability of
the President, perform the duties and exercise the power 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.
Section 11. 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
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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 12. Controller. The Controller shall be responsible for
preparing and maintaining reasonable and adequate books of account and other
accounting records of the assets,
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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 13. 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 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
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authorized committee of directors, the Chairman of the Board of Directors, the
President or any other officer to whom the Secretary reports.
Section 14. 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 15. 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
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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.
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
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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 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.
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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
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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 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,
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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 "Canceled," 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,
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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
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,
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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.
(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
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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, with
respect to any criminal action
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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
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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 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
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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.
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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.
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
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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
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such proceeding (or part thereof) was authorized or consented to by the Board
of Directors of the Corporation.
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.
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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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AMENDMENT TO THE
FINANCING REIMBURSEMENT AGREEMENT
AMENDMENT dated May 3, 1996 (this "Amendment"), to the Financing
Reimbursement Agreement dated as of February 28, 1995 (the "Financing
Reimbursement Agreement"), between Revlon Holdings Inc., a Delaware corporation
("Old Revlon") and Revlon Consumer Products Corporation, a Delaware corporation
("Products Corporation").
WHEREAS, Old Revlon and Products Corporation wish to amend the
Financing Reimbursement Agreement, pursuant to Section 4.01 thereof, to more
accurately express the agreement of the parties.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Unless the context requires otherwise, all
capitalized terms used herein and not otherwise defined herein have the meaning
assigned to them in the Financing Reimbursement Agreement.
SECTION 2. Effectiveness; Counterparts. Upon execution by the parties
hereto, this Amendment shall be deemed effective as of February 28, 1995. As
amended hereby, the Financing Reimbursement Agreement is hereby ratified,
confirmed and continued in all respects. This Amendment may be signed in
separate counterparts, each of which shall be deemed for all purposes an
original, but all such counterparts shall constitute one and the same
instrument.
SECTION 3. Amendment to the Financing Reimbursement Agreement.
(a) Amendment to Section 2.01. Section 2.01 of the Financing
Reimbursement Agreement is hereby amended in its entirety to read as follows:
"Section 2.01. Subject to the terms of this Agreement, Old Revlon
agrees to pay to Products Corporation on the Maturity Date an amount as shall
be determined pursuant to Section 2.02 hereof (the "Interest Allocation") which
shall represent reimbursement by Old Revlon of interest paid by Products
Corporation on account of indebtedness incurred under the New Credit Agreement
and under borrowings from affiliates of Products Corporation. Such agreement
hereunder by Old Revlon shall constitute the promise and obligation of Old
Revlon to pay the Interest Allocation, without interest thereon, to Products
Corporation on the Maturity Date."
(b) Amendment to Section 2.02. Section 2.02 of the Financing
Reimbursement Agreement is hereby amended in its entirety to read as follows:
<PAGE>
"Section 2.02. The Interest Allocation shall be calculated with
respect to each fiscal quarter of Products Corporation, beginning with the
quarter ended March 31, 1995, and shall equal the sum of the products with
respect to each fiscal quarter of multiplying the rate of interest of 1.5% per
annum by the average balance outstanding under the New Credit Agreement for
each such quarter and the average balance outstanding under borrowings from
affiliates of Products Corporation for each such quarter."
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ Robert K. Kretzman
-------------------------------------
Name: Robert K. Kretzman
Title: Vice President
REVLON HOLDINGS INC.
By: /s/ Glenn P. Dickes
-------------------------------------
Name: Glenn P. Dickes
Title: Vice President
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CONFORMED COPY
FIRST AMENDMENT AND CONSENT NUMBER 1
FIRST AMENDMENT AND CONSENT NUMBER 1, dated as of January 9, 1997
(this "Amendment"), to the Amended and Restated Credit Agreement, dated as of
January 24, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Revlon Consumer Products Corporation, a
Delaware corporation (the "Company"), the Borrowing Subsidiaries from time to
time parties thereto (the "Borrowing Subsidiaries"; collectively with the
Company, the "Borrowers"), the financial institutions from time to time parties
thereto (the "Lenders"), the Arranger named therein, the Co-Agents named
therein, Citibank, N.A., as documentation agent (in such capacity, the
"Documentation Agent"), and The Chase Manhattan Bank (formerly known as
Chemical Bank), as administrative agent (in such capacity, the "Administrative
Agent").
W I T N E S S E T H :
WHEREAS, the Company has entered into the Agreement and Plan of
Merger, dated as of November 27, 1996 (the "Merger Agreement"), with The
Cosmetic Center, Inc. ("Cosmetic Center") and Prestige Fragrance & Cosmetics,
Inc. ("PFC"), pursuant to which PFC is to be merged with and into Cosmetic
Center (or a subsidiary thereof) and Cosmetic Center is to be the surviving
entity of such merger (the "Cosmetic Center Merger");
WHEREAS, in connection with the Cosmetic Center Merger, the Company
has requested that the Agents and the Lenders amend certain provisions of the
Credit Agreement, as more fully described herein;
WHEREAS, the Company has requested that the Agents and the Lenders
consent to certain other transactions, as more fully described herein;
WHEREAS, the Agents and the Lenders are willing to amend such
provisions and consent to such transactions, but only upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company, the Agents and the Lenders hereby
agree as follows:
1. Definitions. All terms defined in the Credit Agreement shall have
such defined meanings when used herein unless otherwise defined herein.
2. Amendment of Subsection 1.1. Subsection 1.1 of the Credit Agreement
hereby is amended by:
(a) deleting therefrom, in its entirety, the definition of the term
"Subsidiary"; and
<PAGE>
2
(a) inserting therein, in proper alphabetical order, the following new defined
terms:
"Cosmetic Center Merger" shall mean the merger of Prestige
Fragrance & Cosmetics, Inc. with and into The Cosmetic Center, Inc.
(or any wholly-owned Subsidiary thereof) substantially upon the terms
described in the Agreement and Plan of Merger, dated as of November
27, 1996, among The Cosmetic Center, Inc., the Company and Prestige
Fragrance & Cosmetics, Inc.
"Subsidiary" of any Person shall mean a corporation or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other
Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person; provided that, (a) unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company, (b) unless otherwise qualified, all
references to a "wholly owned Subsidiary" or to "wholly pledged
Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company of which the Company directly or
indirectly owns all of the capital stock or other equity interests
(other than directors' qualifying shares) and (c) from and after the
consummation of the Cosmetic Center Merger, The Cosmetic Center, Inc.
and each of its Subsidiaries shall be deemed not to constitute a
"Subsidiary" of the Company for any purpose under this Agreement
(including, without limitation, the calculation of compliance with the
financial covenants contained in subsection 13.1), other than:
(x) the representations and warranties contained in
subsections 10.7, 10.8, 10.24, 10.28;
(y) the Defaults and Events of Default contained in Section
14(g), (m), (n) and (o); and
(z) the provisions of subsections 9.4 (with respect to any
Net Proceeds Event in respect of capital stock of The Cosmetic
Center, Inc., with The Cosmetic Center, Inc. being deemed to be a
Subsidiary of the Company for purposes of the definition of the
term "Net Proceeds Event") and 12.11 (with respect to capital
stock or other equity interests of The Cosmetic Center, Inc., but
not of any Subsidiaries thereof);
3. Amendment of Subsection 10.30. Subsection 10.30 of the Credit
Agreement hereby is amended by deleting clause (b) thereof in its entirety and
by substituting therefor the following:
<PAGE>
3
(b) Neither the Company nor any of its Domestic Subsidiaries
maintains any Inventory (as defined in the Company Security Agreement or
the Subsidiary Security Agreement, as the case may be) with respect to
which the Administrative Agent does not possess a perfected, first priority
security interest, other than (i) any such Inventory with respect to which
the Agent holds a perfected security interest which is subject only to
prior Liens which are permitted to encumber such Inventory pursuant to
subsection 13.3 and (ii) any such inventory which is maintained by the
Company and its Subsidiaries at a location at which the book value of all
such inventory does not exceed $1,000,000 in the aggregate.
4. Amendment of Subsection 12.1. Subsection 12.1 of the Credit
Agreement hereby is amended by inserting therein as a new clause (d) the
following:
(d) as soon as available, but in any event within 45 days after
the end of each fiscal quarter of each fiscal year of the Company (or, in
the case of the fourth fiscal quarter of each fiscal year, within 90 days
after the end thereof), a copy of (i) the unaudited consolidated balance
sheet of each of the Company and its Subsidiaries (other than The Cosmetic
Center, Inc. and its Subsidiaries) and The Cosmetic Center, Inc. and its
Subsidiaries as at the end of each such quarter, (ii) the related unaudited
consolidated statements of operations and of cash flows for the portion of
the fiscal year through such date and (iii) the related unaudited
consolidated statements of operations for such quarterly period, certified
(subject to normal year-end audit adjustments) by a Responsible Officer of
the Company; provided that the financial statements delivered with respect
to The Cosmetics Center, Inc. and its Subsidiaries for the fourth fiscal
quarter of each fiscal year shall be certified without a "going concern" or
like qualification or exception, or qualification arising out of the scope
of the audit, by independent certified public accountants of nationally
recognized standing;
5. Amendment of Subsection 13.2(d). Subsection 13.2(d) of the Credit
Agreement hereby is amended by deleting clause (d) thereof in its entirety and
by substituting therefor the following:
(d) Indebtedness (i) of the Company to any of its wholly-owned
Subsidiaries, (ii) of any wholly-owned Subsidiary of the Company to any
other wholly-owned Subsidiary of the Company and (iii) of any wholly-owned
Subsidiary of the Company to the Company;
6. Amendment of Subsection 13.5. Subsection 13.5 of the Credit
Agreement hereby is amended by:
(a) deleting the word "and" which appears at the end of clause (a) thereof;
(b) deleting the period which appears at the end of clause (b) thereof and by
substituting therefor a semi-colon, followed by the word "and"; and
<PAGE>
4
(c) inserting therein as a new clause (c) thereof the following:
(c) the Company may consummate the Cosmetic Center Merger.
7. Amendment of Subsection 13.7. Subsection 13.7 of the Credit
Agreement hereby is amended by deleting clause (a)(iv) thereof in its entirety
and by substituting therefor the following:
(iv) Restricted Payments made from time to time to finance (A) the
purchase by Revlon of its common stock (for not more than market price) in
connection with the delivery of such common stock to grantees under any
stock option plan maintained by it upon the exercise by such grantees of
stock options or stock appreciation rights settled with common stock or
upon the grant of shares of common stock pursuant thereto and (B) the
payment by Revlon of amounts owing in respect of stock appreciation rights
and performance units under any such stock option plan; provided that (x)
the sum of (i) the aggregate amount of Restricted Payments made pursuant to
this clause (iv) and (ii) the aggregate amount of open-market purchases of
common stock of Revlon, Inc. under subsection 13.8(h), does not exceed
$6,000,000 in any year and (y) amounts available pursuant to this clause
(iv) to be utilized for Restricted Payments during any year which are not
utilized during such year may be carried forward and utilized in any
succeeding year;
8. Amendment of Subsection 13.8. Subsection 13.8 of the Credit
Agreement hereby is amended by:
(a) deleting the word "and" which appears at the end of clause (e) thereof;
(b) deleting the period which appears at the end of clause (f) thereof and by
substituting therefor a semi-colon; and
(c) inserting therein as new clauses (g) and (h) thereof the following:
(g) the Company and its Subsidiaries may make or commit to make
investments in The Cosmetic Center, Inc. in connection with the
consummation of the Cosmetic Center Merger; and
(h) the Company may make investments in open-market purchases of
common stock of Revlon, Inc. to the extent necessary to permit the
Company to satisfy its obligations under its "excess 401-K plan" for
highly compensated employees; provided that (i) the sum of (A) the
aggregate amount of Restricted Payments made pursuant to subsection
13.7(a)(iv) and (B) the aggregate amount of such purchases under this
subsection 13.8(h), does not exceed $6,000,000 in any year and (ii)
amounts available pursuant to this subsection 13.8(h) to be
<PAGE>
5
utilized for investments during any year which are not utilized during
such year may be carried forward and utilized in any succeeding year.
9. Consents. (a) The Agents and the Lenders hereby (i) consent to the
release of Prestige Fragrance & Cosmetics, Inc. (and The Cosmetic Center, Inc.,
as successor thereto) from its obligations under the Subsidiaries Guarantee,
the Subsidiary Security Agreement and the Intellectual Property Security
Documents to which it is party immediately upon the consummation of the
Cosmetic Center Merger and (ii) authorize and instruct the Administrative Agent
to execute and deliver such documents, instruments and agreements (including,
without limitation, Uniform Commercial Code termination statements) as may
reasonably be requested by the Company in order to effectuate such release.
(b) The Agents and the Lenders hereby authorize and instruct the
Administrative Agent to execute and deliver such documents, instruments and
agreements as may reasonably be requested by the Company (or as otherwise may
be desirable) in order to amend the definitive documentation governing the
pledge to the Administrative Agent of the capital stock of Prestige Fragrance &
Cosmetics, Inc. such that, upon consummation of the Cosmetic Center Merger, the
Administrative Agent shall hold a first priority, perfected security interest
in all of the issued and outstanding capital stock of The Cosmetic Center, Inc.
which is owned by the Company and its Subsidiaries.
(c) The Lenders hereby authorize and instruct the Administrative Agent
to take such action and execute such documents, instruments and agreements as
reasonably may be necessary in order that, upon the consummation of the
Cosmetic Center Merger, (i) each reference to "Prestige Fragrance & Cosmetics,
Inc." contained in the Collateral Agency Agreement (Bank Obligations) or the
Credit Agreement shall be a reference to "The Cosmetic Center, Inc." and (ii)
the Intercreditor Agreement shall be amended to reflect the consummation of the
Cosmetic Center Merger and such amendments to the Collateral Agency Agreement
(Bank Obligations).
10. Consent to Rose Chandel Sale. The Agents and the Lenders hereby
consent that the sale by the Company and its Subsidiaries of the trademark
"Rose Chandel" and certain related assets shall be deemed to constitute a
Specified Disposition for purposes of the Credit Documents; provided that the
aggregate consideration received by the Company and its Subsidiaries on account
of such sale (other than the sale of any inventory relating to the Rose Chandel
trademark) is not more than $350,000.
11. Conditions to Effectiveness. This Amendment shall become effective
on and as of the date that the Administrative Agent shall have received
counterparts of this Amendment, duly executed by the Company, the Majority
Lenders and each Fronting Lender, and duly acknowledged and consented to by
each Guarantor, Grantor and Pledgor (other than the Company); provided that it
also shall be a condition to the effectiveness of clauses (a) and (b) of
Section 9 hereof that the Administrative Agent shall have received counterparts
of this
<PAGE>
6
Amendment, duly executed by Lenders holding not less than 85% of the Aggregate
Commitment.
12. Representations and Warranties. The Company, as of the date hereof
and after giving effect to the amendment contained herein, hereby confirms,
reaffirms and restates the representations and warranties made by it in Section
10 of the Credit Agreement and otherwise in the Credit Documents to which it is
a party; provided that each reference to the Credit Agreement therein shall be
deemed to be a reference to the Credit Agreement after giving effect to this
Amendment.
13. Reference to and Effect on the Credit Documents; Limited Effect.
On and after the date hereof and the satisfaction of the conditions contained
in Section 8 of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Credit Agreement, and each reference in the other Credit Documents to "the
Credit Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby. The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender or the Agents under any of the Credit
Documents, nor constitute a waiver of any provisions of any of the Credit
Documents. Except as expressly amended herein, all of the provisions and
covenants of the Credit Agreement and the other Credit Documents are and shall
continue to remain in full force and effect in accordance with the terms
thereof and are hereby in all respects ratified and confirmed.
14. Counterparts. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts (which may include
counterparts delivered by facsimile transmission) and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. Any
executed counterpart delivered by facsimile transmission shall be effective as
for all purposes hereof.
15. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ Steven Berns
-------------------------------------
Name: Steven Berns
Title: Vice President and Treasurer
<PAGE>
7
THE CHASE MANHATTAN BANK (formerly known
as Chemical Bank and as successor by
merger to The Chase Manhattan Bank, N.A.),
as Administrative Agent, as a Co-Agent
and as a Lender
By: /s/ Neil R. Boylan
------------------------------------------
Name: Neil R. Boylan
Title: Vice President
CITIBANK, N.A., as Documentation Agent
and as a Lender
By: /s/ James Buchanan
------------------------------------------
Name: James Buchanan
Title: Attorney-in-Fact
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By: /s/ Jeffrey W. Maillet
------------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
GENERAL ELECTRIC CAPITAL CORPORATION,
as a Co-Agent and as a Lender
By: /s/ Michael McGonigle
------------------------------------------
Name: Michael McGonigle
Title: Duly Authorized Signatory
<PAGE>
8
BANK OF AMERICA ILLINOIS, as a Co-Agent
and as a Lender
By: /s/ L. Dustin Vincent, III
------------------------------------------
Name: L. Dustin Vincent, III
Title: Managing Director
CREDIT LYONNAIS NEW YORK BRANCH as a Co-Agent
By: /s/ Frederick Haddad
------------------------------------------
Name: Frederick Haddad
Title: Senior Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as
a Co-Agent
By:
------------------------------------------
Name:
Title:
CREDIT SUISSE, as a Co-Agent and as a Lender
By: /s/ Joel Glodowski
------------------------------------------
Name: Joel Glodowski
Title: Managing Director
By: /s/ Chris T. Horgan
------------------------------------------
Name: Chris T. Horgan
Title: Associate
<PAGE>
9
THE FIRST NATIONAL BANK OF BOSTON, as a
Co-Agent and as a Lender
By: /s/ Richard D. Hill, Jr.
