<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-47875
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REVLON CONSUMER PRODUCTS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
13-3662953
(I.R.S.
DELAWARE 2844 EMPLOYER
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 527-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WADE H. NICHOLS III, ESQ.
REVLON CONSUMER PRODUCTS CORPORATION
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 527-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
STACY J. KANTER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS OFFER FOR ALL OUTSTANDING 8 1/8% SENIOR NOTES DUE 2006
IN EXCHANGE FOR 8 1/8% SENIOR EXCHANGE NOTES DUE 2006
AND
OFFER FOR ALL OUTSTANDING 8 5/8% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR 8 5/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008
OF
REVLON CONSUMER PRODUCTS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON MAY 5, 1998, UNLESS EXTENDED
Revlon Consumer Products Corporation, a Delaware corporation (the
"Company" or "Revlon"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange an
aggregate principal amount of up to $250,000,000 of its 8 1/8% Senior
Exchange Notes due 2006 (the "New Senior Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a
like principal amount of its issued and outstanding 8 1/8% Senior Notes due
2006 (the "Old Senior Notes" and, together with the New Senior Notes, the
"Senior Notes") from the holders thereof and to exchange an aggregate
principal amount of up to $650,000,000 of its 8 5/8% Senior Subordinated
Exchange Notes due 2008 (the "New Senior Subordinated Notes" and, together
with the New Senior Notes, the "New Notes"), which have been registered under
the Securities Act, for a like principal amount of its issued and outstanding
8 5/8% Senior Subordinated Notes due 2008 (the "Old Senior Subordinated
Notes" and, together with the New Senior Subordinated Notes, the "Senior
Subordinated Notes") from the holders thereof. The Old Senior Subordinated
Notes and the Old Senior Notes are collectively referred to herein as the
"Old Notes," and the Old Notes and the New Notes are collectively referred to
herein as the "Notes." The terms of the New Notes are identical in all
material respects to the Old Notes, except for certain transfer restrictions
and registration rights relating to the Old Notes and except that, if the
Exchange Offer is not consummated by August 3, 1998, the interest rate on the
Old Notes from and including such date until but excluding the date of
consummation of the Exchange Offer will increase by 0.5%. The Old Notes were
originally issued by Revlon Escrow Corp. ("Revlon Escrow") on February 2,
1998 pursuant to an offering (the "Offering"), which was exempt from
registration under the Securities Act. The Company assumed the obligations of
Revlon Escrow under the Old Senior Subordinated Notes and related indenture
(the "Senior Subordinated Notes Indenture") upon consummation of the 10 1/2%
Senior Subordinated Notes Redemption (as defined herein), which occurred on
March 4, 1998. The Company assumed the obligations of Revlon Escrow under the
Old Senior Notes and related indenture (the "Senior Notes Indenture" and,
together with the Senior Subordinated Notes Indenture, the "Indentures") upon
consummation of the 9 3/8% Senior Notes Redemption (as defined herein), which
occurred on April 1, 1998.
Interest on the Notes is payable semiannually on February 1 and August 1
of each year, commencing August 1, 1998, at the rate of 8 1/8% per annum in
the case of the Senior Notes and 8 5/8% per annum in the case of the Senior
Subordinated Notes. The Senior Notes will mature on February 1, 2006. The
Senior Subordinated Notes will mature on February 1, 2008. The Old Notes were
originally offered to fund the redemption by the Company of each of the
Company's (i) $555,000,000 aggregate principal amount of 10 1/2% Senior
Subordinated Notes due 2003 (the "10 1/2% Senior Subordinated Notes") and
(ii) $260,000,000 aggregate principal amount of 9 3/8% Senior Notes due 2001
(the "9 3/8% Senior Notes" and, together with the 10 1/2% Senior Subordinated
Notes, the "RCPC Notes").
Concurrently with the closing of the Offering, Revlon Escrow deposited the
net proceeds of the Offering (the "Escrowed Funds") with an escrow agent (the
"Escrow Agent"), and the Escrowed Funds were temporarily invested in Treasury
Securities and other Permitted Investments (as such terms are defined herein),
and were used to repurchase a portion of the 9 3/8% Senior Notes in open
market transactions as permitted by the Escrow Agreement (as defined herein).
On March 4, 1998, a portion of the Escrowed Funds was used to finance the
10 1/2% Senior Subordinated Notes Redemption. The remaining Escrowed Funds
were used to finance the 9 3/8% Senior Notes Redemption on April 1, 1998.
The Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after February 1, 2002, at the redemption
prices set forth herein. The Senior Subordinated Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after
February 1, 2003, at the redemption prices set forth herein. In addition, at
any time prior to February 1, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the Senior Notes and up to 35% of the aggregate
principal amount of the Senior Subordinated Notes originally issued at a
redemption price of 108 1/8% and 108 5/8%, respectively, of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the date
fixed for redemption, with, and to the extent the Company receives, the net
cash proceeds of one or more public equity offerings of the Company or
Revlon, Inc., provided that at least $162.5 million aggregate principal
amount of the Senior Notes and at least $422.5 million aggregate principal
amount of the Senior Subordinated Notes remains outstanding immediately after
the occurrence of each such redemption. Upon a Change of Control (as defined
herein), the Company will have the option to redeem the Notes in whole at a
redemption price equal to the principal amount thereof plus the Applicable
Premium (as defined herein) and, subject to certain conditions, each holder
of the Notes will have the right to require the Company to repurchase all or
a portion of such holder's Notes at 101% of the principal amount thereof.
(continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE 19 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD
NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 3, 1998.
<PAGE>
The Old Senior Notes are, and the New Senior Notes will be, senior
unsecured obligations of the Company and the Old Senior Notes rank, and the
New Senior Notes will rank, pari passu in right of payment with all existing
and future Senior Debt (as defined herein) of the Company, including the 9
1/2% Senior Notes and the indebtedness under the Credit Agreement (as such
terms are defined herein). The Old Senior Subordinated Notes are, and the New
Senior Subordinated Notes will be, general unsecured obligations of the
Company and the Old Senior Subordinated Notes are, and the New Senior
Subordinated Notes will be, (i) subordinate in right of payment to all
existing and future Senior Debt of the Company, including the Senior Notes,
the 9 1/2% Senior Notes and the indebtedness under the Credit Agreement, (ii)
pari passu in right of payment with all future Senior Subordinated Debt (as
defined herein), if any, of the Company and (iii) senior in right of payment
to all future subordinated debt, if any, of the Company. The Old Notes are,
and the New Notes will be, effectively subordinated to the outstanding
indebtedness and other liabilities of the Company's subsidiaries. As of
December 31, 1997, after giving effect to the Refinancing Transactions (as
defined herein), the outstanding indebtedness of the Company's subsidiaries
would have been approximately $235.6 million. See "Description of the Notes."
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on
the Old Notes, from February 2, 1998. Accordingly, if the relevant record
date for interest payment occurs after the consummation of the Exchange
Offer, registered holders of New Notes on such record date will receive
interest accruing from the most recent date to which interest has been paid
or, if no interest has been paid, from February 2, 1998. If, however, the
relevant record date for interest payment occurs prior to the consummation of
the Exchange Offer, registered holders of Old Notes on such record date will
receive interest accruing from the most recent date to which interest has
been paid or, if no interest has been paid, from February 2, 1998. Old Notes
accepted for exchange will cease to accrue interest from and after the date
of the consummation of the Exchange Offer, except as set forth in the
immediately preceding sentence. Holders of Old Notes whose Old Notes are
accepted for exchange will not receive any payment in respect of interest on
such Old Notes otherwise payable on any interest payment date the record date
for which occurs on or after consummation of the Exchange Offer.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Agreement dated
January 28, 1998 among the Company and the other signatories thereto (the
"Registration Agreement"). Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission") as set forth in
no-action letters issued to third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement with any person to
participate in the distribution of such New Notes. However, the Company does
not intend to request the Commission to consider, and the Commission has not
considered, the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Each holder, other than a broker-dealer, must acknowledge that
it is not engaged in, and does not intend to engage in, a distribution of
such New Notes and has no arrangement or understanding to participate in a
distribution of New Notes. Each broker-dealer that receives New Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date. In the event the Company terminates the Exchange
Offer and does not accept for exchange any Old Notes, the Company will
promptly return the Old Notes to the holders thereof. See "The Exchange
Offer."
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for New Notes in the Exchange
Offer on terms which may differ from those contained in the Registration
Agreement. This Prospectus, as it may be amended or supplemented from time to
time, may be used by the Company in connection with any such additional
exchange offers.
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or
the ability of holders of the New Notes to sell their New Notes or the price
at which such holders may be able to sell their New Notes. Bear, Stearns &
Co. Inc. and Lehman Brothers Inc. (the "Initial Purchasers") have advised the
Company that they currently intend to make a market in the New Notes. The
Initial Purchasers are not obligated to do so, however, and any market-making
with respect to the New Notes may be discontinued at any time without notice.
The Company does not intend to apply for listing or quotation of the New
Notes on any securities exchange or stock market.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act, with respect to
the New Notes being offered by this Prospectus. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits thereto, to which reference is hereby made. Any statements made in
this Prospectus concerning the provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement.
The Registration Statement and the exhibits thereto may be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and will also be available for inspection and copying at the regional offices
of the Commission located at 7 World Trade Center, New York, New York 10048
and at Citicorp Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files periodic reports and other
information with the Commission. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission and the address of such site is http://www.sec.gov. In the event
the Company is not required to be subject to the reporting requirements of
the Exchange Act in the future, the Company will be required under the
Indentures, pursuant to which the Old Notes have been, and the New Notes will
be, issued, to continue to file with the Commission and to furnish to holders
of the Notes the information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act, including reports on Forms 10-K,
10-Q and 8-K, for so long as any Notes are outstanding.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and the notes thereto contained
elsewhere in this Prospectus. Unless otherwise indicated or unless the
context otherwise requires, all references in this Prospectus to the
"Company" or "Revlon" mean Revlon Consumer Products Corporation and its
subsidiaries. All market share and market position data in this Prospectus
for the Company's brands and specific products are based upon retail dollar
sales which are derived from A.C. Nielsen data. A.C. Nielsen measures retail
sales volume of products sold in the United States self-select distribution
channel, which is defined as the following channels of distribution:
independent and chain drug stores, mass-volume retailers, supermarkets and
combination supermarket/drug stores. Such data represents A.C. Nielsen's
estimates based upon data gathered by A.C. Nielsen from market samples. Such
data is therefore subject to some degree of variance.
THE COMPANY
REVLON is one of the world's best known names in cosmetics and is a
leading mass market cosmetics brand. The Company's vision is to provide
glamour, excitement and innovation through quality products at affordable
prices. To pursue this vision, the Company's management team combines the
creativity of a cosmetics and fashion company with the marketing, sales and
operating discipline of a consumer packaged goods company. The Company
believes that its global brand name recognition, product quality and
marketing experience have enabled it to create one of the strongest consumer
brand franchises in the world, with products sold in approximately 175
countries and territories. The Company's products are marketed under such
well-known brand names as REVLON, COLORSTAY, REVLON AGE DEFYING, ALMAY and
ULTIMA II in cosmetics; MOON DROPS, ETERNA 27, ALMAY TIME-OFF, ULTIMA II,
JEANNE GATINEAU and NATURAL HONEY in skin care; CHARLIE and FIRE & ICE in
fragrances; FLEX, OUTRAGEOUS, AQUAMARINE, MITCHUM, COLORSTAY, COLORSILK, JEAN
NATE, PLUSBELLE, BOZZANO and COLORAMA in personal care products; and ROUX
FANCI-FULL, REALISTIC, CREME OF NATURE, CREATIVE NAIL and AMERICAN CREW in
professional products. To further strengthen its consumer brand franchises,
the Company markets each core brand with a distinct and uniform global image,
including packaging and advertising, while retaining the flexibility to
tailor products to local and regional preferences.
Revlon was founded by Charles Revson, who revolutionized the cosmetics
industry by introducing nail enamels matched to lipsticks in fashion colors
over 65 years ago. Today, the Company has leading market positions in many of
its principal product categories in the United States self-select
distribution channel, which the Company believes is the fastest-growing
channel of distribution for cosmetics, skin care, fragrance and personal care
products. The Company's leading market positions for its REVLON brand
products include the number one positions in lip makeup and nail enamel
(which the Company has occupied for the past 21 years), with the number one
and two selling brands of lip makeup for 1997. The Company's market share in
lip makeup and nail enamel has increased from 25.3% and 21.1%, respectively,
for 1992, to 31.4% and 22.8%, respectively, for 1997. The Company has the
number two position in face makeup (including the top three selling brands of
foundation), where its market share has increased from 11.7% for 1992 to
21.2% for 1997. Propelled by the success of its new product launches and
market share gains in its existing product lines, the Company captured in
1996 and continued to hold in 1997 the number one position overall in color
cosmetics (consisting of lip, eye and face makeup and nail enamel) in the
United States self-select distribution channel, where its market share has
increased from 15.6% for 1992 to 21.6% for 1997. The Company also has leading
market positions in several product categories in certain markets outside of
the United States, including in Argentina, Australia, Brazil, Canada, Mexico
and South Africa.
The Company believes that it is an industry leader in the development of
innovative and technologically advanced consumer and professional products.
In June 1994, the Company launched COLORSTAY lipcolor, which uses patented
transfer-resistant technology that provides long wear. COLORSTAY lip makeup
achieved a 13.0% market share in the United States self-select distribution
channel for 1997, making it the number one selling lip makeup in that
channel, with a market share of more than twice that
4
<PAGE>
of any competitor's brand. The success of COLORSTAY lip makeup boosted the
Company's total lip makeup market share to more than twice the market share
of the next largest competitor. The Company capitalized on the highly
successful launch of COLORSTAY lipcolor by introducing a collection of
COLORSTAY cosmetics, including foundation, mascara, eye colors, eye liners
and lip pencils. In 1997, the Company introduced patent-pending COLORSTAY
hair color, which added a new category to the Company's COLORSTAY franchise
and brings proprietary long wear technology to the growing at home hair color
market. The Company has also introduced the COLORSTAY collection in
international markets, where it has increased the Company's color cosmetics
sales in such markets. The Company has applied the proprietary
transfer-resistant technology developed for COLORSTAY to the ALMAY AMAZING
collection, which is part of the Company's line of hypo-allergenic,
dermatologist-tested, fragrance-free cosmetics and skin care products. In
1998, the Company intends to continue to introduce new products under its
COLORSTAY and ALMAY brands.
In April 1994, the Company introduced REVLON AGE DEFYING foundation, which
uses proprietary technology designed to meet the needs of women in the over
35 age bracket. REVLON AGE DEFYING foundation was the number two selling
foundation in the United States self-select distribution channel for 1997 and
achieved a 7.9% market share for such period. The Company capitalized on this
highly successful launch by introducing a collection of REVLON AGE DEFYING
color cosmetics, including eye makeup, blush, pressed powder and compact
makeup. With the addition of NEW COMPLEXION compact makeup in 1996, NEW
COMPLEXION foundations achieved a 7.3% market share in the United States
self-select distribution channel for 1997, giving Revlon the number one, two
and three selling brands of foundation for 1997. In 1998, the Company intends
to continue to introduce new products under its REVLON AGE DEFYING and NEW
COMPLEXION brands.
The Company has introduced, and intends to continue to introduce,
innovative products designed to fulfill identified consumer needs. In 1996
the Company launched its STREETWEAR nail enamel targeted for the trend
conscious cosmetics consumer. In line with the Company's successful strategy
used in connection with the COLORSTAY and REVLON AGE DEFYING franchises, and
to capitalize on STREETWEAR nail enamel's highly successful launch, the
Company launched a collection of STREETWEAR lip, nail and eye products. In
1997, the Company also launched TOP SPEED nail enamel, which contains a
patented speed drying polymer formula which sets in 90 seconds. MOISTURESTAY,
which the Company introduced in March 1998, uses patent-pending technology to
moisturize the lips, even after the color wears off.
In the United States and increasingly in international markets, the
Company's products are sold principally in the expanding self-select
distribution channel. The trend in the cosmetics, skin care and fragrance
industry has been the shift of consumer purchases from the
demonstrator-assisted channel to the self-select distribution channel. The
Company believes that it is well-positioned to continue to take advantage of
the shifting consumer shopping patterns in international markets towards the
self-select distribution channel, particularly in Western Europe, Latin
America and the Far East. The Company also is expanding its presence in the
new and emerging markets of Africa, China, Eastern Europe and Russia.
In the United States, the self-select distribution channel, in which
consumers select their own purchases without the assistance of an in-store
demonstrator, includes independent drug stores and chain drug stores (such as
Walgreens, CVS, Eckerds and Rite Aid), mass volume retailers (such as
Wal-Mart, Target Stores and Kmart) and supermarkets and combination
supermarket/drug stores (such as Pathmark, Albertson's, Kroger's and
Smith's). Internationally, the self-select distribution channel includes
retailers such as Boots in the United Kingdom and Western Europe, Shoppers
Drug Mart in Canada and Wal-Mart worldwide. The foregoing retailers, among
others, sell the Company's products. See "Business -- Overview."
5
<PAGE>
Business Strategy
The Company's business strategy, which implements its vision and is
intended to continue to improve its operating performance, is to:
o Strengthen and broaden its core brands through globalization of
marketing and advertising, product development and manufacturing and
through increasing its emphasis on advertising and promotion.
o Lead the industry in the development and introduction of
technologically advanced innovative products that set new trends.
o Expand the Company's presence in all markets in which the Company
competes and enter new and emerging markets.
o Continue to reduce costs and improve operating efficiencies, customer
service and product quality by reducing overhead, rationalizing factory
operations, upgrading management information systems, globally sourcing
raw materials and components and carefully managing working capital.
o Continue to expand market share and product lines through possible
strategic acquisitions or joint ventures. See "Business -- Business
Strategy."
As a result of the implementation of its strategy, through December 31,
1997, the Company achieved 17 consecutive quarters of increased net sales,
operating income and EBITDA (as defined herein) compared with the
corresponding quarter of the respective prior year. Net sales, operating
income (before a non-recurring charge of $7.6 million related to business
consolidation costs and other, net) and EBITDA (before such non-recurring
charge) increased 10.2%, 10.3% and 12.4%, respectively, for 1997 over 1996
and 11.8%, 38.3% and 27.4%, respectively, for 1996 over 1995. In addition,
the Company's results improved to net income of $59.7 million for 1997
(excluding a $14.9 million extraordinary charge incurred in connection with
the early extinguishment of indebtedness) (the "Adjusted 1997 Net Income")
from net income of $25.6 million for 1996 (excluding a $6.6 million
extraordinary charge incurred in connection with the early extinguishment of
indebtedness) (the "Adjusted 1996 Net Income") and a net loss of $41.2
million for 1995. The Company has increased its investment in advertising and
consumer-directed promotion while decreasing its selling, general and
administrative ("SG&A") expenses as a percentage of net sales to 55.9% for
1997 compared with 57.2% for 1996 and 58.8% for 1995.
Background
On June 24, 1992, the Company succeeded to assets and liabilities of the
cosmetics and skin care, fragrance and personal care products business of
Revlon Holdings Inc. ("Holdings"), an indirect parent company of the Company.
Holdings retained certain small brands that historically had not been
profitable (the "Retained Brands") and certain other assets and liabilities.
Unless the context otherwise requires, references to the Company or Revlon
relating to dates or periods prior to its formation mean the cosmetics and
skin care, fragrance and personal care products business of Holdings to which
the Company has succeeded.
On March 5, 1996, Revlon, Inc., the direct parent of the Company,
completed an initial public offering (the "Revlon IPO") in which it issued
and sold 8,625,000 shares of its Class A common stock, par value $.01 per
share, for $24.00 per share. Revlon, Inc. contributed the net proceeds of
$187.8 million (net of underwriters' discount and related fees and expenses)
to the Company, which in turn used such funds to repay borrowings outstanding
under the credit agreement in effect at that time (the "1995 Credit
Agreement") and to pay fees and expenses related to entering into a new
credit agreement (the "1996 Credit Agreement"), which was subsequently repaid
in May 1997 with borrowings under the Company's existing credit agreement
(the "Credit Agreement").
The Company's principal executive offices are located at 625 Madison
Avenue, New York, New York 10022, and its telephone number is (212) 527-4000.
The Company was incorporated in Delaware in April 1992.
6
<PAGE>
The following sets forth a summary organizational chart for the Company
and Revlon Escrow.
----------------------------------
MAFCO HOLDINGS INC.
("MAFCO HOLDINGS")
----------------------------------
|
|100%
----------------------------------
MACANDREWS & FORBES
HOLDINGS INC.
("MACANDREWS & FORBES")
----------------------------------
|
|100%
----------------------------------
REVLON HOLDINGS INC.
("HOLDINGS")
----------------------------------
| |
----------------------------- |100%
| ----------------------------------
| REV
| HOLDINGS INC.
| ("REV HOLDINGS")
| ----------------------------------
| |
|100% |83.1%
| ----------------------------------
| REVLON, INC.
| ("REVLON, INC.")
| ----------------------------------
| |
| |100%
------------------------ ----------------------------------
REVLON ESCROW CORP. REVLON CONSUMER
("REVLON ESCROW") PRODUCTS CORPORATION
------------------------ (INCLUDING OPERATING SUBSIDIARIES)
(THE "COMPANY" OR "REVLON")
----------------------------------
* REV Holdings beneficially owns 11,250,000 shares of Class A common
stock of Revlon, Inc. (representing 56.6% of the outstanding shares of
Class A common stock) and all of the outstanding 31,250,000 shares of
Class B common stock, par value $.01 per share, of Revlon, Inc., which
together represent approximately 83.1% of the outstanding shares of
common stock of Revlon, Inc. and approximately 97.4% of the combined
voting power of the outstanding shares of common stock of Revlon, Inc.
See "Ownership of Common Stock."
** Subsequent to the Refinancing Transactions, the capital stock of Revlon
Escrow was contributed to the Company and Revlon Escrow was dissolved.
7
<PAGE>
THE REFINANCING TRANSACTIONS
Concurrently with the closing of the Offering, Revlon Escrow, a then
subsidiary of Holdings, an indirect parent company of the Company, deposited
the Escrowed Funds, which consisted of the net proceeds of the Offering (net
of discounts to the Initial Purchasers), with the Escrow Agent. Pursuant to
the Escrow Agreement, the Escrowed Funds were held in escrow and invested in
Treasury Securities and other Permitted Investments, and were used to
repurchase a portion of the 9 3/8% Senior Notes in open market transactions as
permitted by the Escrow Agreement. On March 4, 1998, a portion of the Escrowed
Funds were used to finance the redemption of the 10 1/2% Senior Subordinated
Notes (the "10 1/2% Senior Subordinated Notes Redemption"). On April 1, 1998,
a portion of the Escrowed Funds were used to finance the redemption of the
9 3/8% Senior Notes (the "9 3/8% Senior Notes Redemption"). The remaining
Escrowed Funds were used to repay indebtedness under the working capital
lines under the Credit Agreement.
On March 4, 1998, the Company assumed Revlon Escrow's obligations under
the Senior Subordinated Notes and the Senior Subordinated Notes Indenture,
and all obligations of the Company under the 10 1/2% Senior Subordinated
Notes Indenture were satisfied and discharged.
On April 1, 1998, the Company assumed Revlon Escrow's obligations under
the Senior Notes and the Senior Notes Indenture and all obligations of the
Company under the 9 3/8% Senior Notes Indenture were satisfied and
discharged. The remaining Escrowed Funds were released to the Company.
The Offering, the 10 1/2% Senior Subordinated Notes Redemption, the 9 3/8%
Senior Notes Redemption and the assumption by the Company of Revlon Escrow's
obligations under the Notes are referred to collectively herein as the
"Refinancing Transactions." Subsequent to the Refinancing Transactions, the
capital stock of Revlon Escrow was contributed to the Company and Revlon
Escrow was dissolved.
8
<PAGE>
THE EXCHANGE OFFER
SECURITIES OFFERED ............ Up to $250,000,000 aggregate principal
amount of 8 1/8% Senior Exchange Notes due
2006 and up to $650,000,000 aggregate
principal amount of 8 5/8% Senior
Subordinated Exchange Notes due 2008, each
of which has been registered under the
Securities Act. The terms of the New Notes
and the Old Notes are identical in all
material respects, except for certain
transfer restrictions and registration
rights relating to the Old Notes and except
that, if the Exchange Offer is not
consummated by August 3, 1998, the interest
rate on the Old Notes from and including
such date until but excluding the date of
consummation of the Exchange Offer will
increase by 0.5%. See "--Summary Description
of the New Notes" and "Description of the
Notes -- Registration Rights."
THE EXCHANGE OFFER ............ The New Notes are being offered in exchange
for a like aggregate principal amount of Old
Notes. The issuance of the New Notes is
intended to satisfy obligations of the
Company contained in the Registration
Agreement. For procedures for tendering the
Old Notes, see "The Exchange Offer --
Procedures for Tendering Old Notes."
TENDERS; EXPIRATION DATE;
WITHDRAWAL ................... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on May 5, 1998, or such
later date and time to which it is extended
(the "Expiration Date"). The tender of Old
Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the
Expiration Date. Any Old Note not accepted
for exchange for any reason will be returned
without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange
Offer. See "The Exchange Offer -- Terms of
the Exchange Offer; Period for Tendering Old
Notes" and "The Exchange Offer -- Withdrawal
Rights."
CERTAIN CONDITIONS TO
EXCHANGE OFFER ............... The Company shall not be required to accept
for exchange, or to issue New Notes in
exchange for, any Old Notes and may
terminate or amend the Exchange Offer if at
any time before the acceptance of the Old
Notes for exchange or the exchange of the
New Notes for such Old Notes certain events
have occurred, which, in the reasonable
judgment of the Company, make it inadvisable
to proceed with the Exchange Offer and/or
with such acceptance for exchange or with
such exchange. Such events include (i) any
threatened, instituted or pending action
seeking to restrain or prohibit the Exchange
Offer, (ii) a general suspension of trading
in securities on any national securities
exchange or in the over-the-counter market,
(iii) a general banking moratorium, (iv) the
commencement of a war or armed hostilities
involving the United States and (v) a
material adverse change or development
involving a prospective material ad-
9
<PAGE>
verse change in the Company's business,
properties, assets, liabilities, financial
condition, operations, results of operations
or prospects that may affect the value of
the Old Notes or the New Notes. In addition,
the Company will not accept for exchange any
Old Notes tendered, and no New Notes will be
issued in exchange for any such Old Notes,
at any such time as any stop order shall be
threatened or in effect with respect to the
Registration Statement of which this
Prospectus constitutes a part or the
qualification of the Indentures under the
Trust Indenture Act of 1939. See "The
Exchange Offer -- Certain Conditions to the
Exchange Offer."
FEDERAL INCOME TAX
CONSEQUENCES ................. The exchange pursuant to the Exchange Offer
will not result in gain or loss to the
holders or the Company for federal income
tax purposes. See "Certain U.S. Federal
Income Tax Considerations."
USE OF PROCEEDS ............... There will be no proceeds to the Company
from the exchange pursuant to the Exchange
Offer. See "Use of Proceeds."
EXCHANGE AGENT ................ U.S. Bank Trust National Association (formerly
known as First Trust National Association) is
serving as exchange agent (the "Exchange
Agent") in connection with the Exchange Offer.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indentures regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register Old Notes under the Securities
Act. See "Description of the Notes -- Registration Rights." Based on
interpretations by the staff of the Commission, as set forth in no-action
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by holders thereof (other than any
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the
distribution of such New Notes. However, the Company does not intend to
request the Commission to consider, and the Commission has not considered,
the Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each
holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes.
If any holder is an affiliate of the Company, is engaged in or intends to
engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the
10
<PAGE>
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities and that it
will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." In addition, to comply with
the state securities laws, the New Notes may not be offered or sold in any
state unless they have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with. The offer and sale of the New Notes to "qualified institutional buyers"
(as such term is defined under Rule 144A of the Securities Act) is generally
exempt from registration or qualification under the state securities laws.
The Company currently does not intend to register or qualify the sale of the
New Notes in any state where an exemption from registration or qualification
is required and not available. See "The Exchange Offer -- Consequences of
Exchanging or Failing to Exchange Old Notes" and "Description of the Notes --
Registration Rights."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that, if the Exchange Offer is not
consummated by August 3, 1998, the interest rate on the Old Notes from and
including such date until but excluding the date of consummation of the
Exchange Offer will increase by 0.5%. The New Notes will bear interest from
the most recent date to which interest has been paid on the Old Notes or, if
no interest has been paid on the Old Notes, from February 2, 1998.
Accordingly, if the relevant record date for interest payment occurs after
the consummation of the Exchange Offer registered holders of New Notes on
such record date will receive interest accruing from the most recent date to
which interest has been paid or, if no interest has been paid, from February
2, 1998. If, however, the relevant record date for interest payment occurs
prior to the consummation of the Exchange Offer, registered holders of Old
Notes on such record date will receive interest accruing from the most recent
date to which interest has been paid or, if no interest has been paid, from
February 2, 1998. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer,
except as set forth in the immediately preceding sentence. Holders of Old
Notes whose Old Notes are accepted for exchange will not receive any payment
in respect of interest on such Old Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
THE SENIOR NOTES
SENIOR NOTES OFFERED .......... Up to $250,000,000 principal amount of 8
1/8% Senior Exchange Notes due 2006, which
have been registered under the Securities
Act.
MATURITY DATE ................. February 1, 2006.
INTEREST PAYMENT DATES ........ February 1 and August 1, commencing August
1, 1998.
OPTIONAL REDEMPTION ........... The Senior Notes may be redeemed at the
option of the Company in whole or from time
to time in part at any time on
11
<PAGE>
or after February 1, 2002 at the redemption
prices set forth herein. In addition, at any
time prior to February 1, 2001, the Company
may redeem up to 35% of the aggregate
principal amount of the Senior Notes
originally issued at a redemption price of
108 1/8% of the principal amount thereof,
plus accrued and unpaid interest, if any,
thereon to the date fixed for redemption,
with, and to the extent the Company
receives, the net cash proceeds of one or
more Public Equity Offerings (as defined
herein), provided that at least $162.5
million aggregate principal amount of the
Senior Notes remains outstanding immediately
after the occurrence of each such
redemption. See "Description of the Notes --
The Senior Notes -- Optional Redemption."
CHANGE OF CONTROL ............. Upon a Change of Control, the Company will
have the option to redeem the Senior Notes
in whole at a redemption price equal to the
principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the date
of redemption plus the Applicable Premium
and, subject to certain conditions, each
holder of the Senior Notes will have the
right to require the Company to repurchase
all or a portion of such holder's Senior
Notes at a price equal to 101% of the
principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the date
of repurchase.
RANKING ....................... The Old Senior Notes are, and the New Senior
Notes will be, senior unsecured obligations
of the Company and the Old Senior Notes
rank, and the New Senior Notes will rank,
pari passu in right of payment with all
existing and future Senior Debt of the
Company, including the 9 1/2% Senior Notes
due 1999 (the "9 1/2% Senior Notes") and the
indebtedness under the Credit Agreement, and
senior to all future subordinated
indebtedness of the Company. The Old Senior
Notes are, and the New Senior Notes will be,
effectively subordinated to the outstanding
indebtedness and other liabilities of the
Company's subsidiaries. As of December 31,
1997, after giving effect to the Refinancing
Transactions, the outstanding indebtedness
of the Company's subsidiaries would have
been approximately $235.6 million. See "Risk
Factors -- Substantial Level of
Indebtedness," "Risk Factors -- Ability to
Pay Principal of Notes," "Risk Factors --
Ranking of Notes and Subordination" and
"Description of the Notes -- The Senior
Notes."
CERTAIN COVENANTS ............. The Senior Notes Indenture contains
covenants that, among other things, limit
(i) the issuance of additional debt and
redeemable stock by the Company, (ii) the
incurrence of liens, (iii) the issuance of
debt and preferred stock by the Company's
subsidiaries, (iv) the payment of dividends
on capital stock of the Company and its
subsidiaries and the redemption of capital
stock of the Company, (v) the sale of assets
and subsidiary stock, (vi) transactions with
affiliates and (vii) consolidations, mergers
and transfers of all or substantially all
the Company's assets.
12
<PAGE>
The Senior Notes Indenture also prohibits
certain restrictions on distributions from
subsidiaries. All of these limitations and
prohibitions, however, are subject to a
number of important qualifications. See
"Description of the Notes -- The Senior
Notes."
THE SENIOR SUBORDINATED NOTES
SENIOR SUBORDINATED NOTES
OFFERED . .................... Up to $650,000,000 principal amount of 8
5/8% Senior Subordinated Exchange Notes due
2008, which have been registered under the
Securities Act.
MATURITY DATE ................. February 1, 2008.
INTEREST PAYMENT DATES ........ February 1 and August 1, commencing August
1, 1998.
OPTIONAL REDEMPTION ........... The Senior Subordinated Notes may be
redeemed at the option of the Company in
whole or from time to time in part at any
time on or after February 1, 2003 at the
redemption prices set forth herein. In
addition, at any time prior to February 1,
2001, the Company may redeem up to 35% of
the aggregate principal amount of the Senior
Subordinated Notes originally issued at a
redemption price of 108 5/8% of the
principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the date
fixed for redemption, with, and to the
extent the Company receives, the net cash
proceeds of one or more Public Equity
Offerings, provided that at least $422.5
million aggregate principal amount of the
Senior Subordinated Notes remains
outstanding immediately after the occurrence
of each such redemption. See "Description of
the Notes -- The Senior Subordinated Notes
-- Optional Redemption."
CHANGE OF CONTROL ............. Upon a Change of Control, the Company will
have the option to redeem the Senior
Subordinated Notes in whole at a redemption
price equal to the principal amount thereof,
plus accrued and unpaid interest, if any,
thereon to the date of redemption plus the
Applicable Premium and, subject to certain
conditions, each holder of the Senior
Subordinated Notes will have the right to
require the Company to repurchase all or a
portion of such holder's Senior Subordinated
Notes at a price equal to 101% of the
principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the date
of repurchase.
RANKING ....................... The Old Senior Subordinated Notes are, and
the New Senior Subordinated Notes will be,
general unsecured obligations of the Company
and the Old Senior Subordinated Notes are,
and the New Senior Subordinated Notes will
be, (i) subordinate in right of payment to
all existing and future Senior Debt of the
Company, including the Senior Notes, the 9
1/2% Senior Notes and the indebtedness under
the Credit Agreement, (ii) pari passu in
right of payment with all future Senior
Subordinated Debt, if any, of the Company
and (iii) senior in right of payment
13
<PAGE>
to all future subordinated debt, if any, of
the Company. The Old Senior Subordinated
Notes are, and the New Senior Subordinated
Notes will be, effectively subordinated to
the outstanding indebtedness and other
liabilities of the Company's subsidiaries.
As of December 31, 1997, after giving effect
to the Refinancing Transactions, the
outstanding indebtedness of the Company's
subsidiaries would have been approximately
$235.6 million. See "Risk Factors --
Substantial Level of Indebtedness," "Risk
Factors -- Ability to Pay Principal of
Notes," "Risk Factors --Ranking of Notes and
Subordination" and "Description of the Notes
-- The Senior Subordinated Notes."
CERTAIN COVENANTS ............. The Senior Subordinated Notes Indenture
contains covenants that, among other things,
limit (i) the issuance of additional debt
and redeemable stock by the Company, (ii)
the incurrence of liens, (iii) the issuance
of debt and preferred stock by the Company's
subsidiaries, (iv) the payment of dividends
on capital stock of the Company and its
subsidiaries and the redemption of capital
stock of the Company, (v) the sale of assets
and subsidiary stock, (vi) transactions with
affiliates, (vii) consolidations, mergers
and transfers of all or substantially all
the Company's assets and (viii) the issuance
of additional subordinated debt that is
senior in right of payment to the Senior
Subordinated Notes. The Senior Subordinated
Notes Indenture also prohibits certain
restrictions on distributions from
subsidiaries. All of these limitations and
prohibitions, however, are subject to a
number of important qualifications. See
"Description of the Notes -- The Senior
Subordinated Notes."
