<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
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 1-11178
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
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
--- ---
As of September 30, 1999, 19,992,837 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 the shares of Class B Common Stock were held by REV
Holdings Inc., an indirect wholly owned subsidiary of Mafco Holdings Inc.
Total Pages - 20
<PAGE>
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 97.7 $ 34.7
Trade receivables, less allowances of $28.4
and $28.5, respectively .......................................... 447.7 536.0
Inventories ............................................................ 301.6 264.1
Prepaid expenses and other ............................................. 60.9 69.9
---------- ----------
Total current assets ............................................. 907.9 904.7
Property, plant and equipment, net ........................................... 359.3 378.9
Other assets ................................................................. 169.8 173.5
Intangible assets, net ....................................................... 362.3 372.9
---------- ----------
Total assets ..................................................... $ 1,799.3 $ 1,830.0
========== --========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings - third parties .................................. $ 34.4 $ 27.9
Current portion of long-term debt - third parties ...................... 6.3 6.0
Accounts payable ....................................................... 170.7 134.8
Accrued expenses and other ............................................. 390.5 389.7
---------- ----------
Total current liabilities ........................................ 601.9 558.4
Long-term debt - third parties ............................................... 1,811.0 1,629.9
Long-term debt - affiliates .................................................. 24.1 24.1
Other long-term liabilities .................................................. 246.2 265.6
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 B Common Stock, par value $.01 per share; 200,000,000
shares authorized, 31,250,000 issued and outstanding ............. 0.3 0.3
Class A Common Stock, par value $.01 per share; 350,000,000
shares authorized, 19,992,837 and 19,986,771 issued and
outstanding, respectively ........................................ 0.2 0.2
Capital deficiency ..................................................... (228.4) (228.5)
Accumulated deficit since June 24, 1992 ................................ (604.8) (402.0)
Accumulated other comprehensive loss ................................... (105.8) (72.6)
---------- ----------
Total stockholders' deficiency ................................... (883.9) (648.0)
---------- ----------
Total liabilities and stockholders' deficiency ................... $ 1,799.3 $ 1,830.0
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed
Financial Statements.
2
<PAGE>
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ................................................ $ 452.4 $ 548.6 $ 1,446.9 $ 1,621.7
Cost of sales............................................. 170.0 186.1 510.6 543.4
------------ ------------ ------------ ------------
Gross profit ........................................ 282.4 362.5 936.3 1,078.3
Selling, general and administrative expenses ............. 403.5 322.6 1,001.0 958.2
Business consolidation costs and other, net............... 4.4 (7.1) 22.1 (7.1)
------------ ------------ ------------ ------------
Operating (loss) income ............................. (125.5) 47.0 (86.8) 127.2
------------ ------------ ------------ ------------
Other expenses (income):
Interest expense .................................... 36.8 33.0 108.6 103.3
Interest income ..................................... (0.4) (1.4) (1.9) (3.8)
Amortization of debt issuance costs.................. 0.8 1.1 3.3 3.9
Foreign currency losses, net......................... 0.2 1.9 0.2 4.7
Miscellaneous, net................................... (0.1) 0.4 0.2 3.6
------------ ------------ ------------ ------------
Other expenses, net............................. 37.3 35.0 110.4 111.7
------------ ------------ ------------ ------------
(Loss) income from continuing operations
before income taxes.................................. (162.8) 12.0 (197.2) 15.5
Provision (benefit) for income taxes ..................... 1.9 (0.7) 5.6 6.4
------------ ------------ ------------ ------------
(Loss) income from continuing operations.................. (164.7) 12.7 (202.8) 9.1
Loss from discontinued operations ........................ -- -- -- (31.5)
Extraordinary items - early extinguishment of debt ....... -- -- -- (51.7)
------------ ------------ ------------ ------------
Net (loss) income......................................... $ (164.7) $ 12.7 $ (202.8) $ (74.1)
============ ============ ============ ============
Basic (loss) income per common share:
(Loss) income from continuing operations ........... $ (3.21) $ 0.25 $ (3.96) $ 0.18
Loss from discontinued operations .................. -- -- -- (0.62)
Extraordinary items ................................ -- -- -- (1.01)
------------ ------------ ------------ ------------
Net (loss) income per common share.................. $ (3.21) $ 0.25 $ (3.96) $ (1.45)
============ ============ ============ ============
Diluted (loss) income per common share:
(Loss) income from continuing operations ........... $ (3.21) $ 0.24 $ (3.96) $ 0.17
Loss from discontinued operations .................. -- -- -- (0.60)
Extraordinary items ................................ -- -- -- (0.99)
------------ ------------ ------------ ------------
Net (loss) income per common share.................. $ (3.21) $ 0.24 $ (3.96) $ (1.42)
============ ============ ============ ============
Weighted average number of common shares outstanding:
Basic .............................................. 51,242,837 51,234,946 51,239,344 51,211,511
============ ============ ============ ============
Dilutive............................................ 51,242,837 52,175,749 51,239,344 52,326,097
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed
Financial Statements.
3
<PAGE>
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
AND COMPREHENSIVE LOSS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
PREFERRED COMMON CAPITAL ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK STOCK DEFICIENCY DEFICIT LOSS (A) DEFICIENCY
--------- ------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998............................ $ 54.6 $ 0.5 $ (231.1) $ (258.8) $ (23.7) $ (458.5)
Issuance of common stock....................... 2.6 2.6
Comprehensive loss:
Net loss............................... (74.1) (74.1)
Revaluation of marketable securities... (2.4) (2.4)
Currency translation adjustment........ (10.3)(b) (10.3)
---------
Total comprehensive loss....................... (86.8)
-------- ------- --------- --------- --------- ---------
Balance, September 30, 1998......................... $ 54.6 $ 0.5 $ (228.5) $ (332.9) $ (36.4) $ (542.7)
======== ======= ========= ========= ========= =========
Balance, January 1, 1999............................ $ 54.6 $ 0.5 $ (228.5) $ (402.0) $ (72.6) $ (648.0)
Issuance of common stock....................... 0.1 0.1
Comprehensive loss:
Net loss............................... (202.8) (202.8)
Revaluation of marketable securities... (0.9) (0.9)
Currency translation adjustment........ (32.3) (32.3)
---------
Total comprehensive loss....................... (236.0)
-------- ------- --------- --------- --------- ---------
Balance, September 30, 1999......................... $ 54.6 $ 0.5 $ (228.4) $ (604.8) $ (105.8) $ (883.9)
======== ======= ========= ========= ========= =========
</TABLE>
- --------------------
(a) Accumulated other comprehensive loss includes a revaluation of
marketable securities of $3.9 and $2.4 as of September 30, 1999 and
1998, respectively, currency translation adjustments of $69.4 and $29.5
as of September 30, 1999 and 1998, respectively, and adjustments for the
minimum pension liability of $32.5 and $4.5 as of September 30, 1999 and
1998, respectively.
(b) Accumulated other comprehensive loss and comprehensive loss each include
a reclassification adjustment of $2.2 for realized gains associated with
the sale of certain assets outside the United States.
See Accompanying Notes to Unaudited Consolidated Condensed
Financial Statements.
4
<PAGE>
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................................................... $ (202.8) $ (74.1)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization ............................................. 90.9 80.6
Loss (gain) on sale of business interests and certain assets, net ......... 1.6 (7.1)
Loss from discontinued operations ......................................... -- 31.5
Extraordinary items ....................................................... -- 51.7
Change in assets and liabilities:
Decrease in trade receivables ........................................ 74.7 14.2
Increase in inventories .............................................. (44.5) (50.5)
Decrease (increase) in prepaid expenses and
other current assets .................................... 7.0 (5.8)
Increase in accounts payable ......................................... 39.9 3.0
Decrease in accrued expenses and other
current liabilities ..................................... (8.3) (76.4)
Other, net ........................................................... (49.3) (63.9)
--------- -----------
Net cash used for operating activities ......................................... (90.8) (96.8)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................................... (31.4) (40.5)
Acquisition of businesses, net of cash acquired ................................ -- (57.6)
Proceeds from the sale of business interests and certain assets ................ 1.6 13.7
--------- -----------
Net cash used for investing activities ......................................... (29.8) (84.4)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings - third parties .......................... 8.1 1.3
Proceeds from the issuance of long-term debt - third parties ................... 515.1 1,178.9
Repayment of long-term debt - third parties .................................... (336.3) (961.8)
Net proceeds from issuance of common stock ..................................... 0.1 1.1
Proceeds from the issuance of debt - affiliates ................................ 67.1 105.9
Repayment of debt - affiliates ................................................. (67.1) (110.6)
Payment of debt issuance costs ................................................. -- (16.5)
--------- -----------
Net cash provided by financing activities ...................................... 187.0 198.3
--------- -----------
Effect of exchange rate changes on cash and cash equivalents ................... (3.4) (2.0)
Net cash used by discontinued operations ....................................... -- (16.9)
--------- -----------
Net increase (decrease) in cash and cash equivalents ...................... 63.0 (1.8)
Cash and cash equivalents at beginning of period .......................... 34.7 37.4
--------- -----------
Cash and cash equivalents at end of period ................................ $ 97.7 $ 35.6
========= ===========
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest ............................................................. $ 120.1 $ 116.2
Income taxes, net of refunds ......................................... 6.1 9.8
Supplemental schedule of noncash investing activities:
Liabilities assumed in connection with business acquisitions:
Fair value of assets acquired ....................................... $ -- $ 74.5
Cash paid ........................................................... -- (57.6)
--------- -----------
Liabilities assumed ................................................. $ -- $ 16.9
========= ===========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed
Financial Statements.
5
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(1) 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 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.
The accompanying Consolidated Condensed Financial Statements are unaudited.
In management's opinion, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation have been made.
The Unaudited Consolidated Condensed Financial Statements include the
accounts of the Company after elimination of all material intercompany balances
and transactions. The Company has made a number of estimates and assumptions
relating to the assets and liabilities, the disclosure of contingent assets and
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 Unaudited
Consolidated Condensed Financial Statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The results of operations and financial position, including working
capital, for interim periods are not necessarily indicative of those to be
expected for a full year, due, in part, to seasonal fluctuations, which are
normal for the Company's business.
The Company matches advertising and promotion expenses with sales revenues
for interim reporting purposes. Advertising and promotion expenses estimated for
a full year are charged to earnings for interim reporting purposes in proportion
to the relationship that net sales for such period bear to estimated full year
net sales. As a result, for the nine months ended September 30, 1999 and 1998,
disbursements and commitments for advertising and promotion exceeded advertising
and promotion expenses by $19.2 and $48.4, respectively, and such amounts were
deferred.
Effective January 1999, the Company adopted Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities," which requires that costs
incurred during start-up activities, including organization costs, be expensed
as incurred. The adoption of this statement did not have a material effect on
the Company's financial condition or results of operations.
(2) INVENTORIES
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Raw materials and supplies ..................... $ 90.0 $ 78.2
Work-in-process ................................ 19.6 14.4
Finished goods ................................. 192.0 171.5
------ ------
$301.6 $264.1
====== ======
</TABLE>
6
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(3) BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
The basic income (loss) per common share has been computed based upon the
weighted average number of shares of common stock outstanding during each of the
periods presented. The diluted income (loss) per common share has been computed
based upon the weighted average number of shares of common stock outstanding and
when appropriate the dilutive effect of stock options. The Company's outstanding
stock options represent the only dilutive potential common stock outstanding.
The number of shares used in the calculation of diluted income (loss) per common
share was greater than the number of shares used in the calculation of basic
income (loss) per common share by 940,803 and 1,114,586 for the three month and
nine month periods ended September 30, 1998, respectively. The number of shares
used in the calculations of basic and diluted loss per common share was the same
for the three month and nine month periods ended September 30, 1999,
respectively, as the effect of shares otherwise assumed to be issued as a result
of the exercise of the related stock options would have been antidilutive.
(4) BUSINESS CONSOLIDATION COSTS AND OTHER, NET
In the fourth quarter of 1998, the Company committed to a restructuring
plan to realign and reduce personnel, exit excess leased real estate, realign
and consolidate regional activities, reconfigure certain manufacturing
operations and exit certain product lines. In the first quarter of 1999, the
Company recorded a net charge of $8.2 relating to such restructuring plan,
principally for additional employee severance and other personnel benefits, and
continued to implement such restructuring plan during the second quarter of 1999
during which it recorded a charge of $8.5 for employee severance and other
personnel benefits as well as other costs. Also in the second quarter of 1999,
the Company adopted a plan to exit a non-core business as to which a charge of
$1.0 is included in the table below. In the third quarter of 1999, the Company
recorded an additional charge of $3.8 relating to the restructuring plan for
employee severance and other personnel benefits, as well as costs associated
with the exit from a leased facility. In the third quarter of 1999, the Company
also consummated the exit from the non-core business referred to above, as to
which an additional charge of $0.6 is included in the table below.
Of the 720 employees and the 493 employees for whom severance and other
personnel benefits were included in the charges for the fourth quarter 1998 and
the nine month period ended September 30, 1999, respectively, the Company had
terminated 1,013 employees by September 30, 1999.
Details of the activity described above during the nine month period ended
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Balance Utilized, Net Balance
As Of --------------------------- As Of
1/1/99 Expenses, Net Cash Noncash 9/30/99
------------ ----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Employee severance and other
personnel benefits ............. $ 24.9 $ 20.5 $ (27.2) $ -- $ 18.2
Factory, warehouse, office
and other costs ................. 12.1 1.6 (4.9) (0.3) 8.5
------- ------- ------- ------- -------
$ 37.0 $ 22.1 $ (32.1) $ (0.3) $ 26.7
======= ======= ======= ======= =======
</TABLE>
In the third quarter of 1998 the Company recognized a gain of approximately
$7.1 on the sale of the wigs and hairpieces portion of its U.S. operation.
7
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(5) LONG-TERM DEBT
In November 1998, Products Corporation issued and sold $250.0 principal
amount of 9% Senior Notes due 2006 (the "9% Notes"), of which $200.0 was used to
temporarily reduce borrowings under the Credit Agreement (as hereinafter
defined) then in effect in anticipation of the redemption referred to below. On
June 1, 1999, Products Corporation redeemed the $200.0 principal amount of
9 1/2% Senior Notes due 1999 (the "1999 Notes") with borrowings from the Credit
Agreement.
The Credit Agreement contained financial covenants requiring Products
Corporation to maintain minimum interest coverage and to limit its leverage
ratio, among other things. As a result of the loss from continuing operations
before taxes incurred by Products Corporation in the quarter ended September 30,
1999, the interest coverage and leverage ratios specified in the Credit
Agreement were not achieved at September 30, 1999. The Credit Agreement was
amended on November 10, 1999 to (i) eliminate the interest coverage ratio and
leverage ratio covenants from the quarter ended September 30, 1999 through the
year 2000 and to modify those covenants for the years 2001 and 2002; (ii) add a
minimum EBITDA covenant for the year 2000; (iii) limit the amount that Products
Corporation may spend for capital expenditures and investments including
acquisitions; (iv) permit the sale of Products Corporation's worldwide
professional products business and its non-core Latin American brands Colorama,
Juvena, Bozzano and Plusbelle (such sales, the "Asset Sales") (see Note 7); (v)
change the reduction of the aggregate commitment that is required upon
consummation of any Asset Sale to an amount equal to 60% of the Net Proceeds (as
defined in the Credit Agreement) from such Asset Sale as opposed to 100% of such
Net Proceeds as provided under the Credit Agreement prior to the amendment; (vi)
increase the "applicable margin" by 3/4 of 1% and (vii) permit the amendment of
the Japanese yen-denominated credit agreement (the "Yen Credit Agreement")
described below. Until the Asset Sales are consummated, the aggregate commitment
under the Credit Agreement, along with the originally scheduled reductions
thereof, remains as described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
On November 12, 1999, the borrower under the Yen Credit Agreement
executed an amendment to the Yen Credit Agreement to eliminate the amortization
payment due in March 2000 and to provide that the final maturity date of the Yen
Credit Agreement will be the earlier of (i) the closing date of the sale of
Products Corporation's professional products business and (ii) December 31,
2000.