------------------------------------------
Name: Richard D. Hill, Jr.
Title: Director
THE FUJI BANK, LIMITED, NEW YORK BRANCH,
as a Co-Agent and as a Lender
By: /s/ Teiji Teramoto
------------------------------------------
Name: Teiji Teramoto
Title: Vice President and Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES Agency, as a Co-Agent and
as a Lender
By: /s/ Paul B. Clifford
------------------------------------------
Name: Paul B. Clifford
Title: Deputy General Manager
NATIONSBANK, N.A., as a Co-Agent and as
a Lender
By: /s/ Ellen M. Bagnato
------------------------------------------
Name: Ellen M. Bagnato
Title: Vice President
THE TORONTO-DOMINION BANK, as a Co-Agent and
as a Lender
By: /s/ David G. Parker
------------------------------------------
Name: David G. Parker
Title: Manager, Credit Administration
<PAGE>
10
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By: /s/ G. Kevin Dooley
------------------------------------------
Name: G. Kevin Dooley
Title: Vice President
By: /s/ Frederick K. Kammler
------------------------------------------
Name: Frederick K. Kammler
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Elliot Jaffee
------------------------------------------
Name: Elliot J. Jaffee
Title: Vice President
CERES FINANCE, LTD.
By: /s/ Darren P. Riley
------------------------------------------
Name: Darren P. Riley
Title: Director
STRATA FUNDING LTD.
By: /s/ Darren P. Riley
------------------------------------------
Name: Darren P. Riley
Title: Director
AERIES FINANCE, LTD.
By: /s/ Andrew Wignall
------------------------------------------
Name: Andrew Ian Wignall
Title: Director
<PAGE>
11
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ R. Douglas Henderson
------------------------------------------
Name: R. Douglas Henderson
Title: Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By: /s/ R. Douglas Henderson
------------------------------------------
Name: R. Douglas Henderson
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Eliza S. Adams
------------------------------------------
Name: Eliza S. Adams
Title: Vice President
PRIME INCOME TRUST
By:
------------------------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Howard Tiffen
------------------------------------------
Name: Howard Tiffen
Title: Senior Vice President
<PAGE>
12
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By: /s/ Payson Swaffield
------------------------------------------
Name: Payson F. Swaffield
Title: Vice President
ABN-AMRO BANK, N.V.
By: /s/ Frances O'R. Logan
------------------------------------------
Name: Frances O'R. Logan
Title: Group Vice President
By: /s/ Thomas T. Rogers
------------------------------------------
Name: Thomas T. Rogers
Title: Assistant Vice President
KEYPORT LIFE INSURANCE COMPANY
By: Chanceller LGT Senior Secured Management,
Inc., as Portfolio Advisor
By: /s/ Christopher E. Jansen
------------------------------------------
Name: Christopher E. Jansen
Title: Managing Director
MEDICAL LIABILITY MUTUAL INSURANCE
By: Chanceller LGT Senior Secured Management,
Inc., as Portfolio Advisor
By: /s/ Christopher E. Jansen
------------------------------------------
Name: Christopher E. Jansen
Title: Managing Director
<PAGE>
13
ALLIED IRISH BANK
By: /s/ W. P. Murray
------------------------------------------
Name: W. P. Murray
Title: Vice President
By: /s/ W. J. Strickland
------------------------------------------
Name: W. J. Strickland
Title: Senior Vice President
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
dated as of January 9, 1997
Each of the undersigned (in its capacity as a Guarantor, Grantor
and/or Pledgor, as the case may be, under the Security Documents to which it is
a party) does hereby (a) consent, acknowledge and agree to the transactions
described in the foregoing Second Amendment and (b) after giving effect to such
Second Amendment, (i) confirms, reaffirms and restates the representations and
warranties made by it in each Credit Document to which it is a party, (ii)
ratifies and confirms each Security Document to which it is a party and (iii)
confirms and agrees that each such Security Document is, and shall continue to
be, in full force and effect, with the Collateral described therein securing,
and continuing to secure, the payment of all obligations of the undersigned
referred to therein; provided that each reference to the Credit Agreement
therein and in each of the other Credit Documents shall be deemed to be a
reference to the Credit Agreement after giving effect to such Second Amendment.
Each of the undersigned hereby further acknowledges and agrees that any
Acceptances created under the Credit Agreement shall, for all purposes under
the Security Documents, be deemed to constitute a Local Subsidiary Loan and be
secured, guaranteed or otherwise supported (as the case may be) as such.
ALEXANDRA DE MARKOFF, LTD.
ALMAY, INC.
APPLIED SCIENCE & TECHNOLOGIES INC.
ASTERION, INC.
BILL BLASS, INC.
CARRINGTON PARFUMS LTD.
CHARLES OF THE RITZ GROUP LTD.
CHARLES REVSON INC.
COSMETIQUES HOLDINGS, INC.
DOLLY PARTON INC.
ETHEREA, INC.
FASHION & DESIGNER FRAGRANCE GROUP,INC.
FERMODYL PROFESSIONALS INC.
FIFTIETH FLOOR WORKSHOP, INC.
FRAGRANCE & BEAUTY PRODUCTS, INC.
GENERAL WIG MANUFACTURERS, INC.
INSPIRATIONS INC.
NEW ESSENTIALS LIMITED
NORELL PERFUMES, INC.
NORTH AMERICA REVSALE INC.
OXFORD PROPERTIES CO.
PACIFIC FINANCE & DEVELOPMENT CORP.
PPI TWO CORPORATION
PPI FOUR CORPORATION
PRESTIGE FRAGRANCE & COSMETICS, INC.
PRESTIGE FRAGRANCES, LTD.
REALISTIC/ROUX PROFESSIONAL PRODUCTS
INC.
REVLON, INC.
REVLON COMMISSARY SALES, INC.
REVLON CONSUMER PRODUCTS CORPORATION
REVLON GOVERNMENT SALES, INC.
REVLON HOLDINGS INC.
REVLON INTERNATIONAL CORPORATION
REVLON PROFESSIONAL, INC.
REVLON PROFESSIONAL PRODUCTS INC.
REVLON RECEIVABLES SUBSIDIARY, INC.
REVLON RESEARCH CENTER, INC.
RIROS CORPORATION
RIT INC.
RLI HOLDINGS, INC.
RLL CORPORATION
ROUX LABORATORIES, INC.
VISAGE BEAUTE COSMETICS, INC.
By: /s/ Steven Berns
------------------------------------
Name: Steven Berns
Title: Vice President
<PAGE>
SECOND AMENDMENT TO TAX SHARING AGREEMENT
This is the Second Amendment dated as of January 1, 1997 to the TAX
SHARING AGREEMENT entered into as of June 24, 1992 (as amended on February 28,
1995) (the "Agreement"), by and among MAFCO HOLDINGS, INC., a Delaware
corporation ("Parent"), REVLON HOLDINGS INC., a Delaware corporation
("Holdings"), REVLON, INC., a Delaware corporation ("Public Co."), REVLON
CONSUMER PRODUCTS CORPORATION, a Delaware corporation ("Operating Co.") and the
Subsidiaries of Public Co. that are signatories hereto (capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
the Agreement).
RECITALS
The Agreement provides that Public Co. shall make certain payments in
respect of taxes to Holdings and Operating Co. and its Subsidiaries shall make
certain payments to Public Co. in respect of taxes under circumstances as
provided in the Agreement. The parties desire to amend the Agreement as set
forth herein.
AGREEMENT
For good and valuable consideration, the parties hereto agree as
follows:
1. Amendment of Section 4(b). Section 4(b) of the Agreement is hereby
amended and restated in its entirety as follows:
"(b) Each of the Subsidiaries of Operating Co. agrees to pay to
Operating Co. an amount equal to its liability for Federal, state and
local income taxes (including estimated taxes), if any; such liability
to be determined as if such Subsidiary had not been included in the
consolidated income tax return for the Parent Group with respect to
such Taxable Period but had instead filed its own separate return for
such Taxable Period but otherwise calculated in accordance with the
principles of Paragraphs 1(c), 1(e), 3(a) and 3(b) hereof, no later
than one business day prior to the date upon which the relevant
payment by Operating Co. to Public Co. is required to be made under
the terms hereof or, if no such payment by Operating Co. is required
to be made hereunder, not later than one business day prior to the due
date of the Parent Group's consolidated
<PAGE>
Federal income tax return or any relevant combined state or local
income tax return (or the relevant due date for the payment of
Estimated Taxes), as the case may be, for such Taxable Period.
Operating Co. agrees to pay to Public Co. its share, if any, of each
of the items of Public Co. Group's Federal Tax and Public Co. Group's
State and Local Tax and of payments of Estimated Tax, each such share
to be determined in accordance with the principles of Paragraphs 1(c),
1(e), 3(a) and 3(b) hereof as if Operating Co. had not been included
in the consolidated income tax return for the Parent Group with
respect to such Taxable Period but had instead filed its own
consolidated return for such Taxable Period, no later than one
business day prior to the date upon which the relevant payment by
Public Co. is required to be made under the terms hereof. Public Co.
agrees to pay to Operating Co. its share of any payment received by
Public Co. from Parent or Holdings pursuant to this Agreement and
Operating Co. agrees to pay to each Subsidiary of Operating Co. its
share of any payment received by Operating Co. from Public Co.
pursuant to this Agreement, in each case, each such share to be
determined in accordance with the principles of Paragraphs 1(c), 1(e),
3(a) and 3(b) hereof as if Operating Co. or such Subsidiary of
Operating Co., as the case may be, had not been included in the
consolidated income tax return for the Parent Group with respect to
such Taxable Period but had instead filed its own consolidated return
for such Taxable Period, as promptly as practicable following the
receipt of any such payment and the determination of such share."
2. Amendment of Section 5. Section 5 of the Agreement is hereby
amended and restated in its entirety as follows:
"5. Restricted Payments. Notwithstanding any other provision of
this Agreement, in no event shall any payment be made by Operating Co.
to Public Co. pursuant to this Agreement to the extent that and for so
long as such payment is prohibited under or is inconsistent with the
terms of that certain Credit Agreement dated as of June 24, 1992,
among Operating Co., the lenders that are parties thereto, the Chase
Manhattan Bank, N.A., Chemical Bank and Citibank, N.A., as Managing
Agents for the lenders, and Chemical Bank, as Administrative Agent,
and any credit agreement resulting from the refinancing of such
Agreement (any such agreement and refinancing agreement shall be
referred to as the "Credit Agreement"). To the extent that and for so
long as any such payment by Operating Co. to Public Co. is prohibited,
Public Co. shall not be required to make the corresponding payments to
Holdings; provided that Public Co. shall be liable to pay over such
amount promptly upon termination of such prohibition."
3. This Second Amendment shall be effective as of January 1, 1997.
Except as amended by this Second Amendment, the Agreement shall remain
unchanged and in full force and effect.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed by its respective duly authorized officer as of the date first
above written.
MAFCO HOLDINGS INC.
By: /s/ Glenn P. Dickes
--------------------------------
Name: Glenn P. Dickes
Title: Senior Vice President
REVLON HOLDINGS INC.
By: /s/ Stanley B. Dessen
--------------------------------
Name: Stanley B. Dessen
Title: Senior Vice President
REVLON, INC.
By: /s/ Stanley B. Dessen
--------------------------------
Name: Stanley B. Dessen
Title: Senior Vice President
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ Stanley B. Dessen
--------------------------------
Name: Stanley B. Dessen
Title: Senior Vice President
ALMAY, INC.
AMERICAN CREW, INC.
APPLIED SCIENCE & TECHNOLOGIES INC.
CARRINGTON PARFUMS LTD.
CHARLES REVSON INC.
CREATIVE NAIL DESIGN, INC.
DOLLY PARTON INC.
FASHION & DESIGNER FRAGRANCE GROUP, INC.
FERMODYL PROFESSIONALS INC.
GENERAL WIG MANUFACTURERS, INC.
NORTH AMERICA REVSALE INC.
OXFORD PROPERTIES CO.
PACIFIC FINANCE & DEVELOPMENT CORP.
PPI TWO CORPORATION
PRESTIGE FRAGRANCE & COSMETICS, INC.
-3-
<PAGE>
PRESTIGE FRAGRANCES, LTD.
REALISTIC/ROUX PROFESSIONAL PRODUCTS INC.
REVLON COMMISSARY SALES, INC.
REVLON CONSUMER CORP.
REVLON GOVERNMENT SALES, INC.
REVLON INTERNATIONAL CORPORATION
REVLON PROFESSIONAL, INC.
REVLON PROFESSIONAL PRODUCTS INC.
REVLON RECEIVABLES SUBSIDIARY, INC.
RIROS CORPORATION
RIT INC.
ROUX LABORATORIES, INC.
For and on behalf of the above-listed
companies:
By: /s/ Stanley B. Dessen
--------------------------------
Name: Stanley B. Dessen
Title: Vice President
-4-
<PAGE>
- -------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
OPERATING SERVICES AGREEMENT
by and among
REVLON HOLDINGS INC.,
REVLON, INC.
and
REVLON CONSUMER PRODUCTS CORPORATION
June 24, 1992
(Amended and Restated as of January 1, 1996)
- -------------------------------------------------------------------------------
<PAGE>
SECOND AMENDED AND RESTATED
OPERATING SERVICES AGREEMENT
OPERATING SERVICES AGREEMENT dated as of June 24, 1992, as amended as
of January 1, 1993, amended and restated as of September 1, 1993, amended as of
January 1, 1994 and amended and restated as of January 1, 1996 (this
"Agreement"), by and among Revlon Holdings Inc., a Delaware corporation
("Holdings"), Revlon, Inc., a Delaware corporation and a wholly owned
subsidiary of Holdings ("Public Co."), and Revlon Consumer Products
Corporation, a Delaware corporation and a wholly owned subsidiary of Public Co.
("Operating Co.").
W I T N E S S E T H:
WHEREAS, pursuant to an Asset Transfer Agreement, dated June 24, 1992
(the "Transfer Agreement"), by and among Holdings, National Health Care Group,
Inc., a Delaware corporation and a wholly owned subsidiary of Holdings, Charles
of the Ritz Group Ltd., a Delaware corporation and a wholly owned subsidiary of
Holdings, Public Co. and Operating Co., Public Co. has acquired from Holdings
and Operating Co. has acquired from Public Co., among other things, the
Contributed Assets (as defined in the Transfer Agreement, capitalized terms
used and not defined herein shall have the meanings ascribed to them in the
Transfer Agreement); and
WHEREAS, Holdings owns certain assets relating to the Charles of the
Ritz, Visage Beaute, Bill Blass, Ellen Tracy, Norell, Alexandra de Markoff,
Guess and New Essentials businesses (such brands and any brands hereinafter
transferred from Operating Co. to Holdings, in each case, to the extent
retained by Holdings (and not sold, licensed, sublicensed or otherwise disposed
of to Operating Co. or any third party) are collectively referred to herein as
the "Retained Brands").
WHEREAS, in connection with and as part of the Transfer Agreement,
Operating Co. is willing to perform, or cause its subsidiaries to perform, for
Holdings or subsidiaries of Holdings those services for the Retained Brands as
set forth herein, for the consideration and upon and subject to the other terms
and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
SERVICES
Section 1.1 Services. Operating Co. hereby agrees to provide, or cause
its subcontractors, subsidiaries or subsidiaries' subcontractors to provide,
such services (the
<PAGE>
"Services"), including but not limited to manufacturing, warehousing,
invoicing, collection (taking into account adjustments for returns, allowances
and related items), accounting, management information services, research and
development, advertising, sales, promotional, marketing, management, licensing,
tax, treasury (including making payments on Holdings' behalf), legal and
distribution services, for the Retained Brands as had been provided by
Holdings, or subsidiaries of Holdings, for the Retained Brands prior to the
date hereof or as are reasonably necessary or desirable in order to operate the
Retained Brands.
Section 1.2 Retained Brands Inventory. (a) At such time as a third
party shall order inventory transferred to Operating Co. pursuant to the
Transfer Agreement which relates to the Retained Brands (other than New
Essentials), Operating Co. shall sell to Holdings, and Holdings shall purchase
from Operating Co., such inventory at a price equal to the value of such
inventory as reflected on the books of Operating Co. Such sale to a third party
shall be satisfied using such inventory.