GENERAL
USE OF PROCEEDS ............... The Company will not receive any proceeds
from the Exchange Offer. The Company used
the net proceeds of the Offering, which were
approximately $880 million (net of discounts
to the Initial Purchasers and fees and
expenses), to finance the 10 1/2% Senior
Subordinated Notes Redemption and the 9 3/8%
Senior Notes Redemption and to repay
indebtedness under the working capital lines
under the Credit Agreement. Pending such
uses, the Escrowed Funds were held in escrow
and invested in Treasury Securities and
other Permitted Investments, and were used to
repurchase a portion of the 9 3/8% Senior
Notes in open market transactions as
permitted by the Escrow Agreement. See "Use
of Proceeds."
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<PAGE>
EXCHANGE OFFER; REGISTRATION
RIGHTS ....................... Holders of New Notes are not entitled to any
registration rights with respect to the New
Notes. Pursuant to the Registration
Agreement, Revlon Escrow and the Company
agreed that they would, at their cost, use
their best efforts to cause a registration
statement to be declared effective under the
Securities Act for the exchange of Old Notes
for registered notes. The Registration
Statement of which this Prospectus is a part
constitutes the registration statement for
purposes of the Registration Agreement. See
"Description of the Notes -- Registration
Rights."
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate
the specific factors set forth under "Risk Factors" before making a decision
to tender their Old Notes in the Exchange Offer.
15
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary historical financial data for each of the years in the
five-year period ended December 31, 1997 have been derived from the audited
consolidated financial statements of the Company.
The pro forma statement of operations data for the year ended December 31,
1997 give pro forma effect to the Refinancing Transactions as if such
transactions had been consummated on January 1, 1997. The as adjusted balance
sheet as of December 31, 1997 gives pro forma effect to the Refinancing
Transactions as if such transactions had occurred on December 31, 1997. The
pro forma adjustments are based upon available information and certain
assumptions that management of the Company believes are reasonable. The pro
forma financial data do not purport to represent the results of operations or
the financial position of the Company that actually would have occurred had
the foregoing transactions been consummated on the aforesaid dates.
The following summary financial data should be read in conjunction with
"--The Refinancing Transactions," "Capitalization," "Selected Historical and
Pro Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
Prospectus.
16
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF OPERATIONS DATA:
Net sales ........................................ $2,390.9 $2,169.5 $1,940.0 $1,736.7 $1,595.2
Gross profit...................................... 1,558.8 1,443.0 1,287.0 1,137.8 1,024.3
Selling, general and administrative expenses .... 1,336.7 1,241.6 1,141.4 1,030.4 973.8
Business consolidation costs and other, net ..... 7.6 (a) -- -- -- --
---------- ---------- ---------- ----------- ----------
Operating income.................................. 214.5 201.4 145.6 107.4 50.5
Interest expense, net............................. 133.2 130.0 137.7 130.4 114.4
Amortization of debt issuance costs............... 6.7 8.3 11.0 8.4 8.0
Other, net........................................ 11.5 12.0 12.7 20.8 39.3
Gain on sale of subsidiary stock ................. (6.0)(b) -- -- -- --
---------- ---------- ---------- ----------- ----------
Income (loss) before income taxes................. 69.1 51.1 (15.8) (52.2) (111.2)
Provision for income taxes........................ 9.4 25.5 25.4 22.8 19.0
---------- ---------- ---------- ----------- ----------
Income (loss) before extraordinary items and
cumulative effect of accounting changes.......... 59.7 25.6 (41.2) (75.0) (130.2)
Extraordinary items--early extinguishments of
debt............................................. (14.9) (6.6) -- -- (9.5)
Cumulative effect of accounting changes........... -- -- -- (28.8)(c) (6.0)(d)
---------- ---------- ---------- ----------- ----------
Net income (loss)................................. $ 44.8 $ 19.0 $ (41.2) $ (103.8) $ (145.7)
========== ========== ========== =========== ==========
OTHER DATA:
EBITDA (e)........................................ $ 319.2 $ 284.0 $ 223.0 $ 177.8 $ 119.5
Ratio of EBITDA to interest expense, net ........ 2.4x 2.2x 1.6x 1.4x 1.0x
PRO FORMA DATA (F):
Interest expense, net ............................ $ 126.5
Income before extraordinary item.................. 67.4
Ratio of EBITDA to interest expense, net ........ 2.5x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------
ACTUAL AS ADJUSTED (G)
---------- ---------------
<S> <C> <C>
(IN MILLIONS)
BALANCE SHEET DATA:
Total assets ............................. $1,836.4 $1,841.5
Long-term debt, excluding current
portion.................................. 1,458.7 1,535.1
Total stockholder's deficiency............ (456.7) (508.5)
</TABLE>
- ------------
See Notes to Summary Historical and Pro Forma Financial Data.
17
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) During 1997, the Company incurred business consolidation costs, net, of
approximately $7.6 million in connection with the implementation of its
business strategy to rationalize factory operations, including
primarily severance and other related costs in certain operations and
the consolidation of certain warehouse, distribution and headquarter
operations related to the merger (the "Cosmetic Center Merger") of the
Company's wholly owned subsidiary, Prestige Fragrance & Cosmetics, Inc.
("PFC"), with and into The Cosmetic Center, Inc. ("CCI"), with CCI
surviving the Cosmetic Center Merger ("Cosmetic Center"), offset by
related gains associated with the sale of certain factory operations of
approximately $4.3 million and a settlement of a claim of $12.7
million.
(b) Represents the gain from the sale of subsidiary stock pursuant to the
Cosmetic Center Merger.
(c) Effective January 1, 1994, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The Company
recognized a charge of $28.8 million in the first quarter of 1994 to
reflect the cumulative effect of the accounting change, net of income
tax benefit.
(d) Effective January 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," for its retiree benefit plan in the United States.
Accordingly, the Company recognized a charge of $6.0 million in the
1993 first quarter to reflect the cumulative effect of the accounting
change.
(e) EBITDA is defined as operating income before business consolidation
costs and other, net, plus depreciation and amortization other than
that relating to early extinguishment of debt, debt discount and debt
issuance costs. EBITDA is presented here not as a measure of operating
results but rather as a measure of debt service ability. EBITDA should
not be considered in isolation or as a substitute for net income or
cash flow from operations prepared in accordance with generally
accepted accounting principles as a measure of the profitability or
liquidity of the Company. EBITDA does not take into account the
Company's debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be
available for discretionary uses.
(f) The pro forma statement of operations data for the year ended December
31, 1997 reflect a reduction of interest expense and amortization of
debt issuance costs of $58.4 million and $2.1 million, respectively,
reflecting the 10 1/2% Senior Subordinated Notes Redemption, a
reduction of interest expense and amortization of debt issuance costs
of $24.4 million and $0.9 million, respectively, reflecting the 9 3/8%
Senior Notes Redemption, a reduction of interest expense of $0.4
million reflecting the decrease of working capital lines using the
balance of the net proceeds from the Offering and an increase in
interest expense and amortization of debt issuance costs of $76.5
million and $2.0 million, respectively, to reflect such expenses as if
the Notes, which were used to refinance the RCPC Notes, had been
outstanding from the beginning of the period presented.
(g) The as adjusted balance sheet data give effect to the Refinancing
Transactions and the extraordinary loss of $51.8 million related
thereto as if such transactions had occurred on December 31, 1997.
18
<PAGE>
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate
the following risks before tendering their Old Notes in the Exchange Offer,
although the risk factors set forth below (other than "--Consequences of
Failure to Exchange") are generally applicable to the Old Notes as well as
the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indentures regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act or under any applicable state securities laws. See "The Exchange Offer
- --Consequences of Exchanging or Failing to Exchange Old Notes."
SUBSTANTIAL LEVEL OF INDEBTEDNESS
The Company has a substantial amount of outstanding indebtedness. As of
December 31, 1997, after giving effect to the Refinancing Transactions, the
Company's total indebtedness would have been approximately $1,583.3 million.
See "Capitalization." This level of indebtedness could adversely impact the
Company's ability to make payments on, or to repurchase, the Notes. In
addition, subject to the restrictions imposed by the Indentures, the Credit
Agreement and the indenture governing the 9 1/2% Senior Notes (the "9 1/2%
Senior Notes Indenture"), the Company may incur from time to time additional
indebtedness that ranks (i) pari passu in right of payment to the Senior
Notes, (ii) subordinated in right of payment to the Senior Notes (but not
senior in right of payment to the Senior Subordinated Notes), (iii) pari
passu in right of payment to the Senior Subordinated Notes or (iv)
subordinated in right of payment to the Senior Subordinated Notes. See
"Description of the Notes." Subject to certain limitations contained in its
outstanding debt instruments, the Company's subsidiaries may incur additional
indebtedness to finance working capital or capital expenditures, investments
or acquisitions or for other purposes. See "--Restrictions Imposed by the
Terms of the Company's Indebtedness; Consequences of Failure to Comply" and
"Description of Other Indebtedness."
This level of indebtedness could have important consequences to the
holders of the Notes, including the following: (i) a substantial portion of
the Company's cash flow from operations must be dedicated to the payment of
the principal of and interest on such indebtedness and will not be available
for other purposes; (ii) the ability of the Company to obtain financing in
the future for working capital needs, capital expenditures, acquisitions,
investments, general corporate purposes or other purposes may be materially
limited or impaired; and (iii) the Company's level of indebtedness may reduce
the Company's flexibility to respond to changing business and economic
conditions.
ABILITY TO PAY PRINCIPAL OF NOTES
The Company currently anticipates that, in order to pay the principal
amount of the Notes upon the occurrence of an Event of Default, to redeem or
repurchase the Notes upon a Change of Control, or in the event that the
Company's cash flows from operations are not sufficient to enable it to pay
the principal amount of the Notes at maturity, the Company will be required
to adopt one or more alternatives, such as refinancing its indebtedness,
selling assets or operations, selling its equity securities or seeking
capital contributions or loans from its affiliates. None of the affiliates of
the Company are required to make any capital contributions, loans or other
payments to the Company with respect to the Company's obligations on the
Notes. There can be no assurance that any of the foregoing actions could be
effected on satisfactory terms, that any of the foregoing actions would
enable the Company to pay the principal amount of the
19
<PAGE>
Notes or that any of such actions would be permitted by the terms of the
Indentures or any other debt instruments of the Company or the Company's
subsidiaries then in effect. See "--Restrictions Imposed by the Terms of the
Company's Indebtedness; Consequences of Failure to Comply," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Other Indebtedness."
RANKING OF NOTES AND SUBORDINATION
The Old Senior Notes are, and the New Senior Notes will be, senior
unsecured obligations of the Company and the Old Senior Notes rank, and the
New Senior Notes will rank, pari passu in right of payment with all existing
and future Senior Debt of the Company, which Senior Debt includes the 9 1/2%
Senior Notes and the indebtedness under the Credit Agreement, except any such
Senior Debt which by its terms is subordinated to the Senior Notes. The Old
Senior Subordinated Notes are, and the New Senior Subordinated Notes will be,
general unsecured obligations of the Company and the Old Senior Subordinated
Notes are, and the New Senior Subordinated Notes will be, (i) subordinated in
right of payment to all existing and future Senior Debt of the Company, which
Senior Debt includes the Senior Notes, the 9 1/2% Senior Notes and the
indebtedness under the Credit Agreement, (ii) pari passu in right of payment
with all future Senior Subordinated Debt, if any, of the Company and (iii)
senior in right of payment to all future subordinated debt, if any, of the
Company.
The Company may not pay principal of, or premium or interest on, the
Senior Subordinated Notes, make any deposit pursuant to defeasance provisions
or repurchase, redeem or otherwise retire the Senior Subordinated Notes if
any Senior Debt is not paid when due or any other default on Senior Debt
occurs and the maturity of such Senior Debt is accelerated in accordance with
its terms unless, in either case, and until such default has been cured or
waived or has ceased to exist, any such acceleration has been rescinded or
such Senior Debt has been discharged or paid in full. In addition, if a
default exists with respect to certain Senior Debt and certain other
conditions are satisfied, the Company may not make any payments on the Senior
Subordinated Notes for a designated period of time. Upon any payment or
distribution of assets of the Company upon a total or partial liquidation,
dissolution, reorganization or similar proceeding, the holders of Senior Debt
will be entitled to receive payment in full before the holders of the Senior
Subordinated Notes are entitled to receive any payment. See "Description of
the Notes." The indebtedness under the Credit Agreement is guaranteed by each
domestic subsidiary of the Company (other than Cosmetic Center) and by
Revlon, Inc., and is secured by pledges of the stock of the Company, all of
its domestic subsidiaries and 66% of the capital stock of certain of its
foreign subsidiaries. The amount of Senior Debt outstanding as of December
31, 1997, after giving effect to the Refinancing Transactions, would have
been approximately $902.6 million. See "--Substantial Level of Indebtedness"
and "Description of Other Indebtedness."
The Company conducts a substantial portion of its operations through its
subsidiaries and depends, in part, on earnings and cash flows of, and
dividends from, such subsidiaries to pay its obligations, including payments
of principal and interest on its indebtedness. In addition, any right of the
Company and its creditors to participate in the assets of any of the
Company's subsidiaries upon any liquidation or reorganization of any such
subsidiary will be subject to the prior claims of that subsidiary's
creditors, including trade creditors (except to the extent the Company may
itself be a creditor of such subsidiary). Accordingly, the Notes will be
effectively subordinated to the outstanding indebtedness and other
liabilities, including trade payables, of the Company's subsidiaries. As of
December 31, 1997, after giving effect to the Refinancing Transactions, the
outstanding indebtedness of such subsidiaries would have been approximately
$235.6 million. See "--Substantial Level of Indebtedness" and "Description of
Other Indebtedness."
ABILITY TO SERVICE DEBT
Based upon the Company's current level of operations and anticipated
growth in net sales and earnings as a result of its business strategy, the
Company expects that cash flows from operations and funds from currently
available credit facilities and refinancings of existing indebtedness will be
sufficient to enable the Company to satisfy its anticipated cash requirements
for the foreseeable future on a
20
<PAGE>
consolidated basis, including debt service. The Company may borrow additional
funds under the Credit Agreement, subject to certain restrictions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources." Other
than the Refinancing Transactions, the Company does not have any current
plans with respect to the refinancing of its other indebtedness, although it
believes that it will be able to refinance such indebtedness upon maturity.
However, there can be no assurance that the Company will be able to refinance
such other indebtedness or that net sales or earnings will grow as a result
of the continued implementation of the Company's business strategy (see
"--Operating History under the Business Strategy"). As a result, there can be
no assurance that the Company will be able to satisfy anticipated 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 its indebtedness, selling assets or operations, seeking capital
contributions or loans from Revlon, Inc. or other affiliates of the Company
or selling its equity securities. 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources" and
"Description of Other Indebtedness."
RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S INDEBTEDNESS; CONSEQUENCES
OF FAILURE TO COMPLY
The terms and conditions of the debt instruments of the Company, including
the Indentures, the 9 1/2% Senior Notes Indenture and the Credit Agreement,
impose restrictions on the ability of the Company and its subsidiaries to
incur debt, create liens, pay dividends, sell assets and make investments or
acquisitions. The terms of the Credit Agreement require the Company to
maintain specified financial ratios and meet certain tests, including
leverage ratio and minimum interest coverage, and impose restrictions on the
ability of the Company and its subsidiaries to make capital expenditures. All
of the capital stock of the Company, substantially all of the non-real
property domestic assets of the Company, the Company's facility located in
Phoenix, Arizona and certain assets outside the United States are pledged as
collateral for the obligations under the Credit Agreement. See "Description
of Other Indebtedness -- Credit Agreement." In addition, the occurrence of a
change of control (as defined in the relevant agreement) of the Company would
be an event of default under the Credit Agreement, and would give the holders
of the Notes and the 9 1/2% Senior Notes the right to require repurchase of
their notes. See "Description of Other Indebtedness."
The ability of the Company and its subsidiaries to comply with the terms
of their respective debt instruments can be affected by events beyond their
control, including events such as prevailing economic conditions, changes in
consumer preferences and changes in the competitive environment, which could
have the effect of impairing the Company's operating performance, and there
can be no assurance that the Company and its subsidiaries will be able to
comply with the provisions of their respective debt instruments, including
compliance by the Company with the financial ratios and tests contained in
the Credit Agreement. Breach of any of these covenants or the failure to
fulfill the obligations thereunder and the lapse of any applicable grace
periods would result in an event of default under the applicable debt
instruments, and the holders of such indebtedness could declare all amounts
outstanding under their debt instruments to be due and payable immediately.
There can be no assurance that the assets or cash flow of the Company or the
Company's subsidiaries, as the case may be, would be sufficient to repay in
full borrowings under their outstanding debt instruments, whether upon
maturity or if such indebtedness were to be accelerated upon an event of
default or, in the case of the debt instruments of the Company, upon a
required repurchase in the event of a change of control, or that the Company
would be able to refinance or restructure its payments on such indebtedness.
In the case of the Credit Agreement, if such indebtedness were not so repaid,
refinanced or restructured, the lenders could proceed to realize on their
collateral. In addition, any event of default or declaration of acceleration
under one debt instrument could also result in an event of default under one
or more of the Company's other debt instruments. See "--Substantial Level of
Indebtedness" and "Description of Other Indebtedness."
21
<PAGE>
OPERATING HISTORY UNDER THE BUSINESS STRATEGY
The Company's business strategy is to (i) strengthen and broaden its core
brands through globalization of marketing and advertising, product
development and manufacturing and through increasing its emphasis on
advertising and promotion; (ii) lead the industry in the development and
introduction of technologically advanced innovative products that set new
trends; (iii) expand the Company's presence in all markets in which the
Company competes and enter new and emerging markets; (iv) continue to reduce
costs and improve operating efficiencies, customer service and product
quality by reducing overhead, rationalizing factory operations, upgrading
management information systems, globally sourcing raw materials and
components and carefully managing working capital; and (v) continue to expand
market share and product lines through possible strategic acquisitions or
joint ventures. See "Business -- Business Strategy." The Company's ability to
continue to implement its strategy successfully will be dependent on
business, financial and other factors that are beyond the Company's control,
including economic conditions, changes in consumer preferences and changes in
the competitive environment. There can be no assurance that the Company will
continue to be successful in the implementation of its strategy. See
"Selected Historical and Pro Forma Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus.
COMPETITION
The cosmetics and skin care, fragrance and personal care and professional
products business is highly competitive. The Company competes on the basis of
numerous factors. Brand recognition, together with product quality,
performance and price, and the extent to which consumers are educated on
product benefits, have a marked influence on consumers' choices among
competing products and brands. Advertising, promotion, merchandising and
packaging, and the timing of new product introductions and line extensions
also have a significant impact on buying decisions, and the structure and
quality of the sales force affect product reception, in-store position,
permanent display space and inventory levels in retail outlets. An increase
in the amount of competition faced by the Company could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the Company competes in selected product categories
against a number of multinational manufacturers, some of which are larger and
have substantially greater resources than the Company. Those competitors that
have greater financial resources may have more flexibility to respond to
changing business and economic conditions than the Company. See "Business --
Competition."
SOCIAL, POLITICAL AND ECONOMIC RISKS AFFECTING FOREIGN OPERATIONS AND EFFECTS
OF FOREIGN CURRENCY FLUCTUATIONS
As of December 31, 1997, the Company had operations established in 26
foreign countries, and its products are sold in approximately 175 countries
and territories. The Company is exposed to the risk of changes in social,
political and economic conditions inherent in operating in foreign countries.
Such changes include changes in the laws and policies that govern foreign
investment in countries where it has operations, as well as, to a lesser
extent, changes in United States laws and regulations relating to foreign
trade and investment. In addition, the Company's results of operations and
the value of its foreign assets are affected by fluctuations in foreign
currency exchange rates, which may adversely affect reported earnings and,
accordingly, the comparability of period-to-period results of operations.
Changes in currency exchange rates may affect the relative prices at which
the Company and foreign competitors sell their products in the same market.
For 1997, 1996 and 1995, 39.2%, 41.9% and 42.5%, respectively, of the
Company's net sales were outside the United States. In addition, the cost of
certain items required in the Company's operations may be affected by changes
in the value of the relevant currencies. The Company enters into forward
foreign exchange contracts to hedge certain cash flows denominated in foreign
currency (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Condition, Liquidity and Capital
Resources"). The Company recorded net foreign currency losses of $6.4
million, $5.7 million and $10.9 million in 1997, 1996 and 1995, respectively.
For a more complete discussion of foreign currency fluctuations, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, the Company's operations in Brazil (which
22
<PAGE>
accounted for approximately 5.5% of the Company's net sales for 1997) were
accounted for as operating in a hyperinflationary economy until June 30,
1997. Effective July 1, 1997, Brazil was considered a non-hyperinflationary
economy. There can be no assurance as to the future effect of changes in
social, political and economic conditions on the Company's business or
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued on February 2, 1998 to a small number of institutional
investors and institutional accredited investors and are eligible for trading
in the Private Offering, Resale and Trading through Automated Linkages
(PORTAL) Market, the National Association of Securities Dealers' screenbased,
automated market for trading of securities eligible for resale under Rule
144A. To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered Old Notes could be
adversely affected. There is no existing trading market for the New Notes,
and there can be no assurance regarding the future development of a market
for the New Notes, or the ability of holders of the New Notes to sell their
New Notes or the price at which such holders may be able to sell their New
Notes. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the New Notes, they are not obligated to
do so, and any such market-making may be discontinued at any time without
notice. As a result, the market price of the New Notes could be adversely
affected. The Company does not intend to apply for listing or quotation of
the New Notes on any securities exchange or stock market.
CONTROL BY MACANDREWS & FORBES
The Company is indirectly owned through 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. As a result, MacAndrews & Forbes will be able
to direct and control the policies of the Company and its subsidiaries,
including mergers, sales of assets and similar transactions. See "Ownership
of Common Stock" and "Relationship with MacAndrews & Forbes." The shares of
common stock of the Company are pledged to secure Revlon, Inc.'s guarantee
under the Credit Agreement, and shares of Revlon, Inc. and shares of common
stock of intermediate holding companies are or may from time to time be
pledged to secure obligations of MacAndrews & Forbes or its affiliates. A
foreclosure upon any such shares of common stock could constitute a change of
control under the Indentures and certain other debt instruments of the
Company and its subsidiaries. Such occurrence of a change of control would
result in an event of default permitting acceleration under the Credit
Agreement and would enable holders of the Company's 9 1/2% Senior Notes to
require that the Company repurchase their 9 1/2% Senior Notes. In addition, a
change of control under the Indentures would give the holders of the Notes
the right to require the Company to repurchase the Notes. See "--Ability to
Pay Principal of Notes." There can be no assurance that upon a change of
control the assets of the Company would be sufficient to repay in full the
borrowings under the Credit Agreement or to repurchase the 9 1/2% Senior
Notes and the Notes. See "--Ranking of Notes and Subordination."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of
management as well as assumptions made by, and information currently
available to, management and which involve risks and uncertainties. The
Company's actual results may differ materially with those discussed in such
forward-looking statements. Such forward looking statements are principally
contained in the sections "Prospectus Summary," "Business -- Business
Strategy," "Business -- Products," "Business -- Business Process
Enhancements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and include, without limitation, the
Company's expectations and estimates as to introduction of new products and
expansion into markets, future financial performance, including growth in net
sales and earnings and the
23
<PAGE>
effect on sales of inventory balancing and consolidation in the chain
drugstore industry in the U.S., cash flows from operations, improved results
from business consolidations, information system upgrades and globalization
of the Company's manufacturing operations, capital expenditures, the
availability of funds from currently available credit facilities and
refinancings of indebtedness, capital contributions or loans from Revlon,
Inc. or affiliates of the Company, the sale of assets or equity securities,
and the cost and timely implementation of the Company's Year 2000 compliance
modifications. In addition, in those and other portions of this Prospectus,
the words "believes," "does not believe," "no reason to believe," "expects,"
"plans," "intends," "estimates," "anticipated" or "anticipates" and similar
expressions, as they relate to the Company or the Company's management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions, including the risk factors
described in this Prospectus. In addition to factors that may be described in
this Prospectus and the Company's filings with the Commission, 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, and to globalize its manufacturing
operations; (v) the inability to refinance indebtedness, secure capital
contributions or loans from Revlon, Inc. or affiliates of the Company or sell
assets or equity securities; (vi) effects of and changes in economic
conditions, including inflation and monetary conditions, and in trade,
monetary, fiscal and tax policies in countries outside of the U.S. in which
the Company operates, including Brazil; (vii) actions by competitors,
including business combinations, technological breakthroughs, new product
offerings and marketing and promotional successes; (viii) difficulties or
delays in realizing improved results from business consolidations; (ix)
combinations among significant customers or the loss, insolvency or failure
to pay its debts by a significant customer or customers; (x) lower than
expected sales as a result of inventory balancing and consolidation in the
chain drugstore industry in the U.S.; and (xi) unanticipated costs or
difficulties or delays in implementing the Company's Year 2000 compliance
modifications. The Company assumes no responsibility to update
forward-looking information contained herein.
24
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The
Company used the net proceeds of the Offering, which were approximately $880
million (net of discounts to the Initial Purchasers and fees and expenses),
to finance the 10 1/2% Senior Subordinated Notes Redemption and to finance
the 9 3/8% Senior Notes Redemption. The 10 1/2% Senior Subordinated Notes
matured on February 15, 2003 and bore interest at the rate of 10 1/2% per
annum. The 9 3/8% Senior Notes matured on April 1, 2001 and bore interest at
the rate of 9 3/8% per annum. The Company used the remaining balance of the
net proceeds of the Offering to repay indebtedness under the working capital
lines under the Credit Agreement. See "Description of Other Indebtedness."
Pending such uses, the Escrowed Funds were held in escrow and invested in
Treasury Securities and other Permitted Investments, and were used to
repurchase a portion of the 9 3/8% Senior Notes in open market transactions
as permitted by the Escrow Agreement.
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997 and the pro forma consolidated capitalization
of the Company as of December 31, 1997, as adjusted to give effect to the
consummation of the Refinancing Transactions as if they had occurred on such
date. This table should be read in conjunction with the notes hereto and the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
HISTORICAL AS ADJUSTED
------------ -------------
(IN MILLIONS)
<S> <C> <C>
Short-term borrowings--third parties.................... $ 42.7 $ 42.7
Current portion of long-term debt--third parties ...... 5.5 5.5
------------ -------------
$ 48.2 $ 48.2
============ =============
Long-term debt:
Working capital lines.................................. $ 344.6 $ 337.0
Bank mortgage loan agreement due 2000.................. 33.3 33.3
9 1/2% Senior Notes due 1999........................... 200.0 200.0
9 3/8% Senior Notes due 2001........................... 260.0 -- (a)
10 1/2% Senior Subordinated Notes due 2003............. 555.0 -- (b)
8 1/8% Senior Notes due 2006........................... -- 249.2 (c)
8 5/8% Senior Subordinated Notes due 2008.............. -- 649.8 (d)
Cosmetic Center facility .............................. 39.0 39.0
Advances from Holdings................................. 30.9 30.9
Other notes payable (6.8%-9.1%) due
through 2004.......................................... 1.4 1.4
------------ -------------
Long-term debt including current portion............... 1,464.2 1,540.6
Less current portion................................... 5.5 5.5
------------ -------------
Total long-term debt.................................. 1,458.7 1,535.1
------------ -------------
Stockholder's deficiency:
Preferred stock, par value $1.00 per share; 1,000
shares authorized, 546 issued and outstanding ....... 54.6 54.6
Common stock, par value $1.00 per share; 1,000 shares
authorized, issued and outstanding ................... -- --
Capital deficiency .................................... (230.8) (230.8)
Accumulated deficit since June 24, 1992................ (256.8) (308.6) (e)
Adjustment for minimum pension liability............... (4.5) (4.5)
Currency translation adjustments ...................... (19.2) (19.2)
------------ -------------
Total stockholder's deficiency ....................... (456.7) (508.5)
------------ -------------
Total capitalization................................. $1,002.0 $1,026.6
============ =============
</TABLE>
(a) Reflects the 9 3/8% Senior Notes Redemption.
(b) Reflects the 10 1/2% Senior Subordinated Notes Redemption.
(c) Reflects the issuance of the Senior Notes net of a discount of $0.8
million.
(d) Reflects the issuance of the Senior Subordinated Notes net of a
discount of $0.2 million.
(e) Reflects the extraordinary loss incurred as a result of the redemption
of the RCPC Notes.
26
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The selected historical financial data for, and as of the end of, each of
the years in the five-year period ended December 31, 1997 have been derived
from the audited consolidated financial statements of the Company.
The pro forma statement of operations data for the year ended December 31,
1997 give pro forma effect to the Refinancing Transactions as if such
transactions had been consummated on January 1, 1997. The as adjusted balance
sheet data as of December 31, 1997 give pro forma effect to the Refinancing
Transactions as if such transactions had occurred on December 31, 1997. The
pro forma adjustments are based upon available information and certain
assumptions that management of the Company believes are reasonable. The pro
forma financial data do not purport to represent the results of operations or
the financial position of the Company that actually would have occurred had
the foregoing transactions been consummated on the aforesaid dates.
The following selected financial data should be read in conjunction with
"Prospectus Summary -- The Refinancing Transactions," "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and the
notes thereto included elsewhere in this Prospectus.
27
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF OPERATIONS DATA:
Net sales ........................................... $2,390.9 $2,169.5 $1,940.0 $1,736.7 $1,595.2
Gross profit......................................... 1,558.8 1,443.0 1,287.0 1,137.8 1,024.3
Selling, general and administrative expenses ....... 1,336.7 1,241.6 1,141.4 1,030.4 973.8
Business consolidation costs and other, net ........ 7.6 (a) -- -- -- --
---------- ---------- ---------- ----------- ----------
Operating income .................................... 214.5 201.4 145.6 107.4 50.5
Interest expense, net................................ 133.2 130.0 137.7 130.4 114.4
Amortization of debt issuance costs.................. 6.7 8.3 11.0 8.4 8.0
Other, net........................................... 11.5 12.0 12.7 20.8 39.3
Gain on sale of subsidiary stock .................... (6.0)(b) -- -- -- --
---------- ---------- ---------- ----------- ----------
Income (loss) before income taxes.................... 69.1 51.1 (15.8) (52.2) (111.2)
Provision for income taxes........................... 9.4 25.5 25.4 22.8 19.0
---------- ---------- ---------- ----------- ----------
Income (loss) before extraordinary items and
cumulative effect of accounting changes............. 59.7 25.6 (41.2) (75.0) (130.2)
Extraordinary items--early extinguishments of debt .. (14.9) (6.6) -- -- (9.5)
Cumulative effect of accounting changes.............. -- -- -- (28.8)(c) (6.0)(d)
---------- ---------- ---------- ----------- ----------
Net income (loss).................................... $ 44.8 $ 19.0 $ (41.2) $ (103.8) $ (145.7)
========== ========== ========== =========== ==========
OTHER DATA:
Net cash provided by (used for) operating
activities.......................................... $ 7.1 $ (9.6) $ (52.1) $ (1.3) $ (150.3)
Net cash used for investing activities............... (108.4) (65.1) (72.5) (51.0) (8.7)
Net cash provided by (used for) financing
activities.......................................... 109.1 77.9 125.6 (48.8) 266.6
Ratio of earnings to fixed
charges (e) ........................................ 1.4x 1.3x -- -- --
EBITDA (f)........................................... $ 319.2 $ 284.0 $ 223.0 $ 177.8 $ 119.5
Ratio of EBITDA to interest expense, net ............ 2.4x 2.2x 1.6x 1.4x 1.0x
PRO FORMA DATA (G):
Interest expense, net ............................... $ 126.5
Income before extraordinary item .................... 67.4
Ratio of earnings to fixed
charges (e) ........................................ 1.5x
Ratio of EBITDA to interest expense, net............. 2.5x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31,
----------------------- ---------------------------------------------
AS
ACTUAL ADJUSTED(H) 1996 1995 1994 1993
---------- ----------- ---------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets .............................. $1,836.4 $1,841.5 $1,622.7 $1,536.0 $1,419.4 $1,551.1
Long-term debt, excluding current portion 1,458.7 1,535.1 1,352.2 1,467.5 1,327.5 1,203.8
Total stockholder's deficiency ............ (456.7) (508.5) (496.3) (702.3) (656.2) (554.2)
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Data.
28
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) During 1997, the Company incurred business consolidation costs, net, of
approximately $7.6 million in connection with the implementation of its
business strategy to rationalize factory operations, including
primarily severance and other related costs in certain operations and
the consolidation of certain warehouse, distribution and headquarter
operations related to the Cosmetic Center Merger, offset by related
gains associated with the sale of certain factory operations of
approximately $4.3 million and a settlement of a claim of $12.7
million.
(b) Represents the gain from the sale of subsidiary stock pursuant to the
Cosmetic Center Merger.
(c) Effective January 1, 1994, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The Company
recognized a charge of $28.8 million in the first quarter of 1994 to
reflect the cumulative effect of the accounting change, net of income
tax benefit.
(d) Effective January 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," for its retiree benefit plan in the United States.
Accordingly, the Company recognized a charge of $6.0 million in the
1993 first quarter to reflect the cumulative effect of the accounting
change.
(e) Earnings used in computing the ratio of earnings to fixed charges
consist of income (loss) before income taxes plus fixed charges. Fixed
charges consist of interest expense (including amortization of debt
issuance costs, but not losses relating to the early extinguishment of
debt) and 33% of rental expense (considered to be representative of the
interest factors). Fixed charges exceeded earnings before fixed charges
by $15.8 million in 1995, $52.2 million in 1994 and $111.2 million in
1993.
(f) EBITDA is defined as operating income before business consolidation
costs and other, net, plus depreciation and amortization other than
that relating to early extinguishment of debt, debt discount and debt
issuance costs. EBITDA is presented here not as a measure of operating
results but rather as a measure of debt service ability. EBITDA should
not be considered in isolation or as a substitute for net income or
cash flow from operations prepared in accordance with generally
accepted accounting principles as a measure of the profitability or
liquidity of the Company. EBITDA does not take into account the
Company's debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be
available for discretionary uses.
(g) The pro forma statement of operations data for the year ended December
31, 1997 reflect a reduction of interest expense and amortization of
debt issuance costs of $58.4 million and $2.1 million, respectively,
reflecting the 10 1/2% Senior Subordinated Notes Redemption, a
reduction of interest expense and amortization of debt issuance costs
of $24.4 million and $0.9 million, respectively, reflecting the 9 3/8%
Senior Notes Redemption, a reduction of interest expense of $0.4
million reflecting the decrease of working capital lines using the
balance of the net proceeds from the Offering and an increase in
interest expense and amortization of debt issuance costs of $76.5
million and $2.0 million, respectively, to reflect such expenses as if
the Notes, which were used to refinance the RCPC Notes, had been
outstanding from the beginning of the period presented.
(h) The as adjusted balance sheet data give effect to the Refinancing
Transactions and the extraordinary loss of $51.8 million related
thereto as if such transactions had occurred on December 31, 1997.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus.
OVERVIEW
The Company operates in a single business segment with many different
products, which include an extensive array of glamorous, exciting and
innovative cosmetics and skin care, fragrance and personal care products, and
professional products, consisting of hair and nail care products principally
for use in and resale by professional salons. In addition, the Company also
operates retail and outlet stores and has a licensing group.