8
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(6) GEOGRAPHIC INFORMATION
The Company manages its business on the basis of one reportable operating
segment. 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 and liabilities are affected by
fluctuations in foreign currency exchange rates. The Company's operations in
Brazil have accounted for approximately 3.9% and 5.5% of the Company's net sales
for the third quarter of 1999 and 1998, respectively, and 3.9% and 5.6% of the
Company's net sales for the nine months ended September 30, 1999 and 1998,
respectively. Net sales by geographic area are presented by attributing revenues
from external customers on the basis of where the products are sold.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
GEOGRAPHIC AREAS: September 30, September 30,
---------------- --------------------
Net sales: 1999 1998 1999 1998
------ ------- -------- --------
<S> <C> <C> <C> <C>
United States................................... $250.0 $334.3 $ 847.1 $ 958.3
International................................... 202.4 214.3 599.8 663.4
------ ----- -------- --------
$452.4 $548.6 $1,446.9 $1,621.7
====== ===== ======== ========
<CAPTION>
September 30, December 31,
Long-lived assets: 1999 1998
------ ------
<S> <C> <C>
United States................................... $626.8 $637.9
International................................... 264.6 287.4
------ ------
$891.4 $925.3
====== ======
<CAPTION>
Three Months Ended Nine Months Ended
CLASSES OF SIMILAR PRODUCTS: September 30, September 30,
---------------- --------------------
Net sales: 1999 1998 1999 1998
------ ------ -------- --------
<S> <C> <C> <C> <C>
Cosmetics, skin care and fragrances............. $243.0 $307.8 $ 782.7 $ 942.0
Personal care and professional.................. 209.4 240.8 664.2 679.7
------ ------ -------- --------
$452.4 $548.6 $1,446.9 $1,621.7
====== ====== ======== ========
</TABLE>
9
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(7) SUBSEQUENT EVENTS
On October 1, 1999 the Company announced that it had completed its review
of strategic alternatives to maximize shareholder value and had decided to
pursue the sale of its worldwide professional products business and its non-core
Latin American brands Colorama, Juvena, Bozzano and Plusbelle. The Company is
negotiating or in active discussions with prospective purchasers and, subject to
reaching agreement on terms and documentation, anticipates consummating the
sales during the first quarter of 2000. The Company intends that proceeds, net
of fees, expenses and transaction-related charges, will be applied to reduce
borrowings. The Company has determined not to sell its remaining cosmetics,
personal care, fragrances and skin treatment businesses.
In October and November 1999 purported class actions were filed by each of
Thomas Comport, Boaz Spitz, Felix Ezeir and Amy Hoffman and Ted Parris,
individually and on behalf of others similarly situated to them, in the United
States District Court for the Southern District of New York, against the Company
and certain of its present and former officers and directors and against the
Company's independent auditors in the Comport and Hoffman/Parris cases,
alleging, among other things, violations of Rule 10b-5 under the Securities
Exchange Act of 1934, as amended, through the alleged use of deceptive
accounting practices during the period from October 29, 1997 through October 2,
1998, inclusive, in the Comport and Hoffman/Parris cases and October 30, 1997
through October 1, 1999, inclusive, in the Spitz and Ezeir cases. Each of the
actions seeks a declaration that it is properly brought as a class action, and
unspecified damages, attorney fees and other costs. The Company believes the
allegations contained in these suits to be without merit and intends to
vigorously defend against them.
On November 1, 1999 the Company elected Jeffrey M. Nugent, formerly
worldwide President of Neutrogena Corporation Inc., as President and Chief
Executive Officer, effective December 5, 1999, and George Fellows resigned as
Director and President and Chief Executive Officer.
10
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
OVERVIEW
The Company operates in a single 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 has a licensing group.
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales for the three month
and nine month periods ended September 30, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -------------------
Net sales: 1999 1998 1999 1998
------ ------ -------- --------
<S> <C> <C> <C> <C>
United States................ $250.0 $334.3 $847.1 $958.3
International................ 202.4 214.3 599.8 663.4
------ ------ -------- --------
$452.4 $548.6 $1,446.9 $1,621.7
====== ====== ======== ========
</TABLE>
The following sets forth certain statements of operations data as a
percentage of net sales for the three month and nine month periods ended
September 30, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of sales ............................. 37.6% 33.9% 35.3% 33.5%
Gross profit .............................. 62.4 66.1 64.7 66.5
Selling, general and administrative
expenses ("SG&A") .................... 89.2 58.8 69.2 59.1
Business consolidation costs and other, net 0.9 (1.3) 1.5 (0.4)
Operating (loss) income ................... (27.7) 8.6 (6.0) 7.8
</TABLE>
NET SALES
Net sales were $452.4 and $548.6 for the third quarters of 1999 and 1998,
respectively, a decrease of $96.2, or 17.5% on a reported basis (a decrease of
15.4% on a constant U.S. dollar basis), and were $1,446.9 and $1,621.7 for the
nine months ended September 30, 1999 and 1998, respectively, a decrease of
$174.8, or 10.8% on a reported basis (a decrease of 8.4% on a constant U.S.
dollar basis).
United States. Net sales in the United States were $250.0 for the third
quarter of 1999 compared to $334.3 for the third quarter of 1998, a decrease of
$84.3, or 25.2%, and were $847.1 for the nine months ended September 30, 1999
compared to $958.3 for the nine months ended September 30, 1998, a decrease of
$111.2, or 11.6%. Net sales for the third quarter and nine months ended
September 30, 1999 were adversely affected by slower than anticipated category
growth, competitive activities and a reduction in the level of Company shipments
to certain retailers in accordance with such retailers' new, lower inventory
target levels. The reduction of inventory shipments will continue and is
expected to adversely impact sales at least through the fourth quarter of 1999.
REVLON brand color cosmetics continued as the number one brand in dollar
market share in the U.S. self-select distribution channel. New products in the
nine months ended September 30, 1999 included EVERYLASH mascara, MOISTURESTAY
11
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
SHEER LIP COLOR, REVLON AGE DEFYING compact makeup, WET/DRY EYE SHADOW, ALMAY
STAY SMOOTH lip makeup and mascara, ALMAY FOUNDATION with the Skin Stays Clean
attributes, products in the ALMAY ONE COAT collection, MITCHUM COOL DRY
antiperspirant and COLORSTAY Liquid Lip.
International. Net sales outside the United States were $202.4 for the
third quarter of 1999 compared to $214.3 for the comparable 1998 period, a
decrease of $11.9, or 5.6%, on a reported basis (an increase of 0.4% on a
constant U.S. dollar basis), and were $599.8 for the nine months ended September
30, 1999 compared to $663.4 for the nine months ended September 30, 1998, a
decrease of $63.6, or 9.6%, on a reported basis (a decrease of 3.5% on a
constant U.S. dollar basis). Net sales for the third quarter and nine months
ended September 30, 1999 on a constant U.S. dollar basis were affected by
unfavorable economic conditions in certain markets outside the U.S., which
restrained consumer and trade demand, and lower sales in certain markets. The
decrease in net sales for the third quarter and the nine months ended September
30, 1999 on a reported basis also reflects the unfavorable effect on sales of a
stronger U.S. dollar against certain foreign currencies, particularly the
Brazilian real, partially offset by the weakening of the U.S. dollar against the
Japanese yen. Sales outside the United States are divided into three geographic
regions. In Europe, which is comprised of Europe, the Middle East and Africa,
net sales decreased by 2.5% on a reported basis to $89.0 for the third quarter
of 1999 as compared to the third quarter of 1998 (an increase of 2.6% on a
constant U.S. dollar basis), and decreased by 8.8% on a reported basis to $271.2
for the nine months ended September 30, 1999 as compared to the nine months
ended September 30, 1998 (a decrease of 5.1% on a constant U.S. dollar basis).
In the Western Hemisphere, which is comprised of Canada, Mexico, Central
America, South America and Puerto Rico, net sales decreased by 14.3% on a
reported basis to $77.0 for the third quarter of 1999 as compared to the third
quarter of 1998 (a decrease of 2.4% on a constant U.S. dollar basis), and
decreased by 14.5% on a reported basis to $223.3 for the nine months ended
September 30, 1999 as compared to the nine months ended September 30, 1998 (a
decrease of 1.5% on a constant U.S. dollar basis). The Company's operations in
Brazil are significant. In Brazil, net sales were $17.5 on a reported basis for
the third quarter of 1999 compared to $30.1 for the third quarter of 1998, a
decrease of $12.6, or 41.9% (a decrease of 7.6% on a constant U.S. dollar
basis), and were $56.9 for the nine months ended September 30, 1999 on a
reported basis compared to $91.3 for the nine months ended September 30, 1998, a
decrease of $34.4, or 37.7% (a decrease of 3.5% on a constant U.S. dollar
basis). On a reported basis, net sales in Brazil were adversely affected by the
stronger U.S. dollar against the Brazilian real. In the Far East, net sales
increased by 9.6% on a reported basis to $36.4 for the third quarter of 1999 as
compared to the third quarter of 1998 (an increase of 1.2% on a constant U.S.
dollar basis), and increased by 0.6% on a reported basis to $105.3 for the nine
months ended September 30, 1999 as compared to the nine months ended September
30, 1998 (a decrease of 3.2% on a constant U.S. dollar basis). Net sales outside
the United States, including, without limitation, in Brazil, were, and may
continue to be, adversely impacted by generally weak economic conditions,
political and economic uncertainties, including, without limitation, currency
fluctuations and competitive activities in certain markets.
Cost of sales
As a percentage of net sales, cost of sales was 37.6% for the third quarter
of 1999 compared to 33.9% for the third quarter of 1998, and 35.3% for the nine
months ended September 30, 1999 compared to 33.5% for the nine months ended
September 30, 1998. The increase in cost of sales as a percentage of net sales
for the third quarter and nine months ended September 30, 1999 compared to the
comparable 1998 periods is due to changes in product mix, the effect of weaker
local currencies on the cost of imported purchases by subsidiaries outside the
U.S. and the effect of lower net sales.
SG&A expenses
As a percentage of net sales, SG&A expenses were 89.2% ($403.5) for the
third quarter of 1999 compared to 58.8% ($322.6) for the third quarter of 1998,
and were 69.2% ($1,001.0) for the nine months ended September 30, 1999 compared
to 59.1% ($958.2) for the nine months ended September 30, 1998. SG&A expenses in
the 1999 periods reflect increased brand support as a percentage of net sales
partially offset by cost savings achieved from the Company's restructuring
program. The increases in SG&A expenses as a percentage of net sales are due in
large measure to the reduced levels of sales coupled with the Company's decision
to maintain throughout the second half of 1999 brand support intended to drive
consumer purchasing and facilitate the inventory reduction process by U.S.
retailers referred to earlier.
12
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Business consolidation costs and other, net
In the fourth quarter of 1998, the Company committed to a restructuring
plan to realign and reduce personnel, exit excess leased real estate, realign
and consolidate regional activities, reconfigure certain manufacturing
operations and exit certain product lines. In the first quarter of 1999, the
Company recorded a net charge of $8.2 relating to such restructuring plan,
principally for additional employee severance and other personnel benefits and
continued to implement such restructuring plan during the second quarter of 1999
during which it recorded a charge of $8.5 for employee severance and other
personnel benefits as well as other costs. Also in the second quarter of 1999,
the Company adopted a plan to exit a non-core business as to which a charge of
$1.0 is included in business consolidation costs and other, net. In the third
quarter of 1999, the Company recorded an additional charge of $3.8 relating to
the restructuring plan for employee severance and other personnel benefits, as
well as costs associated with the exit from a leased facility. In the third
quarter of 1999, the Company also consummated the exit from the non-core
business referred to above, as to which an additional charge of $0.6 is included
in business consolidation costs and other, net. In the third quarter of 1998 the
Company recognized a gain of approximately $7.1 on the sale of the wigs and
hairpieces portion of its U.S. operation.
Operating (loss) income
As a result of the foregoing, operating (loss) for the third quarter of
1999 was $(125.5) compared to operating income of $47.0 for the third quarter of
1998 and an operating (loss) of $(86.8) for the nine months ended September 30,
1999 compared to operating income of $127.2 for the nine months ended September
30, 1998.
Other expenses/(income)
Interest expense was $36.8 for the third quarter of 1999 compared to $33.0
for the third quarter of 1998 and $108.6 for the nine months ended September 30,
1999 compared to $103.3 for the nine months ended September 30, 1998. The
increase in interest expense for the third quarter and nine months ended
September 30, 1999 as compared to the comparable 1998 periods is due to higher
average outstanding debt and higher interest rates under the Credit Agreement,
partially offset by lower interest rates as a result of the refinancings in
1998.
Foreign currency losses, net, were $0.2 for the third quarter of 1999
compared to $1.9 in the third quarter of 1998 and $0.2 for the nine months ended
September 30, 1999 compared to $4.7 for the nine months ended September 30,
1998. Foreign currency losses, net, for the third quarter and the nine months
ended September 30, 1998 were comprised primarily of losses in several markets
in Latin America.
Provision (benefit) for income taxes
The provision (benefit) for income taxes was $1.9 for the third quarter of
1999 compared to $(0.7) for the third quarter of 1998 and $5.6 for the nine
months ended September 30, 1999 compared to $6.4 for the nine months ended
September 30, 1998. The decrease during the nine months ended September 30, 1999
compared with the corresponding 1998 period was primarily due to lower taxable
income outside the United States.
Discontinued operations
During 1998, the Company determined to exit the retail and outlet store
business comprised of its approximately 85% ownership interest in The Cosmetic
Center, Inc. ("CCI") and, accordingly, the results of operations of CCI have
been reported as discontinued operations for the 1998 periods along with the
then estimated loss on disposal of such operations. By the end of 1998, the
Company completed the disposition of its approximately 85% equity interest in
CCI.
13
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Extraordinary items
The extraordinary item of $51.7 in the 1998 period resulted from the
write-off of deferred financing costs and payment of call premiums associated
with the redemption in March 1998 of Products Corporation's 10 1/2% Senior
Subordinated Notes due 2003 (the "Senior Subordinated Notes") and the redemption
in April 1998 of Products Corporation's 9 3/8% Senior Notes due 2001 (the
"Senior Notes").
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $90.8 and $96.8 for the nine
months ended September 30, 1999 and 1998, respectively. The decrease in net cash
used for operating activities for the nine months ended September 30, 1999
compared to the nine months ended September 30, 1998 was the result of changes
in working capital, partially offset by operating losses and increased use of
cash for business consolidation costs during the nine months ended September 30,
1999.