(b) At such time as any raw materials, packaging, bulks and
componentry ("basic inventory") transferred to Operating Co. pursuant to the
Transfer Agreement which is exclusively related to the Retained Brands is
converted into finished goods inventory of the Retained Brands, Operating Co.
shall sell to Holdings, and Holdings shall purchase from Operating Co., such
inventory at a price equal to the cost of goods of such inventory, as reflected
on the books of Operating Co. Sales to third parties of such inventory shall be
for the account of Holdings.
Section 1.3 Manufactured Goods. At such time as any finished goods
inventory of the Retained Brands is manufactured by Operating Co. pursuant to
this Agreement, Operating Co. shall sell to Holdings, and Holdings shall
purchase from Operating Co., such inventory at a price equal to the cost of
goods of such inventory, as reflected on the books of Operating Co.
ARTICLE II
PAYMENT FOR SERVICES
Section 2.1 Payment for Services. Holdings shall pay Operating Co. a
fee in cash (the "Service Fee") for the Services provided hereunder which shall
be equal to (i) all of Operating Co.'s (and its subsidiaries') and Public Co.'s
direct and indirect costs (including an allocable portion of corporate
overhead) in connection with providing the Services, all as allocated by
Operating Co., and (ii) a fee equal to five percent of the net sales
(determined on a basis consistent with Operating Co.'s published financial
statements) of the products of the Retained Brands (other than sales of
products of the Retained Brands by Operating Co. to Holdings pursuant to
Section 1.2 hereof).
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Section 2.2 Payment of Charges. Operating Co. shall provide a schedule
to Holdings on or before the 30th day following each calendar month calculating
the Service Fee and the payments due pursuant to Section 1.2 hereof, annexing
schedules in reasonable detail itemizing the charges so scheduled and the
calculations thereof. Payment (net of Holdings' accounts receivables collected
by Operating Co. on behalf of Holdings which shall be applied by Operating Co.
for payments due Operating Co. hereunder) shall be due on or before the 45th
day following each calendar quarter.
ARTICLE III
TERM
Section 3.1 Termination. (a) Subject to Section 6.3 hereof, each of
Holdings or Public Co. may terminate this Agreement effective at the end of any
calendar month upon 90-days written notice provided, however, that Public Co.
may not terminate this Agreement with respect to any Rights owed to a third
party arising out of, related to or due to ("related to") the Retained Brands
existing on the date hereof or entered into with the consent of Public Co. or
Operating Co. for so long as such Rights remain in effect.
(b) Upon the termination of this agreement in accordance with its
terms, Operating Co. shall sell to Holdings, and Holdings shall purchase from
Operating Co., any finished goods or basic inventory related to the Retained
Brands (other than New Essentials) at a price equal to the value of such
inventory, as reflected on the books of Operating Co.
ARTICLE IV
INDEMNIFICATION
Section 4.1 Indemnification. (a) Holdings shall indemnify and hold
harmless Public Co., Operating Co., their respective subsidiaries and their
respective directors, officers, employees, representatives and agents
(collectively, the "Public Co. Indemnified Parties") from and against any and
all Losses of any kind whatsoever that may be incurred by, imposed upon or
asserted or awarded against a Public Co. Indemnified Party related to Public
Co.'s, Operating Co.'s or Operating Co.'s subsidiaries performance of the
Services, except to the extent the same are related to a Public Co. Indemnified
Party's gross negligence or willful misconduct.
(b) Public Co. and Operating Co. shall jointly and severally
indemnify and hold harmless Holdings, its subsidiaries and affiliates (other
than Public Co. and its subsidiaries) and their respective directors, officers,
employees, representatives and agents (collectively, the "Holdings Indemnified
Parties") from and against any and all Losses of any kind whatsoever that may
be incurred by, imposed upon or asserted or awarded against a
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Holdings Indemnified Party to the extent related to the gross negligence or
willful misconduct of Public Co.'s or Operating Co.'s performance of the
Services.
(c) Notwithstanding anything in subsection (a) or (b) to the
contrary, Public Co. and Operating Co. shall jointly and severally indemnify
and hold harmless a Holdings Indemnified Party for all Losses on account of
pollution or the violation of any environmental law, regulations, rules or
orders of any federal, state, local or foreign government to the extent
directly related to the provision of the Services hereunder, other than Losses
attributable to the period prior to the date hereof.
Section 4.2 Insurance. The amount of any claim by a party entitled to
indemnification under this Agreement (an "Indemnitee") shall be reduced by any
insurance or other benefits which the Indemnitee receives in respect of such
Loss. If any Loss for which indemnification has been provided is subsequently
reduced by any reimbursement from insurance coverage or other sources, the
amount of such reduction shall be remitted to the indemnifying party. The
Indemnitee shall use its reasonable efforts to obtain such benefit or
reimbursement.
ARTICLE V
ADDITIONAL COVENANTS
Section 5.1 Confidentiality. Holdings and Public Co. and Operating Co.
acknowledge that in connection with the performance of Services hereunder, each
of (i) Holdings and (ii) Public Co. and Operating Co., as the case may be, will
gain access to highly confidential and proprietary information regarding the
other and its financial and business affairs, and each of (i) Holdings and (ii)
Public Co. and Operating Co., as the case may be, hereby agrees to keep such
information confidential and further agrees not to disclose such information to
a third party (other than for the purposes of this Agreement and the
transactions contemplated hereby), without the prior written consent of the
other party except (i) as required by law or the rules of any stock exchange on
which any of its securities are listed, (ii) in respect of information to the
extent publicly available through no fault or breach hereof by either Holdings
or Public Co. or Operating Co., as the case may be, (iii) in respect of
information obtained from a third party not, to the knowledge of the party
obtaining such information, under any obligation to either Holdings or Public
Co. or Operating Co., as the case may be, or (iv) in respect of disclosure made
in connection with the $500,000,000 Credit Agreement dated as of June 24, 1992
by and among Operating Co., the lenders parties thereto, The Chase Manhattan
Bank, N.A., Chemical Bank and Citibank, N.A., as Managing Agents, and Chemical
Bank, as Administrative Agent or any amendment thereto or credit agreement
resulting from the refinancing thereof or any successor credit agreement.
Section 5.2 Limited License. (a) Holdings hereby grants to Operating
Co. (and its subsidiaries) during the term of this Agreement a non-exclusive
royalty-free license to
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those trademarks, patents and other intellectual property rights owned by or
licensed to Holdings on the date hereof that are Excluded Assets under the
Transfer Agreement, other than any intellectual property rights which are the
subject of the Sublicensing Agreements, or that come into existence during the
term of this Agreement, and that would have been Excluded Assets had they been
in existence on the date hereof used in the manufacturing, marketing,
advertising, promotion, distribution or sale of, or research and development in
connection with, the Retained Brands (the "Holdings Intellectual Property")
subject to and on the condition that Operating Co. at all times adhere to the
methods, formulas, specifications and other quality standards of Holdings in
effect from time to time in order that the products and services identified by
the Retained Brands shall be of a standard and quality satisfactory to
Holdings.
(b) Operating Co. acknowledges the ownership (or license rights,
as the case may be) of the Holdings Intellectual Property in Holdings and
agrees that Operating Co. shall obtain no right of ownership or any other right
whatsoever over and in relation to the Holdings Intellectual Property through
any right herein permitted, and that all use of the Holdings Intellectual
Property shall inure to the benefit of Holdings. Operating Co. agrees not to
use the Holdings Intellectual Property after the termination of this Agreement.
(c) Operating Co. hereby grants to Holdings during the term of
this Agreement a non-exclusive royalty-free license to continue to use those
trademarks, patents and other intellectual property owned by Operating Co. on
the date hereof that are Contributed Assets under the Transfer Agreement used
in the manufacture, marketing, advertising, promotion, distribution or sale of,
or research and development in connection with, the Retained Brands (the
"Operating Co. Intellectual Property") subject to and on the condition that
Holdings at all times adheres to the methods, formulas, specifications and
other quality standards of Operating Co. in effect from time to time in order
that the products and services identified by the Retained Brands shall be of a
standard and quality satisfactory to Operating Co.
(d) Holdings acknowledges the ownership of the Operating Co.
Intellectual Property in Operating Co. and agrees that Holdings shall obtain no
right of ownership or any other right whatsoever over and in relation to the
Operating Co. Intellectual Property through any right herein permitted, and
that all use of the Operating Co. Intellectual Property shall inure to the
benefit of Operating Co. Holdings agrees not to use the Operating Co.
Intellectual Property after the termination of this Agreement.
Section 5.3 Force Majeure. (a) If performance by Operating Co. of any
of the Services is prevented or delayed by strikes, walkouts, fires, embargoes,
war or other outbreak of hostilities, acts of federal, state, municipal or
other government agencies, delays of carriers or suppliers, public emergency,
act of God, or any other cause (including the foregoing) which is beyond
Operating Co.'s reasonable control (each, a "Force Majeure Event"), such delay
or failure to perform shall not be deemed a breach of this Agreement but any
such duty or obligation, the performance or satisfaction of which has been
delayed thereby, shall remain in
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force and shall be performed or satisfied pursuant to this Agreement as soon as
said performance or satisfaction becomes legally and commercially practicable.
In the event of such a failure or delay, Operating Co. shall provide its full
cooperation to Holdings to secure another party or parties to provide the
Services.
(b) Holdings shall have the right to terminate the Services on
five days written notice if a material interruption of the provision of such
Service is continuous for a period of 30 days unless such interruption is cured
prior to the end of the notice period.
ARTICLE VI
RIGHT OF FIRST REFUSAL
Section 6.1 Grant of Right of First Refusal. (a) If Holdings receives
a bona fide offer (the "Offer"), from an individual or entity other than Public
Co. or Operating Co. (a "Third Party") which Holdings desires to accept, to
purchase or otherwise acquire all or any part of the Retained Brands, Holdings
shall within 48 hours after it determines that it desires to accept such Offer
submit to Public Co. and Operating Co. a notice of such Offer (the "Offer
Notice") together with a complete copy of the contract, letter of intent, term
sheet, agreement in principle or similar document in respect of such Offer if
such has been submitted to Holdings or, if such has not been submitted to
Holdings, a reasonably detailed description of the terms of such Offer,
including, but not limited to, the name of the proposed purchaser, the price
and consideration offered, the duration of the Offer and any other material
terms and conditions of the Offer.
(b) Either of Public Co. or Operating Co. shall have the right
(the "Purchase Right") at any time during the 90-day period (the "Exercise
Period") commencing on the date of Public Co.'s and Operating Co.'s receipt of
the Offer Notice to notify Holdings that it intends to purchase the Retained
Brands on terms substantially the same as those specified in the Offer Notice
by delivering to Holdings a written notice (the "Exercise Notice") to that
effect prior to the expiration of the Exercise Period. The Exercise Notice
shall also specify a closing date (the "Closing Date") which shall not be later
than the later of (i) the closing date specified in the Offer or (ii) 30 days
after the date of the Exercise Notice.
(c) If the consideration proposed to be paid by such Third Party
consists of non-cash consideration, Public Co. or Operating Co. may, at its
election, pay the fair market value of such non-cash consideration (or any part
thereof) in cash. The fair market value of such non-cash consideration shall be
determined in good faith by Holdings and Public Co. or Operating Co.
(d) The closing associated with the sale of all or a portion of
the Retained Brands (the "Closing") shall occur on the Closing Date and at a
place and at a time mutually agreed upon by Holdings and Public Co.
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(e) If Public Co. or Operating Co. fails to deliver an Exercise
Notice during the Exercise Period or the Closing shall not occur by the Closing
Date, Holdings shall be free to sell such portion of the Retained Brands to the
Third Party on terms no less favorable to Holdings as those specified in the
Offer Notice for a period of 180 days after the earlier to occur of (i) the
expiration of the Exercise Period and (ii) the date Public Co. or Operating Co.
declines to exercise its Purchase Right, provided Holdings shall give Public
Co. and Operating Co. notice of such sale at least ten days prior to the
closing therefor together with a copy of each definitive agreement relating
thereto. If the sale or transfer of the Retained Brands is not so consummated
within such period or if any of the terms or conditions of the proposed sale or
transfer are modified in any manner materially adverse to Holdings, Holdings
shall not have the right to sell, dispose of or otherwise transfer such portion
of the Retained Brands unless and until it re-offers Public Co. and Operating
Co. the Purchase Right pursuant to the terms of this Article VI. Thereafter,
Public Co. shall have the rights set forth in this Section 6.1 with respect to
such renewed or modified offer as if the same were an original Offer as
described above.
(f) If the terms of an Offer are at any time modified, amended or
supplemented in any material respect, Holdings shall promptly furnish Public
Co. with a copy of such modification, amendment or supplement.
Section 6.2 Notice of Intention to Sell the Retained Brands. If at any
time Holdings desires to actively seek offers to purchase all or a portion of
the Retained Brands, Holdings shall promptly give Public Co. and Operating Co.
a written notice to that effect and shall thereupon make available to Public
Co. and Operating Co. for immediate inspection the Retained Brands and other
relevant data with respect to the Retained Brands. Holdings shall provide to
Public Co. and Operating Co. all written presentations made available to Third
Parties in connection with a prospective sale of the Retained Brands.
Section 6.3 Termination. (a) If, in accordance with the terms of this
Article VI, Public Co. and Operating Co. elect not to exercise a Purchase Right
with respect to all or a portion of the Retained Brands and Holdings transfers
the Retained Brands to a Third Party in accordance with the terms of the Offer,
Public Co.'s and Operating Co.'s Purchase Right with respect to the Retained
Brands so transferred shall terminate upon the transfer of the Retained Brands
to such Third Party. Notwithstanding the foregoing, no failure of Public Co. to
exercise its Purchase Right as to any portion of the Retained Brands shall be
deemed a waiver or limitation of any rights of Public Co. as to any other
portion of the Retained Brands.
(b) Upon any transfer of all or a portion of the Retained Brands
to a Third Party, this Agreement shall terminate with respect to the Retained
Brands so transferred.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Amendment and Modification; Waiver. This Agreement may be
amended, modified or supplemented only by written agreement of the parties
hereto. The failure of any of the parties hereto to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefit thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 7.2 Successors and Assigns; Parties in Interest; Assignment.
This Agreement shall be binding upon and inure solely to the benefit of the
parties hereto and their respective permitted successors and assigns, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person or persons any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties
hereto, except that Public Co. or Operating Co. may transfer or assign, in
whole or from time to time in part, to one or more of their respective
affiliates, any or all of its rights and obligations hereunder, and Public Co.
or Operating Co. may assign its obligations hereunder with respect to any
Service to an entity which acquires the facility at which such Service is
performed, provided that such acquirer agrees to assume and perform the same,
but no such transfer or assignment to an affiliate or third party will relieve
the transferring party of its obligations hereunder.
Section 7.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given upon receipt by
the respective parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Holdings, to:
c/o MacAndrews & Forbes Holdings Inc.
38 East 63rd Street
New York, New York 10022
Attention: Glenn P. Dickes, Esq.
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(b) if to Public Co., to:
Revlon, Inc.
625 Madison Avenue
New York, New York 10022
Attention: Wade H. Nichols III, Esq.
(c) if to Operating Co., to:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: Wade H. Nichols III, Esq.
Section 7.4 Expenses. The payment of taxes incurred in connection with
this Agreement shall be governed by the Tax Sharing Agreement (as defined in
Section 7.7 hereof). Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
Section 7.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 7.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.7 Entire Agreement. This Agreement, the Transfer Agreements,
the Reimbursement Agreement, the Real Property Asset Transfer Agreement, the
Sublicensing Agreements and the Tax Sharing Agreement, and the exhibits and
schedules hereto and thereto, as such agreements may be amended or modified,
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter hereof.
Section 7.8 Captions. The captions herein are included for convenience
of reference only and are not intended to be part of or affect the meaning or
interpretation of this Agreement.
Section 7.9 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in
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accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or equity.
Section 7.10 Severability. This Agreement shall be deemed severable;
the invalidity or unenforceability of any term or provision of this Agreement
shall not affect the validity or enforceability of this Agreement or of any
other term hereof, which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
REVLON HOLDINGS INC.
By: /s/ Glenn P. Dickes
---------------------------
Glenn P. Dickes
Vice President
REVLON, INC.
By: /s/ Robert K. Kretzman
---------------------------
Robert K. Kretzman
Vice President
REVLON CONSUMER PRODUCTS
CORPORATION
By: /s/ Robert K. Kretzman
---------------------------
Robert K. Kretzman
Vice President
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Employment Agreement
EMPLOYMENT AGREEMENT, dated as of January 1, 1996 but effective as of
the date provided in Section 2.1, between Revlon Consumer Products Corporation,
a Delaware corporation (the "Company"), and M. Katherine Dwyer (the
"Executive").
The Company wishes to continue the employment of the Executive, and
the Executive wishes to accept such continued employment, on the terms and
conditions set forth in this Agreement.
Accordingly, the Company and the Executive hereby agree as follows:
Employment, Duties and Acceptance.