In the United States and increasingly in international markets, the
Company's products are sold principally in the self-select distribution
channel, which the Company believes is the fastest-growing channel of
distribution for cosmetics, skin care, fragrance and personal care products.
In addition, the trend in the cosmetics, skin care and fragrance industry has
been the shift of consumer purchases from the demonstrator-assisted channel
to the self-select distribution channel.
The Company's net sales in the United States are made primarily in the
self-select distribution channel, which for 1997 represented a majority of
the Company's net sales in the United States. In the United States, the
Company also sells ULTIMA II products in the demonstrator-assisted
distribution channel and consumer and professional products to United States
Government military exchanges and commissaries. Outside the United States,
the Company sells consumer products in the self-select distribution channel
and through department stores and specialty stores, such as perfumeries, and
sells professional products.
The Company is making substantial improvements in its global sourcing,
materials management and distribution capabilities, which have contributed to
an improvement in the Company's gross profit margin. Such improvements
include the utilization of the Company's large purchasing capacity to
maximize cost savings in raw materials and components, improvement in the
percentage of timely order fulfillment and improvement in the timeliness and
accuracy of new product and promotion deliveries. See "Business --
Manufacturing and Related Operations and Raw Materials." The Company
continues to upgrade its management information systems to provide an
integrated system for forecasting, production, inventory management,
distribution, procurement and accounting. The Company is rationalizing and
increasing the efficiency of its manufacturing operations worldwide by
centralizing production of some product categories for sale throughout the
world within designated facilities and by shifting production of certain
other product categories to more cost effective manufacturing sites. Shifts
of production may result in the closing of certain of the Company's less
significant manufacturing facilities, and the Company continually reviews its
needs in this regard. In addition, as part of its efforts to continuously
improve operating efficiencies, the Company attempts to ensure that a
significant portion of its capital expenditures are devoted to improving
operating efficiencies.
The Company has increased its emphasis on advertising and promotion. The
Company increased advertising and consumer-directed promotion expenditures by
11.8% for 1997 over levels for 1996 and by 17.4% for 1996 over 1995 levels.
The level of advertising and consumer-directed promotion expenditures in any
period is based upon the Company's assessment of advertising and promotional
support required by each of the Company's products in light of expected
volume, competitive pressures and the dynamics of the markets for such
products during such period.
The Company has achieved 17 consecutive quarters of increased net sales,
operating income and EBITDA compared with the corresponding quarter of the
respective prior year. Net sales, operating income (before a non-recurring
charge of $7.6 million related to business consolidation costs and other,
net) and EBITDA (before such non-recurring charge) increased 10.2%, 10.3% and
12.4%, respectively, for 1997 over 1996 and 11.8%, 38.3% and 27.4%,
respectively, for 1996 over 1995. In addition, the Company's results improved
to Adjusted 1997 Net Income of $59.7 million for 1997 from Adjusted 1996 Net
Income of $25.6 million for 1996 and net loss of $41.2 million for 1995.
The Company presents its business geographically as its United States
operation, which comprises the Company's business in the United States, and
its International operation, which comprises its business outside of the
United States.
30
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales by operation for
each of the last three years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997* 1996* 1995*
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
United
States....... $1,452.5 $1,259.7 $1,115.4
International 938.4 909.8 824.6
---------- ---------- ----------
$2,390.9 $2,169.5 $1,940.0
========== ========== ==========
</TABLE>
The following sets forth certain statements of operations data as a
percentage of net sales for each of the last three years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997** 1996** 1995**
-------- -------- --------
<S> <C> <C> <C>
Cost of sales................................. 34.8% 33.5% 33.7%
Gross profit.................................. 65.2 66.5 66.3
Selling, general and administrative expenses 55.9 57.2 58.8
Business consolidation costs and other, net . 0.3 -- --
Operating income ............................. 9.0 9.3 7.5
EBITDA........................................ 13.4 13.1 11.5
</TABLE>
- ------------
* The results of Cosmetic Center, after giving effect to certain
intercompany adjustments for 1997, 1996 and 1995, were as follows,
respectively: Net sales of $152.3 million, $77.4 million and $72.7
million, cost of sales of $89.5 million, $37.6 million and $38.0
million, SG&A expenses of $61.9 million, $38.4 million and $36.5
million, operating (loss) income of ($3.1 million), $1.4 million and
($1.8 million) and EBITDA of $4.9 million, $3.6 million and $0.2
million. 1997 includes business consolidation costs of $4.0 million
in the operating (loss).
** Excluding the results of Cosmetic Center, after giving effect to
certain intercompany adjustments for 1997, 1996 and 1995, the above
percentages would have been, respectively: cost of sales of 33.2%,
32.9% and 32.9%, gross profit of 66.8%, 67.1% and 67.1%, SG&A
expenses of 57.0%, 57.5% and 59.2%, business consolidation costs and
other, net, of 0.1%, 0% and 0%, operating income of 9.7%, 9.6% and
7.9% and EBITDA of 14.0%, 13.4% and 11.9%.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales
Net sales were $2,390.9 million and $2,169.5 million for 1997 and 1996,
respectively, an increase of $221.4 million, or 10.2% or 12.6% on a constant
U.S. dollar basis, primarily as a result of successful new product
introductions worldwide, increased demand in the United States, the impact of
the Cosmetic Center Merger, increased distribution internationally into the
expanding self-select distribution channel and the further development of new
international markets.
United States. The United States operation's net sales increased to
$1,452.5 million for 1997 from $1,259.7 million for 1996, an increase of
$192.8 million, or 15.3%. Net sales improved for 1997, primarily as a result
of continued consumer acceptance of new product offerings, general
improvement in consumer demand for the Company's color cosmetics and the
impact of the Cosmetic Center Merger. These results were partially offset by
a decline in the Company's fragrance business caused by downward trends in
the mass fragrance industry and the Company's strategy to de-emphasize new
fragrance products. Even though consumer sell-through for the REVLON and
ALMAY brands, as described below in more detail, has
31
<PAGE>
increased significantly, the Company's sales to its customers have been
during 1997 and may continue to be impacted by retail inventory balancing and
reductions resulting from consolidation in the chain drugstore industry in
the U.S.
REVLON brand color cosmetics continued as the number one brand in dollar
market share in the self-select distribution channel with a share of 21.6%
for 1997 versus 21.4% for 1996. Market share, which is subject to a number of
conditions, can vary from quarter to quarter as a result of such things as
timing of new product introductions and advertising and promotional spending.
New product introductions (including, in 1997, certain products launched
during 1996) generated incremental net sales in 1997, principally as a result
of launches of products in the COLORSTAY collection, including COLORSTAY eye
makeup and face products such as powder and blush, COLORSTAY haircolor,
launched in the third quarter of 1997, TOP SPEED nail enamel, launched in the
third quarter of 1997, and launches of REVLON AGE DEFYING line extensions,
the STREETWEAR collection, NEW COMPLEXION face makeup, LINE & SHINE lip
makeup and launches of products in the ALMAY AMAZING collection, including
lip makeup, eye makeup, face makeup and concealer, ALMAY ONE COAT, and ALMAY
TIME-OFF REVITALIZER.
International. The International operation's net sales increased to $938.4
million for 1997 from $909.8 million for 1996, an increase of $28.6 million,
or 3.1% on a reported basis or 8.8% on a constant U.S. dollar basis. Net
sales improved for 1997, principally as a result of increased distribution
into the expanding self-select distribution channel, successful new product
introductions, including the continued roll-out of the COLORSTAY cosmetics
collection and the further development of new international markets. This was
partially offset by the Company's decision to exit the unprofitable
demonstrator-assisted channel in Japan in the second half of 1996,
unfavorable economic conditions in several international markets, and, on a
reported basis, the unfavorable effect on sales of a stronger U.S. dollar
against certain foreign currencies, primarily the Spanish peseta, the Italian
lira and several other European currencies, the Australian dollar, the South
African rand and the Japanese yen. New products such as COLORSTAY haircolor
and STREETWEAR were introduced in select international markets in the second
half of 1997. During 1997, the International operation's sales were divided
into the following geographic areas: Europe, which is comprised of Europe,
the Middle East and Africa (in which net sales increased by 3.4% on a
reported basis to $417.9 million for 1997 as compared to 1996 or an increase
of 11.3% on a constant U.S. dollar basis); the Western Hemisphere, which is
comprised of Canada, Mexico, Central America, South America and Puerto Rico
(in which net sales increased by 11.1% on a reported basis to $346.6 million
for 1997 as compared to 1996 or an increase of 14.5% on a constant U.S.
dollar basis); and the Far East (in which net sales decreased by 10.3% on a
reported basis to $173.9 million for 1997 as compared to 1996 or a decrease
of 5.5% on a constant U.S. dollar basis). Excluding in both periods the
effect of the Company's strategy of exiting the demonstrator-assisted
distribution channel in Japan, Far East net sales on a constant U.S. dollar
basis for 1997 would have been at approximately the same level as those in
1996.
The Company's operations in Brazil are significant and, along with
operations in certain other countries, have been subject to, and may continue
to be subject to, significant political and economic uncertainties. In
Brazil, net sales, operating income and income before taxes were $130.9
million, $16.0 million and $7.7 million, respectively, for 1997 compared to
$132.7 million, $25.1 million and $20.0 million, respectively, for 1996.
Results of operations in Brazil for 1997 were adversely impacted by
competitive activity affecting the Company's toiletries business. See "Risk
Factors -- Social, Political and Economic Risks Affecting Foreign Operations
and Effects of Foreign Currency Fluctuations."
Cost of sales
As a percentage of net sales, cost of sales was 34.8% for 1997 compared to
33.5% for 1996. The increase in cost of sales as a percentage of net sales is
due primarily to the impact of the Cosmetic Center Merger. Excluding the
results of Cosmetic Center, as a percentage of net sales, cost of sales would
have been 33.2% for 1997 compared to 32.9% for 1996. Other factors which
increased cost of sales as a percentage of net sales included factors which
enhanced overall operating income, including increased sales of the Company's
higher cost, enhanced-performance, technology-based products and increased
export sales and other factors including the effect of weaker local
currencies on the cost of imported purchases and competitive pressures on the
Company's toiletries business in certain International
32
<PAGE>
markets. These factors were partially offset by the benefits of improved
overhead absorption against higher production volumes and more efficient
global production and purchasing.
SG&A expenses
As a percentage of net sales, SG&A expenses were 55.9% for 1997, an
improvement from 57.2% for 1996. SG&A expenses other than advertising and
consumer-directed promotion expenses, as a percentage of net sales, improved
to 39.3% for 1997 compared with 40.8% for 1996, primarily as a result of
reduced general and administrative expenses, improved productivity and lower
distribution costs in 1997 compared with those in 1996. In accordance with
its business strategy, the Company increased advertising and
consumer-directed promotion expenditures in 1997 compared with 1996 to
support growth in existing product lines, new product launches and increased
distribution in the self-select distribution channel in many of the Company's
markets in the International operation. Advertising and consumer-directed
promotion expenses increased by 11.8% to $397.4 million, or 16.6% of net
sales, for 1997 from $355.5 million, or 16.4% of net sales, for 1996.
Business consolidation costs and other, net
Business consolidation costs and other, net, in 1997 include severance and
other costs in connection with the consolidation of certain warehouse,
distribution and headquarter operations related to the Cosmetic Center
Merger, severance, writedowns of certain assets to their estimated net
realizable value and other related costs to rationalize factory operations in
certain operations in accordance with the Company's business strategy,
partially offset by related gains from the sales of certain factory
operations and an approximately $12.7 million settlement of a claim in the
second quarter of 1997. These business consolidations are intended to lower
the Company's operating costs and increase efficiency in the future.
Operating income
As a result of the foregoing, operating income increased by $13.1 million,
or 6.5%, to $214.5 million for 1997 from $201.4 million for 1996.
Other expenses/income
Interest expense was $136.2 million for 1997 compared to $133.4 million
for 1996. The slight increase in interest expense in 1997 is due to higher
average outstanding borrowings, partially offset by lower interest rates.
Gain on sale of subsidiary stock of $6.0 million was recognized in the
second quarter of 1997 as a result of the Cosmetic Center Merger.
Foreign currency losses, net, were $6.4 million for 1997 compared to $5.7
million for 1996. The increase in foreign currency losses for 1997 as
compared to 1996 resulted primarily from a non recurring gain recognized in
1996 in connection with the Company's simplification of its international
corporate structure and from the strengthening of the U.S. dollar versus
currencies in the Far East and most European currencies, partially offset by
the stabilization of the Venezuelan bolivar and Mexican peso versus the
devaluations which occurred during 1996.
Provision for income taxes
The provision for income taxes was $9.4 million and $25.5 million for 1997
and 1996, respectively. The decrease was primarily attributable to lower
taxable income in certain International operations, partially as a result of
the implementation of tax planning, including the utilization of net
operating loss carryforwards in certain International operations, and
benefits from net operating loss carryforwards domestically.
Extraordinary item
The extraordinary item in 1997 resulted from the write-off in the second
quarter of 1997 of deferred financing costs associated with the early
extinguishment of borrowings under the 1996 Credit Agreement
33
<PAGE>
prior to maturity with proceeds from the Credit Agreement, and costs of
approximately $6.3 million in connection with the redemption of the Company's
Sinking Fund Debentures. The extraordinary item in 1996 resulted from the
write-off in the first quarter of 1996 of deferred financing costs associated
with the early extinguishment of borrowings under the 1995 Credit Agreement
prior to maturity with the net proceeds from the Revlon IPO and proceeds from
the 1996 Credit Agreement.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net sales
Net sales were $2,169.5 million and $1,940.0 million for 1996 and 1995,
respectively, an increase of $229.5 million, or 11.8%, primarily as a result
of successful new product introductions worldwide, increased demand in the
United States, acquisitions of certain exclusive line professional product
businesses, increased distribution internationally into the expanding
self-select distribution channel and the further development of new
international markets.
United States. The United States operation's net sales increased to
$1,259.7 million for 1996 from $1,115.4 million for 1995, an increase of
$144.3 million, or 12.9%. Net sales improved for 1996 primarily as a result
of continued consumer acceptance of new product offerings, general
improvement in consumer demand for the Company's color cosmetics in the
United States and acquisitions of certain exclusive line professional product
businesses, partially offset by overall softness in the fragrance industry
and lower sales of one of the Company's prestige brands. The Company improved
the dollar share of its REVLON brand cosmetics in the color cosmetics
business in the United States self-select distribution channel to 21.4% for
1996 from 19.5% for 1995, moving into the leading position in market share.
Market share, which is subject to a number of conditions, can vary from
quarter to quarter as a result of such things as timing of new product
introductions and advertising and promotional spending. New product
introductions (including, in 1996, certain products launched during 1995)
generated incremental net sales in 1996, principally as a result of launches
of products in the COLORSTAY collection, including COLORSTAY foundation, lip
makeup, eye makeup and COLORSTAY LASHCOLOR mascara, launches of products in
the ALMAY AMAZING collection, including lip makeup, eye makeup, face makeup
and concealer, and launches of CHERISH fragrance and MITCHUM CLEAR and ALMAY
CLEAR COMPLEXION line extensions.
International. The International operation's net sales increased to $909.8
million for 1996 from $824.6 million for 1995, an increase of $85.2 million,
or 10.3% on a reported basis or 12.6% on a constant U.S. dollar basis. Net
sales improved principally as a result of successful new product
introductions, including the continued roll-out of the COLORSTAY cosmetics
collection and REVLON AGE DEFYING makeup, increased distribution into the
expanding self-select distribution channel, the further development of new
international markets, partially offset, on a reported basis, by the
unfavorable effect on sales of a stronger U.S. dollar against certain foreign
currencies, primarily the South African rand, Japanese yen, and several
European currencies. During 1996, the International operation's sales were
divided into the following geographic areas: Europe, which is comprised of
Europe, the Middle East and Africa (in which net sales increased to $404.0
million for 1996 from $374.6 million for 1995, an increase of $29.4 million,
or 7.8%); the Western Hemisphere, which is comprised of Canada, Mexico,
Central America, South America and Puerto Rico (in which net sales increased
to $311.9 million for 1996 from $275.4 million for 1995, an increase of $36.5
million, or 13.3%); and the Far East (in which net sales increased to $193.9
million for 1996 from $174.6 million for 1995, an increase of $19.3 million,
or 11.1%).
The Company's operations in Brazil are significant and, along with
operations in certain other countries, have been subject to, and may continue
to be subject to, significant political and economic uncertainties. In
Brazil, net sales, operating income and income before taxes were $132.7
million, $25.1 million and $20.0 million, respectively, for 1996 compared to
$118.6 million, $22.8 million and $19.8 million, respectively, for 1995. In
Mexico, net sales for 1996 and 1995 were adversely affected by the December
1994 devaluation of the Mexican peso and related economic weakness. In
Venezuela, net sales and income before taxes for 1996 and 1995 were adversely
affected by high inflation and in the 1996 period by a currency devaluation.
See "Risk Factors -- Social, Political and Economic Risks Affecting Foreign
Operations and Effects of Foreign Currency Fluctuations."
34
<PAGE>
Cost of sales
As a percentage of net sales, cost of sales was 33.5% for 1996 compared to
33.7% for 1995, respectively. The improvement for 1996 resulted from the
benefits of improved overhead absorption against higher production volumes
and more efficient global production and purchasing. This improvement was
partially offset by changes in product mix involving an increase in sales of
the Company's higher cost technology-based products, an increase in export
sales, lower margin products (such as those products sold in Brazil), the
effect of weaker local currencies on the cost of imported purchases and
competitive pressures on the Company's toiletries business in certain
international markets in Europe and the Far East. The aforementioned
increases in sales that negatively impacted cost of sales were, however, more
profitable to the Company's overall operating results.
SG&A expenses
As a percentage of net sales, SG&A expenses were 57.2% for 1996, an
improvement from 58.8% for 1995. SG&A expenses other than advertising and
consumer-directed promotion expenses, as a percentage of net sales, improved
to 40.8% for 1996 compared with 43.2% for 1995 primarily as a result of
reduced general and administrative expenses, improved productivity and lower
distribution costs in 1996 compared with 1995, partially offset by additional
costs incurred in Japan in 1996 in connection with the Company's strategy of
exiting the demonstrator-assisted distribution channel. In accordance with
its business strategy, the Company increased advertising and
consumer-directed promotion expenditures in 1996 compared with 1995 to
support growth in existing product lines, new product launches and increased
distribution in the self-select distribution channel in many of the Company's
markets in the International operation. Advertising and consumer-directed
promotion expenses increased by 17.4% to $355.5 million, or 16.4% of net
sales, for 1996 compared to $302.9 million, or 15.6% of net sales, for 1995.
Operating income
As a result of the foregoing, operating income increased by $55.8 million,
or 38.3%, to $201.4 million for 1996 from $145.6 million for 1995.
Other expenses/income
Interest expense was $133.4 million for 1996 compared to $142.6 million
for 1995. The reduction in interest expense is attributable to lower average
outstanding borrowings as a result of the paydown of debt under the 1996
Credit Agreement and under the 1995 Credit Agreement with the use of proceeds
from the Revlon IPO in the 1996 period and lower interest rates under the
1996 Credit Agreement than under the 1995 Credit Agreement.
Foreign currency losses, net, were $5.7 million for 1996 compared to $10.9
million for 1995. The reduction in the foreign currency loss in 1996 as
compared to 1995 was due to lower foreign currency losses primarily in Mexico
and Venezuela and the Company's simplification of its international corporate
structure, which resulted in $2.1 million of gains, previously deferred in
the currency translation account, partially offset by the strengthening of
the U.S. dollar against the Spanish peseta and the strengthening of the U.K.
pound against several European currencies.
Miscellaneous, net, was $6.3 million for 1996 compared to $1.8 million for
1995. The increase relates primarily to the Company's continued investment in
certain emerging markets.
Extraordinary item
The extraordinary item resulted from the write-off recorded in the first
quarter of 1996 of deferred financing costs associated with the early
extinguishment of the 1995 Credit Agreement prior to its maturity with the
net proceeds from the Revlon IPO and borrowings under the 1996 Credit
Agreement.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used for) operating activities was $7.1 million,
($9.6 million) and ($52.1 million) for 1997, 1996 and 1995, respectively. The
increase in net cash provided by operating activities for
35
<PAGE>
1997 compared with net cash used in 1996 resulted primarily from higher
operating income and improved working capital management, partially offset by
increased spending on merchandise display units in connection with the
Company's continued expansion into the self-select distribution channel. The
decrease in net cash used for operating activities for 1996 compared with
1995 resulted primarily from higher operating income, lower restructuring
payments ($13.3 million for 1996 compared with $24.2 million for 1995) and
improved management of inventory relative to business growth, partially
offset by higher trade receivable balances as a result of higher net sales
and increased spending on merchandise display units in connection with the
Company's continued expansion into the self-select distribution channel.
Net cash used for investing activities was $108.4 million, $65.1 million
and $72.5 million for 1997, 1996 and 1995, respectively. Net cash used for
investing activities for 1997, 1996 and 1995 included capital expenditures of
$56.5 million, $58.0 million and $54.3 million, respectively, and $60.4
million, $7.1 million and $21.2 million, respectively, used for acquisitions.
Net cash used for acquisitions in 1997 consisted primarily of cash paid to
the CCI shareholders in connection with the cash election pursuant to the
Cosmetic Center Merger and cash paid for the acquisition of a South American
hair care manufacturer and its distributor. See "Business -- Business
Strategy."
Net cash provided by financing activities was $109.1 million, $77.9
million and $125.6 million for 1997, 1996 and 1995, respectively. Net cash
provided by financing activities for 1997 included cash drawn under the 1996
Credit Agreement, the Credit Agreement and Cosmetic Center's credit facility,
partially offset by the repayment of borrowings under the 1996 Credit
Agreement, the payment of fees and expenses related to entering into the
Credit Agreement, the repayment of borrowings under the Company's Japanese
yen-denominated credit agreement (the "Yen Credit Agreement"), the repayment
of borrowings under CCI's former credit agreement and the redemption of the
Sinking Fund Debentures. Net cash provided by financing activities for 1996
included the net proceeds from the Revlon IPO, cash drawn under the 1995
Credit Agreement and under the 1996 Credit Agreement, partially offset by the
repayment of borrowings under the 1995 Credit Agreement, the payment of fees
and expenses related to the 1996 Credit Agreement and the repayment of
borrowings under the Yen Credit Agreement. Net cash provided by financing
activities for 1995 consisted primarily of borrowings under the credit
agreement of the Company in effect prior to the 1995 Credit Agreement and
borrowings under the 1995 Credit Agreement, partially offset by repayments of
cash drawn under those credit agreements, repayments under the Yen Credit
Agreement and payment of debt issuance costs under the 1995 Credit Agreement.
In May 1997, the Company entered into the Credit Agreement with a
syndicate of lenders, whose individual members change from time to time. The
proceeds of loans made under the Credit Agreement were used for the purpose
of repaying the loans outstanding under the 1996 Credit Agreement and to
redeem the Sinking Fund Debentures and were and will be used for general
corporate purposes or, in the case of the Acquisition Facility, the financing
of acquisitions. See Note 10(a) to the Consolidated Financial Statements. At
December 31, 1997 the Company had approximately $200.0 million outstanding
under the Term Loan Facilities (as defined herein), $102.7 million
outstanding under the Multi-Currency Facility (as defined herein), $41.9
million outstanding under the Acquisition Facility (as defined herein) and
$34.8 million of issued but undrawn letters of credit under the Special LC
Facility (as defined herein). See "Description of Other Indebtedness --
Credit Agreement."
A subsidiary of the Company is the borrower under the Yen Credit
Agreement, which had a principal balance of approximately yen 4.3 billion as
of December 31, 1997 (approximately $33.3 million U.S. dollar equivalent as
of December 31, 1997). In accordance with the terms of the Yen Credit
Agreement, approximately yen 539 million (approximately $5.2 million U.S.
dollar equivalent) was paid in January 1996 and approximately yen 539 million
(approximately $4.6 million U.S. dollar equivalent) was paid in January 1997.
In June 1997, the Company amended and restated the Yen Credit Agreement to
extend the term to December 31, 2000 subject to earlier termination under
certain circumstances. In accordance with the terms of the Yen Credit
Agreement, as amended and restated, approximately yen 539 million
(approximately $4.2 million U.S. dollar equivalent as of December 31, 1997)
is due in each of March 1998, 1999 and 2000 and yen 2.7 billion
(approximately $20.7 million U.S. dollar equivalent as of December 31, 1997)
is due on December 31, 2000. See "Description of Other Indebtedness -- Yen
Credit Agreement."
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The Company made an optional sinking fund payment of $13.5 million and
redeemed all of the outstanding $85.0 million principal amount Sinking Fund
Debentures during 1997 with the proceeds of borrowings under the Credit
Agreement. $9.0 million aggregate principal amount of previously purchased
Sinking Fund Debentures were used for the mandatory sinking fund payment due
July 15, 1997.
The Company borrows funds from its affiliates from time to time to
supplement its working capital borrowings at interest rates more favorable to
the Company than interest rates under the Credit Agreement. No such
borrowings were outstanding as of December 31, 1997.
In connection with the early redemptions of the Old Notes, the Company
expects to record an extraordinary loss of up to $52 million in 1998. The
indentures governing the 8 5/8% Notes (the "8 5/8% Notes Indenture") and the
8 1/8% Notes (the "8 1/8% Notes Indenture" and, together with the 8 5/8%
Notes Indenture, the "Notes Indentures") contain covenants that, after the
Assumption among other things, limit (i) the issuance of additional debt and
redeemable stock by the Company, (ii) the incurrence of liens, (iii) the
issuance of debt and preferred stock by the Company's subsidiaries, (iv) the
payment of dividends on capital stock of the Company, (v) the sale of assets
and subsidiary stock, (vi) transactions with affiliates, (vii)
consolidations, mergers and transfers of all or substantially all the
Company's assets and (viii) in the case of the 8 5/8% Notes Indenture, the
issuance of additional subordinated debt that is senior in right of payment
to the 8 5/8% Notes. The Notes Indentures also prohibit certain restrictions
on distributions from the Company and subsidiaries of the Company. All of
these limitations and prohibitions, however, are subject to a number of
important qualifications. See "Description of the Notes."
The Company's principal sources of funds are expected to be cash flow
generated from operations and borrowings under the Credit Agreement and other
existing working capital lines. The Credit Agreement, the 9-1/2% Senior Notes
and the Notes will contain certain provisions that by their terms limit the
Company'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 and debt service payments.
The Company estimates that capital expenditures for 1998 will be
approximately $65 million, including upgrades to the Company's management
information systems. Pursuant to a tax sharing agreement (see "Certain
Relationships and Related Transactions-Tax Sharing Agreement"), the Company
may be required to make tax sharing payments to Revlon, Inc. (which in turn
may be required to make tax sharing payments to Mafco Holdings Inc.) as if
the Company were filing separate income tax returns, except that no payments
are required by the Company (or Revlon, Inc.) if and to the extent that the
Company is prohibited under the Credit Agreement from making tax sharing
payments to Revlon, Inc. The Credit Agreement prohibits the Company from
making any tax sharing payments other than in respect of state and local
income taxes. The Company 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 taxes pursuant to the tax
sharing agreement will be required for 1998. See "Relationship with
MacAndrews & Forbes -- Tax Sharing Agreement."
As of December 31, 1997, the Company was party to a series of interest
rate swap agreements totaling a notional amount of $225.0 million in which
the Company agreed to pay on such notional amount a variable interest rate
equal to the six month LIBOR to its counterparties and the counterparties
agreed to pay on such notional amounts fixed interest rates averaging
approximately 6.03% per annum. The Company entered into these agreements in
1993 and 1994 (and in the first quarter of 1996 extended a portion equal to a
notional amount of $125.0 million through December 2001) to convert the
interest rate on $225.0 million of fixed-rate indebtedness to a variable
rate. If the Company had terminated these agreements, which the Company
considered to be held for other than trading purposes, on December 31, 1997
and 1996, a loss of approximately $0.1 million and $3.5 million,
respectively, would have been realized. Certain other swap agreements were
terminated in 1993 for a gain of $14.0 million and were amortized over the
original lives of the agreements through 1997. The amortization of the 1993
realized gain in 1997, 1996, and 1995 was approximately $3.1 million, $3.2
million and $3.2 million, respectively. Cash flow from the agreements
outstanding at December 31, 1997 was approximately break even for 1997. The
Company terminated these agreements in January 1998 and realized a gain of
approximately $1.6 million, which will be recognized upon repayment of the
hedged indebtedness.
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The Company enters into forward foreign exchange contracts and option
contracts from time to time to hedge certain cash flows denominated in
foreign currencies. At December 31, 1997 and 1996, the Company had forward
foreign exchange contracts denominated in various currencies of approximately
$90.1 million and $62.0 million, respectively, and option contracts of
approximately $94.9 million outstanding at December 31, 1997. Such contracts
are entered into to hedge transactions predominantly occurring within twelve
months. If the Company had terminated these contracts on December 31, 1997
and 1996, no material gain or loss would have been realized.
Based upon the Company's current level of operations and anticipated
growth in net sales and earnings as a result of its business strategy, the
Company expects that cash flows from operations and funds from currently
available credit facilities and refinancings of existing indebtedness will be
sufficient to enable the Company to meet its anticipated cash requirements
for the foreseeable future on a consolidated basis, including for debt
service. However, there can be no assurance that cash flow from operations
and funds from existing credit facilities and refinancing of existing
indebtedness will be sufficient to meet the Company's cash requirements on a
consolidated basis. If the Company is unable to satisfy such cash
requirements, the Company could be required to adopt one or more
alternatives, such as reducing or delaying capital expenditures,
restructuring indebtedness, selling assets or operations or seeking capital
contributions or loans from Revlon, Inc. or affiliates of the Company. 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 9 1/2%
Senior Notes and the Notes generally restrict the Company from paying
dividends or making distributions, except that the Company 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 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.
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 million per annum. See "Risk
Factors -- Ability to Pay Principal of Notes," "Risk Factors -- Ability to
Service Debt," "Risk Factors -- Restrictions Imposed by the Terms of the
Company's Indebtedness; Consequences of Failure to Comply" and "Risk
Factors -- Substantial Level of Indebtedness."
EFFECT OF NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued SFAS 130
"Reporting Comprehensive Income," which establishes standards for reporting
and displaying comprehensive income and its components in a full set of
general-purpose financial statements. The Company will adopt SFAS 130 in
fiscal 1998.
INFLATION
In general, costs are affected by inflation and the effects of inflation
may be experienced by the Company in future periods. Management believes,
however, that such effects have not been material to the Company during the
past three years in the United States or foreign non-hyperinflationary
countries. The Company operates in certain countries around the world, such
as Brazil, Venezuela and Mexico, that have experienced hyperinflation in the
past three years. The Company's operations in Brazil were accounted for as
operating in a hyperinflationary economy until June 30, 1997. Effective July
1, 1997 Brazil was considered a non-hyperinflationary economy. The impact of
accounting for Brazil as a non-hyperinflationary economy was not material to
the Company's operating results. Effective January 1997, Mexico was
considered a hyperinflationary economy for accounting purposes. In
hyperinflationary foreign countries, the Company attempts to mitigate the
effects of inflation by increasing prices in line with inflation, where
possible, and efficiently managing its working capital levels. See "Risk
Factors -- Social, Political and Economic Risks Affecting Foreign Operations
and Effects of Foreign Currency Fluctuations."
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on May 5, 1998; provided, however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $250,000,000 aggregate principal amount
of the Old Senior Notes was outstanding, and $650,000,000 aggregate principal
amount of the Old Senior Subordinated Notes was outstanding. This Prospectus,
together with the Letter of Transmittal, is first being sent on or about
April 3, 1998, to all holders of Old Notes known to the Company. The Company's
obligation to accept Old Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth below under "--Certain Conditions
to the Exchange Offer."
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open,
and thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof as described below.
During any such extension, all Old Notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by the
Company. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not therefore
accepted for exchange, upon the occurrence of any of the events specified
below under "--Certain Conditions to the Exchange Offer." The Company will
give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release
or other public announcement no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to those holders
of Old Notes who did not exchange their Old Notes for New Notes in the
Exchange Offer on terms which may differ from those contained in the
Registration Agreement. This Prospectus, as it may be amended or supplemented
from time to time, may be used by the Company in connection with any such
additional exchange offers. Such additional exchange offers will take place
from time to time until all outstanding Old Notes have been exchanged for New
Notes pursuant to the terms and conditions contained herein.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit either (i) a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to U.S. Bank Trust National Association, as Exchange Agent, at
the address set forth below under "--Exchange Agent" on or prior to the
Expiration Date, or (ii) if such Old Notes are tendered pursuant to the
procedures for book-entry transfer set forth below, a holder tendering Old
Notes may transmit an Agent's
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Message (as defined herein) to the Exchange Agent in lieu of the Letter of
Transmittal on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure
is available, into the Exchange Agent's account at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, along with the Letter of Transmittal or
an Agent's Message, as the case may be, must be received by the Exchange
Agent prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted to the Book-Entry Transfer Facility and received
by the Exchange Agent and forming a part of the Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from the tendering Participant (as defined herein) that such
Participant has received and agrees to be bound by the Letter of Transmittal
and the Company may enforce the Letter of Transmittal against such
Participant. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR
AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK
OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined herein). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a firm
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Old Notes are registered in the
name of a person other than a signer of the Letter of Transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory
form as determined by the Company in its sole discretion, duly executed by,
the registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all
tenders of any particular Old Notes not properly tendered or to not accept
any particular Old Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange
Offer as to any particular Old Notes either before or after the Expiration
Date (including the right to waive the ineligibility of any holder who seeks
to tender Old Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Old Notes either
before or after the Expiration Date (including the Letter of Transmittal and
the instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such reasonable period
of time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
any defect or irregularity with respect to any tender of Old Notes for
exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders that
appear on the Old Notes.
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If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority
to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, and that neither the holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Notes. In the case of a holder
that is not a broker-dealer, each such holder, by tendering, will also
represent to the Company that such holder is not engaged in, or intends to
engage in, a distribution of the New Notes. If any holder or any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Company, or is engaged in or intends to engage in or has an arrangement
or understanding with any person to participate in a distribution of such New
Notes to be acquired pursuant to the Exchange Offer, such holder or any such
other person (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Old
Notes properly tendered and will issue the New Notes promptly after
acceptance of the Old Notes. See "--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent, with
written confirmation of any oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Interest on the New Notes will accrue from February 2,
1998, the date of original issuance of the Old Notes. If the Exchange Offer
is not consummated by August 3, 1998, the interest rate on the Old Notes from
and including such date until but excluding the date of consummation of the
Exchange Offer will increase by 0.5%. Payments of such interest, if any, on
Old Notes in exchange for which New Notes were issued will be made to the
persons who, at the close of business on February 1 or August 1 next
preceding the interest payment date, are registered holders of such Old Notes
if such record date occurs prior to such exchange, or are registered holders
of the New Notes if such record date occurs on or after the date of such
exchange, even if Notes are cancelled after the record date and on or before
the interest payment date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents or, in the case of a
Book-Entry Confirmation, an Agent's Message in lieu thereof. If any tendered
Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desired to exchange, such unaccepted or
non-exchanged Old Notes will be returned without expense to the tendering
holder thereof (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of
the Exchange Offer.