Net cash used for investing activities was $29.8 and $84.4 for the nine
months ended September 30, 1999 and 1998, respectively. Net cash used for
investing activities in the 1999 period included proceeds from the consummation
of the exit from and sale of a small non-core business, and in the 1998 period
included cash paid in connection with acquisitions, partially offset by the
proceeds from the sale of the wigs and hairpieces portion of the Company's U.S.
operation and certain fixed assets. Both periods included capital expenditures.
Net cash provided by financing activities was $187.0 and $198.3 for the
nine months ended September 30, 1999 and 1998, respectively. Net cash provided
by financing activities for the nine months ended September 30, 1999 included
cash drawn under the Credit Agreement, partially offset by repayments of
borrowings under the Credit Agreement, redemption of the 1999 Notes and
repayments under the Yen Credit Agreement. Net cash provided by financing
activities for the nine months ended September 30, 1998 included proceeds from
the issuance of Products Corporation's 8 5/8% Senior Subordinated Notes due 2008
(the "8 5/8% Notes"), Products Corporation's 8 1/8% Senior Notes due 2006 (the
"8 1/8% Notes") and cash drawn under the Credit Agreement, partially offset by
the payment of fees and expenses related to the issuance of the 8 5/8% Notes and
the 8 1/8% Notes, the redemption of the Senior Subordinated Notes and the Senior
Notes, and the repayment of borrowings under the Yen Credit Agreement. During
the nine months ended September 30, 1998, net cash used by discontinued
operations was $16.9.
In May 1997, Products Corporation entered into a credit agreement (as
subsequently amended, the "Credit Agreement") with a syndicate of lenders, whose
individual members change from time to time. The Credit Agreement provides up to
$748.0 and is comprised of five senior secured facilities: $198.0 in two term
loan facilities (the "Term Loan Facilities"), a $300.0 multi-currency facility
(the "Multi-Currency Facility"), a $200.0 revolving acquisition facility, which
may also be used for general corporate purposes and which may be increased to
$400.0 under certain circumstances with the consent of a majority of the lenders
(the "Acquisition Facility"), and a $50.0 special standby letter of credit
facility (the "Special LC Facility"). At September 30, 1999, the Company had
approximately $198.0 outstanding under the Term Loan Facilities, $259.9
outstanding under the Multi-Currency Facility, $200.0 outstanding under the
Acquisition Facility and $28.8 of issued but undrawn letters of credit under the
Special LC Facility.
The Credit Agreement contained financial covenants requiring Products
Corporation to maintain minimum interest coverage and to limit its leverage
ratio, among other things. As a result of the loss from continuing operations
before taxes incurred by Products Corporation in the quarter ended September 30,
1999, the interest coverage and leverage ratios specified in the Credit
Agreement were not achieved at September 30, 1999. The Credit Agreement was
amended on November 10, 1999 to (i) eliminate the interest coverage ratio and
leverage ratio covenants from the quarter ended September 30, 1999 through the
year 2000 and to modify those covenants for the years 2001 and 2002; (ii) add a
minimum EBITDA covenant for the year 2000; (iii) limit the amount that Products
Corporation may spend for capital expenditures and investments including
acquisitions; (iv) permit the sale of Products Corporation's worldwide
professional products business and its non-core Latin American brands Colorama,
Juvena, Bozzano and Plusbelle; (v) change the reduction of the aggregate
commitment that is required upon consummation of any Asset Sale to an amount
equal to 60% of the Net Proceeds (as defined in the Credit Agreement) from such
Asset Sale as opposed to 100% of such Net Proceeds as provided under the Credit
Agreement prior to the amendment; (vi) increase the "applicable margin" by 3/4
of 1% and (vii) permit the amendment of the Yen Credit Agreement described
below. Until the Asset Sales are
14
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
consummated, the aggregate commitment under the Credit Agreement, along with the
originally scheduled reductions thereof, remains as described in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
A subsidiary of Products Corporation is the borrower under the Yen
Credit Agreement, which had a principal balance of approximately (yen) 1.0
billion as of September 30, 1999 (approximately $9.5 U.S. dollar equivalent as
of September 30, 1999) after giving effect to the payment of approximately (yen)
539 million (approximately $4.6 U.S. dollar equivalent) in March 1999. On
November 12, 1999, the borrower under the Yen Credit Agreement executed an
amendment to the Yen Credit Agreement to eliminate the amortization payment due
in March 2000 and to provide that the final maturity date of the Yen Credit
Agreement will be the earlier of (i) the closing date of the sale of Products
Corporation's professional products business and (ii) December 31, 2000.
In November 1998, Products Corporation issued and sold $250.0 principal
amount of 9% Notes, of which $200.0 was used to temporarily reduce borrowings
under the Credit Agreement in anticipation of the redemption referred to below.
On June 1, 1999, Products Corporation redeemed the $200.0 principal amount of
1999 Notes with borrowings from 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 interest rates under the Credit Agreement. No such
borrowings were outstanding as of September 30, 1999.
The Company's principal sources of funds are expected to be cash flow
generated from operations and borrowings under the Credit Agreement,
refinancings and other existing working capital lines. The Credit Agreement, the
8 5/8% Notes, the 8 1/8% Notes and the 9% Notes contain certain provisions that
by their terms limit Products Corporation's and/or its subsidiaries' ability to,
among other things, incur additional debt. The Company's principal uses of funds
are expected to be the payment of operating expenses, working capital and
capital expenditure requirements, expenses in connection with the Company's
restructuring referred to above and debt service payments. Additionally, the
Company expects that it will receive cash proceeds from the Asset Sales, a
portion of which proceeds, net of fees, expenses and transaction-related
charges, will be used to repay indebtedness under the Credit Agreement.
The Company estimates that capital expenditures for 1999 will be
approximately $45, including upgrades to the Company's management information
systems. The Company estimates that cash payments related to the restructuring
plans referred to in Note 4 will be approximately $55, of which approximately
$38 will be paid in 1999. Pursuant to a tax sharing agreement, Revlon, Inc. may
be required to make tax sharing payments to Mafco Holdings Inc. as if Revlon,
Inc. were filing separate income tax returns, except that no payments are
required by Revlon, Inc. if and to the extent that Products Corporation is
prohibited under the Credit Agreement from making tax sharing payments to
Revlon, Inc. The Credit Agreement prohibits Products Corporation from making any
tax sharing payments other than in respect of state and local income taxes.
Revlon, Inc. currently anticipates that, as a result of net operating tax losses
and prohibitions under the Credit Agreement, no cash federal tax payments or
cash payments in lieu of federal taxes pursuant to the tax sharing agreement
will be required for 1999.
Products Corporation enters into forward foreign exchange contracts and
option contracts from time to time to hedge certain cash flows denominated in
foreign currencies. Products Corporation had forward foreign exchange contracts
denominated in various currencies of approximately $11.8 and $30.3 (U.S. dollar
equivalent) outstanding at September 30, 1999 and 1998, respectively, and option
contracts of approximately $12.6 and $24.0 outstanding at September 30, 1999 and
1998, respectively. Such contracts are entered into to hedge transactions
predominantly occurring within twelve months. If Products Corporation had
terminated these contracts on September 30, 1999 and 1998 no material gain or
loss would have been realized.
Based upon the Company's current level of operations and anticipated net
sales and earnings, the Company expects that cash flows from operations and
funds from currently available credit facilities and refinancings of existing
indebtedness as well as anticipated proceeds during the first quarter of 2000
from the Asset Sales 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. However, there can be no assurance that the
combination of cash flow from operations, funds from existing credit facilities
and refinancings of existing indebtedness and anticipated proceeds during the
first quarter of 2000 from the Asset Sales will be sufficient to meet the
Company's cash requirements on a consolidated basis. 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,
15
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
selling other assets or operations, or seeking capital contributions or loans
from affiliates of the Company or issuing additional shares of capital stock of
Revlon, Inc. Revlon, Inc., 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 dividend or distribution on
the Class A Common Stock that may be authorized by the Board of Directors of
Revlon, Inc. There can be no assurance that any of such actions could be
effected, that they would enable the Company to continue to satisfy its capital
requirements or that they would be permitted under the terms of the Company's
various debt instruments then in effect. The terms of the Credit Agreement, the
8 5/8% Notes, the 8 1/8% Notes and the 9% Notes generally restrict Products
Corporation from paying dividends or making distributions, except that Products
Corporation is permitted to pay dividends and make distributions to Revlon,
Inc., among other things, to enable Revlon, Inc. 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 (the "Commission") filing fees and other miscellaneous expenses
related to being a public holding company and to pay dividends or make
distributions in certain circumstances to finance the purchase by Revlon, Inc.
of its Class A Common Stock in connection with the delivery of such Class A
Common Stock to grantees under the Revlon, Inc. Second Amended and Restated 1996
Stock Plan, provided that the aggregate amount of such dividends and
distributions taken together with any purchases of Revlon, Inc. common stock on
the open market to satisfy matching obligations under the excess savings plan
may not exceed $6.0 per annum.
YEAR 2000
Commencing in 1997, the Company undertook a business process enhancement
program to substantially upgrade management information technology systems in
order to provide comprehensive order processing, production and accounting
support for the Company's business. The Company also developed a comprehensive
plan to address Year 2000 issues. The Year 2000 plan addresses three main areas:
(a) information technology systems; (b) non-information technology systems
(including factory equipment, building systems and other embedded systems); and
(c) business partner readiness (including without limitation customers,
inventory and non-inventory suppliers, service suppliers, banks, insurance
companies and tax and other governmental agencies). To oversee the process, the
Company established a Steering Committee comprised of senior executives of the
Company.
In connection with and as part of the Company's business process
enhancement program, certain information technology systems have been and will
continue to be upgraded to be Year 2000 compliant. In addition, as part of its
Year 2000 plan, the Company identified potential deficiencies related to Year
2000 in certain of its information technology systems, both hardware and
software, and is in the process of addressing them through upgrades and other
remediation. The Company was substantially compliant by the end of the third
quarter of 1999, and it currently expects to complete upgrade and remediation
and testing of its information systems during the fourth quarter of 1999. Such
upgrades, remediation and testing remain to be completed at certain locations in
the European Region that represent less than 5% of worldwide net revenues. With
regard to EDI transactions, the Company has implemented the 4010 EDI transaction
standard and the Company has performed tests with most of its trading partners,
with a few being scheduled for tests during the fourth quarter of 1999. For the
limited number of trading partners using an EDI method other than the 4010
standard, the Company intends to coordinate with them on their approach to Year
2000 compliance. In respect of non-information technology systems with date
sensitive operating controls, the Company identified those items that required
remediation or replacement, and has completed the upgrade and remediation
program.
The Company has identified and contacted and continues to identify and
contact key suppliers, both inventory and non-inventory, key customers and other
strategic business partners, such as banks, pension trust managers and marketing
data suppliers, either by soliciting written responses to questionnaires and/or
by meeting with certain of such third parties. The parties from whom the Company
has received responses to date generally have indicated that their systems are
or will be Year 2000 compliant.
The Company does not expect that incremental out-of-pocket costs of its
Year 2000 program (which do not include costs incurred in connection with the
Company's comprehensive business process enhancement program) will be material.
These costs are expected to continue to be incurred through the end of 1999 and
include the cost of third party consultants, remediation of existing computer
software and replacement and remediation of embedded systems.
16
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
The Company believes that at the current time it is difficult to identify
specifically the most reasonably likely worst case Year 2000 scenario. As with
all manufacturers and distributors of products such as those sold by the
Company, a reasonable worst case scenario would be the result of failures of
third parties (including, without limitation, governmental entities and entities
with which the Company has no direct involvement, as well as the Company's
suppliers of goods and services and customers) that continue for more than a
brief period in various geographic areas where the Company's products are
produced or sold at retail or in areas from which the Company's raw materials
and components are sourced. Continuing failures in key geographic areas in the
United States and in certain European, South American and Asian countries that
limit the Company's ability to produce products, its customers' ability to
purchase and pay for the Company's products and/or consumers' ability to shop,
would be likely to have a material adverse effect on the Company's results of
operations and financial condition, although it would be expected that at least
part of any lost sales eventually would be recouped. The extent of such deferred
or lost revenue cannot be estimated at this time. In connection with functions
that represent a particular Year 2000 risk, including the production,
warehousing and distribution of products and the supply of raw materials and
components, the Company has various contingency plans. These contingency plans
include (a) receiving additional raw material and component inventory for items
with long lead-times during December 1999 as a precautionary measure to protect
production and sales in January 2000, (b) pre-staging production material and
generating backup files of critical production and inventory data (via on-line
or hard copy) prior to January 1, 2000 and (c) performing additional start-up
tests of critical systems at critical locations during the weekend of January
2-3, 2000 before the first business day of Year 2000 and during the first week
in January 2000.
The Company's Year 2000 efforts are ongoing and its overall plan, as well
as the contingency plans, will continue to evolve as January 1, 2000 approaches.
While the Company currently anticipates continuity of its business activities,
that continuity will be dependent upon its ability, and the ability of third
parties upon which the Company relies directly, or indirectly, to be Year 2000
compliant. There can be no assurance that the Company and such third parties
will eliminate potential Year 2000 issues in a timely manner or as to the
ultimate cost to the Company of doing so.
EURO CONVERSION
As part of the European Economic and Monetary Union, a single currency (the
"Euro") will replace the national currencies of the principal European countries
(other than the United Kingdom) in which the Company conducts business and
manufacturing. The conversion rates between the Euro and the participating
nations' currencies were fixed as of January 1, 1999, with the participating
national currencies to be removed from circulation between January 1, 2002 and
June 30, 2002 and replaced by Euro notes and coinage. During the transition
period from January 1, 1999 through December 31, 2001, public and private
entities as well as individuals may pay for goods and services using checks,
drafts, or wire transfers denominated either in the Euro or the participating
country's national currency. Under the regulations governing the transition to a
single currency, there is a "no compulsion, no prohibition" rule which states
that no one can be prevented from using the Euro after January 1, 2002 and no
one is obliged to use the Euro before July 2002. In keeping with this rule, the
Company expects to either continue using the national currencies or the Euro for
invoicing or payments. Based upon the information currently available, the
Company does not expect that the transition to the Euro will have a material
adverse effect on the business or consolidated financial condition of the
Company.
17
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has exposure to market risk both as a result of changing
interest rates and movements in foreign currency exchange rates. The Company's
policy is to manage market risk through a combination of fixed and floating rate
debt, the use of derivative financial instruments and foreign exchange forward
and option contracts. The Company does not hold or issue financial instruments
for trading purposes. The qualitative and quantitative information presented in
Item 7A of the Company's Annual Report on Form 10-K for the year ended December
31, 1998 describes significant aspects of the Company's financial instrument
programs which have material market risk as of December 31, 1998. As referred to
above, on June 1, 1999, Products Corporation redeemed the $200.0 principal
amount of 1999 Notes with borrowings from the Credit Agreement. As of September
30, 1999 there had been no other substantive changes in the qualitative and
quantitative information presented in Item 7A at December 31, 1998. The
following table presents the information required by Item 7A as of September 30,
1999 and October 29, 1999.