1.1 Employment, Duties. The Company hereby employs the Executive
for the Term (as defined in Section 2.1), to render exclusive and full-time
services to the Company as head of the Company's United States cosmetics,
fragrances, skin treatments and implements business or in such other executive
position of at least an equivalent level consistent with the Executive's
business experience and background as may be assigned to the Executive by the
President of the Company, and to perform such other duties consistent with such
position (including service as a director or officer of any affiliate of the
Company, if elected) as may be assigned to the Executive by the President of
the Company. The Executive's title shall be President, Revlon Cosmetics U.S.A.
or such other title of at least equivalent level consistent with the
Executive's duties from time to time as may be assigned to the Executive by the
President of the Company.
1.2 Acceptance. The Executive hereby accepts such employment and
agrees to render the services described above. During the Term, the Executive
agrees to serve the Company faithfully and to the best of the Executive's
ability, to devote the Executive's entire business time, energy and skill to
such employment, and to use the Executive's best efforts, skill and ability to
promote the Company's interests.
1.3 Location. The duties to be performed by the Executive hereunder
shall be performed primarily at the office of the Company in the New York City
metropolitan area, subject to reasonable travel requirements consistent with
the nature of the Executive's duties from time to time on behalf of the
Company.
2. Term of Employment; Certain Post-Term Benefits.
2.1 The Term. The term of the Executive's employment under this
Agreement (the "Term") shall commence on the effective date of the initial
public offering of the Company's (or its immediate parent's) common stock (the
"Effective Date") and shall end on such date as is provided pursuant to Section
2.2. This Agreement will become null and void if the Effective Date has not
occurred prior to January 1, 1997.
<PAGE>
2.2 End-of-Term Provisions. At any time on or after the second
anniversary of the Effective Date the Company shall have the right to give
written notice of non-renewal of the Term. In the event the Company gives such
notice of non-renewal, the Term automatically shall be extended so that it ends
twelve months after the last day of the month in which the Company gives such
notice. If the Company shall not theretofore have given such notice, from and
after the third anniversary of the Effective Date unless and until the Company
gives written notice of non-renewal as provided in this Section 2.2, the Term
automatically shall be extended day-by-day; upon the giving of such notice by
the Company, the Term automatically shall be extended so that it ends twelve
months after the last day of the month in which the Company gives such notice.
Non-extension of the Term shall not be deemed to be a breach of this Agreement
by the Company for purposes of Section 4.4.
2.3 Special Curtailment. The Term shall end earlier than the date
provided in Section 2.2, if sooner terminated pursuant to Section 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive during the
Term a base salary, payable semi-monthly in arrears, at the annual rate of not
less than $500,000 (the "Base Salary"). All payments of Base Salary or other
compensation hereunder shall be less such deductions or withholdings as are
required by applicable law and regulations. In the event that the Company, in
its sole discretion, from time to time determines to increase the Base Salary,
such increased amount shall, from and after the effective date of the increase,
constitute "Base Salary" for purposes of this Agreement.
3.2 Bonus. In addition to the amounts to be paid to the Executive
pursuant to Section 3.1, the Executive shall receive an annual bonus in
accordance with the Company's Executive Bonus Plan as in effect from time to
time or such plan or program as may replace it, on the basis of a target bonus
of 50% of Base Salary.
3.3 Stock Options. From and after an initial public offering of the
Company's (or its immediate parent's) common stock, the Executive shall be
recommended to the Compensation Committee or other committee of the Board
administering the 1996 Revlon Stock Plan or any plan that may replace it, as
from time to time in effect, to receive an option at the time of the initial
public offering to purchase 45,000 shares of Revlon common stock and an option
during each subsequent year during the Term to purchase 30,000 shares of Revlon
Common Stock, with (i) the initial such grant to be on the date of the initial
public offering for a term of 10 years at an option exercise price equal to the
initial public offering price and with the option not becoming exercisable
until the third anniversary of the date of grant and then becoming 100%
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exercisable for the balance of the term of such option, unless prior thereto
the Executive's employment is terminated by the Company otherwise than for
cause pursuant to Section 4.3, in which event the option shall be exercisable
with respect to 25% if termination occurs during the period from the first to
the second anniversaries of the grant date and with respect to 50% if
termination occurs during the period from the second to the third anniversaries
of the grant date and in either case shall remain so exercisable for one year
from the date of such termination and (ii) each subsequent grant to vest and
otherwise be on terms (other than number of shares covered) substantially the
same as other senior executives of the Company generally.
3.4 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or paid by the
Executive during the Term in the performance of the Executive's services under
this Agreement, subject to and in accordance with the Company's applicable
expense reimbursement and related policies and procedures as in effect from
time to time.
3.5 Vacation. During each year of the Term, the Executive shall be
entitled to a vacation period or periods of four weeks taken in accordance with
the vacation policy of the Company as in effect from time to time.
3.6 Fringe Benefits.
(i) During the Term, the Executive shall be entitled to participate
in those qualified and non-qualified defined benefit, defined contribution,
group insurance, medical, dental, disability and other benefit plans of the
Company as from time to time in effect made available to senior executives of
the Company generally and shall be entitled to the use of a Company-provided
automobile in accordance with the Company's executive automobile policy and
guidelines as from time to time in effect.
(ii) During the Term, the Company agrees to make available to the
Executive additional term life insurance coverage with a face amount of three
times the Executive's Base Salary from time to time, subject to the insurer's
satisfaction with the results of any required medical examination to which the
Executive hereby agrees to submit, and shall reimburse the Executive for the
premium expense related thereto and gross the Executive up for the tax payable
with respect to such reimbursement. Such coverage shall be provided pursuant to
the Company's optional supplemental term insurance program, if available, or if
not, the Executive may select a plan of the Executive's choice and may
designate the beneficiary of such plan.
(iii) During the Term the Company shall maintain an individual
policy of disability insurance, naming the Executive as the insured and the
Executive or a designee as the beneficiary, with a benefit equal to (A) fifty
percent of the sum of the Executive's Base Salary in effect on the date of
disability plus the Executive's most recent annual
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bonus pursuant to Section 3.2 less (B) the long-term disability benefit payable
under the Company's group disability program as in effect from time to time
(irrespective of whether the Executive has elected to participate in such
long-term disability program).
4. Termination.
4.1 Death. If the Executive shall die during the Term, the Term
shall terminate and no further amounts or benefits shall be payable hereunder
except pursuant to life insurance provided under Section 3.6.
4.2 Disability. If during the Term the Executive shall become
physically or mentally disabled, whether totally or partially, such that the
Executive is unable to perform the Executive's services hereunder for (i) a
period of six consecutive months or (ii) for shorter periods aggregating six
months during any twelve month period, the Company may at any time after the
last day of the six consecutive months of disability or the day on which the
shorter periods of disability shall have equalled an aggregate of six months,
by written notice to the Executive (but before the Executive has returned to
active service following such disability), terminate the Term and no further
amounts or benefits shall be payable hereunder, except that the Executive shall
be entitled to receive until the first to occur of (x) the Executive ceasing to
be disabled or (y) the Executive's attaining the age of 65, continued coverage
for the Executive under the Company paid group life insurance plan (including
supplemental coverage under Section 3.6) and for the Executive and his or her
spouse and children under the Company's group medical (including executive
medical) plan, to the extent permitted by such plans and to the extent such
benefits continue to be provided to the Company's senior executives generally.
4.3 Cause. In the event of gross neglect by the Executive of the
Executive's duties hereunder, conviction of the Executive of any felony,
conviction of the Executive of any lesser crime or offense involving the
property of the Company or any of its subsidiaries or affiliates, willful
misconduct by the Executive in connection with the performance of Executive's
duties hereunder or other material breach by the Executive of this Agreement or
any other conduct on the part of the Executive which would make the Executive's
continued employment by the Company materially prejudicial to the best
interests of the Company, the Company may at any time by written notice to the
Executive terminate the Term and, upon such termination, the Executive shall be
entitled to receive no further amounts or benefits hereunder, except as
required by law.
4.4 Company Breach; Other Termination. In the event of the breach
of any material provision of this Agreement by the Company or the failure of
the Compensation Committee (or other appropriate Committee of the Company's
Board of Directors) to fully implement the Company's recommendation pursuant to
Section 3.3, the Executive shall be entitled to terminate the Term upon 60
days' prior written notice to the Company. In addition, the Company shall be
entitled to terminate the Term at any time and without
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<PAGE>
prior notice otherwise than pursuant to the provisions of Section 2.2, 4.2 or
4.3. Upon such termination by the Executive, or in the event the Company so
terminates the Term otherwise than pursuant to the provisions of Section 2.2,
4.2 or 4.3, the Company's sole obligation shall be to make the payments and
provide the benefits prescribed by the Executive Severance Policy of the
Company as in effect on the date of this Agreement, upon the Executive's
compliance with the terms thereof.
4.5 Litigation Expenses. If the Company and the Executive become
involved in any action, suit or proceeding relating to the alleged breach of
this Agreement by the Company or the Executive, then if and to the extent that
a final judgment in such action, suit or proceeding is rendered in favor of the
Executive, the Company shall reimburse the Executive for all expenses
(including reasonable attorneys' fees) incurred by the Executive in connection
with such action, suit or proceeding or the portion thereof adjudicated in
favor of the Executive. Such costs shall be paid to the Executive promptly upon
presentation of expense statements or other supporting information evidencing
the incurrence of such expenses.
5. Protection of Confidential Information;
Non-Competition.
5.1 The Executive acknowledges that the Executive's work for the
Company will bring the Executive into close contact with many confidential
affairs of the Company not readily available to the public, including trade
secrets and confidential marketing, sales, product development and other data
and plans which it would be impracticable for the Company to effectively
protect and preserve in the absence of this Section 5 and the disclosure or
misappropriation of which could materially adversely affect the Company.
Accordingly, the Executive agrees:
5.1.1 Except in the course of performing the Executive's duties
provided for in Section 1.1, not at any time, whether during or after the
Executive's employment with the Company, to divulge to any other entity or
person any confidential information acquired by the Executive concerning the
Company's or its affiliates' financial affairs or business processes or methods
or their research, development or marketing programs or plans, any other of its
or their trade secrets, any information regarding personal matters of any
directors, officers, employees or agents of the Company or its affiliates or
their respective family members, or any information concerning the
circumstances of the Executive's employment and any termination of the
Executive's employment with the Company or any information regarding
discussions related to any of the foregoing. The foregoing prohibitions shall
include, without limitation, directly or indirectly publishing (or causing,
participating in, assisting or providing any statement, opinion or information
in connection with the publication of) any diary, memoir, letter, story,
photograph, interview, article, essay, account or description (whether
fictionalized or not) concerning any of the foregoing, publication being deemed
to include any presentation or reproduction of any written, verbal
5
<PAGE>
or visual material in any communication medium, including any book, magazine,
newspaper, theatrical production or movie, or television or radio programming
or commercial. In the event that the Executive is requested or required to make
disclosure of information subject to this Section 5.1.1 under any court order,
subpoena or other judicial process, the Executive will promptly notify the
Company, take all reasonable steps requested by the Company to defend against
the compulsory disclosure and permit the Company to control with counsel of its
choice any proceeding relating to the compulsory disclosure. The Executive
acknowledges that all information the disclosure of which is prohibited by this
section is of a confidential and proprietary character and of great value to
the Company.
5.1.2 To deliver promptly to the Company on termination of the
Executive's employment by the Company, or at any time the Company may so
request, all memoranda, notes, records, reports, manuals, drawings, blueprints
and other documents (and all copies thereof) relating to the Company's business
and all property associated therewith, which the Executive may then possess or
have under the Executive's control.
5.2 The Executive shall in all respects fully comply with the terms
of the Employee Agreement as to Confidentiality and Non-Competition referred to
in such Executive Severance Plan (whether or not the Executive is a signatory
thereof) with the same effect as of the same were set forth herein in full.
5.3 If the Executive commits a breach of any of the provisions of
Sections 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages and disgorgement of
profits will not provide an adequate remedy to the Company; and
5.3.2 The right and remedy to require the Executive to account for
and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or received by
the Executive as the result of any transactions constituting a breach of any of
the provisions of Sections 5.1 or 5.2 hereof, and the Executive hereby agrees
to account for and pay over such Benefits to the Company.
In addition, if the Executive attempts or threatens to commit a breach of any
of the provisions of Sections 5.1 or 5.2, the Executive consents to the Company
obtaining a preliminary and a permanent injunction in any court having equity
jurisdiction against the Executive committing the attempted or threatened
breach. Each of the rights and remedies enumerated above shall be independent
of the other, and shall be severally enforceable,
6
<PAGE>
and all of such rights and remedies shall be in addition to, and not in lieu
of, any other rights and remedies available to the Company under law or in
equity.
5.4 If any of the covenants contained in Sections 5.1, 5.2 or 5.3,
or any part thereof, hereafter are construed to be invalid or unenforceable,
the same shall not affect the remainder of the covenant or covenants, which
shall be given full effect, without regard to the invalid portions.
5.5 If any of the covenants contained in Sections 5.1 or 5.2, or
any part thereof, are held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision so as to be enforceable to the maximum extent permitted by
applicable law and, in its reduced form, said provision shall then be
enforceable.
5.6 The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 5.1, 5.2 and 5.3 upon the courts of
any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold such covenants wholly
unenforceable by reason of the breadth of such covenants or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of
any other states within the geographical scope of such covenants as to breaches
of such covenants in such other respective jurisdictions, the above covenants
as they relate to each state being for this purpose severable into diverse and
independent covenants.
5.7 Any termination of the Term or this Agreement shall have no
effect on the continuing operation of this Section 5.
6. Inventions and Patents.
6.1 The Executive agrees that all processes, technologies and
inventions (collectively, "Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the Term shall belong to the Company,
provided that such Inventions grew out of the Executive's work with the Company
or any of its subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Company or any of its subsidiaries
or affiliates or are conceived or made on the Company's time or with the use of
the Company's facilities or materials. The Executive shall further: (a)
promptly disclose such Inventions to the Company; (b) assign to the Company,
without additional compensation, all patent and other rights to such Inventions
for the United States and foreign countries; (c) sign all papers necessary to
carry out the foregoing; and (d) give testimony in support of the Executive's
inventorship.
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<PAGE>
6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Executive within two
years after the termination of the Executive's employment by the Company, it is
to be presumed that the Invention was conceived or made during the Term.
6.3 The Executive agrees that the Executive will not assert any
rights to any Invention as having been made or acquired by the Executive prior
to the date of this Agreement, except for Inventions, if any, disclosed to the
Company in writing prior to the date hereof.
7. Intellectual Property.
Notwithstanding and without limitation of Section 6, the Company shall
be the sole owner of all the products and proceeds of the Executive's services
hereunder, including, but not limited to, all materials, ideas, concepts,
formats, suggestions, developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain, develop or
create in connection with or during the Term, free and clear of any claims by
the Executive (or anyone claiming under the Executive) of any kind or character
whatsoever (other than the Executive's right to receive payments hereunder).
The Executive shall, at the request of the Company, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title or interest in or to any such properties.
8. Indemnification.
The Company will indemnify the Executive, to the maximum extent
permitted by applicable law, against all costs, charges and expenses incurred
or sustained by the Executive in connection with any action, suit or proceeding
to which the Executive may be made a party, brought by any shareholder of the
Company directly or derivatively or by any third party by reason of any act or
omission of the Executive as an officer, director or employee of the Company or
of any subsidiary or affiliate of the Company.
9. Notices.
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, sent by overnight courier or mailed
first class, postage prepaid, by registered or certified mail (notices mailed
shall be deemed to have been given on the date mailed), as follows (or to such
other address as either party shall designate by notice in writing to the other
in accordance herewith):
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<PAGE>
If to the Company, to:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: Wade H. Nichols III
Senior Vice President and
General Counsel
If to the Executive, to her principal residence as reflected in the
records of the Company.
10. General.
10.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made between residents thereof and to be performed entirely in New
York.
10.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
10.4 This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder (i) to any affiliate or (ii)
to third parties in connection with any sale, transfer or other disposition of
all or substantially all of any business or assets in which the Executive's
services are then substantially involved; in any event the obligations of the
Company hereunder shall be binding on its successors or assigns, whether by
merger, consolidation or acquisition of all or substantially all of such
business or assets.
10.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to
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<PAGE>
enforce the same. No waiver by either party of the breach of any term or
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
10.6 This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Subsidiaries and Affiliates.
11.1 As used herein, the term "subsidiary" shall mean any
corporation or other business entity controlled directly or indirectly by the
corporation or other business entity in question, and the term "affiliate"
shall mean and include any corporation or other business entity directly or
indirectly controlling, controlled by or under common control with the
corporation or other business entity in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ George Fellows
-------------------------------------
George Fellows
/s/ M. Katherine Dwyer
-------------------------------------
M. Katherine Dwyer
-10-
<PAGE>
REVLON
EXECUTIVE
BONUS PLAN
Corporate Human Resources
January 1, 1997
<PAGE>
REVLON
EXECUTIVE BONUS PLAN
I. OBJECTIVES
This Executive Bonus Plan ("Plan") for Revlon, Inc. ("Revlon") and
its participating affiliates (collectively, the "Company") is intended to
provide an annual cash incentive program which will:
o reinforce the Company's Strategic Principles and goals and
each eligible individual's role in achieving them;
o attract, retain, and motivate the executive human resources
necessary to operate the Company;
o encourage improved profitability, return on investment, and
growth of the Company;
o enhance the major values of the Company -- quality, growth,
and teamwork; and
o reflect the Company's commitment to pay for performance.