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BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Old
Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees, or an Agent's
Message in lieu of a Letter of Transmittal, and any other required documents,
must, in any case, be transmitted to and received by the Exchange Agent at
one of the addresses set forth below under "--Exchange Agent" on or prior to
the Expiration Date or the guaranteed delivery procedures described below
must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot
be completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice
of Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required
by the Letter of Transmittal, are received by the Exchange Agent within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent." Any such notice of withdrawal must specify the name of
the person having tendered the Old Notes to be withdrawn, identify the Old
Notes to be withdrawn (including the principal amount of such Old Notes), and
(where certificates for Old Notes have been transmitted) specify the name in
which such Old Notes are registered, if different from that of the
withdrawing holder. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of
such certificates the withdrawing holder must also submit the serial numbers
of the particular certificates to be withdrawn and signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Old Notes have been tendered pursuant
to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any
Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility
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pursuant to the book-entry transfer procedures described above, such Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility for the Old Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described
under "--Procedures for Tendering Old Notes" above at any time on or prior to
the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such Old Notes for exchange or the
exchange of the New Notes for such Old Notes, any of the following events
shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order of decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking
any damages as a result thereof, or (ii) resulting in a material delay in
the ability of the Company to accept for exchange or exchange some or all
of the Old Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of
the Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the reasonable judgment of
the Company, might result in the holders of New Notes having obligations
with respect to resales and transfers of New Notes which are greater than
those described in the interpretation of the Commission referred to on the
cover page of this Prospectus, or would otherwise make it inadvisable to
proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in
the reasonable judgment of the Company, is or may be adverse to the
Company, or the Company shall have become aware of facts that, in the
reasonable judgment of the Company, have or may have adverse significance
with respect to the value of the Old Notes or the New Notes;
which in the reasonable judgment of the Company in any case, and regardless
of the circumstances (including any action by the Company) giving rise to any
event described above, makes it inadvisable to proceed with the Exchange
Offer and/or with such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
43
<PAGE>
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indentures under the Trust Indenture Act of 1939
(the "TIA").
EXCHANGE AGENT
U.S. Bank Trust National Association (formerly known as First Trust National
Association) has been appointed as the Exchange Agent for the Exchange Offer.
All executed Letters of Transmittal and Agent's Messages should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal or Agent's Message and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<CAPTION>
<S> <C>
Delivery To: U.S. Bank Trust National Association, Exchange Agent
By Mail: By Overnight Courier or Hand:
U.S. Bank Trust National Association U.S. Bank Trust National Association
Corporate Trust 180 East 5th Street
P.O. Box 64485 4th Floor Window
St. Paul, Minnesota 55101-9549 St. Paul, Minnesota 55101
Attention: Specialized Finance
By Facsimile:
(612) 244-1537
Confirm by Telephone:
(612) 244-1197
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$780,500.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that
Old Notes not tendered or not accepted in the Exchange Offer be returned to,
a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indentures regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the
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<PAGE>
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities laws. The Company does
not currently anticipate that it will register Old Notes under the Securities
Act. See "Description of the Notes -- Registration Rights." Based on
interpretations by the staff of the Commission, as set forth in no-action
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by holders thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate
in the distribution of such New Notes. However, the Company does not intend
to request the Commission to consider, and the Commission has not considered,
the Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each
holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes.
If any holder is an affiliate of the Company, is engaged in or intends to
engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." In addition,
to comply with state securities laws, the New Notes may not be offered or
sold in any state unless they have been registered or qualified for sale in
such state or an exemption from registration or qualification is available
and is complied with. The offer and sale of the New Notes to "qualified
institutional buyers" (as such term is defined under Rule 144A of the
Securities Act) is generally exempt from registration or qualification under
the state securities laws. The Company currently does not intend to register
or qualify the sale of the New Notes in any state where an exemption from
registration or qualification is required and not available.
45
<PAGE>
BUSINESS
OVERVIEW
REVLON is one of the world's best known names in cosmetics and is a
leading mass market cosmetics brand. The Company's vision is to provide
glamour, excitement and innovation through quality products at affordable
prices. To pursue this vision, the Company's management team combines the
creativity of a cosmetics and fashion company with the marketing, sales and
operating discipline of a consumer packaged goods company. The Company
believes that its global brand name recognition, product quality and
marketing experience have enabled it to create one of the strongest consumer
brand franchises in the world, with products sold in approximately 175
countries and territories. The Company's products are marketed under such
well-known brand names as REVLON, COLORSTAY, REVLON AGE DEFYING, ALMAY and
ULTIMA II in cosmetics; MOON DROPS, ETERNA 27, ALMAY TIME-OFF, ULTIMA II,
JEANNE GATINEAU and NATURAL HONEY in skin care; CHARLIE and FIRE & ICE in
fragrances; FLEX, OUTRAGEOUS, AQUAMARINE, MITCHUM, COLORSTAY, COLORSILK, JEAN
NATE, PLUSBELLE, BOZZANO and COLORAMA in personal care products; and ROUX
FANCI-FULL, REALISTIC, CREME OF NATURE, CREATIVE NAIL and AMERICAN CREW in
professional products. To further strengthen its consumer brand franchises,
the Company markets each core brand with a distinct and uniform global image,
including packaging and advertising, while retaining the flexibility to
tailor products to local and regional preferences.
Revlon was founded by Charles Revson, who revolutionized the cosmetics
industry by introducing nail enamels matched to lipsticks in fashion colors
over 65 years ago. Today, the Company has leading market positions in many of
its principal product categories in the United States self-select
distribution channel, which the Company believes is the fastest-growing
channel of distribution for cosmetics, skin care, fragrance and personal care
products. The Company's leading market positions for its REVLON brand
products include the number one positions in lip makeup and nail enamel
(which the Company has occupied for the past 21 years), and for 1997 the
number one and two selling brands of lip makeup. The Company's market share
in lip makeup and nail enamel has increased from 25.3% and 21.1%,
respectively, for 1992, to 31.4% and 22.8%, respectively, for 1997. The
Company has the number two position in face makeup (including the top three
selling brands of foundation), where its market share has increased from
11.7% for 1992 to 21.2% for 1997. Propelled by the success of its new product
launches and market share gains in its existing product lines, the Company
captured in 1996 and continued to hold in 1997 the number one position
overall in color cosmetics (consisting of lip, eye and face makeup and nail
enamel) in the United States self-select distribution channel, where its
market share has increased from 15.6% for 1992 to 21.6% for 1997. The Company
also has leading market positions in several product categories in certain
markets outside of the United States, including in Argentina, Australia,
Brazil, Canada, Mexico and South Africa.
BUSINESS STRATEGY
The Company's business strategy, which implements its vision and is
intended to continue to improve its operating performance, is to:
o Strengthen and broaden its core brands through globalization of
marketing and advertising, product development and manufacturing and
through increasing its emphasis on advertising and promotion.
o Lead the industry in the development and introduction of
technologically advanced innovative products that set new trends.
o Expand the Company's presence in all markets in which the Company
competes and enter new and emerging markets.
o Continue to reduce costs and improve operating efficiencies, customer
service and product quality by reducing overhead, rationalizing factory
operations, upgrading management information systems, globally sourcing
raw materials and components and carefully managing working capital.
o Continue to expand market share and product lines through possible
strategic acquisitions or joint ventures.
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As a result of the implementation of its strategy, through December 31,
1997, the Company achieved 17 consecutive quarters of increased net sales,
operating income and EBITDA compared with the corresponding quarter of the
respective prior year. Net sales, operating income (before a non-recurring
charge of $7.6 million related to business consolidation costs and other,
net) and EBITDA (before such non-recurring charge) increased 10.2%, 10.3% and
12.4%, respectively, for 1997 over 1996 and 11.8%, 38.3% and 27.4%,
respectively, for 1996 over 1995. In addition, the Company's results improved
to Adjusted 1997 Net Income of $59.7 million for 1997 from Adjusted 1996 Net
Income of $25.6 million for 1996 and a net loss of $41.2 million for 1995.
The Company has increased its investment in advertising and consumer directed
promotion while decreasing its SG&A expenses as a percentage of net sales to
55.9% for 1997 compared with 57.2% for 1996 and 58.8% for 1995.
Key steps in implementing the Company's business strategy are as follows:
Strengthen and Broaden Core Brands. The Company believes that its brand
names are widely recognized among consumers and retailers throughout the
world. The Company intends to continue to strengthen and broaden its
portfolio of core brands, including REVLON, COLORSTAY, REVLON AGE DEFYING,
ALMAY, ULTIMA II, CHARLIE, FLEX, OUTRAGEOUS and MITCHUM, by, among other
things, continuing to globalize its marketing and advertising, product
development and manufacturing to provide a uniform image and product
throughout the world. Each core brand is marketed with a distinct and uniform
global image, including packaging and advertising. The Company has formed
Global Marketing Committees, consisting of managers from the Company's
marketing, research and development, operations, advertising and finance
departments from the United States and abroad, which develop strategies for
the Company's current and new brands and products. The Global Marketing
Committees coordinate the Company's globalization efforts while allowing
sufficient flexibility to tailor the Company's products to local and regional
preferences. As part of the Company's globalizing efforts, major United
States product successes, such as COLORSTAY and REVLON AGE DEFYING, are
introduced into international markets, and major international product
successes, such as CHARLIE RED and CHARLIE WHITE, are introduced into the
United States.
As part of the strategy to strengthen and broaden its core brands, the
Company has increased its investment in advertising and promotion. For 1997,
advertising and consumer-directed promotion expenditures increased 11.8% over
1996 levels and by 17.4% for 1996 over 1995 levels. The Company intends to
target the increased advertising and consumer-directed promotion to support
new product introductions as well as certain of the Company's existing
brands. The Company also has developed unique marketing materials such as the
"Revlon Report," a glossy color pamphlet distributed in magazines and on
merchandising units, available in 34 countries and 18 languages, which
highlights seasonal and other fashion and color trends, describes the
Company's products that address those trends and contains coupons, rebate
offers and other promotional material to encourage consumers to try the
Company's products. The Company has created on-the-road beauty sampling and
information vehicles that travel to major retailers in the United States, at
which Company trainers educate consumers on the latest product and shade
offerings. In addition, the uniform global image of the Company's core brands
is reinforced through the visibility of Halle Berry, Cindy Crawford, Kim
Delaney, Karen Duffy, Daisy Fuentes, Melanie Griffith, Salma Hayek and
Vendela, among others, who act as celebrity spokespersons for the Company's
brands throughout the world in all areas of the Company's marketing efforts,
including appearing in the Company's print and television advertisements.
Lead the Industry in Product Innovation and Trends. The Company intends to
continue to lead the industry in developing and marketing trend-setting
products that incorporate proprietary technologies. The Company's recent
product introductions include the breakthrough COLORSTAY makeup, which uses
patent-pending transfer-resistant technology that provides long wear.
COLORSTAY has effectively created an entirely new product category -long
wearing, transfer-resistant lip makeup -that has driven substantially all
growth in lip makeup sales in the United States self-select distribution
channel since its introduction. In 1996, a number of the Company's
competitors began producing long wearing, transfer-resistant lipcolor. In the
first quarter of 1997, the Company relaunched COLORSTAY lipcolor with a new
and improved formula that delivers moisture while retaining transfer
resistance. Launched in June 1994, COLORSTAY achieved a 14.5% and 13.0%
market share in the United States self-select distribution channel for 1996
and 1997, respectively, making it the number one selling lip makeup in that
channel, with a market share of more than twice that of any competitor's
brand. The success of COLORSTAY lip makeup
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<PAGE>
boosted the Company's total lip makeup market share to 31.4% for 1997, more
than twice the market share of the next largest competitor. The Company
capitalized on the highly successful launch of COLORSTAY lipcolor by
introducing a collection of COLORSTAY cosmetics, including foundation,
mascara, eye colors, eye liners and lip pencils, which address consumers'
desire for cosmetic products that can be applied once and will remain fresh
during the entire day. The Company added an entirely new product category to
its COLORSTAY franchise with the introduction in 1997 of COLORSTAY hair
color, which brings patent-pending fade-resistant hair color technology to
the growing at-home hair color market. COLORSTAY foundation, which was
introduced in 1995, was the number one selling foundation in the United
States self-select distribution channel in 1997 and achieved a 9.2% market
share for that period. The Company introduced REVLON AGE DEFYING foundation,
which uses a patented technology that does not settle in but instead conceals
fine facial lines and is designed to meet the needs of women in the over 35
age bracket. Launched in April 1994, REVLON AGE DEFYING foundation achieved
an 7.9% market share in the United States self-select distribution channel
for 1997, making it the number two selling foundation in that channel. The
Company capitalized on this highly successful launch by introducing a
collection of REVLON AGE DEFYING color cosmetics, including eye makeup,
blush, pressed powder and compact makeup. The Company has introduced new
fragrances, such as FIRE & ICE and CHARLIE RED in 1994 followed by CHARLIE
WHITE in 1995. In addition, the Company launched the new fragrances FIRE &
ICE COOL and CHARLIE SUNSHINE in the first quarter of 1997. Other innovative
product introductions include MITCHUM CLEAR roll-on anti-perspirant and NEW
COMPLEXION compact makeup. The Company has introduced, and intends to
continue to introduce, innovative products designed to fulfill identified
consumer needs. In 1996 the Company launched its STREETWEAR nail enamel
targeted for the trend conscious cosmetics consumer. In line with the
Company's successful strategy used in connection with the COLORSTAY and
REVLON AGE DEFYING franchises, and to capitalize on STREETWEAR nail enamel's
highly successful launch, the Company launched a collection of STREETWEAR
lip, nail and eye products. In 1997, the Company also launched TOP SPEED nail
enamel, which contains a patented speed drying polymer formula which sets in
90 seconds. MOISTURESTAY, which the Company introduced in March 1998, uses
patent-pending technology to moisturize the lips, even after the color wears
off.
Expand Presence in All Markets. The Company believes that the self-select
distribution channel in the United States represents the fastest-growing
channel of distribution for cosmetics, skin care, fragrance and personal care
products. The Company intends to capitalize on its established presence and
experience in marketing into the self-select distribution channel to increase
market share in this channel. The Company believes that it can attract
consumers from department stores and specialty stores, existing consumers in
the self-select distribution channel and new cosmetics consumers by providing
them with glamour, excitement and innovation through quality products at
affordable prices. The Company reinforces this effort with its unique
marketing materials such as the "Revlon Report"; on-the-road beauty sampling
and information vehicles, which create consumer and retail excitement about
the Company's new products and encourage trial and purchase by consumers; and
magazine inserts containing samples of the Company's newest products, trial
size products and "shade samplers," a collection of trial size products in
different shades, which allow the consumer to sample the Company's newest
face, eye and lip makeup and nail enamel in coordinated colors. The Company
also provides point-of-sale testers on the Company's display units which
provide information about the Company's products and permit consumers to test
the products, thereby achieving the benefits of an in-store demonstrator
without the corresponding cost. The Company develops jointly with retailers
carefully tailored advertising, point of purchase and other focused marketing
programs. The Company believes that strong relationships with retailers and
consumer traffic generated by its innovative marketing programs will enable
the Company to increase its presence in the expanding self-select
distribution channel by, among other things, increasing the permanent display
space devoted to the Company's products.
The Company intends to capitalize on its experience in the self-select
distribution channel in the United States to realize growth opportunities in
the international markets for cosmetics and skin care, fragrance and personal
care products. The Company believes that the worldwide recognition of the
REVLON name, the Company's existing international presence and the Company's
strengths in the self-select distribution channel are platforms from which to
gain further significant international penetration. Pursuant to its strategy,
the Company introduced the COLORSTAY collection in international
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markets and as a result increased its color cosmetics sales in such markets.
In addition, the Company intends to achieve growth through increasing
distribution into the expanding self-select distribution channels in Western
Europe, Latin America and the Far East, expanding the distribution of certain
regional international brands and entering new and emerging markets. Such new
and emerging markets include Eastern Europe, Russia, China and Africa.
The Company intends to strengthen its professional products business by
introducing a portfolio of innovative, technologically advanced professional
products for exclusive salon use under the REVLON brand, such as REVLONISSIMO
and VOILA hair color, PERFECT PERM permanent wave and line extensions of the
SYNAPLEX and SENSOR PERM brands. The Company has strengthened its exclusive
line professional distributor network and intends to capitalize on this
strength to develop a line of home use hair care products for purchase in
salons. The Company will also further strengthen its leadership position in
the supply of professional and retail ethnic hair care products through,
among other things, the introduction of new products tailored to the specific
needs of the ethnic customer.
As part of its business strategy, the Company acquired in 1995 Creative
Nail Design, Inc. ("Creative Nail"), a leading United States designer,
manufacturer and supplier of nail care and other products, including nail
care treatment, nail extensions and hand creams and lotions for the
professional nail industry. In April 1996, the Company acquired American
Crew, Inc. ("American Crew"), which manufactures and distributes men's
shampoos, conditioners, gels and other hair care products for use and resale
by professional salons. In addition, the Company is currently expanding both
the CREATIVE NAIL and AMERICAN CREW lines internationally. The Company
believes that these acquisitions have broadened the Company's professional
products range and enhanced its distribution capabilities.
Improve Operating Efficiencies. The Company is rationalizing and
increasing the efficiency of its manufacturing operations worldwide by
centralizing production of some product categories for sale throughout the
world within designated facilities and by shifting production of certain
other product categories to more cost effective manufacturing sites. The
Company is making substantial improvements in its global sourcing, materials
management and distribution capabilities, which have contributed to an
improvement in the Company's gross profit margin. The Company intends to
continue to globally source raw materials and components from accredited
vendors, which allows the Company to utilize its large purchasing capacity to
maximize cost savings and ensure the quality of its raw materials and
components. The Company continues to upgrade its management information
systems to provide an integrated system for forecasting, production,
inventory management, distribution, procurement and accounting. As part of
its efforts to continuously improve operating efficiencies, the Company
attempts to ensure that a significant portion of its capital expenditures are
devoted to improving operating efficiencies. Improvements in manufacturing,
sourcing and systems have contributed to improved customer service levels,
improved product quality, an increase in gross profit as a percentage of net
sales and improved management of working capital, as evidenced by the
reduction in the relative amount of working capital necessary to support the
Company's net sales. Gross profit as a percentage of net sales was 65.2% for
1997 compared with 66.5% for 1996 and 66.3% for 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company also measures the improvement in operating performance by
tracking key performance indicators, such as the percentage of timely order
fulfillment, which was approximately 98% for the Company's major United
States facilities in 1997.
Strategic Acquisitions. The Company intends to pursue acquisitions of
brands and businesses which expand the Company's market share and product
lines.
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PRODUCTS
The Company's products include consumer products consisting of cosmetics
and skin care, fragrance and personal care products, and professional
products consisting of hair care products principally for use in and resale
by professional salons. The Company manufactures and markets a variety of
products worldwide. The following table sets forth the Company's principal
brands.
<TABLE>
<CAPTION>
PERSONAL CARE PROFESSIONAL
BRAND COSMETICS SKIN CARE FRAGRANCES PRODUCTS PRODUCTS
- --------------- --------------------- --------------------- -------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
REVLON Revlon, ColorStay, Moon Drops, Revlon Charlie, Charlie Flex, Outrageous, Revlon Professional,
Revlon Age Defying, Results, Eterna 27, Red, Charlie White, Aquamarine, Mitchum, Roux Fanci-full,
StreetWear, Super Revlon Age Defying Charlie Sunshine, Lady Mitchum, Hi & Realistic, Creme of
Lustrous, Moon Drops, Fire & Ice, Fire & Dri, ColorStay, Nature, Sensor Perm,
Velvet Touch, Line & Ice Cool, Jontue, Colorsilk, Frost & Perfect Perm,
Shine, New Ciara, Body Kisses Glow, Revlon Shadings, Fermodyl, Perfect
Complexion, Overtime Jean Nate, Roux Touch, Salon
Eyes, Touch & Glow, Fanci-full, Realistic, Perfection,
Top Speed, Lashful, Creme of Nature, Herba Revlonissimo, Voila,
Lengthwise, Naturally Rich, Fabu-laxer Young Color, Creative
Glamorous, Custom Nail, Contours,
Eyes, Timeliner, American Crew,
Revlon Implements R PRO,
True Cystem
ALMAY Almay, Time-Off, Sensitive Care, Oil Almay
Almay Clear Control, Time-Off,
Complexion Makeup, Moisture Balance,
Amazing, One Coat Moisture Renew, Almay
Clear Complexion
Skin Care
ULTIMA II Ultima II, Beautiful Ultima II, Vital
Nutrient, Wonderwear, Radiance,
The Nakeds Interactives, CHR
SIGNIFICANT Colorama(b), Jeanne Gatineau(b), Floid(b), Plusbelle(b), Colomer(b),
REGIONAL Juvena(b), Natural Honey Versace(a), Charlie Bozzano(b), Juvena(b), Intercosmo(b),
BRANDS Jeanne Gatineau(b) Gold Geniol(b), Personal Bio Point,
Colorama(b), Natural Wonder,
Llongueras(b), Bain de Llongueras(b)
Soleil(b), ZP-11
- --------------- --------------------- --------------------- -------------------- ---------------------- ---------------------
</TABLE>
(a) License held for distribution in certain countries outside the United
States.
(b) Trademark owned in certain markets outside the United States.
Cosmetics and Skin Care. The Company sells a broad range of cosmetics and
skin care products designed to fulfill specifically identified consumer
needs, principally priced in the upper range of the self-select distribution
channel, including lip makeup, nail color and nail care products, eye and
face makeup and skin care products such as lotions, cleansers, creams, toners
and moisturizers. Many of the Company's products incorporate patented,
patent-pending or proprietary technology.
The Company markets several different lines of REVLON lip makeup (which
includes lipstick, lip gloss and liner), and has the number one and two
selling brands of lip makeup in the United States self-select distribution
channel. The Company's breakthrough COLORSTAY lipcolor, which uses patented
transfer-resistant technology that provides long wear, is produced in 40
shades and is the number one brand in the United States self-select
distribution channel. SUPER LUSTROUS lipstick is produced in 60 shades and is
the number two brand in the United States self-select distribution channel.
MOON DROPS, a moisturizing lipstick, is produced in 57 shades. LINE & SHINE,
which was introduced in 1997, is a product that utilizes
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an innovative product form, combining lipliner and lip gloss in one package,
and is produced in eight shades. MOISTURESTAY, which the Company introduced
in March 1998, uses patent-pending technology to moisturize the lips, even
after the color wears off.
The Company's nail color and nail care lines include enamels, cuticle
preparations and enamel removers. The Company's flagship REVLON nail enamel
is produced in 85 shades and uses a patented formula that provides consumers
with improved wear, application, shine and gloss in a toluene-free and
formaldehyde-free formula. TOP SPEED nail enamel, launched in 1997, is
produced in 52 shades and contains a patented speed drying polymer formula
which sets in 90 seconds. STRONG WEAR, a patented strengthening nail enamel
formula produced in 27 shades, contains ingredients that provide protection
against splitting, chipping and breaking. Revlon has the number one position
in nail enamel in the United States self-select distribution channel. The
Company also sells NAIL BUILDERS, which includes nail strengtheners,
hardeners and fortifiers.
The Company sells face makeup, including foundation, powder, blush and
concealers, under such REVLON brand names as REVLON AGE DEFYING, which is
targeted for women in the over 35 age bracket; COLORSTAY foundation, which
uses patent-pending transfer-resistant technology that provides long wear;
and NEW COMPLEXION, for consumers in the 25 to 49 age bracket. COLORSTAY,
REVLON AGE DEFYING and NEW COMPLEXION were the number one, two and three
selling foundations in the United States self-select distribution channel in
1997. The Company was number two in sales of face makeup in the United States
self-select distribution channel with a 21.2% share for 1997.
The Company's eye makeup products include mascaras, eye shadows, brow
color and liners. COLORSTAY eyecolor, mascara and brow color, LASHFUL and
LENGTHWISE mascaras, SOFTSTROKE eyeliners and REVLON CUSTOM EYES and OVERTIME
SHADOW eye shadows are targeted for women in the 18 to 49 age bracket, and
REVLON AGE DEFYING eye color is targeted for women over 35. For 1997, the
Company had a 12.8% market share in eye makeup for the United States
self-select distribution channel.
The Company's ALMAY brand consists of a complete line of hypo-allergenic,
dermatologist-tested, fragrance-free cosmetics and skin care products
targeted for consumers who want "healthy looking skin." The Company positions
the ALMAY brand as the clean, natural-looking and healthy choice. ALMAY
products include lip makeup, nail color and nail care products, eye and face
makeup, skin care products, and sunscreen lotions and creams, including
TIME-OFF makeup and skin care, and the ALMAY AMAZING collection, which
includes AMAZING LASTING lip makeup, which uses the Company's patented
transfer-resistant technology developed for COLORSTAY, ALMAY AMAZING LASH
mascara, ALMAY AMAZING eye makeup, ALMAY AMAZING LASTING makeup and ALMAY
CLEAR COMPLEXION SKIN CARE and MAKEUP and ALMAY EASY-TO-WEAR eyecolor and
ALMAY ONE COAT mascara. In 1998, the Company plans to expand the ONE COAT
brand to include ONE COAT NAIL COLOR, ONE COAT GEL EYECOLOR, ONE COAT GEL EYE
PENCIL and ONE COAT LIP SHINE. The Company plans to introduce ALMAY'S
patent-pending STAY SMOOTH ANTI-CHAP lipcolor, which is the first anti-chap
lip makeup with SPF 25, in the first quarter of 1998. The Company targets
ALMAY for value conscious consumers by offering benefits comparable to higher
priced products, such as Clinique, at affordable prices. ALMAY is the leading
brand in the hypo-allergenic market in the United States self-select
distribution channel.
The Company's STREETWEAR brand consists of a line of nail enamels,
mascaras, lip and eye liners and lip glosses which are targeted for the trend
conscious consumer. STREETWEAR was developed in response to the recent trend
in color and fashion coming from the street.
The Company sells implements, which include nail and eye grooming tools
such as clippers, scissors, files, tweezers and eye lash curlers. The
Company's implements are sold individually and in sets under the REVLON brand
name and are the number one brand in the United States self-select
distribution channel with a market share of 34.2% for 1997, which is more
than two times that of the next largest competitor.
The Company also sells cosmetics in international markets under regional
brand names including COLORAMA in Brazil and JUVENA.
The Company's skin care products, including moisturizers, are sold under
brand names, including ETERNA 27, MOON DROPS, REVLON RESULTS, ALMAY TIME-OFF
REVITALIZER, CLEAR COMPLEXION and ULTIMA II VITAL RADIANCE, a skin care
collection introduced in 1997. In addition, the Company sells skin care
products in international markets under internationally recognized brand
names and under regional brands, including NATURAL HONEY.
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The Company's premium priced cosmetics and skin care products are sold
under the ULTIMA II brand name, which is the Company's flagship premium
priced brand sold throughout the world, and the JEANNE GATINEAU brand name,
which is sold outside the United States. The ULTIMA II line includes the
WONDERWEAR collection, which includes a long-wearing foundation that uses
patent-pending technology, cheek and eyecolor products that use proprietary
technology that provides long wear, and WONDERWEAR LIPSEXXXY lipstick, which
uses patented transfer-resistant technology that provides long wear, the
BEAUTIFUL NUTRIENT collection, a complete line of nourishing makeup that
provides advanced nutrient protection against dryness and THE NAKEDS makeup,
a trend-setting line of makeup emphasizing neutral colors.
Fragrances. The Company sells a selection of moderately priced and premium
priced fragrances, including perfumes, eau de toilettes and colognes. The
Company's portfolio includes fragrances such as CHARLIE and FIRE & ICE and
line extensions such as CHARLIE RED, CHARLIE WHITE, CHARLIE SUNSHINE and FIRE
& ICE COOL. The Company's CHARLIE fragrance has been a market leader since
the mid-1970's and, the Company believes, one of the top selling fragrances
worldwide. CHARLIE fragrances are currently the number two women's fragrance
collection in the United States self-select distribution channel. In
international markets, the Company distributes under license certain brands,
including VERSACE and VAN GILS.
Personal Care Products. The Company sells a broad line of personal care
consumer products which complements its core cosmetics lines and enables the
Company to meet the consumer's broader beauty care needs. In the self-select
distribution channel, the Company sells haircare, anti-perspirant and other
personal care products, including the FLEX, OUTRAGEOUS and AQUAMARINE
haircare lines throughout the world and the COLORAMA, PLUSBELLE, JUVENA,
LLONGUERAS and NATURAL HONEY brands outside the United States; the
breakthrough, patent-pending COLORSTAY and the COLORSILK, REVLON SHADINGS,
FROST & GLOW and ROUX FANCI-FULL hair coloring lines throughout most of the
world; and the MITCHUM, LADY MITCHUM and HI & DRI anti-perspirant brands
throughout the world. Certain hair care products, including ROUX FANCI-FULL
hair coloring and PERFECT TOUCH and SALON PERFECTION home permanents, were
originally developed for professional use. The Company also markets
hypo-allergenic personal care products, including sunscreens, moisturizers
and anti-perspirants, under the ALMAY brand.
Professional Products. The Company sells a comprehensive line of salon
products, including permanent wave preparations, hair relaxers, temporary and
permanent hair coloring products, shampoos, conditioners, styling products
and hair conditioners, to professional salons and beauty supply stores under
the REVLON brand as well as other brand names such as ROUX FANCI-FULL,
REALISTIC, REVLONISSIMO, CREME OF NATURE, FABU-LAXER, LOTTABODY, NATURAL
WONDER, SENSOR and INTERCOSMO. Most of the Company's salon products in the
United States currently are distributed in the non-exclusive distribution
channels, in contrast to those products that are distributed exclusively to
professional salons. Two recent acquisitions, Creative Nail, acquired in
November 1995, and American Crew, acquired in April 1996, increase the
Company's strength in the exclusive distribution channel. Through Creative
Nail, the Company sells nail enhancement systems and nail color and treatment
products and services for use by the professional salon industry under the
CREATIVE NAIL brand name. Through American Crew, the Company sells men's
shampoos, conditioners, gels, and other hair care products for use by
professional salons under the AMERICAN CREW brand name. The Company also
sells retail hair care products under the LLONGUERAS, PERSONAL BIO POINT,
GENIOL, FIXPRAY and LANOFIL brands outside the United States. The Company
markets in salons, beauty supply stores and the self-select distribution
channel several lines of hair relaxers, styling products, hair conditioners
and other hair care products under such names as FABU-LAXER and CREME OF
NATURE designed for the particular needs of ethnic consumers. The Company has
also developed a new exclusive line of ethnic products, AROSCI, which was
launched in 1996. The Company also sells wigs and hair pieces to retail
outlets and certain professional salons under the REVLON brand and, pursuant
to a license, under the ADOLFO brand.
MARKET SHARE
The Company has leading market positions for its REVLON brand products in
many of its principal product categories in the United States self-select
distribution channel, including the number one position in lip makeup and
nail enamel (which the Company has occupied for the past 21 years), and for
1997 the number one and two selling brands of lip makeup. The Company's
market share in lip makeup and nail
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enamel has increased from 25.3% and 21.1%, respectively, for 1992, to 31.4%
and 22.8%, respectively, for 1997. The Company has the number two position in
face makeup (including the top three selling brands of foundation), where its
market share has increased from 11.7% for 1992 to 21.2% for 1997. Propelled
by the success of its new product launches and share gains in its existing
product lines, the Company captured in 1996 and continued to hold in 1997 the
number one position overall in color cosmetics (consisting of lip, eye and
face makeup and nail enamel) in the United States self-select distribution
channel, where its market share has increased from 15.6% for 1992 to 21.6%
for 1997.
The trend in the cosmetics and skin care and fragrance industry has been
the shift of consumer purchases from department and specialty stores
(demonstrator-assisted distribution channels) to the self-select distribution
channel. The Company anticipated this trend and shifted its distribution
accordingly.
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The market for color cosmetics in the United States self-select
distribution channel was approximately $2.9 billion in 1997. The Company's
REVLON brand had the number one position in color cosmetics in 1997 and its
market share for 1994, 1995, 1996 and 1997 is as follows:
COLOR COSMETICS
[BAR GRAPH OMITTED]
The market for face makeup (which includes foundation) in the United
States self-select distribution channel was approximately $956.7 million in
1997. The Company's REVLON brand had the number two position in face makeup
in 1997 and its market share for 1994, 1995, 1996 and 1997 is as follows:
FACE MAKEUP
[BAR GRAPH OMITTED]
The market for foundation in the United States self-select distribution
channel was approximately $497.1 million in 1997. The Company's REVLON brand
had the number two position in foundation in 1997 and its market share for
1994, 1995, 1996 and 1997 is as follows:
FOUNDATION
[BAR GRAPH OMITTED]
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The market for eye makeup in the United States self-select distribution
channel was approximately $812.1 million in 1997. The Company's REVLON brand
had the number four position in eye makeup in 1997 and its market share for
1994, 1995, 1996 and 1997 is as follows:
EYE MAKEUP
[BAR GRAPH OMITTED]
The market for lip makeup in the United States self-select distribution
channel was approximately $721.5 million in 1997. The Company's REVLON brand
had the number one position in lip makeup in 1997 and its market share for
1994, 1995, 1996 and 1997 is as follows:
LIP MAKEUP
[BAR GRAPH OMITTED]
The market for nail enamel in the United States self-select distribution
channel was approximately $370.1 million in 1997. The Company's REVLON brand
had the number one position in nail enamel in 1997 and its market share for
1994, 1995, 1996 and 1997 is as follows:
NAIL ENAMEL
[BAR GRAPH OMITTED]
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The Company's ALMAY brand was the number five brand in the overall color
cosmetics market in the United States self-select distribution channel and
the number one hypo-allergenic brand and its market share for 1994, 1995,
1996 and 1997 is as follows:
ALMAY
[BAR GRAPH OMITTED]
The Company's growth in retail sales in the United States self-select
distribution channel for all of its color cosmetics and for its lip makeup,
face makeup, nail enamel and eye makeup compared with the overall growth in
retail sales in such product categories for 1997, compared with 1996, is as
follows:
GROWTH IN REVLON AND ALMAY BRAND RETAIL SALES VERSUS CATEGORY
[BAR GRAPH OMITTED]
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MARKETING
The Company's vision is to provide glamour, excitement and innovation
through quality products at affordable prices. The Company's marketing
efforts are designed to implement this vision. The Company has formed Global
Marketing Committees, consisting of managers from the Company's marketing,
research and development, operations, advertising and finance departments
from the United States and abroad, which develop strategies for the Company's
current and new brands and products. The Global Marketing Committees
coordinate the Company's globalization efforts while allowing sufficient
flexibility to tailor the Company's products to local and regional
preferences.
Consumer Products. The Company markets extensive consumer product lines at
a range of retail prices primarily through the self-select distribution
channel and markets select premium lines through demonstrator-assisted
channels. Each line is distinctively positioned and is marketed globally with
consistently recognizable logos, packaging and advertising designed to
differentiate it from other brands. The Company's existing consumer product
lines are carefully segmented, and new product lines are developed, to target
specific consumer needs as measured by focus groups and other market research
techniques.
The Company uses print and television advertising and point-of-sale
merchandising, including displays and samples. The Company has shifted a
significant portion of its marketing to appeal to a broader audience and has
increased media advertising, particularly national television advertising.
Advertising and consumer-directed promotion expenditures increased by 11.8%
in 1997 over 1996 levels and by 17.4% for 1996 over 1995 levels. The
Company's marketing emphasizes a uniform global image and product for its
portfolio of core brands, including REVLON, COLORSTAY, REVLON AGE DEFYING,
ALMAY, ULTIMA II, FLEX, CHARLIE, OUTRAGEOUS and MITCHUM. The Company
coordinates advertising campaigns with in-store promotional and other
marketing activities. The Company develops jointly with retailers carefully
tailored advertising, point-of-purchase and other focused marketing programs.