<TABLE>
<CAPTION>
Fair Fair
Average Expected maturity date for year ended September 30, Value Value
Contractual --------------------------------------------------- Sept. 30, Oct. 29,
Rate (a) 2000 2001 2002 2003 2004 Thereafter Total 1999(d) 1999(e)
----------- ---- ---- ---- ---- ---- ---------- ----- ------- ------
DEBT (US dollar equivalent in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term variable rate (various currencies) $34.4 $ 34.4 $ 34.4 $ 34.4
Average interest rate (b) 4.8%
Long-term fixed rate ($US) $1,149.2 1,149.2 997.2 746.7
Average interest rate 8.6%
Long-term variable rate ($US) 46.0 $76.0 $394.3 516.3 516.3 516.3
Average interest rate (b) 9.0% 9.2% 9.3%
Long-term variable rate (various currencies) 5.4 4.9 141.5 $0.0 $0.0 0.0 151.8 151.8 151.8
Average interest rate (b) 3.0% 3.3% 11.0% 7.3% 7.3% 7.3%
-------- -------- --------
Sub-total - Debt $1,851.7 $1,699.7 $1,449.2
======== ======== ========
FORWARD AND OPTION CONTRACTS (c)
British Pound Option Contracts 0.6 1.8 $ 1.8 $ 0.0 $ 0.0
Canadian Dollar Forward Contracts 1.5 2.5 2.5 (0.1) (0.1)
Option Contracts 1.6 5.0 5.0 (0.2) (0.1)
South African Rand Forward Contracts 6.6 3.3 3.3 (0.3) (0.2)
Hong Kong Dollar Forward Contracts 7.9 1.5 1.5 0.0 0.0
Australian Dollar Forward Contracts 1.6 1.5 1.5 (0.1) (0.1)
Option Contracts 1.6 2.9 2.9 (0.1) (0.1)
German Deutschemark Forward Contracts 1.6 1.5 1.5 0.1 0.2
Option Contracts 1.7 2.9 2.9 0.1 0.1
New Zealand Dollar Forward Contracts 1.9 1.2 1.2 0.0 0.0
Switzerland Franc Forward Contracts 1.3 0.3 0.3 0.0 0.0
</TABLE>
(a) Stated in units of local currency per U.S. dollar.
(b) Weighted average variable rates are based upon implied forward rates from
the yield curves at September 30, 1999.
(c) Maturity amounts for forward and option contracts are stated in contract
notional amounts for all contracts outstanding at September 30, 1999.
(d) The fair value of foreign currency options and forward exchange contracts
at September 30, 1999 is the estimated amount the Company would receive
(pay) to terminate the agreements at September 30, 1999.
(e) The fair value of foreign currency options and forward exchange contracts
at October 29, 1999 is the estimated amount the Company would receive (pay)
to terminate the agreements at October 29, 1999.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the quarter ended September 30, 1999
as well as other public documents of the Company contain forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from those discussed in such forward-looking statements.
Such statements include, without limitation, the Company's expectations and
estimates as to introduction of new products and expansion into markets, future
financial performance, including net sales and earnings, the effect on sales of
lower retailer inventory targets, the Company's intention to drive consumer
spending
18
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
and facilitate inventory reduction through brand support, the effect on
sales of political and/or economic conditions and competitive activities in
certain markets, the Company's estimate of restructuring activities, costs and
benefits, cash flow from operations, information systems upgrades, the Company's
plan to address the Year 2000 issue, the costs associated with the Year 2000
issue and the results of Year 2000 non-compliance by the Company or by one or
more of the Company's customers, suppliers or other strategic business partners,
capital expenditures, the Company's qualitative and quantitative estimates as to
market risk sensitive instruments, the Company's expectations about the effects
of the transition to the Euro, the availability of funds from currently
available credit facilities and refinancings of indebtedness, the Asset Sales,
and capital contributions or loans from affiliates or the sale of assets or
operations or additional shares of Revlon, Inc. and the Company's intent to
pursue the sale of its professional products business and its non-core regional
Latin American brands, that it will consummate such sales during the first
quarter of 2000 and its expectation regarding the proceeds of such sales.
Statements that are not historical facts, including statements about the
Company's beliefs and expectations, are forward-looking statements.
Forward-looking statements can be identified by, among other things, the use of
forward-looking language, such as "believe," "expects," "may," "will," "should,"
"seeks," "plans," "scheduled to," "anticipates" or "intends" or the negative of
those terms, or other variations of those terms or comparable language, or by
discussions of strategy or intentions. Forward-looking statements speak only as
of the date they are made, and the Company undertakes no obligation to update
them. A number of important factors could cause actual results to differ
materially from those contained in any forward-looking statement. In addition to
factors that may be described in the Company's filings with the Commission,
including this filing, the following factors, among others, could cause the
Company's actual results to differ materially from those expressed in any
forward-looking statements made by the Company: (i) 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 into certain markets 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) the inability to
refinance indebtedness, secure capital contributions or loans from affiliates or
sell assets or operations or additional shares of Revlon, Inc.; (vi) effects of
and changes in political and/or economic conditions, including inflation and
monetary conditions, and in trade, monetary, fiscal and tax policies in
international markets, including but not limited to Brazil; (vii) actions by
competitors, including business combinations, technological breakthroughs, new
products offerings and marketing and promotional successes; (viii) combinations
among significant customers or the loss, insolvency or failure to pay debts by a
significant customer or customers; (ix) lower than expected sales as a result of
difficulties or delays in achieving retailers' inventory target levels; (x)
difficulties in driving consumer purchasing and facilitating inventory
reductions through brand support; (xi) difficulties, delays or unanticipated
costs or less than expected benefits resulting from the Company's restructuring
activities; (xii) interest rate or foreign exchange rate changes affecting the
Company and its market sensitive financial instruments; (xiii) difficulties,
delays or unanticipated costs associated with the transition to the Euro; (xiv)
difficulties, delays or unanticipated costs in achieving Year 2000 compliance or
unanticipated consequences from non-compliance by the Company or one or more of
the Company's customers, suppliers or other strategic business partners; and
(xv) difficulties or delays in pursuing the Asset Sales, the inability to
consummate such sales during the first quarter of 2000 or to secure the expected
level of proceeds from such sales.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The effect
of adopting the statement and the date of such adoption by the Company have not
yet been determined. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of SFAS No. 133, an Amendment of SFAS No. 133," which has delayed the required
implementation of SFAS No. 133 such that the Company must adopt this new
standard no later than January 1, 2001.
19
<PAGE>
REVLON, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
----------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS
4.12 Fourth Amendment, dated as of November 10, 1999, to the Amended and
Restated Credit Agreement, dated as of May 30, 1997, as amended, among
Revlon Consumer Products Corporation, the Borrowing Subsidiaries from
time to time parties thereto, the financial institutions from time to
time parties thereto, the Co-Agents named therein, Citibank, N.A., as
Documentation Agent, Lehman Commercial Paper Inc., as Syndication
Agent, The Chase Manhattan Bank, as Administrative Agent and Chase
Securities Inc., as Arranger.
4.13 Second Amendment dated as of November 12, 1999 by and among Pacific
Finance & Development Corp. and General Electric Capital Corporation,
assignee of the Long Term Credit Bank of Japan, to the Third Amended
and Restated Credit Agreement dated as of June 30, 1997.
10.27 Revlon Amended and Restated Executive Deferred Compensation Plan dated
as of August 6, 1999.
10.28 Employment Agreement dated as of May 10, 1999 between Revlon Consumer
Products Corporation and D. Eric Pogue.
(b) REPORTS ON FORM 8-K - NONE
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
REVLON, INC.
------------
Registrant
By:/s/ Frank J. Gehrmann By:/s/ Robert F. Sierpinski
- ---------------------------------- ------------------------------------------
Frank J. Gehrmann Robert F. Sierpinski
Executive Vice President Vice President, Acting Controller
and Chief Financial Officer and Acting Chief Accounting Officer
Dated: November 15, 1999
20
<PAGE>
EXHIBIT 4.12
FOURTH AMENDMENT
FOURTH AMENDMENT, dated as of November 10, 1999 (this "Amendment"), to
the Amended and Restated Credit Agreement, dated as of May 30, 1997 (as amended
by the First Amendment, dated as of January 29, 1998, the Second Amendment,
dated as of November 6, 1998, the Third Amendment, dated as of December 23,
1998, and as may be further amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Revlon Consumer Products
Corporation (the "Company"), the Borrowing Subsidiaries from time to time
parties thereto, the financial institutions from time to time parties thereto
(the "Lenders"), the Co-Agents named therein, Citibank, N.A., as Documentation
Agent, Lehman Commercial Paper Inc., as Syndication Agent, The Chase Manhattan
Bank, as Administrative Agent and Chase Securities Inc., as Arranger.
W I T N E S S E T H :
WHEREAS, the Company has requested that the Lenders and the Agents
amend certain provisions of the Credit Agreement;
WHEREAS, the Lenders and the Agents are willing to amend such
provisions 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 Lenders and the Agents hereby agree
as follows:
1. Definitions. (a) General. All terms defined in the Credit Agreement
shall have such defined meanings when used herein unless otherwise defined
herein.
(b) Replacement of Definitions. (i) The definitions of "Applicable
Margin" and "EBITDA" contained in subsection 1.1 of the Credit Agreement are
hereby amended by deleting such definitions in their entirety and substituting
in lieu thereof the following definitions:
"'Applicable Margin' shall mean:
(a) during the period from the Closing Date through and including the
Adjustment Date occurring with respect to the delivery of the consolidated
financial statements of the Company and its Subsidiaries for the fiscal
period ending June 30, 1997, (i) with respect to Alternate Base Rate Loans,
1/2% per annum and (ii) with respect to all other Loans, 1-1/2% per annum;
and
(b) thereafter, for the period commencing with any Adjustment Date
(other than as described below) and ending on the day immediately preceding
the next succeeding Adjustment Date, the Applicable Margin shall be the
rate per annum set forth below for the relevant type of Loan opposite the
Leverage Ratio for such period:
<PAGE>
- ------------------------------------------ ----------------- ------------------
Alternate Base
Rate Loans not
Period constituting Other Loans
Local Loans
- ------------------------------------------ ----------------- ------------------
Leverage Ratio is greater than 5.75 to 2-1/2% 3-1/2%
1.0
- ------------------------------------------ ----------------- ------------------
Leverage Ratio is greater than 5.25 to 2-1/4% 3-1/4%
1.0, but less than or equal to 5.75 to
1.0
- ------------------------------------------ ----------------- ------------------
Leverage Ratio is greater than 4.75 to 2% 3%
1.0, but less than or equal to 5.25 to
1.0
- ------------------------------------------ ----------------- ------------------
Leverage Ratio is greater than 4.50 to 1-3/4% 2-3/4%
1.0, but less than or equal to 4.75 to
1.0
- ------------------------------------------ ----------------- ------------------
Leverage Ratio is less than or equal to 1-1/2% 2-1/2%
4.50 to 1.0
- ------------------------------------------ ----------------- ------------------
; provided, however, for the period beginning on the Fourth Amendment
Effective Date and ending on the day immediately preceding the next
succeeding Adjustment Date, the Applicable Margin shall be determined based
on a Leverage Ratio of greater than 5.75 to 1.0; provided, further, that,
in the event that the financial statements required to be delivered
pursuant to subsection 13.1(a) and (c) are not delivered when due, then
during the period from the date upon which such financial statements were
required to be delivered until the date upon which they actually are
delivered, the Leverage Ratio shall be deemed for purposes of this
definition to be greater than 5.75 to 1.0;"
"'EBITDA' shall mean, for any period, the amount equal to:
(a) Consolidated Net Income for such period;
(b) plus (to the extent deducted in the determination of Consolidated
Net Income and without duplication) the sum of (i) tax expense on account
of such period, (ii) Interest Expense (including, without limitation, fees,
commissions and other charges associated with standby letters of credit and
other financing charges) for such period, (iii) depreciation and
amortization expense for such period, (iv) any losses in respect of
currency fluctuations for such period, (v) any losses in respect of equity
earnings for such period, (vi) the amount (not to exceed the excess of the
book value of the Roppongi Building on December 31, 1995 over $35,000,000)
equal to any write-down in the book value of the Roppongi Building (or,
upon the sale thereof, any loss upon such sale), (vii) non-cash write-offs
in respect of unamortized debt issuance costs, (viii) for any period of
determination including any of the fiscal quarters ending during the period
from December 31, 1998 through and including September 30, 1999 and without
duplication, non-recurring restructuring charges taken by the Company or
any of its Subsidiaries during any of such quarters which are
<PAGE>
included in such period of determination in an aggregate amount for all
such quarters not to exceed $65,000,000, (ix) for any period of
determination including any of the fiscal quarters ending during the period
from December 31, 1999 through and including December 31, 2000 and without
duplication, non-recurring restructuring charges taken by the Company or
any of its Subsidiaries during any of such quarters which are included in
such period of determination in an aggregate amount for all such quarters
not to exceed $135,000,000 and (x) any losses from the asset sales
described in subsection 14.6(l);
(c) minus (to the extent included in the determination of Consolidated
Net Income and without duplication) the sum of (i) interest income for such
period, (ii) extraordinary gains for such period, (iii) any gains in
respect of currency fluctuations for such period, (iv) any gains in respect
of equity earnings for such period and (v) any gains from the asset sales
described in subsection 14.6(l);
provided that, for purposes of the calculation only of the Leverage Ratio
and compliance with the provisions of subsection 14.1(a), the EBITDA of any
Person acquired by the Company or any of its Subsidiaries during the
relevant calculation period shall be included, on a pro forma basis, in the
EBITDA of the Company as if such Person had been acquired on the first day
of the calculation period;"
(c) Addition of Definitions. Subsection 1.1 of the Credit Agreement is
hereby amended by adding thereto the following new defined term in appropriate
alphabetical order:
"'Fourth Amendment' shall mean the Fourth Amendment, dated as of
November 10, 1999, to this Agreement;"
"'Fourth Amendment Effective Date' shall mean the date of effectiveness
of the Fourth Amendment;"
2. Amendment to Subsection 10.4. Subsection 10.4 of the Credit
Agreement is hereby amended by adding thereto the following new paragraph (e):
"(e) Notwithstanding the foregoing provisions of subsection 10.4(a), so
long as no Default or Event of Default shall have occurred and is then
continuing, 60% of the Net Proceeds from each Net Proceeds Event described
in subsection 14.6(l) shall be required to permanently reduce the Aggregate
Commitment at the times and in the manner specified in subsections 10.4(a)
and 10.5 and the remaining 40% of such Net Proceeds shall be required to
prepay the Loans but not reduce the Commitments."
<PAGE>
3. Amendment to Subsection 14.1(a). Subsection 14.1(a) of the Credit
Agreement is hereby amended by deleting the table set forth therein and
substituting in lieu thereof the following new table:
Date Ratio
---- -----
March 31, 2001 1.75 to 1.0
June 30, 2001 1.75 to 1.0
September 30, 2001 1.75 to 1.0
December 31, 2001 2.00 to 1.0
March 31, 2002 2.00 to 1.0
4. Amendment to Subsection 14.1(b). Subsection 14.1(b) of the Credit
Agreement is hereby amended by deleting the table set forth therein and
substituting in lieu thereof the following new table:
Date Ratio
---- -----
March 31, 2001 6.50 to 1.0
June 30, 2001 6.25 to 1.0
September 30, 2001 6.00 to 1.0
December 31, 2001 5.75 to 1.0
March 31, 2002 5.50 to 1.0
5. Amendment to Subsection 14.1(c). Subsection 14.1(c) of the Credit
Agreement is hereby amended by inserting after the amount "$75,000,000" in the
third line the following: "or, beginning with the 1999 fiscal year,
$50,000,000".