II. ELIGIBILITY
(1) Executives whose positions are classified in grades 9 and above
of the Company's exempt salary program, and (2) general managers and above and
other key executives of the Company's operations outside the United States are
eligible for participation in the Plan. No eligible executive may be a
participant in the Plan unless he or she shall have signed Revlon's Employee
Agreement as to Confidentiality and Non-Competition (as the same may be
amended from time to time by the Company).
III. PARTICIPATION LEVELS/TARGET AWARDS
All participants will be assigned a Participation Level which will
determine their Target Award. The Target Award is the Bonus,
expressed as a percent of base salary, which will be earned at 100%
achievement of Plan objectives.
<TABLE>
<CAPTION>
BONUS AWARD OPPORTUNITY
-------------------------------------------------------------------------------
PARTICIPATION LEVEL MINIMUM AWARD THRESHOLD AWARD TARGET AWARD MAXIMUM AWARD
------------------- ------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
A 0 50.0% 100.0% 100.0%
B 0 37.5% 75.0% 100.0%
C 0 30.0% 60.0% 100.0%
I 0 25.0% 50.0% 100.0%
II 0 20.0% 40.0% 80.0%
III 0 15.0% 30.0% 60.0%
IV 0 7.5% 15.0% 30.0%
V 0 3.0% 6.0% 12.0%
</TABLE>
<PAGE>
The maximum award payable with respect to any bonus year to any
individual participant is the lesser of the Maximum Award set forth
above or $2,000,000.
The Participation Level and all other determinations regarding
participation of the Chairman and the President and CEO of Revlon are
determined by the Committee of the Board of Directors of Revlon
administering the Plan. The Participation Level of all other
participants is recommended by the executive's Group Head and
approved by the Senior Vice President, Human Resources of Revlon and
the President and CEO of Revlon, subject to certification by such
Committee to the extent required hereby.
Generally, participation levels are based on an individual's grade
level, reporting level, and the impact the position has on the
organization's results.
It is Management's responsibility to communicate Participation Levels
to each participant.
IV. BUSINESS AND PERSONAL PERFORMANCE OBJECTIVES
Each participant will be notified of their performance objectives as
soon as practical after the beginning of the Plan year. Performance
objectives will fall into two major performance categories --
Business Objectives and Personal Performance Objectives. Unless
otherwise specified by the President and CEO of Revlon, the portion
of the Target Award assigned to Business Objectives and Personal
Performance Objectives shall be as follows:
<TABLE>
<CAPTION>
TARGET AWARD % OF TARGET AWARD % OF BASE SALARY
PARTICIPATION AS % OF BUSINESS PERSONAL BUSINESS PERSONAL
LEVEL BASE SALARY OBJECTIVES OBJECTIVES OBJECTIVES OBJECTIVES
------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
A 100.0% 100.0% -- 100.00% --
B 75.0% 100.0% -- 75.00% --
C 60.0% 100.0% -- 60.00%
I 50.0% 100.0% -- 50.00% --
II 40.0% 85.0% 15.0% 34.00% 6.00%
III 30.0% 80.0% 20.0% 24.00% 6.00%
IV 15.0% 75.0% 25.0% 11.25% 3.75%
V 6.0% 75.0% 25.0% 4.50% 1.50%
</TABLE>
A. BUSINESS OBJECTIVES
Business Objectives should include operating income, operating
cash flow, net sales, or other quantifiable business performance
factors. A minimum of two and maximum of five Business
Objectives will be established each year. If operating income is
a stated Business Objective, then operating cash flow or major
components thereof must also be measured. Each Business
Objective will be assigned a weight so that the total percentage
of the Business Objectives for each Participation Level will
equal the percentage indicated in the above table.
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<PAGE>
Business Objectives will be developed by each Group Head and
approved by the Senior Executive Vice President, Chief Financial
Officer of Revlon and the President and CEO of Revlon, subject
to final review and approval by the Committee administering the
Plan.
B. PERSONAL PERFORMANCE OBJECTIVES
This portion of the Bonus Award will be based on Personal
Performance Objectives which are specific to each individual,
such as human resource management, advertising, account
penetration, new product development, etc. A maximum of five to
seven Personal Performance Objectives will be established each
year with appropriate standards of performance.
Personal Performance Objectives will be developed by each
participant's Department Head, approved by the Group Head and
reviewed with the participant.
V. ACTUAL BONUS AWARDS
Actual Bonus Awards will be determined for each participant based on
the degree to which the participant's Business Objectives and
Personal Performance Objectives are achieved. The earned award for
the achievement of Business Objectives will be added to the earned
award for the achievement of Personal Performance Objectives to
determine a participant's total Bonus Award earned under the Plan,
subject to the maximums provided for in Section III.
A. BUSINESS OBJECTIVES
Bonuses earned under this portion of the Plan will be based on
achievement against each Business Objective's target in
accordance with its assigned weight, as follows:
o 50% of the weighted Target Award will be earned if
approximately 90% of the Business Objective's target is
achieved. No bonus will be earned for any Business Objective
which is not achieved at this minimum threshold.
o 100% of the weighted Target Award will be earned when the
targeted Business Objective is achieved.
o A maximum of 200% of the weighted Target Award will be
earned only if the Business Objective's target is
overachieved by approximately 20% - 30%.
Proportionate awards will be earned for achievement between the
threshold, target, and maximum Objectives.
B. PERSONAL PERFORMANCE OBJECTIVES
Bonuses earned under this portion of the Plan will be based on
each participant's performance against Personal Performance
Objectives. Based on criteria established at the
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<PAGE>
beginning of the year by the President and CEO of Revlon,
participants may earn up to 200% of their personal performance
target award.
VI. CORPORATE/GROUP BUSINESS OBJECTIVES
To foster each executive's commitment to teamwork and sharing in the
Company's overall success, targeted Business Objectives for
participants should include Corporate/Group/Division performance
factors as suggested below:
<TABLE>
<CAPTION>
PERCENT OF TOTAL OBJECTIVES
PARTICIPANT'S ORGANIZATION UNIT OR CORPORATE GROUP DIVISION
REPORTING LEVEL PERFORMANCE PERFORMANCE PERFORMANCE
--------------- ----------- ----------- -----------
<S> <C> <C> <C>
Corporate Staff 100%
Group Direct Reports to President and CEO of 25% 75%
Revlon
Group 20% 80%
Division * *
</TABLE>
*Split between Group/Division, if any, to be determined by Group Head.
VII. ADMINISTRATION AND AWARD PAYMENTS
The Plan will be administered by a Committee of the Board of
Directors of Revlon's parent consisting of at least two
"independent" directors. The Plan will be overseen by the Senior
Vice President, Human Resources of Revlon, and all awards must
be approved by the President and CEO of Revlon prior to payment.
Each Plan year will commence on January 1 and end on December
31.
In January of each Plan year, the proposed Business Objectives
at Threshold, Target, and Maximum will be submitted to the
Senior Executive Vice President, Chief Financial Officer of
Revlon, and a listing of the Plan participants with recommended
Participation Levels will be submitted to the Senior Vice
President, Human Resources of Revlon. Business Objectives and
Participation Levels will be reviewed and approved by the
President and CEO of Revlon. Personal Objectives will be
submitted to the senior human resource executive of each Group
and reviewed and approved by the Group Head.
Operating results will be reviewed by the senior financial
officer of each Division and the Senior Executive Vice
President, Chief Financial Officer of Revlon. The decision of
the Senior Executive Vice President, Chief Financial Officer of
Revlon is final with
Page 5
<PAGE>
respect to results used in calculating Bonus Awards under the
Plan, subject only to Committee review.
Base salary earned during the Plan year will be used in
calculating Bonus Awards under the Plan.
The Committee will review and approve Business Objectives,
Personal Objectives and Participation Levels annually, with
review and approvals related to awards payable to Named
Executive Officers subject to Section 162(m) of the Internal
Revenue Code or any successor provision ("162(m)") obtained by
March 31 of each Plan Year. Business Objectives will be
calculated before the impact of extraordinary items,
discontinued operations and accounting changes and may be
adjusted by the Committee to reflect major acquisitions and
divestitures.
In the event of a change of assignment or transfer prior to
October 31 of the Plan year, the participant's Bonus Award will
be calculated for each position on a pro-rated basis. Similarly,
an executive who is newly hired or who joins the Plan after the
start of the Plan year, and prior to October 31, will be
eligible for a pro-rated Bonus Award based on the percentage of
the Plan year actually worked while a participant.
The Committee will certify awards to Named Executive Officers
before payment.
Bonus Awards will be distributed on or about March 15 following
the bonus year. Bonus Awards will not be paid to a participant
who does not remain actively employed by the Company through the
date Bonus Awards are distributed except that, in the sole
discretion of the President and CEO of Revlon:
i) an executive whose employment terminates due to death,
disability, or retirement at any time after the start of
a Plan year, or
ii) an executive whose employment is terminated by the
Company otherwise than for "good reason" (as defined in
the Revlon Executive Severance Policy) or other like
cause at any time after June 30 of a Plan year,
may receive a Bonus Award, pro-rated if appropriate, based on
the number of months of active employment during the Plan year.
Participation in the Plan shall not confer upon any participant
any rights to continue in the employ of the Company, limit in
any way a participant's right or the right of the Company to
terminate a participant's employment at any time, or confer upon
any participant any claim to receive a Bonus Award other than as
provided in the Plan, and no participant's rights under the Plan
may be assigned, attached, pledged or alienated by operation of
law or otherwise.
Revlon reserves the right to revise or terminate the Plan at any
time during or after a Plan performance period, or to grant
special incentive awards outside the formulas set forth in the
Plan. The President and CEO of Revlon, at his discretion, may
also make exceptions to this Plan as required, except as
otherwise required by 162(m).
Page 6
<PAGE>
Awards to Named Executive Officers subject to 162(m) may be
decreased, but may not be increased, by action of the Committee
to reflect factors other than Business Objectives and/or
Personal Objectives.
Page 7
<PAGE>
REVLON, INC.
AMENDED AND RESTATED 1996 STOCK PLAN
(Amended and Restated as of December 17, 1996)
GENERAL
1.1 Purpose. The purpose of this 1996 Stock Plan (the "Plan") is to
provide for certain officers, directors and key employees of Revlon, Inc.
("Revlon" and, together with its subsidiaries, the "Company") and certain of
its Affiliates an incentive to maintain and enhance the long-term performance
and profitability of the Company. It is the further purpose of the Plan to
permit the granting of awards that will constitute performance based
compensation for certain executive officers, as described in section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), and regulations
promulgated thereunder.
1.2 Administration.
(a) The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of Revlon (the "Board"),
which committee shall consist of two or more directors. It is intended that
the directors appointed to serve on the Committee shall be "disinterested
persons" (within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Act") and "outside directors" (within the meaning
of Code section 162(m)) to the extent Rule 16b-3 and Code section 162(m),
respectively, are applicable; however, the mere fact that a Committee member
shall fail to qualify under either of the foregoing requirements shall not
invalidate any award made by the Committee which award is otherwise validly
made under the Plan. The members of the Committee shall be appointed by, and
may be changed at any time and from time to time in the discretion of, the
Board.
(b) The Committee shall have the authority (i) to exercise
all of the powers granted to it under the Plan, (ii) to construe, interpret
and implement the Plan and Plan agreements executed pursuant to Section 2.6,
(iii) to prescribe, amend and rescind rules and regulations relating to the
Plan, (iv) to make all determinations necessary or advisable in administering
the Plan, and (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan.
(c) The determination of the Committee on all matters
relating to the Plan or any Plan agreement (as defined in Section 2.6) shall
be conclusive.
(d) No member of the Committee shall be liable for any Plan
Action (as defined in Section 3.2), including without limitation any action or
determination made in good faith with respect to the Plan or any Award
hereunder.
<PAGE>
1.3 Persons Eligible for Awards. Awards under the Plan may be made to
such officers, directors and executive, managerial or professional employees
("key personnel") of the Company or its Affiliates as the Committee shall in
its sole discretion select; provided, that officers and directors who are not
employees of either the Company or an Affiliate shall not be eligible to
receive Awards under the Plan.
1.4 Types of Awards Under Plan.
(a) Awards may be made under the Plan in the form of (i)
stock options ("options"), (ii) stock appreciation rights ("stock appreciation
rights") related to an option ("related stock appreciation rights"), (iii)
stock appreciation rights not related to any option ("unrelated stock
appreciation rights"), (iv) restricted stock awards, (v) unrestricted stock
awards and (vi) performance awards, all as more fully set forth in Article II
(collectively, "Awards").
(b) Options granted under the Plan may be either (i)
"nonqualified" stock options subject to the provisions of Code section 83 or
(ii) options intended to qualify for incentive stock option treatment
described in Code section 422.
(c) All options when granted are intended to be nonqualified
options, unless the applicable Plan agreement explicitly states that an option
is intended to be an incentive stock option. If an option is granted with the
stated intent that it be an incentive stock option, and if for any reason such
option (or any portion thereof) shall not qualify as an incentive stock
option, then, to the extent of such nonqualification, such option (or portion)
shall be regarded as a nonqualified option appropriately granted under the
Plan provided that such option (or portion) otherwise satisfies the terms and
conditions of the Plan relating to nonqualified options generally.
1.5 Shares Available for Awards.
(a) Subject to Section 3.5 (relating to adjustments upon
changes in capitalization), as of any date the total number of shares of
Common Stock with respect to which Awards may be granted shall be equal to the
excess (if any) of (i) 5,000,000 shares, over (ii) the sum (without
duplication) of (A) the number of shares subject to outstanding options,
outstanding unrelated stock appreciation rights, outstanding restricted stock
awards not vested pursuant to the lapse of restrictions and outstanding
performance awards as to which the performance cycle has not expired, granted
under the Plan, (B) the number of shares previously issued pursuant to the
exercise of options granted under the Plan, (C) the number of shares subject
to an option, restricted stock award or performance award or part thereof
which is canceled by the Committee and for which cash is paid in respect
thereof pursuant to Section 2.8(f), (D) the number of shares in respect of
which stock appreciation rights granted under the Plan shall have previously
been exercised, (E) the number of shares previously vested pursuant to the
lapse of restrictions under restricted stock awards granted under the Plan,
(F) the number of shares previously issued pursuant to unrestricted stock
awards, and (G) the number of shares previously issued or issuable pursuant to
performance units as to which the performance cycle has expired. In accordance
with (and without limitation upon) the preceding sentence, if and to the
extent an Award under the Plan expires, terminates or is canceled for any
reason whatsoever without the grantee having received any benefit therefrom,
the shares covered by such Award shall again become available
2
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for future Awards under the Plan. For purposes of the foregoing sentence, a
grantee shall not be deemed to have received any "benefit" (i) in the case of
forfeited restricted stock awards by reason of having enjoyed voting rights
and dividend rights prior to the date of forfeiture or (ii) in the case of an
Award canceled pursuant to subsection (c) of this Section 1.5 by reason of a
new Award being granted in substitution therefor.
(b) Shares of Common Stock that shall be subject to issuance
pursuant to Awards made under the Plan shall be authorized and unissued or
treasury shares of Common Stock.
(c) Without limiting the generality of the preceding
provisions of this Section 1.5, the Committee may, but solely with the
grantee's consent, agree to cancel any Award under the Plan and issue a new
Award in substitution therefor upon such terms as the Committee may in its
sole discretion determine, provided that the substituted Award satisfies all
applicable Plan requirements as of the date such new Award is made.
(d) In any calendar year, a person eligible for Awards under
the Plan may not be granted options or stock appreciation rights covering in
the aggregate a total of more than 300,000 shares of Common Stock.
1.6 Definitions of Certain Terms.
(a) The term "Affiliate" as used herein means any person or
entity which, at the time of reference, directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Company.
(b) The term "Common Stock" as used herein means the shares
of Class A Common Stock of the Company as constituted on the effective date of
the Plan, and any other shares into which such Common Stock shall thereafter
be changed by reason of a recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.
(c) Except as otherwise determined by the Committee in its
sole discretion, the term "fair market value" as used herein as of any date
and in respect of any share of Common Stock shall refer to the mean between
the high and low sales prices of a share of Common Stock as reported on the
New York Stock Exchange.
(d) In no event shall the fair market value of any share of
Common Stock, the option exercise price of any option, the appreciation base
per share of Common Stock under any stock appreciation right, or the amount
payable per share of Common Stock under any other Award, be less than the par
value per share of Common Stock.
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ARTICLE II.
STOCK OPTIONS;
STOCK APPRECIATION RIGHTS;
STOCK AWARDS; PERFORMANCE AWARDS
2.1 Grant of Stock Options. The Committee may grant options under the
Plan to purchase shares of Common Stock to such key personnel, in such amounts
and subject to such terms and conditions as the Committee shall from time to
time determine in its sole discretion, subject to the terms and provisions of
the Plan.