In addition, Halle Berry, Cindy Crawford, Kim Delaney, Karen Duffy, Daisy
Fuentes, Melanie Griffith, Salma Hayek and Vendela, among others, act as
celebrity spokespersons for the Company's brands throughout the world in all
areas of the Company's marketing efforts, including appearing in the
Company's print and television advertising. The visibility of such
spokespersons reinforces the global image of the Company's core brands. In
the self-select distribution channel, the Company uses network and spot
television advertising, national cable advertising and print advertising in
major general interest, women's fashion and women's service magazines, as
well as coupons, magazine inserts and point-of-sale testers. In the
demonstrator-assisted distribution channel, the Company principally uses
cooperative advertising programs with retailers, supported by Company-paid or
Company-subsidized demonstrators, and coordinated in-store promotions and
displays.
The Company also has developed unique marketing materials such as the
"Revlon Report," a glossy, color pamphlet distributed in magazines and on
merchandising units, available in 34 countries and 18 languages, which
highlights seasonal and other fashion and color trends, describes the
Company's products that address those trends and contains coupons, rebate
offers and other promotional material to encourage consumers to try the
Company's products. The Company has created on-the-road beauty sampling and
information vehicles that travel to major retailers throughout the United
States, at which Company trainers educate consumers on the latest product and
shade offerings. These vehicles create consumer and retail excitement about
the Company's new and existing products and encourage trial and purchase by
consumers. Other marketing materials designed to introduce the Company's
newest products to consumers and encourage trial and purchase include
point-of-sale testers on the Company's display units that provide information
about, and permit consumers to test, the Company's products, thereby
achieving the benefits of an in-store demonstrator without the corresponding
cost, magazine inserts containing samples of the Company's newest products,
trial size products and "shade samplers," which are collections of trial size
products in different shades. Additionally, the Company has its own website
which features current product and promotional information and was recently
recognized by a major national business magazine as one of the top corporate
sites on the World Wide Web. Revlon was the only cosmetics company to receive
this recognition.
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Professional Products. Professional products are marketed through
educational seminars on their application and benefits, and through
advertising, displays and samples to communicate to professionals and
consumers the quality and performance characteristics of such products. The
shift to exclusive line distributors is intended to significantly reinforce
the Company's marketing and educational efforts with salon professionals. The
Company believes that its presence in the professional markets benefits its
consumer products business since the Company is able to anticipate consumer
trends in hair, nail and skin care, which often appear first in salons.
NEW PRODUCT DEVELOPMENT AND RESEARCH AND DEVELOPMENT
The Company believes that it is an industry leader in the development of
innovative and technologically-advanced consumer and professional products.
The Company's marketing and research and development groups identify consumer
needs and shifts in consumer preferences in order to develop new product
introductions, tailor line extensions and promotions and redesign or
reformulate existing products to satisfy such needs or preferences. The
Company's Advanced Concept Group consists of a select cross-functional group
that conducts research on a wide range of areas to develop new and innovative
technology. The Company independently develops substantially all of its new
products. The Company also has entered into joint research projects with
major universities and commercial laboratories to develop advanced
technologies.
The Company believes that its Edison, New Jersey facility is one of the
most extensive cosmetics research and development facilities in the United
States. The researchers at the Edison facility are responsible for all of the
Company's new product research worldwide, performing research for new
products, ideas, concepts and packaging. The Company also has research
facilities in Brazil and California.
The research and development group at the Edison facility also performs
extensive safety and quality tests on the Company's products, including
toxicology, microbiology and package testing. Additionally, quality control
testing is performed at each manufacturing facility.
As of December 31, 1997, the Company employed approximately 200 people in
its research and development activities, including specialists in
pharmacology, toxicology, chemistry, microbiology, engineering, biology,
dermatology and quality control. In 1997, 1996 and 1995, the Company spent
approximately $29.7 million, $26.3 million and $22.3 million, respectively,
on research and development activities.
In certain instances, proprietary technology developed by the Company for
use in products and packaging is available for licensing to third parties
through the Company's Revlon Technologies division. In 1995, the Company
received the Innovation Award from the Coalition of NorthEast Governors
("CONEG") for its patented and patent-pending ENVIROGLUV glass decorating
technology (which resulted in significant cost reductions in decorating
REVLON AGE DEFYING and COLORSTAY makeup bottles and REVLON nail enamel
bottles and which is being offered for licensing to qualified glass
decorators). The CONEG challenge awards program is a nationwide competition
to recognize companies that make significant contributions to packaging and
source reduction.
MANUFACTURING AND RELATED OPERATIONS AND RAW MATERIALS
The Company is continuing to rationalize its worldwide manufacturing
operations, which is intended to lower costs and improve customer service and
product quality. The globalization of the Company's core brands allows the
Company to centralize production of some product categories for sale
throughout the world within designated facilities and shift production of
certain other product categories to more cost effective manufacturing sites
to reduce production costs. Shifts of production may result in the closing of
certain of the Company's less significant manufacturing facilities, and the
Company continually reviews its needs in this regard. In addition, as part of
its efforts to continuously improve operating efficiencies, the Company
attempts to ensure that a significant portion of its capital expenditures is
devoted to improving operating efficiencies.
The Company manufactures REVLON brand color cosmetics, personal care
products and fragrances for sale in the United States, Japan and most of the
countries in Latin America and Southeast Asia at its
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Phoenix, Arizona facility and its Canadian facility. The Company manufactures
ULTIMA II cosmetics and skin treatment products for sale in the United States
and most of the countries in Latin America and Southeast Asia, personal care
products for sale in the United States and ALMAY brand products for sale
throughout the world at its Oxford, North Carolina facility. Nail care
products for sale through salons worldwide are manufactured and distributed
through the Vista, California facility. Personal Care implements for sale
throughout the world are manufactured at the Company's Irvington, New Jersey
facility. The Company manufactures salon and retail professional products and
personal care consumer products for sale in the United States and Canada at
the Company's Jacksonville, Florida facility. The Phoenix and Oxford
facilities have been ISO-9002 certified. ISO-9002 certification is an
internationally recognized standard for manufacturing facilities, which
signifies that the manufacturing facility has achieved and maintains certain
performance and quality commitment standards.
The Company manufactures its entire line of consumer products (except
implements) for sale in most of Europe at its Maesteg, South Wales facility.
Local production of cosmetics and personal care products takes place at the
Company's facilities in Spain, Canada, Venezuela, Mexico, New Zealand,
Brazil, Italy, Argentina, France and South Africa. The manufacture of
professional products for sale by retailers outside the United States has
been centralized principally at the Company's facilities in Ireland, Spain,
Italy and Mexico. Production of color cosmetics for Japan and Mexico has been
shifted primarily to the United States while production of REVLON brand
personal care products for Argentina has been centralized in Brazil. The
Maestag and Irish facilities have been certified by the British equivalent of
ISO-9002.
The Company purchases raw materials and components throughout the world.
The Company continuously pursues reductions in cost of goods through the
global sourcing of raw materials and components from qualified vendors,
utilizing its large purchasing capacity to maximize cost savings. The global
sourcing of raw materials and components from accredited vendors also ensures
the quality of the raw materials and components. The Company believes that
alternate sources of raw materials and components exist and does not
anticipate any significant shortages of, or difficulty in obtaining, such
materials.
The Company's improvements in manufacturing, sourcing and related
operations have contributed to improved customer service, including an
improvement in the percentage of timely order fulfillment from most of the
Company's principal manufacturing facilities, and the timeliness and accuracy
of new product and promotion deliveries. The Company measures the improvement
in operating performance by tracking key performance indicators, such as the
percentage of timely order fulfillment, which was approximately 98% for the
Company's major United States facilities in 1997. To promote the Company's
understanding of and responsiveness to the needs of its retail customers, the
Company assigns members of senior operations management to lead
inter-departmental teams that visit significant accounts, and has provided
retail accounts with a designated customer service representative. As a
result of these efforts, accompanied by stronger and more customer-focused
management, the Company has developed strong relationships with its retailers
and has received several preferred vendor awards.
The Company emphasizes safety and increased training of employees
resulting in an improved safety record. The Company anticipates that the
globalization of, and continued improvement in, the quality of its
manufacturing operations will result in lower manufacturing costs.
BUSINESS PROCESS ENHANCEMENTS
The Company's management information systems have been substantially
upgraded to provide comprehensive order processing, production and accounting
support for the Company's business. The Company's expenditures on
improvements to its management information systems were approximately $12
million for 1997, and the Company anticipates a similar level of expenditure
in 1998. Systems improvements have been, and the Company anticipates that
they will continue to be, instrumental in contributing to the reduction of
the time from order entry to shipment, improved forecasting of demand and
improved operating efficiencies.
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The Company has made an evaluation of steps necessary to address issues
related to required changes in computer systems for the Year 2000. While the
Company has determined that it currently has computer systems that require
modification to be Year 2000 compliant, many of the modifications are being
accomplished as part of the systems improvements referred to above. As to its
systems which are not impacted by the improvements referred to above, the
Company is identifying those which require modification or replacement to
address the Year 2000 issue. Management believes that there is no material
risk that the Company will fail to address the Year 2000 issues in a timely
manner. Additionally, the Company believes that the Year 2000 issue will not
have a material effect on its financial condition.
DISTRIBUTION
As a result of its improved customer service and consumer traffic
generated by its products and innovative marketing programs, the Company
believes that its relationships with self-select distribution cosmetic
retailers are the best in the cosmetics industry. The Company's products are
sold in approximately 175 countries and territories. The Company's worldwide
sales force had approximately 2,900 people as of December 31, 1997, including
a dedicated sales force for cosmetics, skin care and fragrance products in
the self-select distribution channel, for the demonstrator-assisted
distribution channel, for personal care products distribution, for salon
distribution and for retail stores. In addition, the Company utilizes sales
representatives and independent distributors to serve specialized markets and
related distribution channels.
United States. The United States operation's net sales accounted for
approximately 60.8% of the Company's 1997 net sales, a majority of which were
made in the self-select distribution channel. The Company also sells a broad
range of consumer and retail professional products to United States
Government military exchanges and commissaries. The Company licenses its
trademarks to select manufacturers for products that the Company believes
have the potential to extend the Company's brand names and image. As of
December 31, 1997, 19 licenses were in effect relating to 21 product
categories to be marketed in the self-select distribution channel. Pursuant
to the licenses, the Company retains strict control over product design and
development, product quality, advertising and use of its trademarks. These
licensing arrangements offer opportunities for the Company to generate
revenues and cash flow through earned royalties, royalty advances and, in
some cases, up-front licensing fees. Products designed for professional use
or resale by beauty salons are sold through wholesale beauty supply
distributors and directly to professional salons. Various hair care products,
such as ethnic hair relaxers, scalp conditioners, shampoos and hair coloring
products and wigs and hairpieces are sold directly and through wholesalers to
chain drug stores and mass volume retailers. Wigs and hairpieces are also
sold through mail order direct marketing, retail outlet malls, salons and
certain department stores.
The Company also operates retail stores through Cosmetic Center. See
"--Cosmetic Center Merger." As of December 31, 1997, Cosmetic Center's retail
(or Cosmetic Center) division operated 66 specialty retail stores in the
middle Atlantic region and in Chicago and its outlet (or Prestige Fragrance
and Cosmetics) division operated 201 retail outlet stores throughout the
United States. The stores in the Cosmetic Center division offer a broad range
of brand name prestige and mass merchandised cosmetics products at value
prices. The stores in the Prestige Fragrance and Cosmetics division operate
in factory outlet malls, rural areas and other similar locations that are not
disruptive to the Company's principal distribution channels. In these stores,
Cosmetic Center sells the Company's first quality, first quality excess,
returned and refurbished, and discontinued consumer products and retail
professional products, as well as similar products of competing cosmetics
companies.
International. The International operation's net sales accounted for
approximately 39.2% of the Company's 1997 net sales. The International
operation's ten largest countries in terms of these sales, which include,
among others, Brazil, Spain, the United Kingdom, Australia, South Africa,
Canada and Japan, accounted for approximately 28% of the Company's net sales
in 1997, with Brazil accounting for approximately 5.5% of the Company's net
sales. The International operation is increasing distribution through the
expanding self-select distribution channels outside the United States, such
as drug stores/chemists, hypermarkets/mass volume retailers and variety
stores, as these channels gain importance. The International operation also
distributes through department stores and specialty stores such as
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perfumeries. The International operation's professional products are sold
directly to beauty salons by the Company's direct sales force in Spain,
France, Germany, Portugal, Italy, Mexico and Ireland and through distributors
in other countries. At December 31, 1997, the Company actively sold its
products through wholly owned subsidiaries established in 26 countries
outside of the United States, through joint ventures in India and Indonesia,
and through a large number of distributors and licensees elsewhere around the
world. The Company continues to pursue strategies to establish its presence
in new emerging markets. Such new and emerging markets include Eastern
Europe; Russia; and China, where in 1996 the Company established a subsidiary
with a local minority partner. In addition, the Company is building a
franchise through local distributorships in northern and central Africa,
where the Company intends to expand the distribution of its products by
capitalizing on its market strengths in South Africa.
COSMETIC CENTER MERGER
Pursuant to an Agreement and Plan of Merger dated November 27, 1996, as
amended, among Cosmetic Center, the Company and PFC, PFC was merged with and
into Cosmetic Center effective April 25, 1997 with Cosmetic Center surviving
as a subsidiary of the Company. As a result of the Cosmetic Center Merger,
the Company received 8,479,335 shares of newly issued Cosmetic Center Class C
common stock in exchange for its one share of PFC common stock outstanding
prior to the Cosmetic Center Merger. As a result of the Cosmetic Center
Merger, Cosmetic Center stockholders received for each share of Cosmetic
Center Class A or Class B common stock they held one share of Cosmetic Center
Class C common stock or for those stockholders who so elected (and subject to
a limitation) $7.63 in cash (the "Cash Election"). As a result of the
Cosmetic Center Merger and the Cash Election, the Company holds approximately
85% of Cosmetic Center's outstanding common stock.
CUSTOMERS
The Company's principal customers include chain drug stores and large mass
volume retailers, including such well known retailers as Wal-Mart, Walgreens,
Kmart, Target, CVS, Drug Emporium, American Drug Stores, Eckerds and Rite Aid
in the self-select distribution channel, J.C. Penney in the
demonstrator-assisted distribution channel, Sally's Beauty Company for
professional products, Boots in the United Kingdom and Western Europe and
Wal-Mart worldwide. The foregoing principal customers each accounted for 1%
or more of the Company's net sales in 1997 and are representative of the
Company's customers. No customer of the Company accounted for more than 10%
of the Company's net sales in 1997.
COMPETITION
The cosmetics and skin care, fragrance, personal care and professional
products business is characterized by vigorous competition throughout the
world. Brand recognition, together with product quality, performance and
price and the extent to which consumers are educated on product benefits,
have a marked influence on consumers' choices among competing products and
brands. Advertising, promotion, merchandising and packaging, and the timing
of new product introductions and line extensions, also have a significant
impact on buying decisions, and the structure and quality of the sales force
affect product reception, in-store position, permanent display space and
inventory levels in retail outlets. The Company competes in most of its
product categories against a number of companies, some of which have
substantially greater resources than the Company. In addition to products
sold in the self-select and demonstrator-assisted distribution channels, the
Company's products also compete with similar products sold door-to-door or
through mail order or telemarketing by representatives of direct sales
companies. The Company's principal competitors include L'Oreal S.A., The
Procter & Gamble Company, Helene Curtis Industries, Inc. and Joh A. Benckiser
GmbH in the self-select distribution channel; L'Oreal S.A., Unilever N.V.,
Estee Lauder, Inc. and Joh A. Benckiser GmbH in the demonstrator-assisted
distribution channel; and L'Oreal S.A. and Matrix Essentials, Inc., which is
owned by Bristol-Myers Squibb Company, in professional products.
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SEASONALITY
The Company's business is subject to certain seasonal fluctuations, with
net sales in the second half of the year generally benefiting from increased
retailer purchases in the United States for the back-to-school and Christmas
selling seasons.
PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY
The Company's major trademarks are registered in the United States and in
many other countries, and the Company considers trademark protection to be
very important to its business. Significant trademarks include REVLON,
COLORSTAY, REVLON AGE DEFYING, STREETWEAR, FLEX, PLUSBELLE, MITCHUM, ETERNA
27, ULTIMA II, ALMAY, CHARLIE, JEAN NATE, REVLON RESULTS, COLORAMA, FIRE &
ICE, MOON DROPS, SUPER LUSTROUS and WONDERWEAR LIPSEXXXY for consumer
products and REVLON, ROUX FANCI-FULL, REALISTIC, FERMODYL, CREATIVE NAIL,
AMERICAN CREW and INTERCOSMO for professional products.
The Company utilizes certain proprietary or patented technologies in the
formulation or manufacture of a number of the Company's products, including
COLORSTAY lipcolor and cosmetics, COLORSTAY hair color, FLEX & GO shampoo,
LENGTHWISE mascara, classic REVLON nail enamel, TOP SPEED nail enamel, REVLON
AGE DEFYING foundation and cosmetics, NEW COMPLEXION makeup, WONDERWEAR
foundation, WONDERWEAR LIPSEXXXY lipstick, ALMAY TIME-OFF skin care and
makeup, ALMAY AMAZING cosmetics, ALMAY ONE COAT eye makeup and cosmetics,
ULTIMA II VITAL RADIANCE skin care products, OUTRAGEOUS shampoo, FLEX
hairspray and various professional products, including FERMODYL shampoo and
conditioners. The Company also protects certain of its packaging and
component concepts through design patents. The Company considers its
proprietary technology and patent protection to be important to its business.
GOVERNMENT REGULATION
The Company is subject to regulation by the Federal Trade Commission and
the Food and Drug Administration (the "FDA") in the United States, as well as
various other federal, state, local and foreign regulatory authorities. The
Phoenix, Arizona and Oxford, North Carolina manufacturing facilities are
registered with the FDA as drug manufacturing establishments, permitting the
manufacture of cosmetics that contain over-the-counter drug ingredients such
as sunscreens. Compliance with federal, state, local and foreign laws and
regulations pertaining to discharge of materials into the environment, or
otherwise relating to the protection of the environment, has not had, and is
not anticipated to have, a material effect upon the capital expenditures,
earnings or competitive position of the Company. State and local regulations
in the United States that are designed to protect consumers or the
environment have an increasing influence on product claims, contents and
packaging.
WOMEN'S HEALTH INITIATIVES
The Company is committed to and supports a wide range of philanthropic
women's health programs, focusing primarily on research for breast and
ovarian cancer. Since 1989, the Company has supported the Revlon/UCLA Women's
Cancer Research Program, and raises additional funds for this program through
the annual Revlon Run/Walk in Los Angeles, the largest 5K race in the
country, and the annual Fire & Ice Ball in Hollywood. Revlon is a
longstanding supporter of the National Breast Cancer Coalition and in 1997
received the Corporate Leadership Award for its ongoing support in the fight
against breast cancer. Revlon is a founding sponsor of the Women's Cancer
Research Alliance, a consortium of leading breast cancer research facilities
throughout the U.S. and received the 1997 Gilda's Club Corporate Vision Award
for its commitment to eradicating ovarian cancer.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain geographic,
financial and other information of the Company is set forth in Note 18 of the
Notes to Consolidated Financial Statements of the Company included elsewhere
in this Prospectus.
62
<PAGE>
EMPLOYEES
As of December 31, 1997, the Company employed the equivalent of
approximately 16,000 full-time persons. Approximately 2,100 of such employees
in the United States are covered by collective bargaining agreements. The
Company will be negotiating collective bargaining agreements or portions
thereof covering employees in eleven countries outside of the United States
during 1998 (namely, Australia, Brazil, Canada, England, France, Ireland,
Israel, Italy, Japan, Mexico and South Africa). Although there can be no
assurance, the Company expects that such agreements will be renewed in the
ordinary course, and further believes that its employee relations are
satisfactory. Although the Company has experienced minor work stoppages of
limited duration in the past in the ordinary course of business, such work
stoppages have not had a material effect on the Company's results of
operations or financial condition.
PROPERTIES
The following table sets forth as of December 31, 1997 the Company's major
manufacturing, research and warehouse/distribution facilities, all of which
are owned except where otherwise noted.
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR SPACE
LOCATION USE SQ. FT.
- -------------------------- ----------------------------------------- -------------
<S> <C> <C>
United States:
- --------------------------
Oxford, North Carolina .... Manufacturing, warehousing, distribution 1,012,000
and office
Phoenix, Arizona........... Manufacturing, warehousing, distribution 706,000
and office (partially leased)
Jacksonville, Florida ..... Manufacturing, warehousing, distribution, 526,000
research and office
Columbia, Maryland......... Warehousing, distribution and office 200,000
(leased)
Edison, New Jersey......... Research and office (leased) 133,000
Irvington, New Jersey ..... Manufacturing, warehousing and office 96,000
International:
- --------------------------
Sao Paulo, Brazil.......... Manufacturing, warehousing, distribution, 435,000
office and research
Maesteg, South Wales....... Manufacturing, distribution and office 316,000
Mississauga, Canada........ Manufacturing, warehousing, distribution 245,000
and office
Santa Maria, Spain......... Manufacturing and warehousing 173,000
Caracas, Venezuela......... Manufacturing, distribution and office 145,000
Kempton Park, South Warehousing, distribution and office 127,000
Africa.................... (leased)
Canberra, Australia........ Warehousing, distribution and office 125,000
Isando, South Africa....... Manufacturing, warehousing, distribution 94,000
and office
Escobar, Argentina......... Manufacturing, warehousing, distribution 75,000
and office
Argenteuil, France......... Warehousing and distribution (leased) 73,000
Bologna, Italy............. Manufacturing, warehousing, distribution 60,000
and office
Dublin, Ireland............ Manufacturing, warehousing, distribution 32,500
and office
</TABLE>
In addition to the facilities described above, additional facilities are
owned and leased in various areas throughout the world, including the lease
for the Company's executive offices in New York, New York (345,000 square
feet, of which approximately 57,000 square feet are currently sublet to
affiliates of
63
<PAGE>
the Company and approximately 27,000 square feet are sublet to an
unaffiliated third party). Management considers the Company's facilities to
be well-maintained and satisfactory for the Company's operations, and
believes that the Company's facilities provide sufficient capacity for its
current and expected production requirements. The Company leases from
Holdings on arms' length terms its research and development facility located
in Edison, New Jersey. See "Relationship with MacAndrews & Forbes -- Other
Related Transactions."
LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings incident to
the ordinary course of its business. The Company believes that the outcome of
all pending legal proceedings in the aggregate is unlikely to have a material
adverse effect on the business or consolidated financial condition of the
Company.
64
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information (as of March 31,
1998) concerning the Directors and executive officers of the Company. Each
Director holds office until his successor is duly elected and qualified or
until his resignation or removal, if earlier.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- ----- ----------------------------------------------------
<S> <C> <C>
Ronald O. Perelman . 55 Chairman of the Executive Committee of the Board and
Director
George Fellows ...... 55 President, Chief Executive Officer and Director
Jerry W. Levin ...... 53 Chairman of the Board and Director
William J. Fox ...... 41 Senior Executive Vice President and Director
Frank J. Gehrmann .. 43 Executive Vice President and Chief Financial Officer
Wade H. Nichols III 55 Executive Vice President and General Counsel
M. Katherine Dwyer . 48 Senior Vice President
Ronald H. Dunbar ... 61 Senior Vice President, Human Resources
Donald G. Drapkin .. 50 Director
Irwin Engelman ...... 63 Director
Howard Gittis ....... 64 Director
Edward J. Landau ... 68 Director
</TABLE>
Mr. Perelman has been Chairman of the Executive Committee of the Board of
the Company and of Revlon, Inc. since November 1995, and a Director of the
Company and of Revlon, Inc. since their respective formations in 1992. Mr.
Perelman was Chairman of the Board of the Company and of Revlon, Inc. from
their respective formations in 1992 to November 1995. Mr. Perelman has been
Chairman of the Board and Chief Executive Officer of Mafco Holdings and
MacAndrews Holdings and various of its affiliates for more than the past five
years. Mr. Perelman also is Chairman of the Executive Committees of the
Boards of Directors of Consolidated Cigar Holdings Inc. ("Cigar Holdings") and
M&F Worldwide Corp. ("MFW") and Chairman of the Board of Meridian Sports
Incorporated ("Meridian"). Mr. Perelman is a Director of the following
corporations which file reports pursuant to the Exchange Act: California
Federal Bank, A Federal Savings Bank ("Cal Fed"), Cigar Holdings, First
Nationwide Holdings Inc. ("FN Holdings"), First Nationwide (Parent) Holdings
Inc. ("FN Parent"), MFW, Meridian, Revlon, Inc. and REV Holdings. (On
December 27, 1996, Marvel Entertainment Group ("Marvel"), Marvel (Parent)
Holdings Inc. ("Marvel Parent"), Marvel Holdings Inc. ("Marvel Holdings") and
Marvel III Holdings Inc. ("Marvel III"), of which Mr. Perelman was a Director
on such date, and several subsidiaries of Marvel filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.)
Mr. Fellows has been President and Chief Executive Officer of the Company
and of Revlon, Inc. since January 1997. He was President and Chief Operating
Officer of the Company and of Revlon, Inc. from November 1995 until January
1997, and has been a Director of the Company since September 1994 and a
Director of Revlon, Inc. since November 1995. Mr. Fellows was Senior
Executive Vice President of the Company and of Revlon, Inc. and President and
Chief Operating Officer of the Company's Consumer Group from February 1993 to
November 1995. From 1989 through January 1993, he was a senior executive
officer of Mennen Corporation and then Colgate-Palmolive Company, which
acquired Mennen Corporation in 1992. From 1986 to 1989, he was Senior Vice
President of Holdings. Mr. Fellows is a Director of Cosmetic Center, Revlon,
Inc. and VF Corporation, each of which files reports pursuant to the Exchange
Act.
Mr. Levin has been Chairman of the Board of the Company and of Revlon,
Inc. since November 1995 and a Director of the Company and of Revlon, Inc.
since their respective formations in 1992. Mr. Levin was Chief Executive
Officer of the Company and of Revlon, Inc. from their respective formations
in 1992 to January 1997 and President of the Company and of Revlon, Inc. from
their respective formations in
65
<PAGE>
1992 to November 1995. Mr. Levin has been Executive Vice President of
MacAndrews Holdings since March 1989. Mr. Levin has been Chairman of the
Board of Cosmetic Center since April 1997. For 15 years prior to joining
MacAndrews Holdings, he held various senior executive positions with The
Pillsbury Company. Mr. Levin is a Director of the following corporations
which file reports pursuant to the Exchange Act: Cosmetic Center, Ecolab,
Inc., U.S. Bancorp, Inc., Meridian and Revlon, Inc.
Mr. Fox was appointed President, Strategic and Corporate Development,
Revlon Worldwide, of the Company and of Revlon, Inc. and Chief Executive
Officer, Revlon Technologies in January 1998. He has been Senior Executive
Vice President of Revlon, Inc. and the Company since January 1997, was Chief
Financial Officer of the Company and of Revlon, Inc. from their respective
formations in 1992 until January 1998 and was also Executive Vice President
of the Company and of Revlon, Inc. since their respective formations in 1992
until January 1997. Mr. Fox was elected as a Director of the Company in
September 1994 and of Revlon, Inc. in November 1995. He has been Senior Vice
President of MacAndrews Holdings since August 1990. He was Vice President of
MacAndrews Holdings from February 1987 to August 1990 and was Treasurer of
MacAndrews Holdings from February 1987 to September 1992. Prior to February
1987, he was Vice President and Assistant Treasurer of MacAndrews Holdings.
Mr. Fox joined MacAndrews & Forbes Group, Incorporated in 1983 as Assistant
Controller, prior to which time he was a certified public accountant at the
international auditing firm of Coopers & Lybrand. Mr. Fox is Vice Chairman of
the Board and a Director of Cosmetic Center, and a Director of The Hain Food
Group, Inc. and Revlon, Inc., each of which files reports pursuant to the
Exchange Act.
Mr. Gehrmann was elected as Executive Vice President and Chief Financial
Officer of the Company and of Revlon, Inc. in January 1998. From January 1997
to January 1998, he had been Vice President of the Company and Revlon, Inc.
Prior to January 1997, he served in various appointed senior executive
positions for the Company and for Revlon, Inc., including Executive Vice
President and Chief Financial Officer of the Company's Operating Groups from
August 1996 to January 1998, Executive Vice President and Chief Financial
Officer of the Company's Worldwide Consumer Products business from January
1995 to August 1996, and Executive Vice President and Chief Financial Officer
of the Company's Revlon North America unit from September 1993 to January
1994. From 1983 through September 1993, Mr. Gehrmann held positions of
increasing responsibility in the financial organizations of Mennen
Corporation and the Colgate-Palmolive Company, which acquired Mennen
Corporation in 1992. Prior to 1983, Mr. Gehrmann served as a certified public
accountant at the international auditing firm of Ernst & Young.
Mr. Nichols has been Executive Vice President and General Counsel of the
Company and of Revlon, Inc. since January 1998 and served as Senior Vice
President and General Counsel of the Company and of Revlon, Inc. from their
respective formations in 1992 until January 1998. Mr. Nichols has been Vice
President of MacAndrews Holdings since 1988. Mr. Nichols is a Director of
Cosmetic Center, which files reports pursuant to the Exchange Act.
Ms. Dwyer was appointed President of the Company's United States Consumer
Products business in January 1998. Ms. Dwyer was elected as Senior Vice
President of the Company and of Revlon, Inc. in December 1996. Prior to
December 1996, she served in various appointed senior executive positions for
the Company and for Revlon, Inc., including President of the Company's United
States Cosmetics unit from November 1995 to December 1996 and Executive Vice
President and General Manager of the Company's Mass Cosmetics unit from June
1993 to November 1995. From 1991 to 1993, Ms. Dwyer was Vice President,
Marketing, of Clairol, a division of Bristol-Myers Squibb Company. Prior to
1991, she served in various senior positions for Victoria Creations, Avon
Products Inc., Cosmair, Inc. and The Gillette Company. Ms. Dwyer is a
Director of WestPoint Stevens Inc. and Reebok International Ltd., each of
which files reports pursuant to the Exchange Act.
Mr. Dunbar has been Senior Vice President, Human Resources of the Company
and of Revlon, Inc. since their respective formations in 1992. He was elected
Senior Vice President, Human Resources of Holdings in July 1991. Mr. Dunbar
was Vice President and General Manager of Arnold Menn and Associates, a New
York City career management consulting and executive outplacement firm, from
1989
66
<PAGE>
to 1991 and Executive Vice President and Chief Human Resources Officer of
Ryder System, Inc., a highway transportation firm, from 1978 to 1989. Prior
to that, Mr. Dunbar served in senior executive human resources positions at
Xerox Corporation and Ford Motor Company.
Mr. Drapkin has been a Director of the Company and of Revlon, Inc. since
their respective formations in 1992. He has been Vice Chairman of the Board
of MacAndrews Holdings and various of its affiliates since March 1987. Mr.
Drapkin was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom
for more than five years prior to March 1987. Mr. Drapkin is a Director of
the following corporations which file reports pursuant to the Exchange Act:
Algos Pharmaceutical Corporation, BlackRock Asset Investors, Cardio
Technologies, Inc., Cosmetic Center, Genta, Inc., Playboy Enterprises, Inc.,
Revlon, Inc., VIMRx Pharmaceuticals Inc. and Weider Nutrition International,
Inc. (On December 27, 1996, Marvel, Marvel Holdings, Marvel Parent and
Marvel III, of which Mr. Drapkin was a Director on such date, and several
subsidiaries of Marvel filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code.)
Mr. Engelman has been a Director of the Company since 1993. Mr. Engelman
has been Executive Vice President, Chief Financial Officer and Director of
MacAndrews Holdings and various of its affiliates since 1992. He was
Executive Vice President, Chief Financial Officer and Director of GAF
Corporation from 1990 to 1992, Director, President and Chief Operating
Officer of Citytrust Bancorp Inc. from 1988 to 1990, Executive Vice President
of the Blackstone Group LP from 1987 to 1988 and Director, Executive Vice
President and Chief Financial Officer of General Foods Corporation for more
than five years prior to 1987. Mr. Engelman is a Director of Cal Fed, which
files reports pursuant to the Exchange Act. (On December 27, 1996, Marvel
III, Marvel Parent and Marvel Holdings, of which Mr. Engelman was an
executive officer on such date, and several subsidiaries of Marvel filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code.)
Mr. Gittis has been a Director of the Company and of Revlon, Inc. since
their respective formations in 1992. He has been Vice Chairman of the Board
of MacAndrews Holdings and various of its affiliates for more than five
years. Mr. Gittis is a Director of the following corporations which file
reports pursuant to the Exchange Act: Cal Fed, Cigar Holdings, FN Holdings,
FN Parent, MFW, Revlon, Inc., REV Holdings, Jones Apparel Group, Inc., Loral
Space & Communications Ltd. and Rutherford-Moran Oil Corporation.
Mr. Landau has been a Director of the Company since June 1992 and a
Director of Revlon, Inc. since June 1996. Mr. Landau has been a Senior
Partner in the law firm of Wolf, Block, Schorr and Solis-Cohen LLP
(previously Lowenthal, Landau, Fischer & Bring, P.C.) for more than the past
five years. Mr. Landau is a Director of Offitbank Investment Fund, Inc. and
Revlon, Inc., each of which files reports pursuant to the Exchange Act.
COMPENSATION OF DIRECTORS
Directors who currently are not receiving compensation as officers or
employees of the Company or any of its affiliates are paid an annual retainer
fee of $25,000, payable in quarterly installments, and a fee of $1,000 for
each meeting of the Board of Directors or any committee thereof they attend.
67
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information for the years indicated
concerning the compensation awarded to, earned by or paid to the persons who
served as Chief Executive Officer of the Company during 1997 and the four
most highly paid executive officers, other than the Chief Executive Officer,
who served as executive officers of the Company as of December 31, 1997
(collectively, the "Named Executive Officers"), for services rendered in all
capacities to the Company and its subsidiaries during such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (A) AWARDS
----------------------------------- --------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDER- COMPEN-
NAME AND SALARY BONUS SATION LYING SATION
PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS ($)
- ----------------------------------------- ------ ----------- ----------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
George Fellows ............................. 1997 1,250,000 1,250,000 22,191 170,000 30,917
President and Chief Executive Officer (b) 1996 1,025,000 870,000 15,242 120,000 4,500
1995 841,667 531,700 68,559 0 4,500
Jerry W. Levin ............................. 1997 825,000 0 20,811 170,000 160,871
Chairman of the Board (c) 1996 1,500,000 1,500,000 93,801 170,000 307,213
1995 1,450,000 1,450,000 42,651 0 308,002
William J. Fox ............................. 1997 825,000 772,300 55,159 50,000 71,590
Senior Executive Vice President and 1996 750,000 598,600 50,143 50,000 56,290
Chief Financial Officer (d) 1995 660,000 455,000 54,731 0 56,290
M. Katherine Dwyer ........................ 1997 500,000 800,000 5,948 125,000 18,377
Senior Vice President (e) 1996 500,000 326,100 90,029 45,000 4,500
Carlos Colomer ............................. 1997 700,000 330,700 0 37,000 62,645
Executive Vice President (f) 1996 700,000 192,600 0 37,000 3,062
1995 600,000 135,200 0 0 0
</TABLE>
- ------------
(a) The amounts shown in Annual Compensation for 1997, 1996 and 1995
reflect salary, bonus and other annual compensation awarded to, earned
by or paid to the persons listed for services rendered to the Company
and its subsidiaries. The Company has a bonus plan (the "Executive
Bonus Plan") in which executives participate (including the Chief
Executive Officer and the other Named Executive Officers). The
Executive Bonus Plan provides for payment of cash compensation upon the
achievement of predetermined corporate and/or business unit and
individual performance goals during the calendar year established
pursuant to the Executive Bonus Plan or by the Compensation Committee.