6. Addition of Subsection 14.1(d). There shall be added to the Credit
Agreement the following new subsection 14.1(d):
"(d) Maintenance of Minimum EBITDA. Permit EBITDA for the period from
January 1, 2000 to any date set forth below to be less than the amount set
forth opposite such date:
Date Amount
---- ------
March 31, 2000 $45,000,000
June 30, 2000 $90,000,000
September 30, 2000 $140,000,000
December 31, 2000 $200,000,000"
7. Amendment to Subsection 14.2(b). Subsection 14.2(b) of the Credit
Agreement is hereby amended by adding at the end thereof the following:
<PAGE>
"; provided, further, that the Yen Credit Agreement may be amended to
modify the maturity date thereunder to the earlier of (i) the date of
completion of the sale of the entire Worldwide Professional Products
business of the Company and (ii) December 31, 2000".
8. Amendment to Subsection 14.6. Subsection 14.6 of the Credit
Agreement is hereby amended by (i) deleting the word "and" at the end of clause
(j) thereof, (b) deleting the period at the end of clause (k) and substituting
in lieu thereof the following: "; and" and (c) adding at the end thereof the
following new clause (l):
"(l) the sale by the Company or any of its Subsidiaries of (i) the
Worldwide Professional Products business and (ii) the assets set forth on
Schedule I to the Fourth Amendment."
9. Amendment to Subsection 14.7(a)(v). Subsection 14.7(a)(v) of the
Credit Agreement is hereby amended by inserting after the words "extraordinary
gains" and prior to the comma in the third line thereof the following: "and
(without duplication) any gains from the asset sales described in subsection
14.6(l)".
10. Amendment to Subsection 14.8(e). Subsection 14.8(e) of the Credit
Agreement is hereby amended by deleting the amount "$200,000,000" each time it
appears therein and substituting in lieu thereof the following: "the amount made
in reliance on this paragraph (e) prior to the Fourth Amendment Effective Date".
11. Fees. In consideration of the agreement of the Lenders to consent
to the amendments contained herein, the Company agrees to pay to each Lender
which so consents on or prior to November 10, 1999, an amendment fee in an
amount equal to 0.375% of the amount of such Lender's Commitment, payable on the
date hereof in immediately available funds.
12. 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 and Lenders holding
more than 85% of the Aggregate Commitment, and duly acknowledged and consented
to by each Guarantor, Grantor and Pledgor and the amendments set forth in
paragraphs 3 and 4 shall be deemed to be effective as of September 30, 1999. The
execution and delivery of this Amendment by any Lender shall be binding upon
each of its successors and assigns (including Transferees of its Commitments and
Loans in whole or in part prior to effectiveness hereof) and binding in respect
of all of its Commitments and Loans, including any acquired subsequent to its
execution and delivery hereof and prior to the effectiveness hereof.
<PAGE>
13. 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
11 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.
14. 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 12 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.
15. 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
an original for all purposes hereof.
16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
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/ Irwin Engelman
-----------------------------------------
Name: Irwin Engelman
Title: Vice Chairman, Chief Administrative
Officer and Treasurer
DEUTSCHE REVLON GMBH & CO. KG
REVLON INTERNATIONAL CORPORATION
(UK Branch)
REVLON MANUFACTURING LIMITED
(Australia Branch)
REVLON MANUFACTURING (UK) LIMITED
EUROPEENNE DE PRODUITS DE BEAUTE
REVLON NEDERLAND B.V.
REVLON K.K.
REVLON CANADA, INC.
REVLON SA
REVLON-REALISTIC PROFESSIONAL PRODUCTS LTD.
REVLON PROFESSIONAL LIMITED
REVLON (HONG KONG) LIMITED
EUROPEAN BEAUTY PRODUCTS S.P.A., as
Local Subsidiaries
By: /s/ Robert K. Kretzman
-----------------------------------------
Name: Robert K. Kretzman
Title: Authorized Signatory
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a
Lender
By: /s/ Neil R. Boylan
-----------------------------------------
Name: Neil R. Boylan
Title: Managing Director
<PAGE>
CHASE SECURITIES INC., as Arranger
By: /s/ J. Matthew Lyness
----------------------------------------
Name: J. Matthew Lyness
Title: Vice President
CITIBANK, N.A., as Documentation Agent and as
a Lender
By: /s/ James Buchanan
----------------------------------------
Name: James Buchanan
Title: Attorney-In-Fact
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and as a Lender
By: /s/ Michele Swanson
----------------------------------------
Name: Michele Swanson
Title: Authorized Signatory
ABN AMRO BANK N.V., as a Local Fronting
Lender in the Federal Republic of Germany
By: /s/ John D. Rogers
----------------------------------------
Name: John D. Rogers
Title: Vice President
By: /s/ James S. Adelsheim
----------------------------------------
Name: James S. Adelsheim
Title: Group Vice President
BANKBOSTON, N.A., as a Local Fronting
Lender in the United Kingdom
By: /s/ Richard D. Hill, Jr.
----------------------------------------
Name: Richard D. Hill, Jr.
Title: Managing Director
<PAGE>
NATEXIS BANQUE BFCE, formerly
BANQUE FRANCAISE DU COMMERCE EXTERIEUR,
as a Local Fronting Lender in France
By: /s/ Jordan Sadler
----------------------------------------
Name: Jordan Sadler
Title: Associate
By: /s/ Frank H. Madden, Jr.
----------------------------------------
Name: Frank H. Madden, Jr.
Title: Vice President & Group Manager
THE SANWA BANK LTD., as a Local Fronting
Lender in Japan
By: /s/ Jean-Michel Fatovic
----------------------------------------
Name: Jean-Michel Fatovic
Title: Vice President
BANK OF AMERICA CANADA, as a Local Fronting
Lender in Canada
By: /s/ Richard Hall
----------------------------------------
Name: Richard Hall
Title: Vice President
CITIBANK LIMITED, as a Local Fronting
Lender in Australia
By: /s/ James Buchanan
----------------------------------------
Name: James Buchanan
Title: Attorney-In Fact
<PAGE>
CITIBANK, N.A., as a Local Fronting
Lender in Hong Kong
By: /s/ James Buchanan
----------------------------------------
Name: James Buchanan
Title: Attorney-In-Fact
CITIBANK, N.A., as a Local Fronting
Lender in the Netherlands
By: /s/ James Buchanan
----------------------------------------
Name: James Buchanan
Title: Attorney-In-Fact
CITIBANK, N.A., as a Local Fronting
Lender in Italy
By: /s/ James Buchanan
----------------------------------------
Name: James Buchanan
Title: Attorney-In-Fact
ALLIED IRISH BANK, as a Local Fronting
Lender in Ireland
By: /s/ Brian Oliver
----------------------------------------
Name: Brian Oliver
Title: Senior Vice President
By: /s/ Germaine Reusch
----------------------------------------
Name: Germaine Reusch
Title: Vice President
<PAGE>
CITIBANK, N.A., as a Local Fronting
Lender in Spain
By: /s/ James Buchanan
----------------------------------------
Name: James Buchanan
Title: Attorney-In-Fact
ABN AMRO BANK N.V.
New York Branch
By: /s/ John D. Rogers
----------------------------------------
Name: John D. Rogers
Title: Vice President
By: /s/ James S. Adelsheim
----------------------------------------
Name: James S. Adelsheim
Title: Group Vice President
<PAGE>
ALLIED IRISH BANK PLC
Cayman Islands Branch
By: /s/ Orla Boyle
----------------------------------------
Name: Orla Boyle
Title: Vice President
By: /s/ Germaine Reusch
----------------------------------------
Name: Germaine Reusch
Title: Vice President
BANKBOSTON, N.A., as a Co-Agent
By: /s/ Richard D. Hill, Jr.
----------------------------------------
Name: Richard D. Hill, Jr.
Title: Managing Director
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent
By: /s/ Robert Klawinski
----------------------------------------
Name: Robert Klawinski
Title: Managing Director
THE BANK OF NEW YORK
By: /s/ Georgia Pan-Kita
----------------------------------------
Name: Georgia Pan-Kita
Title: Vice President
NATEXIS BANQUE BFCE, formerly BANQUE
FRANCAISE DU COMMERCE EXTERIEUR, as
a Co-Agent
By: /s/ Jordan Sadler
----------------------------------------
Name: Jordan Sadler
Title: Associate
By: /s/ Frank H. Madden, Jr.
----------------------------------------
Name: Frank H. Madden, Jr.
Title: Vice President & Group Manager
<PAGE>
PARIBAS
By: /s/ John J. McCormick, III
----------------------------------------
Name: John J. McCormick, III
Title: Vice President
By: /s/ Ro Toyoshimn
----------------------------------------
Name: Ro Toyoshimn
Title: Assistant Vice President
BARCLAYS BANK PLC
By: /s/ Marlene Wechselblatt
----------------------------------------
Name: Marlene Wechselblatt
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Sarah McClintock
----------------------------------------
Name: Sarah McClintock
Title: Vice President
By: /s/ Rene LeBlanc
----------------------------------------
Name: Rene LeBlanc
Title: Vice President-Senior Rel. Manager
CREDIT LYONNAIS, New York Branch
By:
----------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as a Co-Agent
By: /s/ Joel Glodowski
----------------------------------------
Name: Joel Glodowski
Title:Managing Director
By: /s/ Vitaly G. Butenko
----------------------------------------
Name: Vitaly G. Butenko
Title:Assistant Vice President
<PAGE>
EATON VANCE INSTITUTIONAL SENIOR LOAN FUND
By EATON VANCE MANAGEMENT, as
Investment Manager
By: /s/ Payson F. Swaffield
----------------------------------------
Name: Payson F. Swaffield
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION, as
a Co-Agent
By: /s/ Elliot Jaffee
----------------------------------------
Name: Elliot Jaffee
Title: Senior Vice President
THE FUJI BANK, LIMITED, New York Branch, as
a Co-Agent
By: /s/ Teiji Teramoto
----------------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
GENERAL ELECTRIC CAPITAL CORPORATION, as
a Co-Agent
By: /s/ William S. Richardson
----------------------------------------
Name: William S. Richardson
Title: Duly Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Anthony Heyman
----------------------------------------
Name: Anthony Heyman
Title: Authorized Signatory
THE MITSUBISHI TRUST AND BANKING CORPORATION
By: /s/ Toshihiro Hayashi
----------------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
<PAGE>
NATIONSBANK, N.A.
By: /s/ Robert Klawinski
----------------------------------------
Name: Robert Klawinski
Title: Managing Director
THE SANWA BANK, LIMITED
NEW YORK BRANCH
By: /s/ Jean-Michel Fatovic
----------------------------------------
Name: Jean-Michel Fatovic
Title: Vice President
VAN KAMPEN CLO I, LIMITED
By VAN KAMPEN MANAGEMENT INC., as
Collateral Manager
By: /s/ Darvin D. Pierce
----------------------------------------
Name: Darvin D. Pierce
Title: Vice President
VAN KAMPEN PRIME RATE INCOME TRUST
By VAN KAMPEN INVESTMENT ADVISORY CORP.
By: /s/ Darvin D. Pierce
----------------------------------------
Name: Darvin D. Pierce
Title: Vice President
ROYAL BANK OF CANADA
By: /s/ Sheryl L. Greenberg
----------------------------------------
Name: Sheryl L. Greenberg
Title: Vice President
SENIOR DEBT PORTFOLIO
By BOSTON MANAGEMENT AND RESEARCH, as
Investment Advisor
By: /s/ Payson F. Swaffield
----------------------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE>
STRATA FUNDING LTD.
By: /s/ David Dyer
----------------------------------------
Name: David Dyer
Title: Director
CERES FINANCE LTD.
By: /s/ David Dyer
----------------------------------------
Name: David Dyer
Title: Director
MEDICAL LIABILITY MUTUAL INSURANCE COMPANY
By: Invesco Senior Secured Management, Inc.
as Investment Manager
By: /s/ Anne M. McCarthy
----------------------------------------
Name: Anne M. McCarthy
Title: Authorized Signatory
<PAGE>
SCHEDULE I
All assets related to the business of manufacturing, marketing and distributing
cosmetic and personal care products under the trademarks "Colorama", "Juvena",
and "Bozanno" principally in Brazil. The assets include tangible and intangible
assets, including, but not limited to, property, plant and equipment, inventory,
receivables and intellectual property. The structure of the transaction will
likely consist of the sale of the outstanding common stock of the Company's
Subsidiary RGI (Cayman) Limited, which owns the shares of Comerical,
Exportadora, Industrial Ltda. Assets owned by Comerical, Exportadora, Industrial
Ltda. and not related to the brands to be sold will likely be transferred to a
Subsidiary of the Company prior to the closing of the transaction.
All assets related to the business of manufacturing, marketing and distributing
personal care products under the trademarks "Plusbelle" in Latin America,
principally in Argentina. The assets include tangible and intangible assets,
including, but not limited to, property, plant and equipment, inventory,
receivables and intellectual property. The structure of the transaction will
likely consist of the sale of the outstanding common stock of Revlon de
Argentina, S.A.I.C. Assets owned by Revlon de Argentina, S.A.I.C. and not
related to the "Plusbelle" brand will likely be transferred to a Subsidiary of
the Company prior to the closing of the transaction.
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Dated as of November 10, 1999
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 Fourth Amendment and (b) after giving effect to such
Fourth 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 Fourth Amendment.
ALMAY, INC.
AMERICAN CREW, INC.
AMERINAIL, INC.
A.P. PRODUCTS LTD.
CARRINGTON PARFUMS LTD.
CHARLES OF THE RITZ GROUP LTD.
CHARLES REVSON INC.
COSMETIQUES HOLDINGS, INC.
CREATIVE NAIL DESIGN, INC.
FERMODYL PROFESSIONALS INC.
MODERN ORGANIC PRODUCTS, 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 FRAGRANCES, LTD.
REALISTIC/ROUX PROFESSIONAL PRODUCTS INC.
REVLON, INC.
REVLON CONSUMER CORP.
REVLON CONSUMER PRODUCTS CORPORATION
REVLON GOVERNMENT SALES, INC.
REVLON HOLDINGS INC.
REVLON INTERNATIONAL CORPORATION
REVLON PRODUCTS CORP.
REVLON PROFESSIONAL, INC.
REVLON PROFESSIONAL PRODUCTS INC.
REVLON REAL ESTATE CORPORATION
REVLON RECEIVABLES SUBSIDIARY, INC.
RIROS CORPORATION
RIROS GROUP INC.
RIT INC.
ROUX LABORATORIES, INC.
VISAGE BEAUTE COSMETICS, INC.
By: /s/Robert K. Kretzman
- ---------------------------------------
Title: Authorized Signatory
<PAGE>
EXHIBIT 4.13
EXECUTION COPY
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is
dated as of November 12, 1999 and entered into by and among PACIFIC FINANCE &
DEVELOPMENT CORP., a California corporation ("COMPANY"), and GENERAL ELECTRIC
CAPITAL CORPORATION, as assignee of The Long Term Credit Bank of Japan ("BANK")
and, for purposes of Section 5 hereof, the Credit Support Parties (as defined in
Section 5 hereof), and is made with reference to that certain Third Amended and
Restated Credit Agreement dated as of June 30, 1997, as amended by First
Amendment dated December 10, 1998 (the "CREDIT AGREEMENT"), by and between
Company and Bank. Capitalized terms used herein without definitions shall have
the same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Bank desire to amend the Credit Agreement to
(i) amend certain prepayment provisions, (ii) amend the Final Maturity Date, and
(iii) make certain other amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING
TO DEFINED TERMS
A. Subsection 1.1 of the Credit Agreement is hereby amended by
replacing the definition of "FINAL MATURITY DATE" with the definition set forth
below, and adding thereto the following definition which shall be inserted in
proper alphabetical order:
"BASIC AGREEMENT" means the Basic Agreement to be entered among
Mortgagor, Mori Building Co., Ltd., Consumer Products and Revlon
Kabushiki Kaisha.