2.2 Grant of Stock Appreciation Rights.
(a) The Committee may grant a related stock appreciation
right in connection with all or any part of an option granted under the Plan,
either at the time such option is granted or at any time thereafter prior to
the exercise, termination or cancellation of such option, and subject to such
terms and conditions as the Committee shall from time to time determine in its
sole discretion, consistent with the terms and provisions of the Plan. The
grantee of a related stock appreciation right shall, subject to the terms and
conditions of the Plan and the applicable Plan agreement, thereby have the
right by exercise thereof to surrender to the Company for cancellation all or
a portion of such related stock appreciation right, but only to the extent
that the related option is then exercisable, and to be paid therefor an amount
equal to the excess (if any) of (i) the aggregate fair market value of the
shares of Common Stock subject to the related stock appreciation right or
portion thereof surrendered (determined as of the exercise date), over (ii)
the aggregate appreciation base (determined pursuant to Section 2.6(d)) of the
shares of Common Stock subject to the stock appreciation right or portion
thereof surrendered.
(b) The Committee may grant an unrelated stock appreciation
right to such key personnel, and in such amount and subject to such terms and
conditions, as the Committee shall from time to time determine in its sole
discretion, subject to the terms and provisions of the Plan. The grantee of an
unrelated stock appreciation right shall, subject to the terms and conditions
of the Plan and the applicable Plan agreement, have the right to surrender to
the Company for cancellation all or a portion of such stock appreciation
right, but only to the extent that such stock appreciation right is then
exercisable, and to be paid therefor an amount equal to the excess (if any) of
(i) the aggregate fair market value of the shares of Common Stock subject to
the stock appreciation right or portion thereof surrendered (determined as of
the exercise date), over (ii) the aggregate appreciation base (determined
pursuant to Section 2.6(d)) of the shares of Common Stock subject to the stock
appreciation right or portion thereof surrendered.
(c) Payment due to the grantee upon exercise of a stock
appreciation right shall be made (i) by check, (ii) in Common Stock (valued at
the fair market value thereof as of the date of exercise), or (iii) partly in
the manner provided in clause (i) and partly in the manner provided in clause
(ii), all as determined by the Committee in its sole discretion. If the
Committee shall determine to make all of such payments in Common Stock, no
fractional shares shall be issued and no payments shall be made in lieu of
fractional shares.
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(d) The grant or exercisability of any stock appreciation
right may be subject to such conditions as the Committee, in its sole
discretion, shall determine, including a change of ownership or control of the
Company or an Affiliate. A stock appreciation right may be deemed to be
automatically exercised upon the occurrence of such events or conditions as
may be determined by the Committee in an applicable Plan agreement.
2.3 Special ISO Requirements. In order for a grantee to receive
special tax treatment with respect to stock acquired under an option granted
as an incentive stock option, the grantee of such option must be, at all times
during the period beginning on the date of grant and ending on the day three
months before the date of exercise of such option, an employee of the Company
or any of the Company's parent corporations (within the meaning of Code
section 424), or of a corporation or a parent or subsidiary corporation of
such corporation issuing or assuming a stock option in a transaction in which
Code section 424(a) applies. If an option granted under the Plan is intended
to be an incentive stock option, and if the grantee, at the time of grant,
owns stock possessing 10 percent or more of the total combined voting power of
all classes of stock of the grantee's employer corporation or of its parent or
subsidiary corporation, then (i) the option exercise price per share shall in
no event be less than 110% of the fair market value of the Common Stock on the
date of such grant and (ii) such option shall not be exercisable after the
expiration of five years after the date such option is granted.
2.4 Restricted and Unrestricted Stock Awards.
(a) The Committee may grant restricted stock awards, alone
or in tandem with other Awards under the Plan, to such key personnel, and
subject to such restrictions, terms and conditions, as the Committee shall
determine in its sole discretion and as shall be evidenced by the applicable
Plan agreements. The vesting of a restricted stock award granted under the
Plan may be conditioned upon the completion of a specified period of
employment with the Company or any Affiliate, upon the attainment of specified
performance goals, and/or upon such other criteria as the Committee may
determine in its sole discretion.
(b) The Committee may grant unrestricted stock awards, alone
or in tandem with other Awards under the Plan, to such key personnel and
subject to such terms and conditions as the Committee shall determine in its
sole discretion and as shall be evidenced by the applicable Plan agreements.
(c) Each Plan agreement with respect to a restricted stock
award shall set forth the amount (if any) to be paid by the grantee with
respect to such Award and when or in what circumstances such payment is
required to be made. If a grantee made any payment for a restricted stock
award or portion thereof which does not vest, appropriate payment shall be
made to the grantee upon or following such forfeiture if and on such terms and
conditions as the Committee may determine.
(d) The Committee may provide that a certificate or
certificates representing the shares underlying a restricted stock award shall
be registered in the grantee's name and bear
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an appropriate legend specifying that such shares are not transferable and are
subject to the provisions of the Plan and the restrictions, terms and
conditions set forth in the applicable Plan agreement, or that such
certificate or certificates shall be held in escrow by the Company on behalf
of the grantee until such shares become vested or are forfeited, all on such
terms and conditions as the Committee may determine. Except as the applicable
Plan agreement may otherwise provide, no shares underlying a restricted stock
award may be assigned, transferred, or otherwise encumbered or disposed of by
the grantee until such shares have vested in accordance with the terms of such
Award. Subject to the provisions of Section 3.2, as soon as practicable after
any restricted stock award shall vest, the Company shall issue or reissue to
the grantee (or to the grantee's designated beneficiary in the event of the
grantee's death) a certificate or certificates for the Common Stock underlying
such restricted stock award without such restrictive legend.
(e) If and to the extent that the applicable Plan agreement
may so provide, a grantee shall have the right to vote and receive dividends
on the shares underlying a restricted stock award granted under the Plan.
Unless otherwise provided in the applicable Plan agreement, any stock received
as a dividend on, or in connection with a stock split of, the shares
underlying a restricted stock award shall be subject to the same restrictions
as the shares underlying such restricted stock award.
(f) Subject to Section 3.5 (relating to adjustments upon
changes in capitalization), as of any date the total number of shares of
Common Stock with respect to which restricted and unrestricted stock awards
may be granted shall not exceed (i) 1,000,000 shares less (ii) the sum
(without duplication) of (A) the number of shares subject to outstanding
restricted stock awards or parts thereof not vested pursuant to the lapse of
restrictions, (B) the number of shares subject to restricted stock awards or
parts thereof which are canceled by the Committee and for which cash is paid
in respect thereof pursuant to Section 2.8(f), (C) the number of shares
subject to restricted stock awards which have vested pursuant to the lapse of
restrictions and (D) the number of shares subject to unrestricted stock
awards, plus (iii) the number of shares subject to restricted stock awards or
parts thereof not vested pursuant to the lapse of restrictions which are
canceled without payment of cash or other consideration in connection with
termination of the grantee's employment or otherwise.
2.5 Performance Awards.
(a) The Committee may grant performance awards, alone or in
tandem with other Awards under the Plan, to acquire shares of Common Stock to
such key personnel and in such amounts and subject to such terms and
conditions as the Committee shall from time to time in its sole discretion
determine, subject to the terms of the Plan.
(b) Each performance award under the Plan shall relate to a
specified maximum number of shares, and shall be exchangeable for all or a
portion of such shares, or for cash (or such other form of consideration as
may be determined by the Committee equivalent in value thereto) in up to an
amount equal to the fair market value of an equal number of unrestricted
shares, at the end of such specified period (a "performance cycle") as may be
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established by the Committee. The number of such shares which may be
deliverable pursuant to such performance award shall be based upon the degree
of attainment over such performance cycle of such measure of the performance
of the Company, an Affiliate, one or more of its or their respective divisions
or other business units, or the grantee, all as may be established by the
Committee. The Committee may make such provision in the Plan agreement for
full or partial credit, prior to completion of such performance cycle or
achievement of the degree of attainment of the measures of performance
specified in connection with such performance award, in the event of the
participant's death, retirement or disability, or in such other circumstances,
as the Committee in its sole discretion may determine to be fair and equitable
to the participant or in the interest of the Company.
(c) In the event that the Committee grants a performance
award that is intended to constitute qualified performance-based compensation
within the meaning of Code section 162(m), the following rules shall apply:
(i) payments under the performance award shall be made solely on account of
the attainment of one or more objective performance goals established in
writing by the Committee not later than 90 days after the commencement of the
period of service to which the performance award relates (or if less, 25% of
such period of service); (ii) the performance goal(s) to which the performance
award relates shall be based on one or more of the following business criteria
applied to the grantee, a business unit or the Company and/or an Affiliate:
stock price, market share, sales, earnings per share, return on equity, net
income, operating income or operating income before restructuring charges,
plus depreciation and amortization other than relating to early extinguishment
of debt and debt issuance costs; (iii) in any year, a grantee may not be
granted performance awards covering a total of more than 100,000 shares of
Common Stock; and (iv) once granted, the Committee may not have discretion to
increase the amount payable under such performance Award, provided, however,
that whether or not a performance award is intended to constitute qualified
performance-based compensation within the meaning of Code section 162(m), the
Committee shall make appropriate adjustments in performance goals under an
Award to reflect the impact of extraordinary items not reflected in such
goals, such as material acquisitions or dispositions of assets, incurrences of
or discharges from material liabilities not in the ordinary course of business
and changes in generally accepted accounting principles applied in preparing
the financial statements upon which the goals are measured.
2.6 Agreements Evidencing Awards.
(a) Awards granted under the Plan shall be evidenced by
written agreements ("Plan agreements") which shall contain such provisions not
inconsistent with the terms and provisions of the Plan as the Committee may in
its sole discretion deem necessary or desirable.
(b) Each Plan agreement with respect to the granting of an
Award other than a related stock appreciation right shall set forth the number
of shares of Common Stock subject to the Award granted thereby. Each Plan
agreement with respect to the granting of a related stock appreciation right
shall set forth the number of shares of Common Stock subject to the related
option which shall also be subject to the related stock appreciation right
granted thereby.
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(c) Each Plan agreement with respect to the granting of an
option shall set forth the amount (the "option exercise price") payable by the
grantee to the Company in connection with the exercise of the option evidenced
thereby. The option exercise price per share shall in no event be less than
100% of the fair market value of a share of Common Stock on the date the
option is granted.
(d) Each Plan agreement with respect to a stock appreciation
right shall set forth the amount (the "appreciation base") over which
appreciation will be measured upon exercise of the stock appreciation right
evidenced thereby. The appreciation base per share of Common Stock subject to
an unrelated stock appreciation right shall in no event be less than 100% of
the fair market value of a share of Common Stock on the date the stock
appreciation right is granted. The appreciation base per share of Common Stock
subject to a related stock appreciation right shall in all cases be the option
exercise price per share of Common Stock subject to the related option.
2.7 Exercise of Related Stock Appreciation Right Reduces Shares
Subject to Option. Upon any exercise of a related stock appreciation right or
any portion thereof, the number of shares of Common Stock subject to the
related option shall be reduced by the number of shares of Common Stock in
respect of which such stock appreciation right shall have been exercised.
2.8 Exercisability of Options, Stock Appreciation Rights and Other
Awards; Cancellation of Awards in Certain Cases. Subject to the other
provisions of the Plan:
(a) Except as hereinafter provided, each Plan agreement with
respect to an option or stock appreciation right shall set forth the period
during which and the conditions subject to which the option or stock
appreciation right evidenced thereby shall be exercisable, and each Plan
agreement with respect to a restricted stock award or performance award shall
set forth the period after which and the conditions subject to which the
shares underlying such Award shall vest or be deliverable, all such periods
and conditions to be determined by the Committee in its sole discretion.
Unless the applicable Plan agreement otherwise specifies: no option or stock
appreciation right shall be exercisable prior to the first anniversary of the
date of grant, and each option or stock appreciation right granted under the
Plan shall become cumulatively exercisable with respect to 25% of the shares
of Common Stock subject thereto, rounded down to the next lower full share, on
the first anniversary of the date of grant, and with respect to an additional
25% of the shares of Common Stock subject thereto, rounded down to the next
lower full share, on each of the second and third anniversaries of the date of
grant, and shall become 100% exercisable on the fourth anniversary of the date
of grant, and shall remain 100% exercisable until the day prior to the tenth
anniversary of the date of grant and shall terminate and cease to be
exercisable on the tenth anniversary of the date of grant.
(b) Except as provided in Section 2.10(e), no option or
stock appreciation right may be exercised and no shares of Common Stock
underlying any other Award under the Plan may vest or become deliverable more
than 10 years after the date of grant.
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(c) Unless the applicable Plan agreement otherwise provides,
a related stock appreciation right shall be exercisable at any time during the
period that the related option may be exercised.
(d) Unless the applicable Plan agreement otherwise provides,
an option or stock appreciation right granted under the Plan may be exercised
from time to time as to all or part of the full number of shares as to which
such option or stock appreciation right shall then be exercisable.
(e) An option or stock appreciation right shall be
exercisable by the filing of a written notice of exercise with the Company, on
such form and in such manner as the Committee shall in its sole discretion
prescribe, and by payment in accordance with Section 2.9.
(f) Unless the applicable Plan agreement otherwise provides:
in the case of an option or stock appreciation right, at any time after the
Company's receipt of written notice of exercise of an option or stock
appreciation right and prior to the option or stock appreciation right
exercise date (as defined in subsection (g) of this Section 2.8), and in the
case of a stock award or performance award, at any time within the six
business days immediately preceding the otherwise applicable date on which the
previously restricted stock award or performance award would otherwise have
become unconditionally vested or the shares subject thereto unconditionally
deliverable, the Committee, in its sole discretion, shall have the right, by
written notice to the grantee, to cancel such Award or any part thereof if the
Committee, in its sole judgment, determines that legal or contractual
restrictions and/or blockage and/or other market considerations would make the
Company's acquisition of Common Stock from, and/or the grantee's sale of
Common Stock to, the public markets illegal, impracticable or inadvisable. If
the Committee determines to cancel all or any part of an Award, the Company
shall pay to the grantee an amount equal to the excess of (i) the aggregate
fair market value of the shares of Common Stock subject to the Award or part
thereof canceled (determined as of the option or stock appreciation right
exercise date, or the date that shares would have been unconditionally vested
or delivered in the case of a stock award or performance award), over (ii) the
aggregate option exercise price or appreciation base of the option or stock
appreciation right or part thereof canceled (in the case of an option or stock
appreciation right) or any amount payable as a condition of delivery of shares
(in the case of a stock award or performance award). Such amount shall be
delivered to the grantee as soon as practicable after such Award or part
thereof is canceled.
(g) Unless the applicable Plan agreement otherwise provides,
the "option exercise date" and the "stock appreciation right exercise date"
shall be the date that written notice of exercise, together with payment, are
received by the Company; provided that if subsection (f) of this Section 2.8
is applicable, the option exercise date or stock appreciation right exercise
date shall be the later of: (i) the sixth business day following the date
written notice of exercise is received by the Company; and (ii) the date when
payment is received by the Company.
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2.9 Payment of Award Price.
(a) Unless the applicable Plan agreement otherwise provides
or the Committee in its sole discretion otherwise determines, any written
notice of exercise of an option or stock appreciation right must be
accompanied by payment of the full option or stock appreciation exercise
price. If Section 2.8(g) applies, and the six business day delay for the
option exercise date or stock appreciation right exercise date is applied, the
grantee shall have no right to pay the option or stock appreciation right
exercise price or to receive Common Stock with respect to the option or stock
appreciation right exercise prior to the lapse of such six business days.