(b) Mr. Fellows became Chief Executive Officer of the Company and of
Revlon, Inc. in January 1997. The amount shown for Mr. Fellows under
Other Annual Compensation for 1997 reflects payments in respect of
gross ups for taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising out
of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Fellows under All Other
Compensation for 1997 reflects $11,117 in respect of life insurance
premiums, $4,800 in respect of matching contributions under the Revlon
Employees' Savings, Profit Sharing and Investment Plan (the "401(k)
Plan") and $15,000 in respect of matching contributions under the
Revlon Excess Savings Plan for Key Employees (the "Excess Plan"). The
amount shown for Mr. Fellows under Other Annual Compensation for 1996
reflects payments in respect of gross ups for taxes on imputed income
arising out of personal use of a Company-provided automobile and for
taxes on imputed income arising out of premiums paid or reimbursed by
the Company in respect of life insurance. The amount shown for Mr.
Fellows under All Other Compensation for 1996 reflects matching
contributions under the 401(k) Plan. The amount shown for Mr. Fellows
under Other Annual Compensation for 1995 includes $43,251 in respect of
membership fees and related expenses for personal use of a health and
country club and $9,458 in respect of gross ups for taxes on imputed
income arising out of personal use of a Company-provided automobile.
The amount shown for Mr. Fellows under All Other Compensation for 1995
reflects matching contributions under the 401(k) Plan.
68
<PAGE>
(c) Mr. Levin was Chief Executive Officer of the Company and of Revlon,
Inc. during 1995, 1996 and January 1997 and Chairman of the Board
during the remainder of 1997. The amount shown for Mr. Levin under
Other Annual Compensation for 1997 reflects payments in respect of
gross ups for taxes on imputed income arising out of personal use of a
Company-provided automobile. The amount shown for Mr. Levin under All
Other Compensation for 1997 reflects $150,971 in respect of
split-dollar life insurance premiums (under which the Company is
entitled to reimbursement of such premiums or the cash surrender value
of such insurance, whichever is less), $2,400 in respect of matching
contributions under the 401(k) Plan and $7,500 in respect of matching
contributions under the Excess Plan. The amount shown for Mr. Levin
under Other Annual Compensation for 1996 includes $26,400 in respect of
personal use of a Company-provided automobile, payments in respect of
gross ups for taxes on imputed income arising out of personal use of
such Company-provided automobile and payments for taxes on imputed
income arising out of premiums paid or reimbursed by the Company in
respect of life insurance. The amount shown for Mr. Levin under All
Other Compensation for 1996 reflects $302,713 in respect of life
insurance premiums and $4,500 in respect of matching contributions
under the 401(k) Plan. The amount shown for Mr. Levin under Other
Annual Compensation for 1995 reflects payments in respect of gross ups
for taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising out
of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Levin under All Other Compensation
for 1995 reflects $303,502 in respect of life insurance premiums and
$4,500 in respect of matching contributions under the 401(k) Plan.
(d) Mr. Fox became Senior Executive Vice President of the Company and of
Revlon, Inc. in January 1997. Mr. Fox served as Chief Financial Officer
of the Company and of Revlon, Inc. during 1995, 1996 and 1997. In
January 1998 Mr. Fox was appointed President, Strategic and Corporate
Development, Revlon Worldwide, and Mr. Gehrmann was elected Chief
Financial Officer of the Company and of Revlon, Inc. The amount shown
for Mr. Fox under Bonus for 1997 includes an additional payment of
$125,000 based upon Mr. Fox's performance. The amount shown for Mr. Fox
under Other Annual Compensation for 1997 reflects payments in respect
of gross ups for taxes on imputed income arising out of personal use of
a Company-provided automobile and payments for taxes on imputed income
arising out of premiums paid or reimbursed by the Company in respect of
life insurance. The amount shown for Mr. Fox under All Other
Compensation for 1997 reflects $51,790 in respect of life insurance
premiums, $4,800 in respect of matching contributions under the 401(k)
Plan and $15,000 in respect of matching contributions under the Excess
Plan. The amount shown for Mr. Fox under Other Annual Compensation for
1996 reflects payments in respect of gross ups for taxes on imputed
income arising out of personal use of a Company-provided automobile and
for taxes on imputed income arising out of premiums paid or reimbursed
by the Company in respect of life insurance. The amount shown for Mr.
Fox under All Other Compensation for 1996 reflects $51,790 in respect
of life insurance premiums and $4,500 in respect of matching
contributions under the 401(k) Plan. The amount shown for Mr. Fox under
Other Annual Compensation for 1995 reflects payments in respect of
gross ups for taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising out
of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Fox under All Other Compensation
for 1995 reflects $51,790 in respect of life insurance premiums and
$4,500 in respect of matching contributions under the 401(k) Plan.
(e) Ms. Dwyer became an executive officer of the Company and of Revlon,
Inc. in December 1996. The amount shown for Ms. Dwyer under Bonus for
1997 includes an additional payment of $300,000 pursuant to her
employment agreement. The amount shown for Ms. Dwyer under Other Annual
Compensation for 1997 reflects payments in respect of gross ups for
taxes on imputed income arising out of personal use of a
Company-provided automobile and payments for taxes on imputed income
arising out of premiums paid or reimbursed by the Company in respect of
life insurance. The amount shown for Ms. Dwyer under All Other
Compensation for 1997 reflects $4,800 in respect of matching
contributions under the 401(k) Plan, $10,857 in respect of matching
contributions under the Excess Plan and $2,720 in respect of life
insurance premiums. The amount shown for Ms. Dwyer under Other Annual
Compensation for 1996 reflects $57,264 in expense reimbursements and
payments in respect of gross ups for taxes on imputed income arising
out of personal use of a Company-provided automobile. The amount shown
for Ms. Dwyer under All Other Compensation for 1996 reflects matching
contributions under the 401(k) Plan.
(f) Mr. Colomer was an executive officer of the Company and of Revlon, Inc.
during 1995, 1996 and 1997. The amount shown for Mr. Colomer under
Bonus for 1997 includes $148,815 which is being deferred at Mr.
Colomer's election. The amount shown for Mr. Colomer under All Other
Compensation for 1997 reflects $59,583 in respect of an expatriate
travel and hardship allowance and $3,062 in respect of life insurance
premiums. The amount shown for Mr. Colomer under All Other Compensation
for 1996 reflects life insurance premiums.
69
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
During 1997, the following grants of stock options were made pursuant to
the Revlon, Inc. Amended and Restated 1996 Stock Plan (the "Stock Plan") to
the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
GRANT DATE
VALUE
INDIVIDUAL GRANTS (A)
-------------------------------------------------------- ---------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE $
- ----------------------------------- ------------ -------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
George Fellows
President and Chief Executive
Officer (b) ........................ 170,000 11% $31.375 1/08/07 $2,703,255
Jerry W. Levin
Chairman of the Board (b) .......... 170,000 11% $31.375 1/08/07 $2,703,255
William J. Fox
Senior Executive Vice President and
Chief Financial Officer (b) ....... 50,000 3% $31.375 1/08/07 $ 795,075
M. Katherine Dwyer
Senior Vice President (b) .......... 125,000 8% $31.375 1/08/07 $1,987,688
Carlos Colomer
Executive Vice President ........... 37,000 2% $31.375 1/08/07 $ 588,356
</TABLE>
The grants made during 1997 under the Stock Plan to Messrs. Fellows,
Levin, Fox and Colomer and Ms. Dwyer were made on January 9, 1997 and consist
of non-qualified options having a term of 10 years. The options vest 25% each
year beginning on the first anniversary of the grant date and will become
100% vested on the fourth anniversary of the grant date and have an exercise
price equal to the New York Stock Exchange ("NYSE") closing price per share
of Revlon, Inc.'s Class A Common Stock on the grant date, as indicated in the
table above. During 1997, Revlon, Inc. also granted an option to purchase
300,000 shares of its Class A Common Stock pursuant to the Stock Plan to Mr.
Perelman, Chairman of the Executive Committee. The option will vest in full
on the fifth anniversary of the grant date and has an exercise price of
$34.875, the NYSE closing price per share of Revlon, Inc.'s Class A Common
Stock on April 4, 1997, the date of the grant.
- ------------
(a) Present values were calculated using the Black-Scholes option pricing
model. The model as applied used the grant date of January 9, 1997. The
model also assumes (i) a risk-free rate of return of 6.41%, which was
the rate as of the grant date for the U.S. Treasury Zero Coupon Bond
issues with a remaining term similar to the expected term of the
options, (ii) stock price volatility of 39.34% based upon the
volatility of the stock price of Revlon, Inc.'s Class A Common Stock,
(iii) a constant dividend rate of zero percent and (iv) that the
options normally would be exercised on the final day of their seventh
year after grant. No adjustments to the theoretical value were made to
reflect the waiting period, if any, prior to vesting of the stock
options or the transferability (or restrictions related thereto) of the
stock options.
(b) Mr. Fellows served as President during all of 1997 and became Chief
Executive Officer in January 1997. Mr. Levin served as Chairman of the
Board during all of 1997 and as Chief Executive Officer during January
1997. Mr. Fox was appointed President, Strategic and Corporate
Development, Revlon Worldwide in January 1998. Ms. Dwyer was appointed
President of the Company's United States Consumer Products business in
January 1998.
70
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following chart shows the number of stock options exercised during
1997 and the 1997 year-end value of the stock options held by the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
SHARES VALUE YEAR-END (#) YEAR-END EXERCISABLE/
ACQUIRED ON REALIZED EXERCISABLE/ UNEXERCISABLE (A)
NAME EXERCISE (#) ($) UNEXERCISABLE ($)
- ----------------------------------- ------------- ---------- ------------------------------- ----------------------------
<S> <C> <C> <C> <C>
George Fellows
President and
Chief Executive Officer ............ 0 0 0/290,000 0/2,026,875
Jerry W. Levin
Chairman of the Board............... 0 0 0/340,000 0/2,592,500
William J. Fox
Senior Executive Vice President and
Chief Financial Officer............. 0 0 0/100,000 0/762,500
M. Katherine Dwyer
Senior Vice President............... 0 0 0/170,000 0/1,001,250
Carlos Colomer
Executive Vice President............ 0 0 0/74,000 0/564,250
</TABLE>
- ------------
(a) Amounts shown represent the market value of the underlying shares of
Revlon, Inc.'s Class A Common Stock at year-end calculated using the
December 31, 1997 NYSE closing price per share of Class A Common Stock
of $35 5/16 minus the exercise price of the stock option. The actual
value, if any, an executive may realize is dependent upon the amount by
which the market price of shares of Revlon, Inc.'s Class A Common Stock
exceeds the exercise price per share when the stock options are
exercised. The actual value realized may be greater or less than the
value shown in the table.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Each of the Chief Executive Officer and the other Named Executive Officers
entered into an executive employment agreement with the Company (except Mr.
Colomer, who entered into an executive employment agreement with a subsidiary
of the Company), which became effective upon consummation of the Revlon IPO,
providing for their continued employment. Effective January 1, 1997, Mr.
Fellows' employment agreement was amended to provide that he will serve as
the President and Chief Executive Officer of the Company and of Revlon, Inc.
at a base salary of $1,250,000 for 1997; $1,350,000 for 1998; $1,450,000 for
1999; $1,550,000 for 2000 and $1,700,000 for 2001 and thereafter, and that
management recommend to Revlon, Inc.'s Compensation Committee (the
"Compensation Committee") that he be granted options to purchase 170,000
shares of Class A Common Stock each year during the term of the agreement. At
any time after January 1, 2001, the Company may terminate the term of Mr.
Fellows' agreement by 12 months' prior notice of non-renewal. In connection
with his assumption of management responsibility for an affiliate, Mr. Levin
and the Company agreed to terminate his employment agreement as of June 30,
1997, with Mr. Levin continuing as Chairman of the Board of the Company and
of Revlon, Inc. (the "Levin Amendment"). Pursuant to the Levin Amendment, Mr.
Levin received a base salary of $825,000 for services provided to the Company
and Revlon, Inc. in 1997. Effective January 1, 1998, Mr. Colomer's employment
agreement was amended to provide that he will serve as Chairman, Revlon
Professional Worldwide Strategic Committee and Chairman, Revlon Professional
International at a base salary of not less than $700,000 for 1998 and
thereafter, and that management recommend to the Compensation Committee that
he be granted options to purchase 37,000 shares of Class A Common Stock each
year during the term of the agreement. Mr. Colomer's agreement further
provides that at any time on or after the second anniversary of the effective
date of his agreement, the Company may terminate the term by 12 months' prior
notice of non-renewal. Mr. Fox's agreement provides for a base
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salary of not less than $750,000 and that management recommend to the
Compensation Committee that Mr. Fox be granted options to purchase 50,000
shares of Class A Common Stock each year during the term of the agreement,
and further provides that at any time on or after the second anniversary of
the effective date of his agreement, the Company may terminate the term by 12
months' prior notice of non-renewal. Effective January 1, 1998, Mr. Fox was
appointed President, Strategic and Corporate Development, Revlon Worldwide,
and Chief Executive Officer, Revlon Technologies. Effective January 1, 1998,
Ms. Dwyer's employment agreement was amended to provide that she will serve
as President of the Company's United States Consumer Products business at a
base salary of $875,000 per annum for 1998 to be increased as of January 1 of
each year by not less than $75,000, and that management recommend to the
Compensation Committee that she be granted options to purchase 75,000 shares
of Class A Common Stock each year during the term of the agreement. At any
time on or after the fourth anniversary of the effective date of her
agreement, the Company may terminate Ms. Dwyer's agreement by 12 months'
prior notice of non-renewal. All of the agreements currently in effect
provide for participation in the Executive Bonus Plan, continuation of life
insurance and executive medical insurance coverage in the event of permanent
disability and participation in other executive benefit plans on a basis
equivalent to senior executives of the Company generally. Pursuant to the
Levin Amendment, Mr. Levin is entitled to continued disability insurance and
life insurance as well as certain other benefits. The agreements with Messrs.
Fellows and Colomer and Ms. Dwyer provide for Company-paid supplemental term
life insurance during employment in the amount of three times base salary,
while the terms of the agreements with Mr. Levin and Mr. Fox provide that, in
lieu of any participation in Company-paid pre-retirement life insurance
coverage, the Company will pay premiums and gross ups for taxes thereon in
respect of, in the case of Mr. Levin, whole life insurance policies on his
life in the amount of $14,100,000 under a split dollar arrangement pursuant
to which the Company would be repaid the amount of premiums it paid up to the
cash surrender value of the policies from insurance proceeds payable under
the policies and, in the case of Mr. Fox, a whole life insurance policy on
his life in the amount of $5,000,000 under an arrangement providing for all
insurance proceeds to be paid to the designated beneficiary under such
policy. The agreements currently in effect provide that in the event of
termination of the term of the relevant executive employment agreement by the
Company (otherwise than for "cause" as defined in the employment agreements
or disability) or by the executive for failure of the Compensation Committee
to adopt and implement the recommendations of management with respect to
stock option grants, the executive would be entitled to severance pursuant to
and subject to the terms of the Executive Severance Policy as in effect on
January 1, 1997 (see "--Executive Severance Policy") (or, at his or her
election, to continued base salary payments throughout the term in the case
of Mr. Fellows and Ms. Dwyer). In addition, the employment agreement with Mr.
Fellows provides that if he remains continuously employed by the Company or
its affiliates until age 60, then upon any subsequent retirement he will be
entitled to a supplemental pension benefit in a sufficient amount so that his
annual pension benefit from all qualified and non-qualified pension plans of
the Company and its affiliates (expressed as a straight life annuity) equals
$500,000. Upon any earlier retirement with the Company's consent or any
earlier termination of employment by the Company otherwise than for "good
reason" (as defined in the Executive Severance Policy), Mr. Fellows will be
entitled to a reduced annual payment in an amount equal to the product of
multiplying $28,540 by the number of anniversaries, as of the date of
retirement or termination, of Mr. Fellows' fifty-third birthday (but in no
event more than would have been payable to Mr. Fellows under the foregoing
provision had he retired at age 60). In each case, the Company reserves the
right to treat Mr. Fellows as having deferred payment of pension for purposes
of computing such supplemental payments.
As of December 31, 1997, 1996, and 1995, Mr. Colomer had a loan
outstanding from the Company's subsidiary in Spain in the amount of 25.0
million Spanish pesetas (approximately $165,050 U.S. dollar equivalent as of
December 31, 1997) dating from 1991 pursuant to a management retention
program grandfathered under a 1992 change in the Spanish tax law which
currently covers certain executives of such subsidiary, including Mr.
Colomer. Pursuant to this management retention program, outstanding loans do
not bear interest but an amount equal to the one-year government bond
interest rate in effect at the beginning of the year is deducted from the
executives' annual compensation, and loans must be repaid in full upon
termination of employment. The amount deducted from Mr. Colomer's
compensation
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was 1.4 million Spanish pesetas (approximately $9,210 U.S. dollar equivalent
as of December 31, 1997) for 1997; 2.15 million Spanish pesetas
(approximately $16,988 U.S. dollar equivalent as of December 31, 1996) for
1996 and 2.25 million Spanish pesetas (approximately $18,097 U.S. dollar
equivalent as of December 31, 1995) for 1995.
EXECUTIVE SEVERANCE POLICY
The Company's Executive Severance Policy, as amended effective January 1,
1996, provides that upon termination of employment of eligible executive
employees, including the Chief Executive Officer and the other Named
Executive Officers, other than voluntary resignation or termination by the
Company for good reason, in consideration for the execution of a release and
confidentiality agreement and the Company's standard Employee Agreement as to
Confidentiality and Non-Competition (the "Non-Competition Agreement"), the
eligible executive will be entitled to receive, in lieu of severance under
any employment agreement then in effect or under the Company's basic
severance plan, a number of months of severance pay in semi-monthly
installments based upon such executive's grade level and years of service
reduced by the amount of any compensation from subsequent employment,
unemployment compensation or statutory termination payments received by such
executive during the severance period, and, in certain circumstances, by the
actuarial value of enhanced pension benefits received by the executive, as
well as continued participation in medical and certain other benefit plans
for the severance period (or in lieu thereof, upon commencement of subsequent
employment, a lump sum payment equal to the then present value of 50% of the
amount of base salary then remaining payable through the balance of the
severance period). Pursuant to the Executive Severance Policy, upon meeting
the conditions set forth therein, Messrs. Fellows, Levin, Fox and Colomer and
Ms. Dwyer would be entitled to severance pay equal to two years of base
salary at the rate in effect on the date of employment termination plus
continued participation in the medical and dental plans for two years on the
same terms as active employees.
DEFINED BENEFIT PLANS
The following table shows the estimated annual retirement benefits payable
(as of December 31, 1997) at normal retirement age (65) to a person retiring
with the indicated average compensation and years of credited service, on a
straight life annuity basis, after Social Security offset, under the Revlon
Employees' Retirement Plan (the "Retirement Plan"), including amounts
attributable to the Pension Equalization Plan, each as described below:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL STRAIGHT LIFE ANNUITY BENEFITS AT
HIGHEST CONSECUTIVE RETIREMENT
FIVE-YEAR AVERAGE WITH INDICATED YEARS OF CREDITED SERVICE (A)
COMPENSATION DURING -------------------------------------------------------
FINAL 10 YEARS 15 20 25 30 35
- ------------------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
600,000 $151,974 $202,632 $253,290 $303,948 $303,948
700,000 177,974 237,299 296,623 355,948 355,948
800,000 203,974 271,965 339,957 407,948 407,948
900,000 229,974 306,632 383,290 459,948 459,948
1,000,000 255,974 341,299 426,623 500,000 500,000
1,100,000 281,974 375,965 469,957 500,000 500,000
1,200,000 307,974 410,632 500,000 500,000 500,000
1,300,000 333,974 445,299 500,000 500,000 500,000
1,400,000 359,974 479,965 500,000 500,000 500,000
1,500,000 385,974 500,000 500,000 500,000 500,000
2,000,000 500,000 500,000 500,000 500,000 500,000
2,500,000 500,000 500,000 500,000 500,000 500,000
</TABLE>
- ------------
(a) The normal form of benefit for the Retirement Plan and the Pension
Equalization Plan is a straight life annuity.
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The Retirement Plan is intended to be a tax qualified defined benefit
plan. Retirement Plan benefits are a function of service and final average
compensation. The Retirement Plan is designed to provide an employee having
30 years of credited service with an annuity generally equal to 52% of final
average compensation, less 50% of estimated individual Social Security
benefits. Final average compensation is defined as average annual base salary
and bonus (but not any part of bonuses in excess of 50% of base salary)
during the five consecutive calendar years in which base salary and bonus
(but not any part of bonuses in excess of 50% of base salary) were highest
out of the last 10 years prior to retirement or earlier termination. Except
as otherwise indicated, credited service only includes all periods of
employment with the Company or a subsidiary prior to retirement. The base
salaries and bonuses of each of the Chief Executive Officer and the other
Named Executive Officers are set forth in the Summary Compensation Table
under columns entitled "Salary" and "Bonus," respectively.
The Employee Retirement Income Security Act of 1974, as amended, places
certain maximum limitations upon the annual benefit payable under all
qualified plans of an employer to any one individual. In addition, the
Omnibus Budget Reconciliation Act of 1993 limits the annual amount of
compensation that can be considered in determining the level of benefits
under qualified plans. The Pension Equalization Plan, as amended effective
January 1, 1996, is a non-qualified benefit arrangement designed to provide
for the payment by the Company of the difference, if any, between the amount
of such maximum limitations and the annual benefit that would be payable
under the Retirement Plan but for such limitations, up to a combined maximum
annual straight life annuity benefit at age 65 under the Retirement Plan and
the Pension Equalization Plan of $500,000. Benefits provided under the
Pension Equalization Plan are conditioned on the participant's compliance
with his or her Non-Competition Agreement and, in any case, on the
participant not competing with the Company for one year after termination of
employment.
The number of years of credited service under the Retirement Plan and the
Pension Equalization Plan as of January 1, 1998 (rounded to full years) for
Mr. Fellows is nine years (which includes credit for prior service with
Holdings), for Mr. Fox is 14 years (which includes credit for service with
MacAndrews Holdings) and for Ms. Dwyer is four years, and as of June 30, 1997
for Mr. Levin is eight years (which includes credit for service with
MacAndrews Holdings). Pursuant to the Levin Amendment, Mr. Levin retains all
benefits under the Retirement Plan and the Pension Equalization Plan accrued
by him as of June 30, 1997. Mr. Colomer does not participate in the
Retirement Plan or the Pension Equalization Plan. Mr. Colomer participates in
the Revlon Foreign Service Employees Pension Plan (the "Foreign Pension
Plan"). The Foreign Pension Plan is a non-qualified defined benefit plan. The
Foreign Pension Plan is designed to provide an employee with 2% of final
average salary for each year of credited service, up to a maximum of 30
years, reduced by the sum of all other Company-provided retirement benefits
and social security or other government-provided retirement benefits.
Credited service includes all periods of employment with the Company or a
subsidiary prior to retirement. Final average salary is defined as average
annual base salary during the five consecutive calendar years in which base
salary was highest out of the last 10 years prior to retirement. The normal
form of payment under the Foreign Pension Plan is a life annuity. Mr.
Colomer's credited service as of January 1, 1998 (rounded to full years)
under the Foreign Pension Plan is 18 years (which includes credit for service
with Holdings).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For 1997, the executive officers of the Company were compensated for
services rendered to the Company and its subsidiaries, participated in
benefit plans sponsored by the Company and received grants of options under
the Stock Plan. Revlon, Inc.'s Compensation Committee (of which Messrs.
Drapkin and Gittis are members) performed the functions of a Compensation
Committee for the Company with respect to determining compensation of
executive officers of the Company.
The Company has used an airplane which is owned by a corporation of which
Messrs. Gittis and Drapkin are the sole stockholders. See "Relationship with
MacAndrews & Forbes -- Other Related Transactions."
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OWNERSHIP OF COMMON STOCK
Revlon, Inc. beneficially owns all of the outstanding shares of common
stock of the Company. No other director, executive officer or other person
beneficially owns any shares of the Company's common stock. MacAndrews &
Forbes, a corporation wholly owned by Ronald O. Perelman, 35 East 62nd
Street, New York, New York 10021, beneficially owns 11,250,000 shares of
Class A common stock of Revlon, Inc. (representing 56.6% of the outstanding
shares of Class A common stock) and all of the outstanding 31,250,000 shares
of Class B common stock of Revlon, Inc., which together represent
approximately 83.1% of the outstanding shares of common stock and
approximately 97.4% of the combined voting power of the outstanding shares of
common stock of Revlon, Inc. The shares of common stock of the Company are
pledged to secure Revlon, Inc.'s obligations under its guarantee of the
Credit Agreement. Shares of Revlon, Inc. and shares of common stock of other
intermediate holding companies are or may from time to time be pledged to
secure obligations of MacAndrews & Forbes or its affiliates.
RELATIONSHIP WITH MACANDREWS & FORBES
Revlon, Inc. beneficially owns all of the outstanding shares of common
stock of the Company. MacAndrews & Forbes beneficially owns shares of Revlon,
Inc.'s common stock having approximately 97.4% of the combined voting power
of the outstanding shares of common stock of Revlon, Inc. As a result,
MacAndrews & Forbes is able to elect the entire Board of Directors of the
Company and control the vote on all matters submitted to a vote of the
Company's stockholder, including extraordinary transactions such as mergers
or sales of all or substantially all of the Company's assets. MacAndrews &
Forbes is wholly owned by Ronald O. Perelman, who is Chairman of the
Executive Committee of the Board of Directors and a Director of the Company.
MacAndrews & Forbes is a diversified holding company with interests in
several industries. Through the Company, MacAndrews & Forbes is engaged in
the cosmetics and skin care, fragrance and personal care products business.
MacAndrews & Forbes owns 65% of Meridian, a manufacturer and marketer of
specialized ski boats. Through its 64% ownership of Cigar Holdings, MacAndrews
& Forbes is engaged in the manufacture and distribution of cigars and pipe
tobacco. Through its 36% ownership of MFW (assuming conversion of certain
preferred stock), MacAndrews & Forbes is in the business of processing
licorice and other flavors. On December 18, 1997, MacAndrews & Forbes
entered into an agreement pursuant to which MacAndrews & Forbes will acquire
a controlling interest in Panavision Inc., a manufacturer and supplier of film
camera systems to the motion picture and television industries. MacAndrews &
Forbes is also in the financial services business through its 80% ownership of
Cal Fed. The principal executive offices of MacAndrews & Forbes are located at
35 East 62nd Street, New York, New York 10021.
TRANSFER AGREEMENTS
In June 1992, Revlon, Inc. and the Company entered into an asset transfer
agreement with Holdings and certain of its wholly owned subsidiaries (the
"Asset Transfer Agreement"), and Revlon, Inc. and the Company entered into a
real property asset transfer agreement with Holdings (the "Real Property
Transfer Agreement" and, together with the Asset Transfer Agreement, the
"Transfer Agreements"). Pursuant to such agreements, on June 24, 1992,
Holdings transferred assets to the Company and the Company assumed all the
liabilities of Holdings, other than certain specifically excluded assets and
liabilities. The liabilities excluded are referred to as the "Excluded
Liabilities." Holdings retained the Retained Brands. Holdings agreed to
indemnify Revlon, Inc. and the Company against losses arising from the
Excluded Liabilities, and Revlon, Inc. and the Company agreed to indemnify
Holdings against losses arising from the liabilities assumed by the Company.
The amounts reimbursed by Holdings to the Company for the Excluded
Liabilities for 1997, 1996 and 1995 were $0.4 million, $1.4 million and $4.0
million, respectively.
OPERATING SERVICES AGREEMENT
In June 1992, Revlon, Inc., the Company and Holdings entered into an
operating services agreement (as amended and restated, and as subsequently
amended, the "Operating Services Agreement") pursuant to which the Company
manufactures, markets, distributes, warehouses and administers, including the
collection of accounts receivable, the Retained Brands for Holdings. Pursuant
to the Operating Services
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Agreement, the Company is reimbursed an amount equal to all of its and
Revlon, Inc.'s direct and indirect costs incurred in connection with
furnishing such services, net of the amounts collected by the Company with
respect to the Retained Brands, payable quarterly. The net amounts reimbursed
by Holdings to the Company for such direct and indirect costs for 1997, 1996
and 1995 were $1.4 million, $5.1 million and $8.6 million, respectively.
Holdings also pays the Company a fee equal to 5% of the net sales of the
Retained Brands, payable quarterly. The fees paid by Holdings to the Company
pursuant to the Operating Services Agreement for services with respect to the
Retained Brands for 1997, 1996 and 1995 were approximately $0.3 million, $0.6
million and $1.7 million, respectively.
REIMBURSEMENT AGREEMENTS
Revlon, Inc., the Company and MacAndrews Holdings have entered into
reimbursement agreements (the "Reimbursement Agreements") pursuant to which
(i) MacAndrews Holdings is obligated to provide (directly or through
affiliates) certain professional and administrative services, including
employees, to Revlon, Inc. and its subsidiaries, including the Company, and
purchase services from third party providers, such as insurance and legal and
accounting services, on behalf of Revlon, Inc. and its subsidiaries,
including the Company, to the extent requested by the Company, and (ii) the
Company is obligated to provide certain professional and administrative
services, including employees, to MacAndrews Holdings (and its affiliates)
and purchase services from third party providers, such as insurance and legal
and accounting services, on behalf of MacAndrews Holdings (and its
affiliates) to the extent requested by MacAndrews Holdings, provided that in
each case the performance of such services does not cause an unreasonable
burden to MacAndrews Holdings or the Company, as the case may be. The Company
reimburses MacAndrews Holdings for the allocable costs of the services
purchased for or provided to the Company and its subsidiaries and for
reasonable out-of-pocket expenses incurred in connection with the provision
of such services. MacAndrews Holdings (or such affiliates) reimburses the
Company for the allocable costs of the services purchased for or provided to
MacAndrews Holdings (or such affiliates) and for the reasonable out-of-pocket
expenses incurred in connection with the purchase or provision of such
services. In addition, in connection with certain insurance coverage provided
by MacAndrews Holdings, the Company obtained letters of credit (which
aggregated approximately $27.7 million as of December 31, 1997) to support
certain self-funded risks of MacAndrews Holdings and its affiliates,
including the Company, associated with such insurance coverage. The costs of
such letters of credit are allocated among, and paid by, the affiliates of
MacAndrews Holdings, including the Company, which participate in the
insurance coverage to which the letters of credit relate. The Company expects
that these self-funded risks will be paid in the ordinary course and,
therefore, it is unlikely that such letters of credit will be drawn upon.
MacAndrews Holdings has agreed to indemnify the Company to the extent amounts
are drawn under any of such letters of credit with respect to claims for
which neither Revlon, Inc. nor the Company is responsible. The net amounts
reimbursed by MacAndrews Holdings to the Company for the services provided
under the Reimbursement Agreements for 1997, 1996 and 1995 were $4.0 million,
$2.2 million and $3.0 million, respectively. Each of Revlon, Inc. and the
Company, on the one hand, and MacAndrews Holdings, on the other, has agreed
to indemnify the other party for losses arising out of the provision of
services by it under the Reimbursement Agreements other than losses resulting
from its willful misconduct or gross negligence. The Reimbursement Agreements
may be terminated by either party on 90 days' notice. The Company does not
intend to request services under the Reimbursement Agreements unless their
costs would be at least as favorable to the Company as could be obtained from
unaffiliated third parties.
TAX SHARING AGREEMENT
Revlon, Inc. and the Company, for federal income tax purposes, are
included in the affiliated group of which Mafco Holdings is the common
parent, and Revlon, Inc.'s and the Company's federal taxable income and loss
are included in such group's consolidated tax return filed by Mafco Holdings.
Revlon, Inc. and the Company also may be included in certain state and local
tax returns of Mafco Holdings or its subsidiaries. In June 1992, Holdings,
Revlon, Inc., the Company and certain of its subsidiaries, and Mafco Holdings
entered into a tax sharing agreement (as subsequently amended, the "Tax
Sharing Agreement"), pursuant to which Mafco Holdings has agreed to indemnify
Revlon, Inc. and the Company against federal,
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state or local income tax liabilities of the consolidated or combined group
of which Mafco Holdings (or a subsidiary of Mafco Holdings other than Revlon,
Inc. or the Company and its subsidiaries) is the common parent for taxable
periods beginning on or after January 1, 1992 during which Revlon, Inc. and
the Company or a subsidiary of the Company is a member of such group.
Pursuant to the Tax Sharing Agreement, for all taxable periods beginning on
or after January 1, 1992, the Company will pay to Revlon, Inc., which in turn
will pay to Holdings, amounts equal to the taxes that the Company would
otherwise have to pay if it were to file separate federal, state or local
income tax returns (including any amounts determined to be due as a result of
a redetermination arising from an audit or otherwise of the consolidated or
combined tax liability relating to any such period which is attributable to
the Company), except that the Company will not be entitled to carry back any
losses to taxable periods ending prior to January 1, 1992. No payments are
required by the Company or Revlon, Inc. if and to the extent the Company is
prohibited under the Credit Agreement from making tax sharing payments to
Revlon, Inc. The Credit Agreement prohibits the Company from making such tax
sharing payments other than in respect of state and local income taxes.
Since the payments to be made by the Company under the Tax Sharing
Agreement will be determined by the amount of taxes that the Company would
otherwise have to pay if it were to file separate federal, state or local
income tax returns, the Tax Sharing Agreement will benefit Mafco Holdings to
the extent Mafco Holdings can offset the taxable income generated by the
Company against losses and tax credits generated by Mafco Holdings and its
other subsidiaries. There were no cash payments in respect of federal taxes
made by the Company pursuant to the Tax Sharing Agreement for 1997, 1996 or
1995. The Company has a liability of $0.9 million to Revlon, Inc. in respect
of federal taxes for 1997 under the Tax Sharing Agreement.
FINANCING REIMBURSEMENT AGREEMENT
Holdings and the Company entered into a financing reimbursement agreement
(the "Financing Reimbursement Agreement") in 1992, which expired on June 30,
1996, pursuant to which Holdings agreed to reimburse the Company for
Holdings' allocable portion of (i) the debt issuance cost and advisory fees
related to the capital restructuring of Holdings and (ii) interest expense
attributable to the higher cost of funds paid by the Company under the credit
agreement in effect at that time as a result of additional borrowings for the
benefit of Holdings in connection with the assumption of certain liabilities
by the Company under the Asset Transfer Agreement and the repurchase of
certain subordinated notes from affiliates. The amount of interest reimbursed
by Holdings for 1994 was approximately $0.8 million and was evidenced by
noninterest-bearing promissory notes originally due and payable on June 30,
1995. In February 1995, the $13.3 million in notes payable by Holdings to the
Company under the Financing Reimbursement Agreement was offset against the
$25.0 million note payable by the Company to Holdings and Holdings agreed not
to demand payment under the resulting $11.7 million note payable by the
Company so long as any indebtedness remained outstanding under the credit
agreement then in effect. In February 1995, the Financing Reimbursement
Agreement was amended and extended to provide that Holdings would reimburse
the Company for a portion of the debt issuance costs and advisory fees related
to the credit agreement then in effect (which portion was approximately $4.7
million and was evidenced by a noninterest-bearing promissory note payable on
June 30, 1996) and 1 1/2% per annum of the average balance outstanding under
the 1995 Credit Agreement and the average balance outstanding under working
capital borrowings from affiliates through June 30, 1996 (see "--Other Related
Transactions"), and such amounts were evidenced by a noninterest-bearing
promissory note payable on June 30, 1996. The amount of interest reimbursed by
Holdings for 1995 was approximately $4.2 million. As of December 31, 1995 the
aggregate amount of notes payable by Holdings under the Financing Reimbursement
Agreement was $8.9 million. In June 1996, $10.9 million in notes due to the
Company, which included $2.0 million of interest reimbursement in 1996, under
the Financing Reimbursement Agreement from Holdings was offset against a $11.7
million demand note payable by the Company to Holdings.