"FINAL MATURITY DATE" means the earlier of (i) the Professional
Products Disposition Date and (ii) December 31, 2000.
"PROFESSIONAL PRODUCTS DISPOSITION DATE" means the closing date
of the sale of the business (the "Professional Products
Business") conducted by Consumer Products and its Affiliates of
manufacturing, marketing and selling (i) professional salon hair
care products; (ii) ethnic hair care products; and (iii) retail
hair care and personal care products principally in Spain,
Portugal and Italy; provided, however, that if the closing date
of the
<PAGE>
sale of the Professional Products Business conducted inside the
United States occurs on a different date than the closing date of
the sale of the Professional Products Business conducted outside
the United States, the Professional Products Disposition Date
shall be the later of the two closing dates.
1.2 AMENDMENTS TO SECTION 2: AMOUNT AND TERMS OF LOAN
A. Subsection 2.06(b) of the Credit Agreement is hereby amended
by deleting the text appearing therein and substituting therefor the following:
"The outstanding principal amount of the Loan and all accrued and
unpaid interest and all Bank Charges and other amounts due to the
Bank under this Agreement shall be due and payable on the Final
Maturity Date."
B. Subsection 2.06(d) of the Credit Agreement is hereby amended
by adding the following clause at the end of the first sentence thereof:
"provided further, that the disposition of the Roppongi Property
(as defined in the Basic Agreement) as contemplated by the Basic
Agreement shall be exempt from the prepayment provisions of this
Section 2.06(d) if the Swap Transaction is completed concurrently
therewith in accordance with Section 4 below (including, without
limitation, the substitution of the Minami Aoyama Land for the
Roppongi Property as provided in Section 4)."
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SECOND
AMENDMENT EFFECTIVE DATE"):
A. On or before the Second Amendment Effective Date, Company
shall deliver to Bank the following, each, unless otherwise noted, dated the
Second Amendment Effective Date:
(i) Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of
State of the State of California, each dated a recent date prior
to the Second Amendment Effective Date;
(ii) Copies of its Bylaws, certified by its corporate
secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of this
Amendment, certified by its corporate secretary or an assistant
secretary as being in full force and effect without modification
or amendment;
2
<PAGE>
(iv) Signature and incumbency certificates of its officers
executing this Amendment;
(v) An opinion of Robert K. Kretzman, Senior Vice President,
Deputy General Counsel and Secretary of Consumer Products, in
form and substance reasonably satisfactory to the Bank and its
counsel; and
(vi) Executed copies of this Amendment executed by Company and
each Credit Support Party.
B. On or before the Second Amendment Effective Date, Company
shall have received the consent of the Required Lenders (as defined in the New
Consumer Products Credit Agreement) to this Amendment.
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to Bank that the following statements are correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each Obligor has all requisite
corporate power and authority to enter into this Amendment, and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT") and each of the
other Operative Agreements, as applicable.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement by Company have been
duly authorized by all necessary corporate action on the part of Company and the
execution and delivery of this Amendment have been duly authorized by all
necessary corporate action on the part of each of the other Obligors.
C. NO CONFLICT. The execution and delivery by each Obligor of
this Amendment and the performance by Company of the Amended Agreement do not
and will not (i) violate any provision of any law or any governmental rule or
regulation applicable to any Obligor or any of their respective Subsidiaries,
the Certificate or Articles of Incorporation or Bylaws of any Obligor or any of
their respective Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on any Obligor or any of their respective
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of any Obligor or any of their respective Subsidiaries (including
without limitation the New Consumer Products Credit Agreement, the Subsidiary
Guaranty and the Revlon Senior Notes), (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of any Obligor or
any of its Subsidiaries (other than Liens created under any of the Operative
Agreements in favor of Bank), or (iv) require any approval of stockholders or
any approval or consent of any Person under any material contractual obligation
of any Obligor or any of their respective Subsidiaries.
3
<PAGE>
D. GOVERNMENTAL CONSENTS. The execution and delivery by each
Obligor of this Amendment and the performance by Company of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and, in the case of
Company, the Amended Agreement have been duly executed and delivered by each
Obligor and are the legally valid and binding obligations of each Obligor,
enforceable against each Obligor in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be correct and complete in all material respects
on and as of the Second Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing
and after giving effect to this Amendment, no event will result that would
constitute an Event of Default or a Potential Event of Default.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT BY COMPANY AND BANK
In accordance with the terms of the Basic Agreement, Mortgagor
expects to transfer all its right, title and interest in the Roppongi Property
to Mori Building Co., Ltd., and Mori Building Co. Ltd. expects to transfer all
its right, title and interest in the Minami Aoyama Land (as defined in the Basic
Agreement) to Mortgagor (such transfers, the "Swap Transaction"). In connection
with the closing of the transactions contemplated by the Basic Agreement, Bank
and Company hereby agree to take such further action, including causing the
Mortgage to be amended or replaced (at the sole expense of the Company,
including, without limitation, Bank's reasonable legal fees and expenses) as may
reasonably be necessary to release the Lien of the Mortgage on the Roppongi
Property and to provide that the Minami Aoyama Land shall be the Property
subject to the Mortgage, free and clear of other liens. In connection with any
such closing, the Company will deliver or cause to be delivered to Bank (i) an
opinion of Japanese counsel in form and substance reasonably acceptable to Bank
and customary for transactions of this type in Japan, as to the effectiveness
and first priority of the lien on the Minami Aoyama Land in favor of Bank and
the absence of other liens on the Minami Aoyama Land, and (ii) documents
evidencing authorization of Mortgagor to enter into the transactions
contemplated by this Section 4. From and after any such closing, the term
"Mortgage" shall mean the Mortgage as so amended or replaced.
4
<PAGE>
SECTION 5. ACKNOWLEDGEMENT AND CONSENT BY CREDIT SUPPORT PARTIES
Company is a party to the Pledge Agreement, as amended through
the Second Amendment Effective Date, pursuant to which Company has created Liens
in favor of Bank on certain collateral to secure the Loan Obligations. Mortgagor
is a party to the Mortgage and the Mortgagor Acknowledgement, in each case as
amended through the Second Amendment Effective Date, pursuant to which Mortgagor
has created Liens in favor of Bank on certain collateral to secure the Loan
Obligations. Revlon International is a party to the Stock Pledge Agreement, as
amended through the Second Amendment Effective Date, pursuant to which Revlon
International has pledged certain collateral to Bank to secure the Loan
Obligations. Consumer Products is a party to the Consumer Products Guarantee, as
amended through the Second Amendment Effective Date, pursuant to which Consumer
Products has guaranteed the Loan Obligations. Company, Revlon International,
Mortgagor and Consumer Products are collectively referred to herein as the
"Credit Support Parties," and the Mortgage, the Pledge Agreement, the Stock
Pledge Agreement, and the Consumer Products Guarantee are collectively referred
to herein as the "Credit Support Documents."
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all collateral encumbered
thereby (except as otherwise permitted under Section 4 hereof) will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "Loan Obligations," "Guaranteed Obligations" and
"Secured Obligations," as the case may be (in each case as such term is defined
in the applicable Credit Support Document), including without limitation the
payment and performance of all such Loan Obligations," "Guaranteed Obligations"
or "Secured Obligations," as the case may be, in respect of the Loan Obligations
of the Company now or hereafter existing under or in respect of the Amended
Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Second Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit Agreement
or any other Operative Agreement to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the
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<PAGE>
Credit Agreement, this Amendment or any other Operative Agreements shall be
deemed to require the consent of such Credit Support Party to any future
amendments to the Credit Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
OPERATIVE AGREEMENTS.
(i) On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring
to the Credit Agreement, and each reference in the other
Operative Agreements to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Operative Agreements shall remain
in full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a waiver
of any right, power or remedy of Bank under, the Credit Agreement
or any of the other Operative Agreements.
B. FEES AND EXPENSES. Company acknowledges that all costs, Bank
Charges, fees and reasonable out-of-pocket third party expenses incurred by Bank
and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. TERMINATION. Either party may terminate this Amendment from
and after November 30, 1999 if the conditions to effectiveness shall not have
been satisfied on or before such date. In such event, this Amendment shall be
void and of no further force of effect, and neither party shall have any
liability or further obligation of any nature to the other party under this
Amendment except as provided in Section 6.B. Termination of this Amendment under
this Section 6.C shall in no event affect the obligations of the parties under
the Credit Agreement of other Operative Agreements.
D. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
E. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6
<PAGE>
F. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment (other than the
provisions of Section 1 hereof, the effectiveness of which is governed by
Section 2 hereof) shall become effective upon the execution of a counterpart
hereof by Company and Bank and receipt by Company and Bank of written,
telephonic or facsimile notification of such execution and authorization of
delivery thereof. Any party executing this Amendment by facsimile shall promptly
provide and executed original to the other parties.
[Remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
PACIFIC FINANCE & DEVELOPMENT CORP.
By: /s/ Robert K. Kretzman
--------------------------------------
Name: Robert K. Kretzman
Title: Vice President and Secretary
REVLON CONSUMER PRODUCTS CORPORATION (for
purposes of Section 5 only)
By: /s/ Robert K. Kretzman
--------------------------------------
Name: Robert K. Kretzman
Title: Senior Vice President, Deputy General
Counsel and Secretary
REVLON INTERNATIONAL CORPORATION (for purposes
of Section 5 only)
By: /s/ Robert K. Kretzman
--------------------------------------
Name: Robert K. Kretzman
Title: Vice President and Secretary
REVLON REAL ESTATE KABUSHIKI KAISHA (for
purposes of Section 5 only)
By: /s/ H. Timothy Ricks
--------------------------------------
Name: H. Timothy Ricks
Title: Representative Director
8
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ William S. Richardson
--------------------------------------
Name: William S. Richardson
Title: Duly Authorized Sigantory
9
<PAGE>
EXHIBIT 10.27
REVLON EXECUTIVE DEFERRED COMPENSATION PLAN
Amended and Restated August 6, 1999
1. PURPOSE
The purpose of this Revlon Executive Deferred Compensation Plan (the "Plan")
is to enable a select group of management and highly compensated executives of
Revlon Consumer Products Corporation (or any successor thereof) ("Revlon") and
its subsidiaries and affiliates (individually and collectively, as the context
may require, the "Company"), to defer bonuses in accordance with the terms and
conditions set forth herein.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of Revlon
or by a committee of three or more persons appointed by such Board (the Board
serving in such function, or such committee, hereinafter called the
"Committee").
(b) The Committee shall have full power and authority to administer the
Plan and otherwise to perform the duties and responsibilities specified
hereunder. Without limitation by way of specification, the Committee shall have
the following specific powers and duties:
(i) to determine the employees who, from time to time, shall be
eligible to participate in the Plan in accordance with Section 4;
(ii) to interpret the provisions of the Plan and make any and all
determinations arising thereunder;
(iii) to maintain such records as it shall deem necessary or
appropriate for the proper administration of the Plan; and
(iv) to establish such rules and procedures not inconsistent with
the terms of the Plan as it shall deem necessary or appropriate to effectuate
the purpose of the Plan.
3. PLAN YEAR
The Plan Year shall be each calendar year.
4. ELIGIBLE EMPLOYEES
The Committee shall determine, during the Plan Year and prior to the
Deferral Election Date (as defined in Section 5(e)), the employees who shall be
eligible to participate in the Plan for each such Plan Year and shall notify
such employees in writing at such time during each such Plan Year as the
Committee may determine. Initially, in 1993, eligible employees shall consist of
all executive employees employed by the Company whose compensation is subject to
U. S.
1
<PAGE>
federal, state, and local income taxes, who are in salary grade 15 or above, who
are actively employed as of October 31, 1993, and who have been notified of
their eligibility to participate in the Plan.
5. BONUS DEFERRALS
(a) Subject to such restrictions and limitations as the Committee may
impose, each participant may elect, in writing on a form or forms prescribed by
the Committee ("Election Form") and at the time prescribed below, to have the
participant's employer defer payment of all or a portion (but not less than
$10,000) of the bonus otherwise payable to the participant with respect to a
Plan Year. For purposes of the foregoing, the term "bonus" shall mean the bonus
with respect to the calendar year that would otherwise be payable to the
participant under the Revlon Executive Bonus Plan or any successor plan thereto
(or in lieu thereof) in the following calendar year, but for the participant's
election hereunder.
(b) Each Election Form filed by the participant shall specify, with
respect to the bonus deferred thereby, (i) the time(s) at which deferred
payments are to begin, and (ii) the form in which such deferred payments are to
be made.
(c) A participant may elect the time at which payment of the deferred
amount will be paid as follows: (i) up to 50% of the deferred amount to be paid
in a lump sum on a date certain no earlier than the January 31 following the
two-year anniversary of the Deferral Election Date and the remaining balance at
the time described in clause (ii) following, or (ii) 100% of the deferred amount
to be paid no earlier than the January 31 following the five-year anniversary of
the Deferral Election Date or any subsequent January 31 or to be paid on
retirement (as defined in Section 7(b) hereof) in the form described in
paragraph (d) below. The deferred amounts shall become payable upon the
participant's termination of employment for any reason, if earlier, as elected
by the participant on the Election Form. If no deferral period is specified on
the Election Form, payment shall be made on the January 31 following the
five-year anniversary of the Deferral Election Date or upon Retirement, if
earlier.
A Participant shall be afforded an opportunity, at such time and in such
manner as the Committee may prescribe, to elect that an earlier payment starting
date and/or form of payment apply to the payment of all or a portion of his
account if payment is made on account of his Retirement within one year of a
Triggering Event; and such earlier starting date may include lump sum payment as
soon as practicable following his termination of employment on account of such
Retirement.
(d) Except as otherwise provided herein, the form of payment may be (i)
a lump sum payment, (ii) in the case of amounts payable upon the participant's
termination of employment due to Retirement (as defined in Section 7(b) hereof),
annual payments over a period certain specified by the participant or over a
period that qualifies as an annuity (rounded up to the next whole year in the
case of a fractional year) under 20 NYCRR Section 132.4(d), as amended, or any
successor provision ("New York Annuity Rule"), as elected by the participant on
the Election Form, or (iii) any other form requested by the participant and to
which the
2
<PAGE>
Committee consents. A payment pursuant to clause (ii) herein shall be subject to
such modifications as the Committee, in its discretion, may determine are
required to satisfy The New York Annuity Rule. If no form of payment is
specified on the Election Form, payment shall be made in a lump sum. If the form
of payment specified on the Election Form is for installment payments on
Retirement and no time period has been elected, the payment shall be made in 5
equal annual installments beginning on the January 31 following the
participant's Retirement date.
(e) Any deferral election shall be submitted to the Committee at such
time as the Committee shall determine during the Plan Year with respect to which
the bonus is determined ("Deferral Election Date"). Such election shall be
irrevocable.