(b) Payment of the option exercise price and of any other
payment required by the Plan agreement to be made pursuant to any other Award
shall be made in any combination of the following: (i) by certified or
official bank check payable to the Company (or the equivalent thereof
acceptable to the Committee); (ii) with the consent of the Committee in its
sole discretion, by personal check (subject to collection) which may in the
Committee's discretion be deemed conditional; and/or (iii) unless otherwise
provided in the applicable Plan agreement, by delivery of previously-acquired
shares of Common Stock owned by the grantee for at least six months (or such
longer or shorter period as the Committee may in its discretion determine that
will not result in variable accounting treatment) having a fair market value
(determined as of the option exercise date, in the case of options, or other
relevant payment date as determined by the Committee, in the case of other
Awards) equal to the portion of the exercise price being paid thereby,
provided that the Committee may require, as a condition of accepting any such
delivery of shares of Common Stock, that the grantee furnish an opinion of
counsel acceptable to the Company to the effect that such delivery would not
result in the grantee incurring any liability under Section 16(b) of the Act
and does not require any Consent (as defined in Section 3.2) (a "Compliance
Opinion"). Payment in accordance with clause (i) of this Section 2.9(b) may be
deemed to be satisfied, if and to the extent that the applicable Plan
agreement so provides or the Committee permits, by delivery to the Company of
an assignment of a sufficient amount of the proceeds from the sale of Common
Stock to be acquired pursuant to the Award to pay for all of the Common Stock
to be acquired pursuant to the Award and an authorization to the broker or
selling agent to pay that amount to the Company and to effect such sale at the
time of exercise or other delivery of shares of Common Stock, provided that
the Committee may require, as a condition of accepting any such payment, that
the grantee furnish a Compliance Opinion. In the case of payment made in
accordance with clause (iii) of this Section 2.9(b) or clause (ii) of Section
3.4(b), if (A) the person paying the option exercise price or other payment
required by a Plan agreement is the grantee of the Award and is actively
employed on the exercise date and (B) all or any portion of the
previously-acquired shares of Common Stock so delivered in payment were
acquired by the grantee upon exercise of an option or stock appreciation
right, then, if and to the extent that the applicable Plan agreement so
provides or the Committee in its sole discretion so determines, the grantee
shall be granted a replacement option on the option exercise date or other
payment date to purchase a number of shares of Common Stock equal to the
number of shares so delivered in payment, at an exercise price equal to the
fair market value of the Common Stock on the exercise date and upon such other
terms, conditions and restrictions (which may be the same as or different than
the terms, conditions and
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restrictions of the Award so exercised) as the Committee may determine and set
forth in the Plan agreement evidencing such replacement option. As soon as
practicable after receipt of full payment, the Company shall, subject to the
provisions of Sections 2.8(f) and 3.2, deliver to the grantee a certificate or
certificates for the shares of Common Stock deliverable pursuant to such
Award, which certificate or certificates may bear such legends as the Company
may deem appropriate concerning restrictions on their disposition in
accordance with applicable federal and state securities laws, rules and
regulations or otherwise.
(c) Notwithstanding any other provision of this Plan or the
applicable Plan agreement, no grantee shall, directly or indirectly, sell any
shares of Common Stock unless (i) such grantee owns the shares to be sold or
has exercised an Award with respect thereto and the shares to be sold are
immediately issuable to the grantee pursuant to such exercise (subject to
Section 2.8(g) if applicable) and (ii) such grantee delivers such shares in
settlement in accordance with all settlement rules applicable to such
transaction.
2.10 Termination of Employment.
(a) The following "default rules" set forth in this Section
2.10 shall govern the exercisability of options and the continuation of other
Awards following termination of employment of a grantee with the Company and
its Affiliates except where: (i) other provisions of the Plan specify a
different rule (e.g., Section 3.11 dealing with early termination of an option
following certain corporate events); or (ii) the Plan agreement provides for a
different rule (as specified by the Committee pursuant to its authority under
the Plan).
(b) Upon termination of a grantee's employment with the
Company and its Affiliates (i) by the Company or its Affiliate either for (A)
"good reason" as defined in the Revlon Executive Severance Policy as in effect
on the date of adoption of this Plan or (B) "good reason", "cause" or any like
term as defined under any employment agreement to which a grantee may be a
party or (ii) by a grantee otherwise than either for (A) "good reason",
"cause" or any like term as defined under any employment agreement to which a
grantee may be a party or (B) the reasons described in subsection (d) or (e)
hereof, all outstanding options and stock appreciation rights granted to such
grantee shall cease to be exercisable, and such grantee may not satisfy any
condition or limitation which is unsatisfied (and no additional portion shall
otherwise become vested) under any other outstanding Award, following the date
of such termination of employment, and all outstanding Awards held by such
grantee shall in all respects automatically be canceled on the date of such
termination of employment.
(c) Upon termination of a grantee's employment with the
Company and its Affiliates for any reason other than as described in
subsection (b), (d) or (e) hereof, the portions of outstanding options and
stock appreciation rights granted to such grantee that are exercisable as of
the date of termination of employment of such grantee may continue to be
exercised, and any payment or notice provided for under the terms of any other
outstanding Award as respects the portion thereof vested as of the date of
termination of employment may
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be given, for a period of one year from and including the date of termination
of employment, but no additional portions of outstanding options or stock
appreciation rights granted to such grantee shall become exercisable, and such
grantee may not satisfy any condition or limitation which is unsatisfied (and
no additional portion shall otherwise become vested) under any other
outstanding Award, following the date of such termination of employment, and
such unexercisable Awards or parts thereof shall in all respects automatically
be canceled on the date of such termination of employment.
(d) If the grantee voluntarily retires with the consent of
the grantee's employer or the grantee's employment terminates due to permanent
disability, all outstanding options and stock appreciation rights granted to
such grantee shall continue to become exercisable, all other outstanding
Awards granted to such grantee shall continue to vest, and the grantee shall
be entitled to continue satisfying any performance or other condition under
all other Awards, in each case in accordance with the terms of the applicable
Plan agreements, and the grantee shall be entitled to exercise each such
option or stock appreciation right and to make any payment, give any notice
and satisfy any performance or other condition under each such other Award, in
each case, for a period of one year from and including the date on which all
portions of the Award first become fully exercisable or vested or capable of
being satisfied, as the case may be, and thereafter such Awards or parts
thereof shall be canceled. Notwithstanding the foregoing, the Committee may in
its sole discretion provide for a longer or shorter period for exercise of an
option or stock appreciation right or may permit a grantee to continue vesting
under an option, stock appreciation right or restricted stock award or to make
any payment, give any notice and continue satisfying any performance or other
condition under any other Award in the case of a grantee whose employment
terminates solely because such grantee's employer ceases to be an Affiliate of
the Company or a grantee who transfers employment with the Company's consent
to a purchaser of a business disposed of by the Company. The Committee may in
its sole discretion determine (i) whether any termination of employment is a
voluntary retirement with employer consent or is due to permanent disability
for purposes of the Plan, (ii) whether any leave of absence (including any
short-term or long-term disability or medical leave) constitutes a termination
of employment within the meaning of the Plan, (iii) the applicable date of any
such termination of employment, and (iv) the impact, if any, of any of the
foregoing on Awards under the Plan.
(e) If the grantee's employment terminates by reason of
death, or if the grantee's employment terminates under circumstances providing
for continued rights under subsection (c) or (d) of this Section 2.10 and
during the period of continued rights described in subsection (c) or (d) the
grantee dies, all outstanding options and stock appreciation rights granted to
such grantee shall become fully exercisable, and any payment or notice
provided for under the terms of any other outstanding Award may be immediately
paid or given and any condition may be satisfied, by the person to whom such
rights have passed under the grantee's will (or if applicable, pursuant to the
laws of descent and distribution) for a period of one year from and including
the date of the grantee's death (notwithstanding that such period may extend
more than 10 years after the grant of the Award) and thereafter all such
Awards or parts thereof shall be canceled.
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MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
(a) The Board may, without shareholder approval, at any time
and from time to time suspend or discontinue the Plan or revise or amend it in
any respect whatsoever, except that no such amendment shall impair any rights
under any Award theretofore made under the Plan without the consent of the
person to whom such Award was made. Furthermore, except as and to the extent
otherwise permitted by Section 3.5 or 3.11, no such amendment shall, without
shareholder approval:
(i) materially increase the benefits accruing to
grantees under the Plan;
(ii) materially increase the number of shares of Common
Stock in respect of which Awards may be issued
under the Plan pursuant to Section 1.5 or pursuant
to grants of restricted or unrestricted stock
awards pursuant to Section 2.4, or increase the
number of shares of Common Stock in respect of
which Awards may be granted in any year under
Section 1.5 or 2.5;
(iii) materially modify the designation in Section 1.3
of the class of persons eligible to receive Awards
under the Plan;
(iv) except as provided in Section 2.10(e), permit a
stock option or unrelated stock appreciation right
to be exercisable, or shares of Common Stock
underlying any other Award to vest or become
deliverable, more than 10 years after the date of
grant;
(v) permit a stock option to have an option exercise
price, or a stock appreciation right to have an
appreciation base, of less than 100% of the fair
market value of a share of Common Stock on the
date the stock option or stock appreciation right
is granted; or
(vi) extend the term of the Plan beyond the period set
forth in Section 3.14.
(b) With the consent of the grantee (unless otherwise
provided in the Plan or the applicable Plan agreement) and subject to the
terms and conditions of the Plan (including Section 3.1(a)), the Committee may
amend outstanding Plan agreements with such grantee, including, without
limitation, any amendment which would (i) accelerate the time or times at
which an Award may vest or be exercised and/or (ii) extend the scheduled
expiration date of the Award.
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3.2 Restrictions.
(a) If the Committee shall at any time determine that any
Consent (as hereinafter defined) is necessary or desirable as a condition of,
or in connection with, the granting of any Award under the Plan, the
acquisition, issuance or purchase of shares or other rights thereunder, any
determination regarding vesting or termination of any Award or satisfaction of
any performance or other condition thereunder or the taking of any other
action thereunder (each such action being hereinafter referred to as a "Plan
Action"), then such Plan Action shall not be required to be taken, in whole or
in part, unless and until such Consent shall have been effected or obtained to
the full satisfaction of the Committee. Without limiting the generality of the
foregoing, in the event that (i) the Committee shall be entitled under the
Plan to make any payment in cash, Common Stock or both, and (ii) the Committee
shall determine that Consent is necessary or desirable as a condition of, or
in connection with, payment in any one or more of such forms, then the
Committee shall be entitled to determine not to make any payment whatsoever
until such Consent shall have been obtained in the manner aforesaid.
(b) The term "Consent" as used herein with respect to any
Plan Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or other self-regulatory
organization or under any federal, state, local or foreign law, rule or
regulation, (ii) the expiration, elimination or satisfaction of any
prohibitions, restrictions or limitations under any federal, state, local or
foreign law, rule or regulation or the rules of any securities exchange or
other self-regulatory organization, (iii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made, and (iv) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies or any parties to any loan agreements or other
contractual obligations of the Company or any of its Affiliates.
3.3 Nontransferability.
(a) No Award granted to any grantee under the Plan and no
rights under any Plan agreement shall be assignable or transferable by the
grantee (voluntarily or by operation of law) other than by will or by the laws
of descent and distribution to the extent provided by the Plan and any
applicable Plan agreement. During the lifetime of the grantee, all rights with
respect to any Award granted to the grantee under the Plan or under any Plan
agreement shall be exercisable only by such grantee.
(b) Notwithstanding Section 3.3(a), the Committee may in the
applicable Plan Agreement or at any time thereafter provide that options
granted hereunder which are not intended to qualify as incentive stock options
under Code section 422 may be transferred without consideration by the
grantee, subject to such rules as the Committee may adopt to preserve the
purposes of the Plan, to:
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(i) the grantee's spouse, children or grandchildren
(including adopted and stepchildren and
grandchildren) (collectively, the "Immediate
Family");
(ii) a trust solely for the benefit of the grantee and
or members of his or her Immediate Family; or
(iii) a partnership or limited liability company whose
only partners or shareholders are the grantee
and/or members of his or her Immediate Family
members.
(each transferee described in clauses (i), (ii) and
(iii) above is hereinafter referred to as a "Permitted
Transferee"); provided that the grantee provides the
Committee with advance written notice describing the
terms and conditions of the proposed transfer and the
Committee notifies the grantee in writing that such a
transfer would comply with the requirements of the Plan
and any applicable Plan Agreement; and provided further
that with respect to options granted to officers and
directors subject to the reporting requirements of
Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") no such options may be
transferred within six months of the grant date to the
extent such transfer would result in the grant of the
option being deemed to constitute a non-exempt purchase
under Section 16 of the Exchange Act. The terms of any
such transferred option shall apply to the Permitted
Transferee, except that (a) Permitted Transferees shall
not be entitled to transfer any options, other than by
will or the laws of descent and distribution; and (b)
Permitted Transferees shall not be entitled to exercise
any transferred options unless there shall be in effect
a registration statement on an appropriate form under
the Securities Act of 1993, as amended, covering the
shares to be acquired pursuant to the exercise of such
option if the Committee determines that such a
registration statement is necessary or appropriate. Upon
notice from a Permitted Transferee of its intent to
exercise an option, the Committee shall advise such
Permitted Transferee if a registration statement is
necessary and if so whether such registration statement
is in effect.
3.4 Withholding Taxes.
(a) Whenever under the Plan shares of Common Stock are to be
delivered upon exercise of an option or stock appreciation right, upon the
lapse of restrictions on restricted stock awards, pursuant to performance
awards or otherwise, the Committee shall be entitled to require as a condition
of delivery that the grantee remit an amount sufficient to satisfy all
federal, state and other governmental withholding tax requirements related
thereto. Whenever cash is to be paid to a grantee under the Plan (whether upon
the exercise or cancellation of an Award or otherwise), the Company shall be
entitled as a condition of its payment to deduct therefrom, or from any
compensation, expense reimbursement or other payments due to the grantee, an
amount
15
<PAGE>
sufficient to satisfy all federal, state and other governmental withholding
tax and like requirements related thereto or to the delivery of any shares of
Common Stock under the Plan.
(b) A grantee may satisfy, in whole or in part, the
foregoing withholding requirements by delivery of unrestricted shares of
Common Stock owned by the grantee for at least six months (or such shorter or
longer period as the Committee may approve or require that will not result in
variable accounting treatment) having a fair market value (determined as of
the date of such delivery by the grantee) equal to the amount otherwise
payable. Without limiting the generality of the foregoing: (i) the Committee
may require, as a condition of accepting any such delivery of shares of Common
Stock, that the grantee furnish a Compliance Opinion and (ii) such delivery
may be made by withholding shares of Common Stock from the shares otherwise
issuable pursuant to the exercise of the Award giving rise to the tax
withholding obligation (in which event the date of delivery shall be deemed
the date the Award was exercised).
3.5 Adjustments Upon Changes in Capitalization If and to the extent
specified by the Committee, the number of shares of Common Stock which may be
issued under the Plan, the number of shares of Common Stock subject to or
underlying options, unrelated stock appreciation rights, and restricted stock
awards and performance awards theretofore granted under the Plan, and the
option exercise price of options, the appreciation base of stock appreciation
rights and any payments due with respect to other Awards theretofore granted
under the Plan, may be appropriately adjusted (as the Committee may determine)
for any increase or decrease in the number of issued shares of Common Stock
resulting from the subdivision or combination of shares of Common Stock or
other capital adjustments, or the payment of a stock dividend after the
effective date of the Plan, or other increase or decrease in such shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that any options, unrelated stock appreciation rights,
restricted stock awards or performance awards, to the extent covering
fractional shares of Common Stock resulting from any such adjustment, shall be
eliminated and terminated, and provided further, that each incentive stock
option granted under the Plan shall not be adjusted in a manner that causes
such option to fail to continue to qualify as an "incentive stock option"
within the meaning of Code section 422. Adjustments under this Section shall
be made by the Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive.
3.6 Right of Discharge Reserved. Nothing in the Plan or in any Plan
agreement shall confer upon any officer, director, employee or other person
the right to continue in the employment of the Company or any of its
Affiliates or affect any right which the Company or any of its Affiliates may
have to terminate the employment of such officer, director, employee or other
person.
3.7 No Rights as a Stockholder. No grantee or other person exercising
an option or stock appreciation right or entitled to delivery of shares of
Common Stock pursuant to any other Award shall have any of the rights of a
stockholder of the Company with respect to shares subject to an option or
stock appreciation right or shares deliverable upon exercise of any other
Award until the issuance of a stock certificate to such person for such
shares. Except as otherwise provided in Section 3.5, no adjustment shall be
made for dividends, distributions or
16
<PAGE>
other rights (whether ordinary or extraordinary, and whether in cash,
securities or other property) for which the record date is prior to the date
such stock certificate is registered in the name of the grantee. In the case
of a grantee of a restricted stock award, the grantee shall have the rights of
a stockholder of the Company if and only to the extent provided in the
applicable Plan agreement.
3.8 Nature of Payments.
(a) Any and all grants of options, stock appreciation
rights, stock awards and performance awards and payments of cash or issuances
of shares of Common Stock hereunder shall be granted, issued, delivered or
paid, as the case may be, in consideration of services performed for the
Company or for its Affiliates by the grantee.
(b) All such grants, issuances and payments shall constitute
a special incentive payment to the grantee and shall not, unless otherwise
determined by the Committee, be taken into account in calculating the amount
of compensation of the grantee for the purposes of determining any pension,
retirement, death or other benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate, on the one hand, and the
grantee on the other hand.
(c) By accepting an Award under the Plan, the grantee shall
thereby be understood to have waived any claim to continued exercise or
vesting of an Award or to damages or severance entitlement related to
non-continuation of the Award beyond the period provided herein or in the
applicable Plan agreement, notwithstanding any contrary provision in any
written employment contract or other agreement with the grantee, whether any
such agreement is executed before or after the grant date of the Award.
3.9 Non-Uniform Determinations. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons
who receive, or are eligible to receive, Awards under the Plan (whether or not
such persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive Awards under the
Plan, (b) the terms and provisions of Awards under the Plan, (c) the exercise
by the Committee of its discretion in respect of the exercise of rights
pursuant to the terms of the Plan or any Plan agreement, and (d) the treatment
of leaves of absences, disability leaves, terminations for good reason and
other determinations under the Plan or any Plan agreement.