OTHER RELATED TRANSACTIONS
Pursuant to a lease dated April 2, 1993 (the "Edison Lease"), Holdings
leases to the Company the Edison research and development facility for a term
of up to 10 years with an annual rent of $1.4 million
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and certain shared operating expenses payable by the Company which, together
with the annual rent, are not to exceed $2.0 million per year. Pursuant to an
assumption agreement dated February 18, 1993, Holdings agreed to assume all
costs and expenses of the ownership and operation of the Edison facility as
of January 1, 1993, other than (i) the operating expenses for which the
Company is responsible under the Edison Lease and (ii) environmental claims
and compliance costs relating to matters which occurred prior to January 1,
1993 up to an amount not to exceed $8.0 million (the amount of such claims
and costs for which the Company is responsible, the "Environmental Limit").
In addition, pursuant to such assumption agreement, the Company agreed to
indemnify Holdings for environmental claims and compliance costs relating to
matters which occurred prior to January 1, 1993 up to an amount not to exceed
the Environmental Limit and Holdings agreed to indemnify the Company for
environmental claims and compliance costs relating to matters which occurred
prior to January 1, 1993 in excess of the Environmental Limit and all such
claims and costs relating to matters occurring on or after January 1, 1993.
Pursuant to an occupancy agreement, during 1997, 1996 and 1995 the Company
rented from Holdings a portion of the administration building located at the
Edison facility and space for a retail store of the Company. The Company
provides certain administrative services, including accounting, for Holdings
with respect to the Edison facility pursuant to which the Company pays on
behalf of Holdings costs associated with the Edison facility and is
reimbursed by Holdings for such costs, less the amount owed by the Company to
Holdings pursuant to the Edison Lease and the occupancy agreement. The net
amount reimbursed by Holdings to the Company for such costs with respect to
the Edison facility for 1997, 1996 and 1995 was $0.7 million, $1.1 million
and $1.2 million, respectively.
During 1997, a subsidiary of the Company sold an inactive subsidiary to an
affiliate for approximately $1.0 million.
Effective July 1, 1997, Holdings contributed to the Company substantially
all of the assets and liabilities of the Bill Blass business not already
owned by the Company. The contributed assets approximated the contributed
liabilities and were accounted for at historical cost in a manner similar to
that of a pooling of interests and, accordingly, prior period financial
statements were restated as if the contribution took place prior to the
beginning of the earliest period presented.
Effective January 1, 1996, the Company acquired from Holdings
substantially all of the assets of Tarlow. The Company assumed substantially
all of the liabilities and obligations of Tarlow. Net liabilities assumed
were approximately $3.4 million. The Company paid $4.1 million to Holdings,
which payment was accounted for as an increase in capital deficiency. Credit
Suisse First Boston Corporation, a nationally recognized investment banking
firm, rendered its written opinion that the terms of the purchase are fair
from a financial standpoint to the Company.
The Company leases certain facilities to MacAndrews & Forbes or its
affiliates pursuant to occupancy agreements and leases. These included space
at the Company's New York headquarters and at the Company's offices in London
during 1997, 1996 and 1995, in Tokyo during 1996 and 1995 and in Hong Kong
during 1997. The rent paid by MacAndrews & Forbes or its affiliates to the
Company for 1997, 1996 and 1995 was $3.8 million, $4.6 million and $5.3
million, respectively.
In July 1995, the Company borrowed from Holdings approximately $0.8
million, representing certain amounts received by Holdings relating to an
arbitration arising out of the sale by Holdings of certain of its businesses.
In 1995, the Company borrowed from Holdings approximately $5.6 million,
representing certain amounts received by Holdings from the sale by Holdings
of certain of its businesses. In June 1997, the Company borrowed from
Holdings approximately $0.5 million, representing certain amounts received by
Holdings from the sale of a brand and inventory relating thereto. Such
amounts are evidenced by noninterest-bearing promissory notes. Holdings
agreed not to demand payment under such notes so long as any indebtedness
remains outstanding under the Credit Agreement.
The Credit Agreement is supported by, among other things, guarantees from
Holdings and certain of its subsidiaries. The obligations under such
guarantees are secured by, among other things, (i) the capital stock and
certain assets of certain subsidiaries of Holdings and (ii) a mortgage on
Holdings' Edison, New Jersey facility.
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The Company borrows funds from its affiliates from time to time to
supplement its working capital borrowings. No such borrowings were
outstanding as of December 31, 1997, 1996 or 1995. The interest rates for
such borrowings are more favorable to the Company than interest rates under
the Credit Agreement and, for borrowings occurring prior to the execution of
the Credit Agreement, the credit facility in effect at the time of such
borrowing. The amount of interest paid by the Company for such borrowings for
1997, 1996 and 1995 was $0.6 million, $0.5 million and $1.2 million,
respectively.
In November 1993, the Company assigned to Holdings a lease for warehouse
space in New Jersey (the "N.J. Warehouse") between the Company and a trust
established for the benefit of certain family members of the Chairman of the
Executive Committee. The N.J. Warehouse had become vacant as a result
of divestitures and restructuring of the Company. The lease has annual
lease payments of approximately $2.3 million and terminates on June 30, 2005.
In consideration for Holdings assuming all liabilities and obligations under
the lease, the Company paid Holdings $7.5 million (for which a liability was
previously recorded) in three installments of $2.5 million each in January
1994, January 1995 and January 1996. Credit Suisse First Boston Corporation,
a nationally recognized investment banking firm, rendered its written opinion
that the terms of the lease transfer were fair from a financial standpoint to
the Company. For 1996 and 1995, the Company paid certain costs associated
with the N.J. Warehouse on behalf of Holdings and was reimbursed by Holdings
for such amounts. The amounts reimbursed by Holdings to the Company for such
costs were $0.2 million and $0.2 million for each of 1996 and 1995.
During 1997, 1996 and 1995, the Company used an airplane owned by a
corporation of which Messrs. Gittis, Drapkin and, during 1995 and 1996, Levin
were the sole stockholders. The Company paid approximately $0.2 million, $0.2
million and $0.4 million for the usage of the airplane for 1997, 1996 and
1995, respectively.
During 1997, the Company purchased products from an affiliate, for which
it paid approximately $0.9 million.
During 1997, the Company provided licensing services to an affiliate, for
which the Company has been paid approximately $0.7 million.
An affiliate of the Company assembles lipstick cases for the Company. The
Company paid approximately $0.9 million, $1.0 million and $1.0 million for
such services for 1997, 1996 and 1995, respectively.
In the fourth quarter of 1996, a subsidiary of the Company purchased an
inactive subsidiary from an affiliate for net cash consideration of
approximately $3.0 million in a series of transactions in which the Company
expects to realize certain tax benefits in future years.
In January 1995, the Company agreed to license certain of its trademarks
to a former affiliate of MacAndrews & Forbes. The amount paid by the
affiliate for 1995 was less than $0.1 million. The affiliate purchased $1.1
million of wigs from the Company during 1995. The Company terminated the
license with the affiliate during 1995.
The Company believes that the terms of the foregoing transactions are at
least as favorable to the Company as those that could be obtained from
unaffiliated third parties.
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DESCRIPTION OF THE NOTES
ESCROW AGREEMENT
On February 2, 1998, Revlon Escrow entered into an escrow agreement (the
"Escrow Agreement") with U.S. Bank Trust National Association (formerly known
as First Trust National Association), as escrow agent (the "Escrow Agent"),
pursuant to which Revlon Escrow deposited with the Escrow Agent the Escrowed
Funds, which consisted of the net proceeds of the Offering (net of discounts
to the Initial Purchasers). The Escrowed Funds were temporarily invested in
Treasury Securities and other Permitted Investments. "Treasury Securities"
mean any investment in obligations issued or guaranteed by the United States
government or any agency thereof, in each case, maturing within 360 days of
the date of acquisition thereof. "Permitted Investments" means (i) Treasury
Securities, (ii) investments in time deposit accounts, certificates of deposit
and money market deposits maturing within 180 days of the date of acquisition
thereof, entitled to U.S. federal deposit insurance for the full amount
thereof or issued by a bank or trust company (including the Escrow Agent or
an affiliate of the Escrow Agent) which is organized under the laws of the
United States of America or any state thereof having capital, surplus and
undivided profits aggregating in excess of $500,000,000 and (iii) repurchase
obligations with a term of not more than 30 days entered into with a nationally
recognized broker dealer, with respect to which the purchased securities are
obligations issued or guaranteed by the United States government or any agency
thereof, which repurchase obligations shall be entered into pursuant to written
agreements. In addition to the Permitted Investments, the Escrowed Funds were
used to repurchase from time to time 9 3/8% Senior Notes pursuant to the Escrow
Agreement (the Escrowed Funds and any such repurchased 9 3/8% Senior Notes are
referred to herein as the "Escrowed Securities"). On March 4, 1998, a portion
of the Escrowed Funds were used to finance the 10 1/2% Senior Subordinated Notes
Redemption. On April 1, 1998, a portion of the Escrowed Funds were used to
finance the 9 3/8% Senior Notes Redemption.
Upon consummation of the 9 3/8% Senior Notes Redemption, the Escrow Agent
released all remaining Escrowed Funds to the Company upon the delivery to the
Escrow Agent of an Officer's Certificate stating that each of the 10 1/2%
Senior Subordinated Notes Redemption, the 9 3/8% Senior Notes Redemption and
the assumption of the Notes by the Company had been consummated. The Company
will use such funds in its discretion for any purpose.
THE SENIOR NOTES
The New Senior Notes will be issued under the Senior Notes Indenture,
dated as of February 1, 1998, between Revlon Escrow and U.S. Bank Trust National
Association (formerly known as First Trust National Association), as trustee
(the "Trustee"), as supplemented by the First Supplemental Indenture thereto
among the Company, Revlon Escrow and the Trustee to be dated as of April 1, 1998
(the "Supplemental Indenture"), copies of which are filed as exhibits to the
Registration Statement of which this Prospectus constitutes a part. Pursuant
to the Supplemental Indenture, the obligations of Revlon Escrow under the Senior
Notes Indenture were assumed by the Company upon the consummation of the 9 3/8%
Senior Notes Redemption, which occurred on April 1, 1998. The following summary,
which describes certain provisions of the Senior Notes Indenture and the Senior
Notes, does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Trust Indenture Act of 1939, as in effect
on the date of the original issue of the Senior Notes (the "TIA"), and all
the provisions of the Senior Notes Indenture and the Senior Notes, including
the definitions therein of terms not defined in this Prospectus. Certain
terms used herein are defined below under "--Certain Definitions." The New
Senior Notes are identical in all material respects to the terms of the Old
Senior Notes, except for certain transfer restrictions and registration
rights relating to the Old Senior Notes and except that, if the Exchange
Offer is not consummated by August 3, 1998, the interest rate on the Old
Senior Notes from and including such date until but excluding the date of
consummation of the Exchange Offer will increase by 0.5%. See "--Registration
Rights."
General
The Old Senior Notes are, and the New Senior Notes will be, unsecured
obligations of the Company, and will mature on February 1, 2006. The Trustee
authenticated and delivered Old Senior Notes for
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original issue in an aggregate principal amount of $250,000,000. The New
Senior Notes will be treated as a continuation of the Old Senior Notes, which
bear interest at a rate equal to 8 1/8% per annum from February 2, 1998,
payable semiannually in arrears on February 1 and August 1 of each year,
commencing August 1, 1998, to the persons who are registered holders thereof
at the close of business on the January 15 or July 15 next preceding such
interest payment date. The rate per annum at which the Old Senior Notes bear
interest may increase under certain circumstances described under
"--Registration Rights." The Old Senior Notes are, and the New Senior Notes
will be, effectively subordinated to the outstanding indebtedness and other
liabilities of the Subsidiaries of the Company. As of December 31, 1997,
after giving effect to the Refinancing Transactions, the outstanding
indebtedness of the Subsidiaries of the Company would have been approximately
$235.6 million.
All interest on the Senior Notes will be computed on the basis of a
360-day year of twelve 30-day months. Principal and interest will be payable
at the office of the Trustee, but, at the option of the Company, interest may
be paid by check mailed to the registered holders of the Senior Notes at
their registered addresses. The Senior Notes will be transferable and
exchangeable at the office of the Trustee and will be issued only in fully
registered form, without coupons, in denominations of $1,000 and any integral
multiple thereof.
Any Old Senior Notes that remain outstanding after the consummation of the
Exchange Offer, together with the New Senior Notes issued in connection with
the Exchange Offer, will be treated as a single class of securities under the
Senior Notes Indenture.
Optional Redemption
Except as set forth below, the Senior Notes will not be redeemable at the
option of the Company prior to February 1, 2002. On and after such date, the
Senior Notes may be redeemed at the option of the Company, at any time as a
whole, or from time to time in part, at the following redemption prices
(expressed as percentages of principal amount), plus accrued interest to the
date of redemption:
if redeemed during the 12-month period commencing February 1:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- -------- ----------------
<S> <C>
2002 104.063%
2003 102.708
2004 101.354
2005 100.000%
</TABLE>
In addition, the Senior Notes may be redeemed at the option of the Company
in connection with the occurrence of a Change of Control at any time as a
whole, at a redemption price equal to the sum of (i) the then outstanding
principal amount thereof, plus (ii) accrued and unpaid interest (if any) to
the date of redemption, plus (iii) the Applicable Premium.
Prior to February 1, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the Senior Notes with, and to the extent the
Company actually receives, the net proceeds of one or more Public Equity
Offerings from time to time, at 108 1/8% of the principal amount thereof,
plus accrued interest to the date of redemption; provided, however, that at
least $162.5 million aggregate principal amount of the Senior Notes must
remain outstanding after each such redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of Senior Notes to be redeemed
at his registered address. Senior Notes in denominations larger than $1,000
may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Senior
Notes (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Senior Notes (or such portions thereof) called for redemption.
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The following definitions are used to determine the Applicable Premium:
"Applicable Premium" means, with respect to a Senior Note at any time, the
greater of (i) 1.0% of the then outstanding principal amount of such Senior
Note at such time and (ii) the excess of (A) the present value of the
required interest and principal payments due on such Senior Note, computed
using a discount rate equal to the Treasury Rate plus 50 basis points, over
(B) the then outstanding principal amount of such Senior Note at such time.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two Business Days prior to the
date fixed for repayment or, in the case of defeasance, prior to the date of
deposit (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining average life to Stated Maturity of the Senior Notes; provided,
however, that if the average life to Stated Maturity of the Senior Notes is
not equal to the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly yields of United States Treasury securities for which such yields
are given, except that if the average life to Stated Maturity of the Senior
Notes is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
Sinking Fund
There will be no mandatory sinking fund payments for the Senior Notes.
Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of Senior Notes will have the right to require the
Company to repurchase all or any part of such holder's Senior Notes at a
repurchase price equal to their Put Amount as of the date of repurchase plus
accrued and unpaid interest to the date of repurchase:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person will be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the
Voting Stock of the Company; provided, however, that the Permitted Holders
"beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting
Stock of the Company than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company (for the
purposes of this clause (i), such other person will be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person beneficially owns, directly or
indirectly, more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders beneficially own, directly or
indirectly, in the aggregate a lesser percentage of the voting power of
the Voting Stock of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of such parent corporation);
or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of the Company was
approved by a vote of 66 2/3% of the directors of the Company then still
in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Directors of
the Company then in office;
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provided that, prior to the mailing of the notice to holders of Senior Notes
provided for in the following paragraph, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full
all Bank Debt or to offer to repay in full all Bank Debt and to repay the
Bank Debt of each lender who has accepted such offer or (ii) obtain the
requisite consent under the Bank Debt to permit the repurchase of the Senior
Notes as provided for below. The Company must first comply with the covenant
in the preceding sentence before it will be required to purchase Senior Notes
in connection with a Change of Control.
Within 45 days following any Change of Control, the Company will mail a
notice to each holder with a copy to the Trustee stating (i) that a Change of
Control has occurred and that such holder has the right to require the
Company to repurchase all or any part of such holder's Senior Notes at a
repurchase price in cash equal to their Put Amount as of the date of
repurchase plus accrued and unpaid interest to the date of repurchase; (ii)
the circumstances and relevant facts regarding such Change of Control; (iii)
the repurchase date (which will be no earlier than 30 days nor later than 60
days from the date such notice is mailed); and (iv) the instructions,
determined by the Company consistent with this provision, that a holder must
follow in order to have its Senior Notes repurchased.
Holders electing to have a Senior Note repurchased will be required to
surrender the Senior Note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least 10 Business Days
prior to the purchase date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than three Business
Days prior to the purchase date, a facsimile transmission or letter setting
forth the name of the holder, the principal amount of the Senior Note which
was delivered for purchase by the holder and a statement that such holder is
withdrawing his election to have such Senior Note repurchased.
On the repurchase date, all Senior Notes repurchased by the Company shall
be delivered to the Trustee for cancellation, and the Company shall pay the
repurchase price plus accrued and unpaid interest to the holders entitled
thereto. Upon surrender of a Senior Note that is repurchased under this
provision in part, the Company shall execute and the Trustee shall
authenticate for the holder thereof (at the Company's expense) a new Senior
Note having a principal amount equal to the principal amount of the Senior
Note surrendered less the portion of the principal amount of the Senior Note
repurchased.
The Company's ability to pay cash to holders of Senior Notes upon a
repurchase may be limited by the Company's then existing financial resources.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with any
offer required to be made by the Company to repurchase the Senior Notes as a
result of a Change of Control.
The Credit Facilities contain, and future indebtedness of the Company may
contain, prohibitions on the occurrence of certain events that would
constitute a Change of Control or require such indebtedness to be purchased
upon a Change of Control. Moreover, the exercise by the holders of their
right to require the Company to repurchase the Senior Notes could cause a
default under such indebtedness, even if the Change of Control itself does
not. Finally, the Company's ability to pay cash to the holders of Senior
Notes following the occurrence of a Change of Control may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases and there can be no assurance that the Company would be able to
obtain financing to make such repurchases.The provisions relating to the
Company's obligation to make an offer to repurchase the Senior Notes as a
result of a Change of Control may be waived or modified with the written
consent of the holders of a majority in principal amount of the Senior Notes.
Certain Covenants
Set forth below are certain covenants contained in the Senior Notes
Indenture:
Limitation on Debt. (a) The Company shall not, and shall not permit any
Subsidiary of the Company to, Issue, directly or indirectly, any Debt;
provided, however, that the Company and its Subsidiaries shall be permitted
to Issue Debt if, at the time of such Issuance, the Consolidated EBITDA
Coverage Ratio for the period of the most recently completed four consecutive
fiscal quarters ending at least 45 days prior to the date such Debt is Issued
exceeds the ratio of 2.0 to 1.0.
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(b) Notwithstanding the foregoing, the Company and its Subsidiaries may
Issue the following Debt:
(1) Debt Issued pursuant to the Credit Agreement, any Refinancing thereof,
or any other credit agreement, indenture or other agreement, in an aggregate
principal amount not to exceed $950 million outstanding at any one time;
(2) Debt (other than Debt described in clause (1) above) Issued for
working capital and general corporate purposes in an aggregate principal
amount at the time of such Issue which, when taken together with the
aggregate principal amount then outstanding of all other Debt Issued pursuant
to this clause (2), will not exceed the sum of (x) 50% of the book value of
the inventory of the Company and its consolidated Subsidiaries and (y) 80% of
the book value of the accounts receivable of the Company and its consolidated
Subsidiaries, in each case as determined in accordance with GAAP;
(3) Debt (other than Debt described in clauses (1) and (2) above) in
respect of the undrawn portion of the face amount of or unpaid reimbursement
obligations in respect of letters of credit for the account of the Company or
any of its Subsidiaries in an aggregate amount at any time outstanding not to
exceed the excess of (i) $150 million over (ii) the undrawn portion of the
face amount of or unpaid reimbursement obligations in respect of letters of
credit Issued under the Credit Agreement or any Refinancing thereof or any
other credit agreement, indenture or other agreement pursuant to clause (1)
above;
(4) Debt of the Company Issued to and held by a Wholly Owned Recourse
Subsidiary of the Company and Debt of a Subsidiary of the Company Issued to
and held by the Company or a Wholly Owned Recourse Subsidiary; provided,
however, that any subsequent Issuance or transfer of any Capital Stock that
results in any such Wholly Owned Recourse Subsidiary ceasing to be a Wholly
Owned Recourse Subsidiary or any subsequent transfer of such Debt (other than
to the Company or a Wholly Owned Recourse Subsidiary) will be deemed, in each
case, to constitute the Issuance of such Debt by the Company or of such Debt
by such Subsidiary;
(5) the Senior Notes, the Senior Subordinated Notes and Debt Issued to
Refinance any Debt permitted by this clause (5); provided, however, that, in
the case of a Refinancing, the principal amount of the Debt so Issued shall
not exceed the principal amount of the Debt so Refinanced plus any
Refinancing Costs thereof; provided further, however, that any Debt Issued
pursuant to this clause (5) to Refinance the Senior Subordinated Notes, or
any Refinancing thereof shall be subordinated to the Senior Notes to at least
the same extent as the Senior Subordinated Notes are subordinated to the
Senior Notes;
(6) Debt (other than Debt described in clause (1), (2), (3), (4) or (5)
above or (11) below) of the Company or any of its Subsidiaries outstanding or
committed on the Issue Date and Debt Issued to Refinance any Debt permitted
by this clause (6), or by paragraph (a) above; provided, however, that in the
case of a Refinancing, the principal amount of the Debt so Issued will not
exceed the principal amount of the Debt so Refinanced plus any Refinancing
Costs thereof;
(7) Debt Issued and arising out of purchase money obligations for property
acquired in an amount not to exceed, for the period through June 30, 1998,
$15 million, plus for each period of twelve consecutive months ending on June
30 thereafter, $15 million; provided, however, that any such amounts which
are available to be utilized during any such twelve month period and are not
so utilized may be utilized during any succeeding period;
(8) Debt of a Subsidiary of the Company Issued and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company (other than
Debt Issued as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary of
the Company or was acquired by the Company);
(9) Debt Issued to Refinance Debt referred to in the foregoing clause (8)
or this clause (9); provided, however, that the principal amount of the Debt
so Issued shall not exceed the principal amount of the Debt so Refinanced
plus any Refinancing Costs thereof;
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(10) Non-Recourse Debt of a Non-Recourse Subsidiary; provided, however,
that if any such Debt thereafter ceases to be Non-Recourse Debt of a
Non-Recourse Subsidiary, then such event will be deemed for the purposes of
this covenant to constitute the Issuance of such Debt by the issuer thereof;
(11) Permitted Affiliate Debt; and
(12) Debt (other than Debt described in clauses (1) through (11) above and
paragraph (a) above) in an aggregate principal amount outstanding at any time
not to exceed $150 million.
(c) To the extent the Company or any Subsidiary of the Company guarantees
any Debt of the Company or of a Subsidiary of the Company, such guarantee and
such Debt will be deemed to be the same indebtedness and only the amount of
the Debt will be deemed to be outstanding. If the Company or a Subsidiary of
the Company guarantees any Debt of a Person that, subsequent to the Issuance
of such guarantee, becomes a Subsidiary, such guarantee and the Debt so
guaranteed will be deemed to be the same indebtedness, which will be deemed
to have been Issued when the guarantee was Issued and will be deemed to be
permitted to the extent the guarantee was permitted when Issued.
Limitation on Liens. The Company shall not, and shall not permit any
Subsidiary of the Company to, create or suffer to exist any Lien upon any of
its property or assets (including Capital Stock or Debt of any Subsidiary of
the Company) now owned or hereafter acquired by it, securing any obligation
unless contemporaneously therewith effective provision is made to secure the
Senior Notes equally and ratably with such obligation with a Lien on the same
assets securing such obligation for so long as such obligation is secured by
such Lien. The preceding sentence shall not require the Company or any
Subsidiary of the Company to equally and ratably secure the Senior Notes if
the Lien consists of the following:
(1) Liens existing as of the Issue Date;
(2) any Lien arising by reason of (i) any judgment, decree or order of any
court or arbitrator, so long as such judgment, decree or order is being
contested in good faith and any appropriate legal proceedings which may have
been duly initiated for the review of such judgment, decree or order shall
not have been finally terminated or the period within which such proceedings
may be initiated shall not have expired, (ii) taxes not delinquent or which
are being contested in good faith, for which adequate reserves (as determined
by the Company) have been established, (iii) security for payment of workers'
compensation or other insurance, (iv) security for the performance of
tenders, contracts (other than contracts for the payment of borrowed money)
or leases in the ordinary course of business, (v) deposits to secure public
or statutory obligations, or in lieu of surety or appeal bonds entered into
in the ordinary course of business, (vi) operation of law in favor of
carriers, warehousemen, landlords, mechanics, materialmen, laborers,
employees, suppliers or similar Persons, incurred in the ordinary course of
business for sums which are not delinquent for a period of more than 30 days
or are being contested in good faith by negotiations or by appropriate
proceedings which suspend the collection thereof, (vii) security for surety,
appeal, reclamation, performance or other similar bonds and (viii) security
for Hedging Obligations;
(3) Liens to secure the payment of all or a part of the purchase price of,
or Capital Lease Obligations with respect to, assets (including Capital
Stock) or property or business acquired or constructed after the Issue Date;
provided, however, that (i) the Debt secured by such Liens shall have
otherwise been permitted to be Issued under the Senior Notes Indenture and
(ii) such Liens shall not encumber any other assets or property of the
Company or any of its Subsidiaries and shall attach to such assets or
property within 180 days of the completion of construction or acquisition of
such assets or property;
(4) Liens on the assets or property of a Subsidiary of the Company
existing at the time such Subsidiary became a Subsidiary of the Company and
not incurred as a result of (or in connection with or in anticipation of)
such Subsidiary becoming a Subsidiary of the Company; provided, however, that
such Liens do not extend to or cover any other property or assets of the
Company or any of its Subsidiaries;
(5) Liens (i) on any assets of the Company or any Subsidiary of the
Company securing obligations in respect of any Debt permitted by clause (1)
or (12) of the second paragraph of "--Limitation on Debt" above, (ii) on any
assets of the Company or any Subsidiary of the Company securing obligations
in respect
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of any Debt permitted by clause (6) of the second paragraph of "--Limitation
on Debt" above which is Issued to Refinance the 9 1/2% Senior Notes or any
Refinancing thereof, and (iii) on the inventory or receivables of the Company
or any Subsidiary of the Company securing obligations in respect of any Debt
permitted by clause (2) of the second paragraph of "--Limitation on Debt"
above;
(6) leases and subleases of real property by the Company and its
Subsidiaries (in any such case, as lessor) which do not interfere with the
ordinary conduct of the business of the Company or any of its Subsidiaries,
and which are made on customary and usual terms applicable to similar
properties;
(7) Liens securing Debt which is Issued to Refinance Debt which has been
secured by a Lien permitted under the Senior Notes Indenture and is permitted
to be Refinanced under the Senior Notes Indenture; provided, however, that
such Liens do not extend to or cover any property or assets of the Company or
any of its Subsidiaries not securing the Debt so Refinanced, other than as
otherwise permitted under "--Limitation on Liens."
(8) easements, reservations, licenses, rights-of-way, zoning restrictions
and covenants, conditions and restrictions and other similar encumbrances or
title defects which, in the aggregate, do not materially detract from the use
of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Company or any of its Subsidiaries;
(9) Liens on assets of a Non-Recourse Subsidiary;
(10) Liens on assets located outside the United States and Canada;
(11) Liens in favor of the United States of America for amounts paid by
the Company or any of its Subsidiaries as progress payments under government
contracts entered into by them;
(12) other Liens incidental to the conduct of the business of the Company
and its Subsidiaries or the ownership of any of their assets not incurred in
connection with Debt, including Liens arising in connection with
reimbursement obligations not constituting Debt in favor of issuers of
standby letters of credit for the account of the Company or a Subsidiary,
which Liens do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(13) Liens granted in the ordinary course of business of the Company or
any of its Subsidiaries in favor of issuers of documentary or trade letters
of credit for the account of the Company or such Subsidiary or bankers'
acceptances, which Liens secure the reimbursement obligations of the Company
or such Subsidiary on account of such letters of credit or bankers'
acceptances; provided, that each such Lien is limited to (i) the assets
acquired or shipped with the support of such letter of credit or bankers'
acceptances and (ii) any assets of the Company or such Subsidiary which are
in the care, custody or control of such issuer in the ordinary course of
business; and
(14) Liens securing Debt which, together with all other Debt secured by
Liens (excluding Debt secured by Liens permitted by clauses (1) through (13)
above) at the time of determination does not exceed $25 million.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any Subsidiary of the Company, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) or to the holders of its Capital Stock
(except dividends or distributions payable solely in its Non-Convertible
Capital Stock or in options, warrants or other rights to purchase its
Non-Convertible Capital Stock and except dividends or distributions payable
to the Company or a Subsidiary of the Company and, if a Subsidiary of the
Company is not wholly owned, to its other equity holders to the extent they
are not Affiliates of the Company), (ii) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior
to scheduled maturity, scheduled repayment or scheduled sinking fund payment
any Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final
maturity, in each case within one year of the date of acquisition) or (iv)
make
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any Investment in (A) an Affiliate of the Company other than a Subsidiary of
the Company and other than an Affiliate of the Company which will become a
Subsidiary of the Company as a result of any such Investment, or (B) a
Non-Recourse Subsidiary (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted Payment") if at the time
the Company or such Subsidiary makes such Restricted Payment (the amount of
any such Restricted Payment, if other than in cash, as determined in good
faith by the Board of Directors, the determination of which shall be
evidenced by a resolution of the Board of Directors):
(1) a Default shall have occurred and be continuing (or would result
therefrom); or
(2) the Company is not able to incur $1.00 of additional Debt in
accordance with the provisions of paragraph (a) of "--Limitation on Debt"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments after the Issue Date would exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company accrued during the
period (treated as one accounting period) from January 1, 1998, to the end of
the most recent fiscal quarter ending at least 45 days prior to the date of
such Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(b) the aggregate Net Cash Proceeds received by the Company from the Issue
or sale of its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) subsequent to the Issue Date (other than an Issuance or sale to a
Subsidiary of the Company or an employee stock ownership plan or other trust
established by the Company or any Subsidiary for the benefit of their
employees);
(c) the aggregate Net Cash Proceeds received by the Company from the Issue
or sale of its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) to an employee stock ownership plan subsequent to January 1, 1998;
provided, however, that if such employee stock ownership plan incurs any
Debt, such aggregate amount shall be limited to an amount equal to any
increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such employee stock ownership plan with respect
to Debt incurred by it to finance the purchase of such Capital Stock;
(d) the amount by which Debt of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Debt of the Company convertible or
exchangeable for Capital Stock (other than Redeemable Stock or Exchangeable
Stock) of the Company (less the amount of any cash, or other property,
distributed by the Company upon such conversion or exchange);
(e) the aggregate net cash proceeds received by the Company subsequent to
the Issue Date as capital contributions (which shall not be deemed to include
any net cash proceeds received in connection with (i) the issuance of any
Permitted Affiliate Debt, (ii) the Initial Cash Payment and (iii) any
contribution designated at the time it is made as a restricted contribution
(a "Restricted Contribution");
(f) to the extent that an Investment made by the Company or a Subsidiary
subsequent to the Issue Date has theretofore been included in the calculation
of the amount of Restricted Payments, the aggregate cash repayments to the
Company or a Subsidiary of such Investment to the extent not included in
Consolidated Net Income of the Company; and
(g) $26 million.
Notwithstanding the foregoing, the Company may take actions to make a
Restricted Payment in anticipation of the occurrence of any of the events
described in this paragraph (a) or paragraph (b) below; provided, however,
that the making of such Restricted Payment shall be conditional upon the
occurrence of such event.
(b) Paragraph (a) shall not prohibit the following:
(i) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the
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proceeds of the substantially concurrent Issue or sale of, Capital Stock of
the Company (other than Redeemable Stock or Exchangeable Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership
plan) or of a cash capital contribution to the Company; provided, however,
that (A) such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of
the amount of Restricted Payments and (B) the Net Cash Proceeds from such
sale shall be excluded from clauses (3)(b) and (3)(c) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations from Net
Available Cash to the extent permitted by "--Limitation on Sales of Assets
and Subsidiary Stock" below, provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value shall be excluded in the calculation in the amount of Restricted
Payments;
(iv) dividends paid within 60 days after the date of declaration thereof,
or Restricted Payments made within 60 days after the making of a binding
commitment in respect thereof, if at such date of declaration or of such
commitment such dividend or other Restricted Payment would have complied with
paragraph (a); provided, however, that at the time of payment of such
dividend or the making of such Restricted Payment, no other Default shall
have occurred and be continuing (or result therefrom); provided further,
however, that such dividend or other Restricted Payment shall be included in
the calculation of the amount of Restricted Payments;
(v) dividends in an aggregate amount per annum not to exceed 6% of the
aggregate Net Cash Proceeds received by the Company in connection with all
Public Equity Offerings occurring after February 15, 1993; provided, however,
that such amount shall be included in the calculation of the amount of
Restricted Payments;
(vi) so long as no Default has occurred and is continuing or would result
from such transaction, (x) amounts paid or property transferred pursuant to
the Permitted Transactions and (y) dividends or distributions, redemptions of
Capital Stock and other Restricted Payments in an aggregate amount not to
exceed the sum of the Initial Cash Payment and all Restricted Contributions,
provided, however, that in the case of clause (y), such dividends,
distributions, redemptions of Capital Stock and other Restricted Payments are
not prohibited by the Credit Agreement or any Refinancing thereof (whether
pursuant to its terms or as a result of waiver, amendment, termination or
otherwise); provided further, however, that such amounts paid, property
transferred, dividends, distributions, redemptions and Restricted Payments
shall be excluded in the calculation of the amount of Restricted Payments;
(vii) so long as no Default has occurred and is continuing or would result
from such transaction, Restricted Payments in an aggregate amount not to
exceed the sum of (x) $25 million and (y) $5 million per annum (net of any
applicable cash exercise price actually received by the Company) made from
time to time to finance the purchase by the Company or Parent of its common
stock (for not more than fair market value) in connection with the delivery
of such common stock to grantees under any stock option plan of the Company
or Parent upon the exercise by such grantees of stock options or stock
appreciation rights settled with common stock or upon the grant of shares of
restricted common stock pursuant thereto; provided, however, that (A) amounts
available pursuant to this clause (vii) to be utilized for Restricted
Payments during any such year may be carried forward and utilized in any
succeeding year and (B) no Restricted Payments shall be permitted pursuant to
this clause unless, at the time of such purchase, the issuance by the Company
or Parent of new shares of common stock to such optionee would cause more
than 19.9% of the total voting power or more than 19.9% of the total value of
the stock of the Company or Parent to be held by Persons other than members
of the Mafco Consolidated Group (the term "stock" for purposes of this clause
shall have the same meaning as such term had for purposes of Section 1504 of
the Code); provided further, however, that such amounts shall be excluded in
the calculation of the amount of Restricted Payments;
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(viii) any purchase, repurchase, redemption, defeasance or other
acquisition by any Non-Recourse Subsidiary of Non-Recourse Debt of such
Non-Recourse Subsidiary; provided, however, that the amount of such purchase,
repurchase, redemption, defeasance or other acquisition shall be excluded in
the calculation of the amount of Restricted Payments;
(ix) any purchase of Senior Subordinated Notes pursuant to the "--Change
of Control" provisions thereof and any purchase of any other Subordinated
Obligations pursuant to an option given to a holder of such Subordinated
Obligation pursuant to a "Change of Control" covenant which is no more
favorable to the holders of such Subordinated Obligations than the provisions
of the Senior Notes Indenture relating to a Change of Control are to holders
as determined in good faith by the Board of Directors of the Company, the
determination of which shall be evidenced by a resolution adopted by such
Board of Directors; provided, however, that no such purchase shall be
permitted prior to the time when the Company shall have purchased all Senior
Notes tendered for purchase by holders electing to have their Senior Notes
purchased pursuant to the provisions of "--Change of Control"; provided
further, however, that such purchases shall be excluded from the calculation
of Restricted Payments;
(x) so long as no Default shall have occurred and be continuing, amounts
paid to Parent to the extent necessary to enable Parent to pay actual
expenses, other than those paid to Affiliates of the Company, incidental to
being a publicly reporting, but non-operating, company; provided, however,
that such amounts paid shall be excluded in the calculation of the amount of
Restricted Payments; or
(xi) any loan to a Permitted Affiliate entered into in the ordinary course
of business; provided, however, that such Permitted Affiliate holds, directly
or indirectly, no more than 10% of the outstanding Capital Stock of the
Company.