6. DEFERRED BONUS ACCOUNT
The Committee shall establish a memorandum account ("Deferred Bonus
Account") for each participant in the Plan. A participant's Deferred Bonus
Account shall be (i) credited with all amounts deferred by the participant under
the Plan as of the date such amounts would otherwise have become payable to such
participant, (ii) increased to reflect the applicable interest rate, as
described in Section 7, and (iii) charged with any distributions made with
respect to the participant pursuant to Section 7.
7. PAYMENT OF DEFERRED BONUS
(a) Except as otherwise provided below, the portion of a participant's
Deferred Bonus Account relating to any year's deferred bonus, plus interest
thereon computed in accordance with paragraph (b) or (c) below, as applicable,
shall be paid to the participant by the Company at the time and in the manner
specified in the Election Form executed and filed by the participant with
respect to such deferral. Amounts remaining unpaid at the participant's death
shall be paid to the participant's beneficiary in accordance with Section 8. All
payments shall be made by check.
(b) If any portion of a participant's Deferred Bonus Account is paid to
the participant (i) on or following the expiration of the deferral period, or
(ii) during the applicable deferral period for any reason other than as provided
in paragraph (c) below including by reason of the participant's termination of
employment due to death, disability, Retirement, as defined below, or upon
termination by the participant's employer other than for "good reason" (within
the meaning of the Revlon Executive Severance Policy) or for "Good Reason"
within one year following a Triggering Event, such portion shall be paid
together with interest accrued thereon at an Incentive Interest Rate equal to
one percent plus the Basic Interest Rate. The "Basic Interest Rate" shall be
calculated separately for each Plan Year and shall be whichever of the following
the Committee determines for that Plan Year: (i) the average prime rate in
effect during January of such Plan Year minus one percent, or (ii) the average
of the Federal Funds rate at the end of each week in January of such Plan Year
plus two percent. "Retirement" shall occur when a participant leaves employment
with the Company and is eligible to receive an early retirement
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<PAGE>
benefit or a normal retirement benefit under the Revlon Employees' Retirement
Plan at the time that the participant departs from the Company.
(c) If any portion of a participant's Deferred Bonus Account is paid to
the participant on account of: (i) the participant's voluntary termination of
employment other than for Retirement, death, disability or for Good Reason
within one year of a Triggering Event, or (ii) termination of employment by the
participant's employer for "good reason" (within the meaning of the Revlon
Executive Severance Policy), then such portion shall be paid together with
interest accrued thereon at the Basic Interest Rate.
(d) For purposes of this Plan:
(1) "Triggering Event" shall mean the first to occur of any of the
following:
(i) a merger of or combination involving Revlon, Inc. or Revlon or any
parent thereof other than a merger or combination in which more than 50% in
voting power of the voting securities of the surviving or resulting corporation
or other entity outstanding immediately after such transaction is beneficially
owned (as such term is defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) by persons who beneficially owned outstanding voting
securities of Revlon, Inc. immediately prior to such transaction, or the
execution of a definitive contract for such a merger or combination provided the
same is in fact consummated;
(ii) the adoption of a Plan contemplating the liquidation of all or
substantially all of the business and assets of the Company;
(iii) a sale or other disposition of all or substantially all of the assets
of the Company or of the business unit to which the participant's services are
at the time dedicated, if any, whether for cash, securities or other property,
other than to a corporation or other entity in which more than 50% in voting
power of the outstanding voting securities outstanding immediately after such
transaction is beneficially owned by persons who beneficially owned outstanding
voting securities of Revlon, Inc. immediately prior to such transaction, or the
execution of a definitive contract for such a sale or other disposition provided
the same is in fact consummated; or
(iv) more than 50% of the voting power of the outstanding voting securities
of Revlon, Inc. becomes beneficially owned, directly or indirectly, by one
person or more than one person acting as a group other than the current
beneficial owner of the ultimate parent company of Revlon, Inc.
(2) "Good Reason" shall mean any of the following occurring after a
Triggering Event not agreed to in writing by the affected employee: (i) a
relocation of the employee's principal place of business to a location which
increases the employee's roundtrip commutation by more than 50 miles, (ii)
failure of the employee to continue participation in bonus, salary review and
equity incentive (or equivalent cash incentive) plans and programs at least
substantially equivalent to those provided to the employee prior to the
Triggering Event, or (iii) the failure of the employee to participate in all
material employee benefit plans and fringe benefit
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arrangements on substantially the same basis as other employees of the same
grade level of the major business unit of which the employee is part, except
that none of the foregoing events shall constitute "Good Reason" unless within
30 days after obtaining actual knowledge of such event the employee gives
written notice to the Company (or if the employee has transferred to a purchaser
of one or more of the Company's businesses, to the purchaser) specifically
identifying the event constituting Good Reason, and the Company (or such
purchaser) fails to cure such event within 30 days after such notice.
(e) In the event that a participant incurs an unforeseeable emergency
the Committee, in its sole discretion and upon written application of such
participant to the Committee, may authorize immediate payment of all or a
portion of such participant's Deferred Bonus Account, including interest accrued
thereon at the Basic Interest Rate, provided that such payment shall in no event
exceed the amount necessary to alleviate such unforeseeable emergency. For
purposes of this Plan, an unforeseeable emergency is an unanticipated emergency
that is caused by an event beyond the control of the participant and that would
result in severe financial hardship to the participant if early withdrawal were
not permitted.
8. DESIGNATION OF BENEFICIARY
A participant may designate a beneficiary or beneficiaries to receive after
the participant's death any amount due to the participant hereunder by executing
a form prescribed by the Committee and delivering it to the Committee at any
time prior to the participant's death, and providing on such form the manner in
which any such death benefits are to be paid. A participant may revoke or change
the participant's beneficiary designation without the beneficiary's consent by
executing a new form and delivering it to the Committee at any time and from
time to time prior to the participant's death. If a participant shall have
failed to designate a beneficiary, or if no such beneficiary shall survive the
participant, then such amounts shall be paid to the participant's estate.
Payment shall be made in a lump sum as soon as practicable following the
participant's death.
9. OTHER EMPLOYEE BENEFITS
Any bonus deferred and any interest thereon paid under this Plan shall not
be includable in creditable compensation in computing benefits under any
employee benefit plan of the Company or its affiliates or subsidiaries, except
to the extent expressly provided for thereunder.
10. NO RIGHT TO EMPLOYMENT
Nothing contained herein shall be construed as conferring upon any
participant the right to continue in the employ of the Company.
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11. DEFERRED BONUS AS AN UNSECURED PROMISE; INSOLVENCY
(a) The Company shall not be required to segregate any funds
representing the Deferred Bonus Accounts of participants hereunder, and nothing
in this Plan shall be construed as providing for such segregation.
(b) Nothing in this Plan, and no action taken pursuant to its terms,
shall create or be construed to create a trust or escrow account of any kind, or
a fiduciary relationship between the Committee or the Company and any
participant, beneficiary or any other person. The participants and their
beneficiaries and any other persons entitled to payment hereunder shall rely
solely on the unsecured promise of the Company to make the payments required
hereunder, but shall have the right to enforce such a claim as an unsecured
general creditor of the Company.
(c) No Plan participant (or a beneficiary) shall have any preferred
claim on, or any beneficial ownership interest in, any assets of the Company.
Any rights created under this Plan shall be mere unsecured contractual rights of
Plan participants (or their beneficiaries) against the Company. Any assets held
by the Company will be subject to the claims of the Company's general creditors
under federal and state law if the Company is insolvent (as defined in paragraph
(d) below).
(d) If at any time the Committee has determined that the Company is
insolvent, the Committee shall discontinue payments to the Plan participants (or
their beneficiaries). The Company shall be considered "insolvent" for purposes
of this Plan if (i) the Committee determines that the Company is unable to pay
its debts as they become due, (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code, or (iii) the
Company is determined to be insolvent by the applicable federal and /or state
regulatory agency. At all times during the continuance of the Plan, all amounts
deferred under the Plan including any applicable interest shall be subject to
the claims of the general creditors of the Company under federal and state law.
The Committee shall resume payments to Plan participants (or their
beneficiaries) in accordance with the terms of this Plan only after the
Committee has determined that the Company is not insolvent (or is no longer
insolvent). Provided that there are sufficient assets, if the Committee
discontinues payments to Plan participants and subsequently resumes such
payments, the first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or their beneficiaries
under the terms of this Plan for the period of such discontinuance, less the
aggregate amount of any payment made to Plan participants (or their
beneficiaries ) by the Company or any employer in lieu of the payments provided
for hereunder during any such period of discontinuance.
12. WITHHOLDING
The Committee shall make provision for the reporting and withholding of any
U.S. federal, state or local taxes that may be required to be withheld with
respect to the payments or the amounts deferred by a participant under this Plan
and shall pay amounts withheld to the
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appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the company.
13. NO ASSIGNMENT
Amounts payable to any participant, beneficiary, or any other person
entitled to any payment hereunder may not be transferred, assigned (either at
law or in equity), anticipated, mortgaged, alienated, pledged, or otherwise
encumbered or subject to attachment, garnishment, levy, execution or other legal
or equitable process, whether or not voluntary, in advance of any such payment
and any attempt to do any of the foregoing shall be void. Except to the extent
required by law, no payment shall be subject to seizure for the payment of
public or private debts, judgments, alimony or separate maintenance, or be
transferable by operation of law in event of bankruptcy, insolvency or
otherwise.
14. OBLIGATIONS TO THE COMPANY
If a participant or beneficiary becomes entitled to a payment under this
Plan, and if at such time the participant has outstanding any debt, obligation,
or other liability representing an amount owed to the Company, the amount of
such indebtedness or claim may be set off against the amounts remaining to be
paid to the participant or the participant's beneficiary. Consent to such
reduction or set off shall be evidenced by the participant's signature on the
Election Form.
15. AMENDMENT AND TERMINATION
Revlon reserves the absolute right to amend or terminate the Plan, in whole
or in part, at any time and from time to time without prior notice to any
participant or beneficiary; provided that unless otherwise agreed to by the
participant no such amendment or termination shall affect the right of any
participant or beneficiary hereunder to receive payment of any amounts deferred
hereunder, together with interest thereon, prior to the date of such amendment
or termination, in accordance with the previously applicable provisions of the
Plan. Notwithstanding any other provision of this Plan, upon termination of the
Plan, the company may, in its sole discretion, make distribution of payments to
all participants in such manner as the Company shall determine.
16. NO THIRD PARTY RIGHTS
Nothing in this Plan shall be construed to create any rights hereunder in
favor of the beneficiary of any participant prior to the participant's death or
in favor of any other person (other than the Company and any participant) or to
limit Revlon's right to amend or terminate the Plan in any manner to the extent
provided in Section 15, notwithstanding that such amendment or termination might
adversely affect potential rights of beneficiaries under the Plan.
17. CLAIMS PROCEDURE
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The Committee establishes the following claims procedures in accordance with
applicable law in order to afford a reasonable opportunity to any participant or
beneficiary whose claim for payments under the Plan has been denied for a full
and fair review of the decision denying such claim. If a claim for payments
under the Plan is denied in whole or in part, the participant (or beneficiary in
the case the participant's death) will receive written notification from the
Committee. The notification will include the specific reasons for the denial, a
description of any additional information needed to perfect the claim and an
explanation of the claim review procedure. Within 90 days after receiving the
denial, the participant or beneficiary or a duly authorized representative may
submit a written request for reconsideration of the claim to the Committee in
accordance with Section 18. Any such request should be accompanied by documents
or records in support of the appeal. The participant or beneficiary may review
pertinent documents and submit issues and documents in writing. If more time is
needed, the Committee may allow more than 90 days to file the request for
review. The Committee will review the claim and by its next scheduled meeting
will provide a written response to the appeal, explaining the reasons for the
decision and the specific provision(s) on which the decision was based. If the
appeal is filed within 30 days of the next scheduled Committee meeting, and
there is not sufficient time for review, the Committee will notify the
participant or beneficiary that the decision will be delayed until the next
scheduled meeting. The Committee shall have the exclusive right to determine any
questions arising in connection with the interpretation, application or
administration of the Plan, and its determination shall be conclusive and
binding upon all parties concerned including, without limitation, any
participant or beneficiary.
18. NOTICE
Any notice required or permitted to be made under this Plan shall be
sufficient if in writing and delivered, or sent by registered or certified mail,
to (i) in the case of notice to the Company or the Committee, the principal
office of Revlon, directed to the attention of the Secretary of the Committee,
and (ii) in the case of a participant or the participant's beneficiary, the
participant's (or such beneficiary's) mailing address maintained in the
Company's personnel records. Such notice shall be deemed given as of the date of
delivery or, if delivery is made by mail, as of the date shown on the postmark
or on the receipt for registration certification.
19. VALIDITY
In the event any provision of this Plan is held invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Plan.
20. DISTRIBUTION OF PLAN AND AMENDMENTS: ACKNOWLEDGMENTS
(a) The Committee shall furnish each participant with a copy of this Plan
prior to the participant's initial deferral election hereunder. In addition, the
Committee shall furnish each participant, or in the case of a deceased
participant, the participant's beneficiary, with a copy of any amendment of this
Plan.
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(b) Each participant, prior to or simultaneously with the participant's
initial deferral election, shall acknowledge receipt of a copy of the Plan. Such
acknowledgment shall constitute an agreement by the participant that the
participant, the participant's beneficiary and any representatives shall be
bound by all of the terms and conditions of the Plan.
21. GOVERNING LAW
Except to the extent preempted by Federal law, this Plan shall be governed
by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Revlon Executive Deferred
Compensation Plan to be adopted on this 6th day of August, 1999.
REVLON CONSUMER PRODUCTS CORPORATION
BY /s/ Wade H. Nichols III
-------------------------------------
Wade H. Nichols III
Executive Vice President
and General Counsel
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EXHIBIT 10.28
EMPLOYMENT AGREEMENT, dated as of May 10, 1999, between REVLON CONSUMER
PRODUCTS CORPORATION, a Delaware corporation ("RCPC" and, together with its
parent Revlon, Inc. and its subsidiaries, the "Company"), and D. ERIC POGUE (the
"Executive").
RCPC wishes to continue the employment of the Executive with the Company,
and the Executive wishes to accept continued employment with the Company, on the
terms and conditions set forth in this Agreement.
Accordingly, RCPC and the Executive hereby agree as follows:
Employment, Duties and Acceptance.
1.1 Employment, Duties. RCPC hereby employs the Executive for the Term
(as defined in Section 2.1), to render exclusive and full-time services to the
Company, in the Executive's present capacity, and to perform such other duties
of at least an equivalent level as may be assigned by the Executive's
supervisor. The Executive's title shall be the Executive's present title 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 Executive's
supervisor.
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 RCPC 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 date hereof (the "Effective Date")
and shall end on the last day of the month thirty-six months following the
consummation of the first Triggering Event to occur, provided, however, that if
no Triggering Event occurs during the Term on or before December 31, 1999, the
Term shall expire on April 30, 2002. During any period that the Executive's
employment shall continue following termination of the Term, the Executive shall
be eligible for severance on terms no less favorable than those of the Revlon
Executive Severance Plan as in effect on the date of this Agreement, subject to
the terms thereof, and the Executive shall be deemed to be an employee at will.