3.10 Other Payments or Awards. Nothing contained in the Plan shall be
deemed in any way to limit or restrict the Company, any Affiliate or the
Committee from making any award or payment or granting any right to any person
under any other plan, arrangement or understanding, whether now existing or
hereafter in effect.
17
<PAGE>
3.11 Reorganization.
(a) In the event that Revlon or any successor is merged or
consolidated with another corporation and, whether or not Revlon or such
successor shall be the surviving corporation, there shall be any change in the
shares of Common Stock as then constituted by reason of such merger or
consolidation, or in the event that all or substantially all of the assets of
the Company are acquired by another person, or in the event of a
reorganization or liquidation of Revlon or any successor (each such event
being herein after referred to as a "Reorganization Event") or in the event
that the Board shall propose that Revlon or any successor enter into a
Reorganization Event, then the Committee may in its discretion, by written
notice to a grantee, provide that such grantee's options and stock
appreciation rights and all other Awards requiring action on the part of such
grantee will be terminated unless such grantee exercises or takes such action
within 30 days (or such longer period as the Committee shall determine in its
sole discretion) after the date of such notice; provided however that if the
Committee takes such action the Committee also shall accelerate to an
appropriate earlier date the dates upon which all outstanding options and
stock appreciation rights of such grantee shall be exercisable and such action
under such other Awards may be taken. The Committee also may in its
discretion, by written notice to a grantee, provide that the restrictions on
restricted stock awards lapse and the performance and other conditions of
other Awards shall be adjusted in the event of a Reorganization Event upon
such terms and conditions as the Committee may determine.
(b) Whenever deemed appropriate by the Committee, the
actions referred to in Section 3.11(a) may be made conditional upon the
consummation of the applicable Reorganization Event.
3.12 Legend on Certificates. All certificates for shares of Common
Stock issued pursuant to Awards hereunder may be stamped or otherwise
imprinted with a legend in such form as the Company may require with respect
to any applicable restrictions on the sale or transfer of shares.
3.13 Section Headings. The section headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections.
3.14 Effective Date and Term of Plan.
(a) This Plan shall be deemed adopted and become effective
upon the approval thereof by the Board; provided that, notwithstanding any
other provision of the Plan, no Award made under the Plan shall be exercisable
unless the Plan is approved, directly or indirectly, by (i) the express
consent of shareholders holding at least a majority in voting power of the
Company's voting stock voting in person or by proxy at a duly held
stockholders' meeting, or (ii) the unanimous written consent of the
shareholders of the Company, within 12 months before or after the date the
Plan is adopted.
18
<PAGE>
(b) The Plan shall terminate 10 years after the earlier of
the date on which it becomes effective or the date on which it is approved by
shareholders, and no Awards shall thereafter be made under the Plan.
Notwithstanding the foregoing, all Awards made under the Plan prior to such
termination date shall remain in effect until such Awards have been satisfied
or terminated in accordance with the terms and provisions of the Plan and the
applicable Plan agreement.
3.15 Governing Law. This Plan shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state.
3.16 Conditions. If pursuant to Section 2.10(e) or Section 3.11(a)
the dates upon which options shall be exercisable are accelerated, it shall be
on the condition that with respect to options granted to officers and
directors subject to the reporting requirements of Section 16 of the Exchange
Act the shares underlying such options may not be sold by any such individual
(or their estate or Permitted Transferee) within 6 months after the grant of
the option to the extent such sale would result in the grant of the option
being deemed to constitute a non-exempt purchase under Section 16 of the
Exchange Act.
19
<PAGE>
REVLON, INC.
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Set forth below is a list of certain of the Registrant's subsidiaries.
Such subsidiaries are incorporated or organized in the jurisdictions indicated.
Revlon Consumer Products Corporation is wholly owned by the Registrant. Except
as otherwise indicated, each of the other listed subsidiaries is wholly owned
by Revlon Consumer Products Corporation directly, or indirectly as indicated,
and all listed subsidiaries are included in the Registrant's consolidated
financial statements. The names of the Registrant's remaining subsidiaries have
been omitted from the following list, but such omitted subsidiaries, considered
in the aggregate as a single subsidiary, would not constitute a significant
subsidiary.
DOMESTIC SUBSIDIARIES
AMERICAN CREW, INC., an Illinois corporation
ALMAY, INC., a Delaware corporation
APPLIED SCIENCE & TECHNOLOGIES INC., a Delaware corporation
CARRINGTON PARFUMS LTD., a Delaware corporation
CHARLES REVSON INC., a New York corporation
CREATIVE NAIL DESIGN, INC., a California corporation
(d/b/a CREATIVE NAIL DESIGN SYSTEMS AND CND INC. in California)
DOLLY PARTON INC., a Delaware corporation
FASHION & DESIGNER FRAGRANCE GROUP, INC., a Delaware corporation
FERMODYL PROFESSIONALS INC., a Delaware corporation
GENERAL WIG MANUFACTURERS, INC., a Florida corporation (1)
(d/b/a REVLON GENERAL WIG AND BEAUTY TRENDS in Florida)
NORTH AMERICA REVSALE INC., a New York corporation
OXFORD PROPERTIES CO., a Delaware corporation
(d/b/a OXFORD PROPERTIES OF DELAWARE in North Carolina)
PACIFIC FINANCE & DEVELOPMENT CORP., a California corporation
PPI TWO CORPORATION, a Delaware corporation
PRESTIGE FRAGRANCE & COSMETICS, INC., a Delaware corporation
(d/b/a COLOURS & SCENTS in Arizona, California, Colorado, Florida,
Georgia, Hawaii, Massachusetts, Missouri, Nevada, New Mexico, New
York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia
and Washington) (d/b/a THE COSMETIC WAREHOUSE in Florida) (d/b/a PFC
FRAGRANCE & COSMETICS, INC. in California) (d/b/a VISAGE in Florida)
PRESTIGE FRAGRANCES, LTD., a Delaware corporation
REALISTIC/ROUX PROFESSIONAL PRODUCTS INC., a Delaware corporation (1)
REVLON COMMISSARY SALES, INC., a Delaware corporation (2)
REVLON CONSUMER CORP., a Delaware corporation
REVLON CONSUMER PRODUCTS CORPORATION, a Delaware corporation
<PAGE>
DOMESTIC SUBSIDIARIES, CONTINUED
REVLON GOVERNMENT SALES, INC., a Delaware corporation
REVLON INTERNATIONAL CORPORATION, a Delaware corporation
REVLON PROFESSIONAL, INC., a Delaware corporation (1)
REVLON PROFESSIONAL PRODUCTS INC., a Delaware corporation (1)
REVLON RECEIVABLES SUBSIDIARY, INC., a Delaware corporation
RIROS CORPORATION, a New York corporation
RIT INC., a Delaware corporation (4)
ROUX LABORATORIES, INC., a New York corporation
(d/b/a REVLON PROFESSIONAL in Florida and New York)
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<PAGE>
FOREIGN SUBSIDIARIES
FOREIGN SUBSIDIARIES
CEIL - COMERCIAL, EXPORTADORA, INDUSTRIAL LTDA. (Brazil) (4)
CENDICO B.V. (Netherlands) (5)
COLEMAN DO BRASIL INDUSTRIA E COMERCIO LIMITADA (Brazil) (32)
DEUTSCHE REVLON GMBH (Germany) (31)
DEUTSCHE REVLON GMBH & CO. KG (Germany) (27)
EUROPEAN BEAUTY PRODUCTS S.P.A. (Italy) (21)
EUROPEENNE DE PRODUITS DE BEAUTE S.A. (France) (9)
INTERCOSMO S.P.A. (Italy) (10)
REVLON A.B. (Sweden) (11)
REVLON (AUST.) PTY. LIMITED (Australia) (12)
REVLON BELGIUM S.A. (Belgium) (29)
REVLON B.V. (Netherlands) (3)
REVLON CANADA INC. (Canada) (3)
REVLON (CAYMAN) LIMITED (Cayman Islands) (22)
REVLON CHINA HOLDINGS LIMITED (33)
REVLON COIFFURE SNC (France) (13)
REVLON COSMETICS AND FRAGRANCES LIMITED (United Kingdom) (14)
REVLON DE ARGENTINA, S.A.I.C. (Argentina) (15)
REVLON EUROPE, MIDDLE EAST AND AFRICA LTD. (Bermuda) (5)
REVLON GESELLSCHAFT M.B.H. (Austria) (16)
REVLON GROUP LIMITED (United Kingdom)
REVLON (HONG KONG) LIMITED (Hong Kong) (3)
REVLON (ISRAEL) LIMITED (Israel) (17)
REVLON K.K. (Japan) (3)
REVLON REAL ESTATE K.K. (Japan) (3)
REVLON LATIN AMERICA AND CARIBBEAN, LTD. (Bermuda) (5)
REVLON (MALAYSIA) SDN. BHD. (Malaysia) (3)
REVLON MANUFACTURING LTD. (Bermuda) (3)
REVLON MANUFACTURING (U.K.) LIMITED (United Kingdom) (18)
REVLON MAURITIUS LTD. (Mauritius) (3)
REVLON NEDERLAND B.V. (Netherlands) (8)
REVLON NEW ZEALAND LIMITED (New Zealand) (3)
REVLON OFFSHORE LIMITED (Bermuda)
REVLON OVERSEAS CORPORATION, C.A. (Venezuela) (19)
REVLON PENSION TRUSTEE COMPANY (U.K.) LIMITED (United Kingdom)
REVLON - PRODUTOS COSMETICOS, LTDA. (Portugal) (8)
REVLON PROFESIONAL, S.A. DE C.V. (Mexico) (6)
REVLON PROFESSIONAL LIMITED (Ireland) (1)
REVLON (PUERTO RICO) INC. (Puerto Rico) (3)
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<PAGE>
FOREIGN SUBSIDIARIES, CONTINUED
REVLON-REALISTIC INTERNATIONAL LIMITED (Ireland) (28)
REVLON, S.A. (Mexico) (3)
REVLON, S.A. (Spain) (20)
REVLON (SHANGHAI) LIMITED (34)
REVLON (SINGAPORE) PTE. LTD. (Singapore) (3)
REVLON SOUTH AFRICA (PROPRIETARY) LIMITED (South Africa) (7)
REVLON (SUISSE) S.A. (Switzerland) (3)
REVLON TAIWAN LIMITED (Taiwan) (7)
RGI BEAUTY PRODUCTS (PROPRIETARY) LIMITED (South Africa)
RGI (CAYMAN) LIMITED (Cayman Islands) (30)
RGI LIMITED (Cayman Islands) (23)
RGI MEDICAL PRODUCTS (PTY.) LIMITED (South Africa) (24)
RIC PTY. LIMITED (Australia) (5)
R.I.F.C. BANK LIMITED (Bahamas) (7)
R.O.C. HOLDING C.A. (Venezuela) (3)
SHANGHAI REVSTAR COSMETIC MARKETING SERVICES (34)
TINDAFIL, S.A. (Uruguay) (25)
ULTIMA II COSMETICS GMBH (Germany) (26)
YAE ARTISTIC PACKINGS INDUSTRY LTD. (Israel) (17)
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<PAGE>
OWNERSHIP
(1) Owned 100% by ROUX LABORATORIES INC. (New York)
(2) Owned 100% by REVLON GOVERNMENT SALES, INC. (Delaware)
(3) Owned 100% by REVLON INTERNATIONAL CORPORATION (Delaware)
(4) Owned 99% by RGI LIMITED (Cayman Islands)
and less than 1%by REVLON INTERNATIONAL CORPORATION (Delaware)
(5) Owned 100% by REVLON MANUFACTURING LIMITED (Bermuda)
(6) Owned 95% by ROUX LABORATORIES INC. (New York)
and 5% by THIRD PARTIES
(7) Owned 100% by REVLON OFFSHORE LIMITED (Bermuda)
(8) Owned 100% by REVLON, S.A. (Spain)
(9) Owned 62% by REVLON EUROPE, MIDDLE EAST AND AFRICA LTD. (Bermuda),
37% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 1% by REVLON, S.A. (Spain)
(10) Owned 100% by EUROPEAN BEAUTY PRODUCTS S.P.A. (Italy)
(11) Owned 100% by REVLON B.V. (Netherlands)
(12) Owned 50% by REVLON MANUFACTURING LIMITED (Bermuda)
and 50% by RIC PTY. LIMITED (Australia)
(13) Owned 100% by EUROPEENNE DE PRODUITS DE BEAUTE, S.A. (France)
(14) Owned 100% by REVLON MANUFACTURING (UK) LIMITED (United Kingdom)
(15) Owned 94% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 6% by REVLON MANUFACTURING LTD. (Bermuda)
(16) Owned 74% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 26% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
(17) Owned 99.8 by REVLON AB, the remainder by third parties (Sweden)
(18) Owned 100% by REVLON GROUP LIMITED (United Kingdom)
(19) Owned 100% by R.O.C. HOLDING C.A. (Venezuela)
(20) Owned 54% by REVLON EUROPE, MIDDLE EAST AND AFRICA LTD. (Bermuda)
and 46% by REVLON INTERNATIONAL CORPORATION (Delaware)
(21) Owned 95.45% by REVLON, S.A. (Spain)
and 4.55% by REVLON INTERNATIONAL CORPORATION (Delaware)
(22) Owned 100% by PPI TWO CORPORATION (Delaware)
(23) Owned 98% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
and 2% by REVLON (CAYMAN) LIMITED (Cayman Islands)
(24) Owned 100% by REVLON SOUTH AFRICA (PTY.) LTD. (South Africa)
(25) Owned 100% by CEIL - COMERCIAL, EXPORTADORA, INDUSTRIAL LTDA. (Brazil)
(26) Owned 75% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 25% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
(27) Owned 50% by DEUTSCHE REVLON GMBH (Germany)
and 50% by REVLON OFFSHORE LIMITED (Bermuda)
(28) Owned 97% by REVLON PROFESSIONAL LIMITED (Ireland)
and 3% by ROUX LABORATORIES INC. (New York)
(29) Owned 100% by REVLON NEDERLAND B.V. (Netherlands)
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<PAGE>
(30) Owned 100% by REVLON (CAYMAN) LIMITED (Cayman Islands)
(31) Owned 99% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
and 1% by REVLON INTERNATIONAL CORPORATION (Delaware)
(32) Owned 83% by CEIL - COMERCIAL EXPORTADORA INDUSTRIAL LTDA. (Brazil),
15% by RGI LIMITED (Cayman Islands)
and 2% by REVLON INTERNATIONAL CORPORATION (Delaware)
(33) Owned 94.737% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 5.263% by SUMSTAR DEVELOPMENT LIMITED (Cayman Islands), an unrelated
third party
(34) Owned 95% by REVLON CHINA HOLDINGS LIMITED
and 5% by BEIJING SUMSTAR INDUSTRIAL COMPANY LIMITED, an unrelated
third party
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<PAGE>
The Board of Directors
Revlon, Inc.:
We consent to incorporation by reference in the registration statement
(No. 333-03-421) on Form S-8 of Revlon, Inc. of our report dated January 28,
1997, relating to the consolidated balance sheets of Revlon Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' deficiency and cash flows for each of
the years in the three-year period ended December 31, 1996, and the related
schedule, which report appears in the December 31, 1996 annual report on Form
10-K of Revlon, Inc.
KPMG Peat Marwick LLP
New York, New York
February 13, 1997
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 12th
day of February, 1997.
/s/ Ronald O. Perelman
----------------------
RONALD O. PERELMAN
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 12th
day of February, 1997.
/s/ Donald G. Drapkin
-----------------
DONALD G. DRAPKIN
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 12th
day of February, 1997.
/s/ Jerry W. Levin
--------------
JERRY W. LEVIN
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 12th
day of February, 1997.
/s/ Howard Gittis
-------------
HOWARD GITTIS
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 22nd
day of January, 1997.
/s/ Vernon E. Jordan, Jr., Esq.
---------------------------
VERNON E. JORDAN, JR., ESQ.
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 27th
day of Janaury, 1997.
/s/ Henry Kissinger
---------------
HENRY KISSINGER
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 14th
day of January, 1997.
/s/ Edward J. Landau, Esq.
----------------------
EDWARD J. LANDAU, ESQ.
<PAGE>
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, her true and
lawful attorney-in-fact and agent, with full power of substitution, for her and
her name, place and stead, in any and all capacities, in connection with the
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 22nd
day of January, 1997.
/s/ Linda Gosden Robinson
---------------------
LINDA GOSDEN ROBINSON
<PAGE>
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
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 14th
day of January, 1997.
/s/ Terry Semel
-----------
TERRY SEMEL
<PAGE>
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, her true and
lawful attorney-in-fact and agent, with full power of substitution, for her and
her name, place and stead, in any and all capacities, in connection with the
REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the year ended
December 31, 1996 (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 she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 28th
day of January, 1997.
/s/ Martha Stewart
--------------
MARTHA STEWART
<PAGE>
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 REVLON, INC. (the "Corporation") Annual Report on Form
10-K for the year ended December 31, 1996 (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
11th day of February, 1997.
/s/ Meyer Feldberg
--------------
MEYER FELDBERG
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<FISCAL-YEAR-END> DEC-31-1996
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