As used herein, "Triggering Event" shall mean the first to occur of any of the
following:
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(i) a merger of or combination involving Revlon, Inc. or RCPC or any
parent thereof other than a merger or combination in which more than 50% in
voting power of the voting securities of the surviving or resulting corporation
or other entity outstanding immediately after such transaction is beneficially
owned (as such term is defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) by persons who beneficially owned outstanding voting
securities of Revlon, Inc. immediately prior to such transaction, or the
execution of a definitive contract for such a merger or combination provided the
same is in fact consummated;
(ii) the adoption of a Plan contemplating the liquidation of all or
substantially all of the business and assets of the Company;
(iii) a sale or other disposition of all or substantially all of the
assets of the Company or of the business unit to which the Executive's services
are at the time dedicated, if any, whether for cash, securities or other
property, other than to a corporation or other entity in which more than 50% in
voting power of the outstanding voting securities outstanding immediately after
such transaction is beneficially owned by persons who beneficially owned
outstanding voting securities of Revlon, Inc. immediately prior to such
transaction, or the execution of a definitive contract for such a sale or other
disposition provided the same is in fact consummated; or
(iv) more than 50% of the voting power of the outstanding voting
securities of Revlon, Inc. becomes beneficially owned, directly or indirectly,
by one person or more than one person acting as a group other than the current
beneficial owner of the ultimate parent company of Revlon, Inc.
2.2 Special Curtailment. The Term shall end earlier than the date
provided in Section 2.1, 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 bi-weekly in arrears, at the annual rate of not less than the
Executive's base salary on the date hereof (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 RCPC, 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 and shall
not thereafter be decreased.
3.2 Bonus. In addition to the amounts to be paid to the Executive
pursuant to Section 3.1, the Executive shall be eligible to receive annual bonus
calculated at the same target and maximum percentages of Base Salary as the
Executive currently is eligible to receive, based upon achievement of objectives
set annually not later than March 31 of such year.
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Notwithstanding the foregoing, if the Executive's employment shall end pursuant
to Section 4.2 at any time during the Term or pursuant to Section 4.4 at any
time prior to the occurrence of a Triggering Event, the Executive's bonus with
respect to the calendar year in which the termination occurs shall be an amount
equal to the bonus that would have been payable to the Executive with respect to
such year if the Executive had remained employed to the date for payment of
bonuses under such Plan, multiplied by a fraction of which the numerator is the
number of days of the Term during such year and the denominator is 365, and if
the Executive's employment shall end pursuant to Section 4.4 on or after the
occurrence of a Triggering Event, the Executive's bonus with respect to the
calendar year in which the termination occurs shall be an amount equal to the
greater of the full year bonus that would have been payable to the Executive as
above described or the Executive's full year target bonus, in either case
without proration, notwithstanding any contrary provision of any plan.
3.3 Stock Options. The Executive shall be recommended to the
Compensation Committee or other committee of the Board administering the Revlon,
Inc. Second Amended and Restated 1996 Stock Plan or any plan that may replace
it, as from time to time in effect, to receive an option not later than February
28 of each year of the Term covering a number of shares not less than the option
granted to the Executive on February 22, 1999, on terms substantially the same
as other senior executives of the Executive's level, provided that if the Term
is to end pursuant to Section 2.1 otherwise than at a calendar year end, the
Company shall not be required to recommend that the stock option to be granted
to the Executive with respect to such final year of the Term cover more than
that number of shares that is the product of multiplying the annual grant
provided for above by a fraction of which the numerator is the number of days of
the Term during such final year and the denominator is 365, and provided further
that this Section 3.3 shall not apply following a Triggering Event.
3.4 Business Expenses. RCPC 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 in accordance with the vacation policy
of the Company as in effect from time to time, but not less than the Executive's
current entitlement.
3.6 Fringe Benefits. During the Term, the Executive shall be entitled
to continue to participate in those qualified and non-qualified defined benefit,
defined contribution, insurance, medical, dental, disability and other benefit
plans and programs of the Company as from time to time in effect (or their
successors) in which the Executive participated on the date hereof as and if in
effect from time to time and in such other plans and programs as may be made
available to senior executives of the Company of the Executive's level
generally. In addition,
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during the Term the Company shall provide to the Executive an automobile, in
accordance with the Company's executive automobile program, of a class at least
comparable to the automobile currently assigned to the Executive, and the
Executive shall be entitled to reimbursement for tax preparation and financial
counseling services with annual maximums at least comparable to those current in
effect.
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) shorter periods aggregating six months
during any twelve month period, RCPC 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 equaled 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 as provided in Section 3.6.
4.3 Cause. RCPC may at any time by written notice to the Executive
terminate the Term for "Cause" and, upon such termination, the Executive shall
be entitled to receive no further amounts or benefits hereunder, except as
required by law. As used herein the term "Cause" shall mean 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 affiliates, willful misconduct by the
Executive in connection with the performance of the 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 with the Company materially prejudicial to the best interests of the
Company.
4.4 Company Breach; Other Termination. The Executive shall be entitled
to terminate the Term and the Executive's employment upon 60 days' prior written
notice in the event that RCPC materially breaches any of its obligations
hereunder or that at any time prior to a Triggering Event the Compensation
Committee (or other appropriate Committee) of the Board of Directors of Revlon,
Inc. shall fail to implement the recommendations of management regarding stock
options pursuant to Section 3.3. In addition, at any time following a Triggering
Event, the Executive shall be entitled to terminate the Term and the Executive's
employment upon 60 days' prior written notice to RCPC for "Good Reason". As used
herein, the term "Good Reason" shall mean any of the following occurring
following a Triggering Event which is not agreed to in writing by the Executive:
(a) a substantial adverse change in the Executive's
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assigned responsibilities, (b) a relocation of the Executive's principal place
of business to a location which increases the Executive's round-trip commutation
by more than 50 miles, (c) failure of the Executive to continue participation in
bonus, salary review and equity incentive (or equivalent cash incentive) plans
and programs at least substantially equivalent to those provided to the
Executive prior to the Triggering Event, or (d) the failure of the Executive to
participate in all material employee benefit plans and fringe benefit
arrangements on substantially the same basis as like executives of the major
business unit of which the Executive is a part, provided however that none of
the foregoing events shall constitute "Good Reason" unless within 30 days after
obtaining actual knowledge of such event the Executive gives written notice to
the Company of the Executive's intention to resign, specifically identifying the
event constituting Good Reason therefor, and the Company shall fail to cure such
event within 30 days after such notice. In addition, RCPC shall be entitled to
terminate the Term and the Executive's employment at any time and without prior
notice otherwise than pursuant to the provisions of Section 4.2 or 4.3. In
consideration of the Executive's covenant in Section 5.2, upon termination under
this Section 4.4 by the Executive, or in the event RCPC so terminates the Term
otherwise than pursuant to the provisions of Section 4.2 or 4.3, RCPC agrees,
and the Company's sole obligation arising from such termination (except as
otherwise provided in Section 3.6) shall be (at the Executive's election by
written notice within 10 days after such termination), for RCPC either
(i) to make the payment in lieu of bonus prescribed by Section 3.2 and
to continue payments in lieu of Base Salary in the amounts prescribed by Section
3.1 and continue the Executive's participation in the group life insurance and
in the medical and dental plans of the Company in which the Executive was
entitled to participate pursuant to Section 3.6 (in each case less amounts
required by law to be withheld) through the date on which the Term would
otherwise have expired pursuant to Section 2.1, provided that such benefit
continuation is subject to the terms of such plans, provided further that such
group life insurance continuation is subject to a limit of two years pursuant to
the terms thereof, provided further that the Executive shall cease to be covered
by medical and/or dental plans of the Company at such time as the Executive
becomes covered by like plans of another company, and provided finally that the
Executive shall, as a condition, execute such release, confidentiality,
non-competition and other covenants as would be required in order for the
Executive to receive payments and benefits under the Policy referred to in
clause (ii) below, or (ii) 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 other than the provision in Paragraph IIIC(ii)
establishing a limit of six months on the lump sum payment provided for therein,
which shall not be applicable to the Executive, upon the Executive's compliance
with the terms thereof. If such termination of employment shall occur prior to a
Triggering Event, any compensation earned by the Executive from other employment
or a consultancy shall reduce the payments required pursuant to clause (i) above
or shall be governed by the terms of the Executive Severance Policy as modified
by the foregoing in the case of clause (ii) above, but if the Executive's
termination of employment shall occur following a Triggering Event, the
Executive shall have no duty to mitigate by seeking other employment or
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otherwise and no compensation earned by the Executive from other employment or a
consultancy shall reduce the payments provided for by clause (i) or (ii).
4.5 Section 280G.
4.5.1 If it shall be determined by the firm of Ernst & Young (or if
such firm shall be unable to serve, by another so-called Big 5 accounting firm
selected by such firm) ("E&Y") that there is not substantial authority to
support the deductibility for federal income tax purposes of one or more
payments or benefits due to the Executive, pursuant to this Agreement or
otherwise, by reason of section 280G of the Internal Revenue Code as amended
(the "Code") or any successor provisions, then RCPC shall reduce the payment in
lieu of bonus provided for in Section 3.2 and then the payments in lieu of Base
Salary provided for in Section 4.4 (said reductions to be applied in inverse
order against the last payments otherwise due) to the extent necessary to avoid
or, if full avoidance is not possible by such reductions, to minimize, the loss
of deductions described above, provided that (a) except as specified in clause
(b) below, such reductions shall not exceed the amount of (i) payments or
benefits due solely as a result of this Agreement (and not as a result of the
Executive's participation in any incentive or benefit plan or arrangement
applicable to the Executive without regard to this Agreement), (ii) benefits
arising from the grant of any options to the Executive effective May 10, 1999 or
thereafter, and (iii) benefits arising from the acceleration to February 12,
2000 of the exercisability of the stock options granted to the Executive
effective February 12, 1999 (and not as a result of the grant of such stock
options), provided that (b) such reductions shall exceed the amount specified in
clause (a) above if and to the extent that E&Y determines that on an after-tax
basis a further reduction pursuant to this clause (b) is more favorable to the
Executive than foregoing such further reduction. The parties agree that all
income tax returns filed for the periods affected by the foregoing shall be
filed on a basis consistent with the determinations of E&Y pursuant hereto, and
that the determinations of E&Y with respect to the foregoing shall be final and
binding and not subject to judicial or other review (except by E&Y at its own
instance before or after any filing). RCPC shall pay all fees and charges of E&Y
in connection with this Section 4.5.
4.5.2 The parties acknowledge that as a result of uncertainty in the
application of Section 280G of the Code at the time of any determination by E&Y
pursuant to Section 4.5.1, it is possible that amounts will be paid or
distributed by RCPC to or for the benefit of the Executive which the parties
intended under Section 4.5.1 not to have been paid or distributed (an
"Overpayment") or that amounts will not be paid or distributed by RCPC to or for
the benefit of the Executive that the parties intended under Section 4.5.1 to
have been paid or distributed (an "Underpayment"). In the event that E&Y (based
upon the assertion of a deficiency by the Internal Revenue Service against RCPC
or its affiliates or against the Executive or at E&Y's own instance before or
after any filing or deficiency) determines that an Overpayment or an
Underpayment has been made, such amount shall be treated for all purposes as a
loan by RCPC (in the case of an Overpayment) or by the Executive (in the case of
an Underpayment) to the other party which shall, promptly following notice of
such determination by E&Y, be repaid
<PAGE>
- 7 -
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code, provided however that to the extent that any Overpayment
would result in a reduction of payments or benefits other than those referred to
in subclauses (i), (ii) and (iii) of Section 4.5.1(a), such loan shall be deemed
made and the Executive shall be required to repay the same only to the extent
that E&Y determines that on an after-tax basis such loan and repayment pursuant
to this Section 4.5.2 is more favorable to the Executive than foregoing such
loan and repayment, and provided further that no loan shall be deemed to have
been made and no amount shall be required to be repaid pursuant to this Section
4.5.2 to the extent that in the opinion of counsel to the Company such loan and
repayment would not either reduce the amount on which the Executive is subject
to excise tax or increase the amount of payments that are deductible by the
Company in relation to Section 280G of the Code.
4.6 Litigation Expenses. If RCPC and the Executive become involved in
any action, suit or proceeding relating to the alleged breach of this Agreement
by RCPC 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, RCPC
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 services will be
unique, that they will involve the development of Company-subsidized
relationships with key customers, suppliers, and service providers as well as
with key Company employees and that the Executive's work for the Company has
given and will give the Executive access to highly confidential information not
available to the public or competitors, 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
<PAGE>
- 8 -
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 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 RCPC, take all reasonable steps requested by
RCPC to defend against the compulsory disclosure and permit RCPC 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 with the Company, or at any time that RCPC 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 In consideration of RCPC's covenant in Section 4.4, the Executive
agrees (i) in all respects fully to comply with the terms of the Employee
Agreement as to Confidentiality and Non-Competition referred to in the Revlon
Executive Severance Policy (the "Non-Competition Agreement"), whether or not the
Executive is a signatory thereof, with the same effect as if the same were set
forth herein in full, and (ii) in the event that the Executive shall terminate
the Executive's employment otherwise than as provided in Section 4.4, the
Executive shall comply with the restrictions set forth in paragraph 9(e) of the
Non-Competition Agreement through the earliest date on which the Term would have
expired pursuant to Section 2.1, subject only to the Company continuing to make
payments equal to the Executive's Base Salary during such period,
notwithstanding the limitation otherwise applicable under paragraph 9(d) thereof
or any other provision of the Non-Competition Agreement.
5.3 If the Executive commits a breach of any of the provisions of
Sections 5.1 or 5.2 hereof, RCPC shall have the following rights and remedies:
5.3.1 the right and remedy to immediately terminate all further
payments and benefits provided for in this Agreement, except as may otherwise be
required by law in the case of qualified benefit plans,
5.3.2 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
<PAGE>
- 9 -
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,
if the Executive attempts or threatens to commit a breach of any of the
provisions of Sections 5.1 or 5.2, the right and remedy to be granted a
preliminary and permanent injunction in any court having equity jurisdiction
against the Executive committing the attempted or threatened breach (it being
agreed that each of the rights and remedies enumerated above shall be
independent of the others and shall be severally enforceable, and that all of
such rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to RCPC under law or in equity), and
5.3.3 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 as directed by RCPC.
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 RCPC'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 the Executive's employment shall
have no effect on the continuing operation of this Section 5.
6. Inventions and Patents.
<PAGE>
- 10 -
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.
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 with 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 RCPC, execute such assignments, certificates
or other instruments as RCPC 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.
RCPC 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.
<PAGE>
- 11 -
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):
If to the Company, to:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: General Counsel
If to the Executive, to the Executive's 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, nor may the Executive pledge,
encumber or anticipate any payments or benefits due hereunder, by operation of
law or otherwise. RCPC may assign its rights, together with its obligations,
hereunder (i) to any affiliate or (ii) to a third party in connection with any
sale, transfer or other disposition of all or substantially all of any business
to which the Executive's services are then principally devoted, provided that no
assignment
<PAGE>
- 12 -
pursuant to clause (ii) shall relieve RCPC from its obligations hereunder to the
extent the same are not timely discharged by such assignee.
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 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. 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/ WADE H. NICHOLS
------------------------------------------------
Wade H. Nichols
Executive Vice President and General Counsel
/s/ D. ERIC POGUE
------------------------------------------------
D. Eric Pogue
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