Limitation on Restrictions on Distributions from Subsidiaries. The Company
shall not, and shall not permit any Subsidiary of the Company to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary of the Company to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Debt owed to the Company, (ii) make any loans or advances to the Company
or (iii) transfer any of its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Subsidiary of the
Company pursuant to an agreement relating to any Debt Issued by such
Subsidiary on or prior to the date on which such Subsidiary was acquired by
the Company (other than Debt Issued as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary of the Company or was acquired by the Company)
and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting an
Issuance of Bank Debt or a Refinancing of any other Debt Issued pursuant to
an agreement referred to in clause (1) or (2) above or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or (2)
above or this clause (3); provided, however, that any such encumbrance or
restriction with respect to any Subsidiary is no less favorable to the
holders of Senior Notes than the least favorable of the encumbrances and
restrictions with respect to such Subsidiary contained in the agreements
referred to in clause (1) or (2) above, as determined in good faith by the
Board of Directors of the Company, the determination of which shall be
evidenced by a resolution of such Board of Directors;
(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease;
(5) in the case of clause (iii) above, restrictions contained in security
agreements securing Debt of a Subsidiary (other than security agreements
securing Debt of a Subsidiary Issued in connection with any agreement
referred to in clause (1), (2) or (3) above) and restrictions contained in
agreements relating to a disposition of property of a Subsidiary, to the
extent such restrictions restrict the transfer of the property subject to
such agreements;
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(6) any encumbrance or restriction binding on a Foreign Subsidiary
contained in an agreement pursuant to which such Foreign Subsidiary has
Issued Debt consisting of working capital borrowings; and
(7) any encumbrance or restriction relating to a Non-Recourse Subsidiary.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) to, make any Asset Disposition unless:
(i) the Company or such Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors of the Company, the determination of
which shall be conclusive and evidenced by a resolution of the Board of
Directors of the Company (including as to the value of all non-cash
consideration), of the Capital Stock and assets subject to such Asset
Disposition;
(ii) at least 75% of the consideration consists of cash, cash equivalents,
readily marketable securities which the Company intends, in good faith, to
liquidate promptly after such Asset Disposition or the assumption of
liabilities (including, in the case of the sale of the Capital Stock of a
Subsidiary of the Company, liabilities of the Company or such Subsidiary);
and
(iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Subsidiary, as the case may
be):
(A) first, to the extent the Company is required by the terms of any Pari
Passu Debt or Debt of a Subsidiary of the Company, to prepay, repay or
purchase Pari Passu Debt or Debt of a Wholly Owned Recourse Subsidiary or
additionally, in the case of an Asset Disposition by a Subsidiary that is not
a Wholly Owned Recourse Subsidiary, Debt of such Subsidiary (in each case
other than Debt owed to the Company or an Affiliate of the Company) in
accordance with the terms of such Debt;
(B) second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), at the Company's election, to
either (1) the optional prepayment, repayment or repurchase of Pari Passu
Debt or Debt of a Wholly Owned Recourse Subsidiary or, additionally in the
case of an Asset Disposition by a Subsidiary that is not a Wholly Owned
Recourse Subsidiary, Debt of such Subsidiary (in each case other than Debt
owed to the Company or an Affiliate of the Company) which the Company is not
required by the terms thereof to prepay, repay or repurchase (whether or not
the related loan commitment is permanently reduced in connection therewith),
or (2) the investment by the Company or any Wholly Owned Recourse Subsidiary
(or, additionally in the case of an Asset Disposition by a Subsidiary that is
not a Wholly Owned Recourse Subsidiary, the investment by such Subsidiary) in
assets to replace the assets that were the subject of such Asset Disposition
or in assets that (as determined by the Board of Directors of the Company,
the determination of which shall be conclusive and evidenced by a resolution
of such Board of Directors) will be used in the businesses of the Company and
its Wholly Owned Recourse Subsidiaries (or, additionally in the case of an
Asset Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the businesses of such Subsidiary) existing on the Issue Date or
in businesses reasonably related thereto, in all cases, within the later of
one year from the date of such Asset Disposition or the receipt of such Net
Available Cash; and
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to
purchase Senior Notes and other Pari Passu Debt designated by the Company
pursuant to and subject to the conditions of paragraph (b) below;
provided, however, that in connection with an offer pursuant to clause (C)
above, if the principal amount and premium of such Senior Notes and such Pari
Passu Debt, together with accrued and unpaid interest tendered for acceptance
pursuant to such offer exceeds the balance of Net Available Cash, then the
Company will accept for purchase the Senior Notes and such Pari Passu Debt of
each such tendering holder on a pro rata basis in accordance with the
principal amount so tendered.
Notwithstanding the foregoing provisions of this paragraph (a), the
Company and the Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this paragraph (a) except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are not
applied in
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accordance with this paragraph (a) exceed $10,000,000. Pending application of
Net Available Cash pursuant to this paragraph (a), such Net Available Cash
shall be (i) invested in Temporary Cash Investments or (ii) used to make an
optional prepayment under any revolving credit facility constituting Pari
Passu Debt or Debt of a Wholly Owned Recourse Subsidiary (or, additionally in
the case of a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt
of such Subsidiary), whether or not the related loan commitment is
permanently reduced in connection therewith.
(b) In the event of an Asset Disposition that requires the purchase of
Senior Notes pursuant to paragraph (a)(iii)(C), the Company will be required
to purchase Senior Notes and Pari Passu Debt designated by the Company
tendered pursuant to an offer by the Company for the Senior Notes and such
Pari Passu Debt (the "Offer") at a purchase price of 100% of the principal
amount without premium, plus accrued interest to the Purchase Date (or in
respect of other Pari Passu Debt such lesser price, if any, as may be
provided for by the terms of such Pari Passu Debt) in accordance with the
procedures (including prorationing in the event of oversubscription) set
forth in paragraph (c) below, provided that the procedures for making an
offer to holders of other Pari Passu Debt will be as provided for by the
terms of such Pari Passu Debt. If (x) the aggregate purchase price of Senior
Notes and other Pari Passu Debt tendered pursuant to the Offer is less than
the Net Available Cash allotted to the purchase of the Senior Notes and Pari
Passu Debt, (y) the Company shall not be obligated to make an offer pursuant
to the last sentence of this paragraph, or (z) the Company shall be unable to
purchase Senior Notes from holders thereof in an Offer because of the
provisions of applicable law or of the Company's or its Subsidiaries' loan
agreements, indentures or other contracts governing Debt or Debt of
Subsidiaries (in which case the Company need not make an Offer) the Company
shall apply the remaining Net Available Cash to (i) invest in assets to
replace the assets that were the subject of the Asset Disposition or in
assets that (as determined by the Board of Directors of the Company, the
determination of which shall be conclusive and evidenced by a resolution of
such Board of Directors) will be used in the businesses of the Company and
its Wholly Owned Recourse Subsidiaries (or, additionally in the case of an
Asset Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the business of such Subsidiary) existing on the Issue Date or in
businesses reasonably related thereto or (ii) in the case of clause (x) or
(y) above, prepay, repay or repurchase Debt of the Company or Debt of a
Wholly Owned Recourse Subsidiary or, additionally in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse Subsidiary,
Debt of such Subsidiary which the Company or such Wholly Owned Recourse
Subsidiary or Subsidiary is not required by the terms thereof to prepay,
repay, repurchase or redeem (in each case other than Debt owed to the Company
or an Affiliate of the Company), whether or not the related loan commitment
is permanently reduced in connection therewith. The Company shall not be
required to make an Offer for Senior Notes and Pari Passu Debt pursuant to
this covenant if the Net Available Cash available therefor (after application
of the proceeds as provided in clause (A) and clause (B) of paragraph
(a)(iii) above) are less than $10,000,000 for any particular Asset
Disposition (which lesser amounts shall not be carried forward for purposes
of determining whether an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within five days after the last date by
which the Company must have applied Net Available Cash pursuant to paragraph
(a)(iii)(B) above, the Company shall be obligated to deliver to the Trustee
and send, by first-class mail to each Holder, a written notice stating that
the Holder may elect to have his Senior Notes purchased by the Company either
in whole or in part (subject to prorationing as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of
principal amount, at the applicable purchase price. The notice shall specify
a purchase date not less than 30 days nor more than 60 days after the date of
such notice (the "Purchase Date") and shall contain information concerning
the business of the Company which the Company in good faith believes will
enable such holders to make an informed decision (which at a minimum will
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on
Form 8-K of the Company filed subsequent to such Quarterly Report, other than
Current Reports describing Asset Dispositions otherwise described in the
offering materials (or corresponding successor reports), and (ii) if
material, appropriate pro forma financial information) and all instructions
and materials necessary to tender Senior Notes pursuant to the Offer,
together with the information contained in clause (2) below.
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(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of paragraph (a) above. On
such date, the Company shall also irrevocably deposit with the Trustee or
with a paying agent (or, if the Company is acting as its own paying agent,
segregate and hold in trust) in immediately available funds an amount equal
to the Offer Amount to be held for payment in accordance with the provisions
of this covenant. The amount so deposited, at the option of, and pursuant to
the specific written direction of, the Company, may be invested in Temporary
Cash Investments the maturity date of which is not later than the Purchase
Date. The Company shall be entitled to any interest or dividends accrued,
earned or paid on such Temporary Cash Investments. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), the Company
shall deliver to the Trustee for cancellation the Senior Notes or portions
thereof which have been properly tendered to and are to be accepted by the
Company. The Trustee shall, on the Purchase Date, mail or deliver payment to
each tendering Holder in the amount of the purchase price. In the event that
the aggregate purchase price of the Senior Notes and Pari Passu Debt
delivered by the Company to the Trustee is less than the Offer Amount, the
Trustee shall deliver the excess to the Company promptly after the expiration
of the Offer Period.
(3) Holders electing to have a Senior Note purchased will be required to
surrender the Senior Note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least ten Business Days
prior to the Purchase Date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than three Business
Days prior to the Purchase Date, a facsimile transmission or letter setting
forth the name of the holder, the principal amount of the Senior Note which
was delivered for purchase by the holder and a statement that such holder is
withdrawing his election to have such Senior Note purchased. If at the
expiration of the Offer Period the aggregate principal amount of Senior Notes
surrendered by holders exceeds the Offer Amount, the Company shall select the
Senior Notes to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only Senior Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased).
Holders whose Senior Notes are purchased only in part will be Issued new
Senior Notes equal in principal amount to the unpurchased portion of the
Senior Notes surrendered.
(4) At the time the Company delivers Senior Notes to the Trustee which are
to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Senior Notes are to be accepted by the Company
pursuant to and in accordance with the terms of this covenant. A Senior Note
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Senior Notes
pursuant to this covenant. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this provision,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this covenant
by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company shall not, and
shall not permit any of its Subsidiaries (other than a Non-Recourse
Subsidiary) to, conduct any business or enter into any transaction or series
of similar transactions (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of the
Company or any legal or beneficial owner of 10% or more of the voting power
of the Voting Stock of the Company or with an Affiliate of any such owner
unless
(i) the terms of such business, transaction or series of transactions are
(A) set forth in writing and (B) at least as favorable to the Company or such
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with
an unrelated third Person and
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(ii) to the extent that such business, transaction or series of
transactions (other than Debt Issued by the Company which is permitted under
"--Limitation on Debt") is known by the Board of Directors of the Company or
of such Subsidiary to involve an Affiliate of the Company or a legal or
beneficial owner of 10% or more of the voting power of the Voting Stock of
the Company or an Affiliate of such owner, then
(A) with respect to a transaction or series of related transactions, other
than any purchase or sale of inventory in the ordinary course of business (an
"Inventory Transaction"), involving aggregate payments or other consideration
in excess of $5.0 million, such transaction or series of related transactions
has been approved (and the value of any noncash consideration has been
determined) by a majority of those members of the Board of Directors of the
Company having no personal stake in such business, transaction or series of
transactions and
(B) with respect to a transaction or series of related transactions, other
than any Inventory Transaction, involving aggregate payments or other
consideration in excess of $20.0 million (with the value of any noncash
consideration being determined by a majority of those members of the Board of
Directors of the Company having no personal stake in such business,
transaction or series of transactions), such transaction or series of related
transactions has been determined, in the written opinion of a nationally
recognized investment banking firm to be fair, from a financial point of
view, to the Company or such Subsidiary, as the case may be.
(b) The provisions of paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to "--Limitation
on Restricted Payments";
(ii) any transaction between the Company and any of its Subsidiaries;
provided, however, that no portion of any minority interest in any such
Subsidiary is owned by (x) any Affiliate (other than the Company, a Wholly
Owned Recourse Subsidiary of the Company, a Permitted Affiliate or an
Unrestricted Affiliate) of the Company or (y) any legal or beneficial owner
of 10% or more of the voting power of the Voting Stock of the Company or any
Affiliate of such owner (other than the Company, any Wholly Owned Recourse
Subsidiary of the Company or an Unrestricted Affiliate);
(iii) any transaction between Subsidiaries of the Company; provided,
however, that no portion of any minority interest in any such Subsidiary is
owned by (x) any Affiliate (other than the Company, a Wholly Owned Recourse
Subsidiary of the Company, a Permitted Affiliate or an Unrestricted
Affiliate) of the Company or (y) any legal or beneficial owner of 10% or more
of the voting power of the Voting Stock of the Company or any Affiliate of
such owner (other than the Company, any Wholly Owned Recourse Subsidiary of
the Company or an Unrestricted Affiliate);
(iv) any transaction between the Company or a Subsidiary of the Company
and its own employee stock ownership plan;
(v) any transaction with an officer or director of the Company, of Parent
or of any Subsidiary of the Company entered into in the ordinary course of
business (including compensation or employee benefit arrangements with any
such officer or director); provided, however, that such officer holds,
directly or indirectly, no more than 10% of the outstanding Capital Stock of
the Company;
(vi) any business or transaction with an Unrestricted Affiliate;
(vii) any transaction which is a Permitted Transaction;
(viii) any transaction pursuant to which Mafco Holdings will provide the
Company and its Subsidiaries at their request and at the cost to Mafco
Holdings with certain allocated services to be purchased from third party
providers, such as legal and accounting services, insurance coverage and
other services; and
Commission Reports. Notwithstanding that the Company may not be required
to be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file or cause to be filed with the Commission
and provide the Trustee and holders of the Senior Notes with the information,
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documents and other reports (or copies of such portions of any of the
foregoing as the Commission may by rules and regulations prescribe) with
respect to the Company specified in Sections 13 and 15(d) of the Exchange
Act. The Company also will comply with the other provisions of TIA Section
314(a).
Successor Company
(a) The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (if not the Company) is
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and such Person expressly assumes
by a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the
Senior Notes Indenture and the Senior Notes; (ii) immediately after giving
effect to such transaction (and treating any Debt which becomes an obligation
of the resulting, surviving or transferee person or any of its Subsidiaries
as a result of such transaction as having been issued by such Person or such
Subsidiary at the time of such transaction), no Default has occurred and is
continuing; (iii) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person would be able to incur at least
$1.00 of Debt pursuant to paragraph (a) of the "--Limitation on Debt"
covenant; (iv) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person has a Consolidated Net Worth in an
amount which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and (v) the Company delivers to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Senior Notes Indenture; provided that, nothing in this
paragraph shall prohibit a Wholly Owned Recourse Subsidiary from
consolidating with or merging with or into, or conveying, transferring or
leasing all or substantially all its assets to, the Company.
(b) The resulting, surviving or transferee Person will be the successor
Company and shall succeed to, and be substituted for, and may exercise every
right and power of, the predecessor Company under the Senior Notes Indenture
and thereafter, except in the case of a lease, the predecessor Company will
be discharged from all obligations and covenants under the Senior Notes
Indenture and the Senior Notes.
Defaults
An Event of Default is defined in the Senior Notes Indenture as (i) a
default in the payment of interest on the Senior Notes when due, continued
for 30 days, (ii) a default in the payment of principal of any Senior Note
when due at its Stated Maturity, upon redemption, upon required purchase,
upon declaration or otherwise, (iii) the failure by the Company to comply
with its obligations described under "--Successor Company" or "--Senior Notes
Assumption" above, (iv) the failure by the Company or the Company to comply
for 30 days after notice with any of the covenants described under
"--Limitation on Debt," "--Limitation on Liens," "--Limitation on Restricted
Payments," "--Limitation on Restrictions on Distributions from Subsidiaries,"
"--Limitations on Sales of Assets and Subsidiary Stock," "--Limitation on
Transactions with Affiliates," "--Limitation on Other Business Operations,"
"--Change of Control" (other than a failure to purchase Senior Notes) or
"--Commission Reports," (v) the failure by the Company to comply for 60 days
after notice with the other agreements applicable to it contained in the
Senior Notes Indenture or the Senior Notes (other than those referred to in
clauses (i), (ii), (iii) and (iv) of this paragraph), (vi) Debt of the
Company or any Significant Subsidiary is not paid within any applicable grace
period after final maturity or is accelerated by the holders thereof because
of a default and the total principal amount of the portion of such Debt that
is unpaid or accelerated exceeds $25 million or its foreign currency
equivalent and such default continues for 10 days after notice as specified
in the last sentence of this paragraph (the "cross acceleration provision"),
(vii) certain events of bankruptcy, insolvency or reorganization of the
Company or a Significant Subsidiary (the "bankruptcy provisions") or (viii)
any judgment or decree for the payment of money in excess of $25 million or
its foreign currency equivalent is entered against the Company or a
Significant Subsidiary and is not discharged and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree or
(B) there is a period of 60 days following the entry of such judgment or
decree during which such judgment or decree is not discharged, waived or the
execution thereof stayed and, in
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the case of (B), such default continues for 10 days after the notice
specified in the next sentence (the "judgment default provision"). However, a
default under clauses (iv), (v), (vi) and (viii) (B) will not constitute an
Event of Default until the Trustee or the holders of 25% in principal amount
of the outstanding Senior Notes notify the Company of the default and the
Company does not cure such default within the time specified after receipt of
such notice.
If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the outstanding Senior Notes
by notice to the Company may declare the principal of and accrued but unpaid
interest on all the Senior Notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable
immediately. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of the Company occurs and is continuing, the
principal of and interest on all the Senior Notes will ipso facto become and
be immediately due and payable without any declaration or other act on the
part of the Trustee or any holders of the Senior Notes. Under certain
circumstances, the holders of a majority in principal amount of the
outstanding Senior Notes may rescind any such acceleration with respect to
the Senior Notes and its consequences.
Subject to the provisions of the Senior Notes Indenture relating to the
duties of the Trustee, in case an Event of Default occurs and is continuing,
the Trustee will be under no obligation to exercise any of the rights or
powers under the Senior Notes Indenture at the request or direction of any of
the holders of the Senior Notes unless such holders have offered to the
Trustee reasonable indemnity or security against any loss, liability or
expense which might be incurred in compliance with such request or direction.
Except to enforce the right to receive payment of principal or interest when
due, no holder of a Senior Note may pursue any remedy with respect to the
Senior Notes Indenture or the Senior Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing,
(ii) holders of at least 25% in principal amount of the outstanding Senior
Notes have requested the Trustee to in writing pursue the remedy, (iii) such
holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt thereof and the offer of security or
indemnity and (v) the holders of a majority in principal amount of the
outstanding Senior Notes have not given the Trustee a direction inconsistent
with such request within such 60-day period. Subject to certain restrictions,
the holders of a majority in principal amount of the outstanding Senior Notes
are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust
or power conferred on the Trustee. The Trustee, however, may refuse to follow
any direction that conflicts with law or the Senior Notes Indenture or that
the Trustee determines is unduly prejudicial to the rights of any other
holder of a Senior Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Senior
Notes notice of the Default within 90 days after it occurs and, if the
Escrowed Securities have not yet been released, shall mail to the Escrow
Agent notice of the Default within one Business Day after the Trustee has
knowledge of such Default. Except in the case of a Default in the payment of
principal of or interest on any Senior Note, the Trustee may withhold notice
if and so long as a committee of its Trust Officers in good faith determines
that withholding notice is in the interests of the holders of the Senior
Notes. In addition, the Company is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate indicating whether
the signers thereof know of any Default that occurred during the previous
year. The Company also is required to deliver to the Trustee, within 30 days
after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action the Company is
taking or proposes to take in respect thereof.
Amendment
Subject to certain exceptions, the Senior Notes Indenture may be amended
with the consent of the holders of a majority in principal amount of the
Senior Notes then outstanding and any past default or noncompliance with any
provisions may be waived with the consent of the holders of a majority in
principal amount of the Senior Notes then outstanding. However, without the
consent of each holder of an outstanding Senior Note affected, no amendment
may, among other things, (i) reduce the principal
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amount of Senior Notes whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Senior
Note, (iii) reduce the principal of or extend the Stated Maturity of any
Senior Note, (iv) reduce the premium payable upon the redemption of any
Senior Note or change the time at which any Senior Note may be redeemed as
described under "--Optional Redemption" above, (v) make any Senior Note
payable in money other than that stated in the Senior Note, (vi) make any
change to the provision which protects the right of any holder of the Senior
Notes to receive payment of principal of and interest on such holder's Senior
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such holder's Senior Notes
or (vii) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
Without the consent of or notice to any holder of the Senior Notes, the
Company and the Trustee may amend the Senior Notes Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption
by a successor corporation of the obligations of the Company under the Senior
Notes Indenture if in compliance with the provisions described under
"--Successor Company" above, to provide for uncertificated Senior Notes in
addition to or in place of certificated Senior Notes (provided that the
uncertificated Senior Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated
Senior Notes are described in Section 163(f)(2)(B) of the Code), to add
guarantees with respect to the Senior Notes, to secure the Senior Notes, to
add to the covenants of the Company for the benefit of the holders of the
Senior Notes or to surrender any right or power conferred upon the Company,
to provide for issuance of the Senior Exchange Notes under the Senior Notes
Indenture (including to provide for treatment of the Senior Exchange Notes
and the Senior Notes as a single class of securities) in connection with the
Exchange Offer, or to comply with any requirement of the Commission in
connection with the qualification of the Senior Notes Indenture under the TIA
or to otherwise comply with the TIA, or to make any change that does not
adversely affect the rights of any holder of the Senior Notes.
The consent of the holders of the Senior Notes is not necessary under the
Senior Notes Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
After an amendment under the Senior Notes Indenture becomes effective, the
Company is required to mail to holders of the Senior Notes a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the Senior Notes, or any defect therein, will not impair or affect
the validity of the amendment.
A consent to any amendment or waiver under the Senior Notes Indenture by
any holder of Senior Notes given in connection with a tender of such holder's
Senior Notes will not be rendered invalid by such tender.
Transfer
The Senior Notes will be issued in registered form and will be
transferable only upon the surrender of the Senior Notes being transferred
for registration of transfer. The Company may require payment of a sum
sufficient to cover any tax, assessment or other governmental charge payable
in connection with certain transfers and exchanges. See "Book Entry; Delivery
and Form."
Defeasance
The Company at any time may terminate all its obligations under the Senior
Notes and the Senior Notes Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations
to register the transfer or exchange of the Senior Notes, to replace
mutilated, destroyed, lost or stolen Senior Notes and to maintain a registrar
and paying agent in respect of the Senior Notes. The Company at any time may
terminate certain of its obligations under the covenants described under
"--Certain Covenants", "--Defaults" and "--Change of Control" above, the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries, or the judgment default provision and
the 30 day covenant compliance provision, described
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under "--Defaults" above and the limitations contained in clause (ii), (iii)
and (iv) described under paragraph (a) of "--Successor Company" ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Senior Notes may not be
accelerated because of an Event of Default with respect thereto. If the
Company exercises its covenant defeasance option, payment of the Senior Notes
may not be accelerated because of an Event of Default specified in clause
(iv), (vi), (vii) (with respect only to Significant Subsidiaries) or (viii)
under "--Defaults" above, or because of the failure of the Company to comply
with clause (ii), (iii) or (iv) described under paragraph (a) of "--Successor
Company" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money
or U.S. Government Obligations for the payment of principal and interest (if
any) on the Senior Notes to redemption or maturity, as the case may be, and
must comply with certain other conditions, including (unless the Senior Notes
will mature or be redeemed within 60 days) delivering to the Trustee an
Opinion of Counsel to the effect that holders of the Senior Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred (and, in the case of
legal defeasance only, such Opinion of Counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable federal income tax
law).
Concerning the Trustee
U.S. Bank Trust National Association (formerly known as First Trust National
Association) is to be the Trustee under the Senior Notes Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Senior Notes.
Governing Law
The Senior Notes Indenture provides that it and the Senior Notes will be
governed by, and construed in accordance with, the laws of the State of New
York without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
Certain Definitions
The following are certain definitions used in the Senior Notes Indenture
and applicable to the description of the Senior Notes Indenture and the
Senior Notes set forth herein.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director
or officer (A) of such specified Person, (B) of any Subsidiary of such
specified Person or (C) of any Person described in clause (i) above. For
purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Subsidiary of the Company (other than directors'
qualifying shares and other than Capital Stock of a Non-Recourse Subsidiary),
property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Subsidiaries
(other than a Non-Recourse Subsidiary) (including any disposition by means of
a merger, consolidation or similar transaction) other than (i) a disposition
by a Subsidiary of the Company to the Company or by the Company or a
Subsidiary of the Company to a Wholly Owned Recourse Subsidiary, (ii) a
disposition of property or assets by the Company or its Subsidiaries at fair
market value in the ordinary course of business, (iii) a disposition by the
Company or its Subsidiaries of obsolete assets in the ordinary course of
business, (iv) a disposition subject to or permitted by the provisions
described
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in "--Limitation on Restricted Payments" above, (v) an issuance of employee
stock options and (vi) a disposition by the Company or its Subsidiaries in
which the Company or its Subsidiaries receive as consideration Capital Stock
of (or similar interests in) a Person engaged in, or assets that will be used
in, the businesses of the Company and its Wholly Owned Recourse Subsidiaries,
or additionally, in the case of a disposition by a Subsidiary of the Company
that is not a Wholly Owned Recourse Subsidiary, the business of such
Subsidiary, existing on the Issue Date or in businesses reasonably related
thereto, as determined by the Board of Directors of the Company, the
determination of which shall be conclusive and evidenced by a resolution of
the Board of Directors of the Company.
"Bank Debt" means any and all amounts payable by the Company or any of its
Subsidiaries under or in respect of the Credit Agreement or any Refinancing
thereof, or any other agreements with lenders party to the foregoing,
including principal, premium (if any), interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Company), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof;
provided, however, that nothing in this definition shall permit the Company
or any of its Subsidiaries to Issue any Debt that is not permitted pursuant
to "--Limitation on Debt" above.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of
a balance sheet of such Person prepared in accordance with GAAP; the amount
of such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Revlon Consumer Products Corporation, a Delaware
corporation, and its successors.
"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio of
(i) the aggregate amount of EBITDA for such period to (ii) Consolidated
Interest Expense for such period; provided, however, that (1) if the Company
or any Subsidiary of the Company has Issued any Debt since the beginning of
such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated EBITDA Coverage Ratio is an Issuance of
Debt, or both, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Debt as if
such Debt had been Issued on the first day of such period and the discharge
of any other Debt Refinanced or otherwise discharged with the proceeds of
such new Debt as if such discharge had occurred on the first day of such
period, (2) if since the beginning of such period the Company or any
Subsidiary of the Company shall have made any Asset Disposition, EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of the
Company or any Subsidiary of the Company Refinanced or otherwise discharged
with respect to the Company and its continuing Subsidiaries in connection
with such Asset Dispositions for such period (or if the Capital Stock of any
Subsidiary of the Company is sold, the Consolidated Interest Expense for such
period directly attributable to the Debt of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such Debt
after such sale) and (3) if since the beginning of such period
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the Company or any Subsidiary of the Company (by merger or otherwise) shall
have made an Investment in any Subsidiary of the Company (or any Person which
becomes a Subsidiary of the Company) or an acquisition of assets, including
any acquisition of assets occurring in connection with a transaction causing
a calculation to be made hereunder, which constitutes all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto, as if such
Investment or acquisition occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto, and
the amount of Consolidated Interest Expense associated with any Debt Issued
in connection therewith, the pro forma calculations shall be determined in
good faith by a responsible financial or accounting Officer of the Company.
If any Debt bears a floating rate of interest and is being given pro forma
effect, the interest on such Debt shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the
entire period.
"Consolidated Interest Expense" means, for any period, the sum of (a) the
interest expense, net of any interest income, of the Company and its
consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such
period as determined in accordance with GAAP consistently applied, plus (b)
Preferred Stock dividends in respect of Preferred Stock of the Company or any
Subsidiary of the Company (other than a Non-Recourse Subsidiary) held by
Persons other than the Company or a Wholly Owned Recourse Subsidiary, plus
(c) the cash contributions to an employee stock ownership plan of the Company
and its Subsidiaries (other than Non-Recourse Subsidiaries) to the extent
such contributions are used by an employee stock ownership plan to pay
interest.
"Consolidated Net Income" means with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
consolidated Subsidiaries for such period as determined in accordance with
GAAP, adjusted to the extent included in calculating such net income (or
loss), by excluding (i) all extraordinary gains or losses; (ii) the portion
of net income (or loss) of such Person and its consolidated Subsidiaries
attributable to minority interests in unconsolidated Persons except to the
extent that, in the case of net income, cash dividends or distributions have
actually been received by such Person or one of its consolidated Subsidiaries
(subject, in the case of a dividend or distribution received by a Subsidiary
of such Person, to the limitations contained in clause (v) below) and, in the
case of net loss, such Person or any Subsidiary of such Person has actually
contributed, lent or transferred cash to such unconsolidated Person; (iii)
net income (or loss) of any other Person attributable to any period prior to
the date of combination of such other Person with such Person or any of its
Subsidiaries on a "pooling of interests" basis; (iv) net gains or losses in
respect of dispositions of assets by such Person or any of its Subsidiaries
(including pursuant to a sale-and-leaseback arrangement) other than in the
ordinary course of business; (v) the net income of any Subsidiary of such
Person to the extent that the declaration of dividends or distributions by
that Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its shareholders; (vi) any net
income or loss of any Non-Recourse Subsidiary, except that such Person's
equity in the net income of any such Non-Recourse Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Non-Recourse Subsidiary during such
period to such Person as a dividend or other distribution; and (vii) the
cumulative effect of a change in accounting principles; provided, however,
that in using Consolidated Net Income for purposes of calculating the
Consolidated EBITDA Coverage Ratio at any time, net income of a Subsidiary of
the type described in clause (v) of this definition shall not be excluded.
"Consolidated Net Worth" of any Person means, at any date, all amounts
which would, in conformity with GAAP, be included under shareholders' equity
on a consolidated balance sheet of such Person as at such date, less (x) any
amounts attributable to Redeemable Stock and (y) any amounts attributable to
Exchangeable Stock.
"Credit Agreement" means the Amended and Restated Credit Agreement dated
as of May 30, 1997 by and among the Company, The Chase Manhattan Bank, N.A.,
Citibank, N.A. and Lehman Commercial Paper Inc., as agents, and the Banks
named therein, as the same may be amended or restated from time to time.
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"Debt" of any Person means, without duplication,
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable and other accrued current
liabilities arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment (including liquidation preference) or other
repurchase of, in the case of a Subsidiary of the Company, any Preferred
Stock and, in the case of any other Person, any Redeemable Stock (but
excluding in each case any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through (v)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including guarantees of
such obligations and dividends; and
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means, with respect to the Senior Notes issuable or issued in
whole or in part in global form, The Depository Trust Company, until a
successor shall have been appointed and become such pursuant to the
applicable provisions of the Senior Notes Indenture and, thereafter,
"Depository" shall mean or include such successor.
"EBITDA" means, for any period, the Consolidated Net Income of the Company
for such period, plus the following to the extent included in calculating
such Consolidated Net Income: (i) income tax expense, (ii) Consolidated
Interest Expense, (iii) depreciation expense, (iv) amortization expense, (v)
all other noncash charges (excluding any noncash charge to the extent that it
requires an accrual of or a reserve for cash disbursements for any future
period) and (vi) foreign currency gains or losses.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock of a Person which by its
terms or otherwise is required to be exchanged or converted or is
exchangeable or convertible at the option of the holder into another security
(other than Capital Stock of such Person which is neither Exchangeable Stock
nor Redeemable Stock).
"Foreign Subsidiary" means any Subsidiary of the Company which (i) is
organized under the laws of any jurisdiction outside of the United States,
(ii) is organized under the laws of Puerto Rico or the U.S. Virgin Islands,
(iii) has substantially all its operations outside of the United States, or
(iv) has substantially all its operations in Puerto Rico or the U.S. Virgin
Islands.
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"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, except that for purposes of
calculating the Consolidated EBITDA Coverage Ratio, it shall mean generally
accepted accounting principles in the United States as in effect on the Issue
Date.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt or other obligation of any other
Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered
into for purposes of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided, however, that the
term "guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or
other similar agreement or arrangement designed to protect such Person
against changes in interest rates or foreign exchange rates.
"holder" or "Securityholder" means the Person in whose name a Senior Note
is registered on the Registrar's books.
"Initial Cash Payment" means the $100 million received by the Company
prior to the Issuance of the 10 1/2% Senior Subordinated Notes.
"Investment" in any Person means any loan or advance to, any net payment
on a guarantee of, any acquisition of Capital Stock, equity interest,
obligation or other security of, or capital contribution or other investment
in, such Person. Investments shall exclude advances to customers and
suppliers in the ordinary course of business. The term "Invest" used as verb
has a corresponding meaning. For purposes of the definitions of "Non-Recourse
Subsidiary" and "Restricted Payment" and for purposes of "--Limitation on
Restricted Payments" above, (i) "Investment" shall include a designation
after the Issue Date of a Subsidiary of the Company as a Non-Recourse
Subsidiary, and such Investment shall be valued at an amount equal to the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of such Subsidiary at the time
that such Subsidiary is designated a Non-Recourse Subsidiary; and (ii) any
property transferred to or from a Non-Recourse Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors of the Company, and if
such property so transferred (including in a series of related transactions)
has a fair market value, as so determined by the Board of Directors, in
excess of $10,000,000, such determination shall be confirmed by an
independent appraiser.
"Issue" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Capital Stock of a Person existing
at the time such Person becomes a Subsidiary of another Person (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Subsidiary at the time it becomes a Subsidiary of such other Person.
The term "Issuance" or "Issued" has a corresponding meaning.
"Issue Date" means the date of original issue of the Senior Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York or in the
state where the principal office of the Trustee is located.
"Lien" means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien.
"Mafco Holdings" means Mafco Holdings Inc., a Delaware corporation, and
its successors.
"Mafco Consolidated Group" means the "Affiliated Group" (within the
meaning of Section 1504(a)(1) of the Code) of which Mafco Holdings is the
common parent.
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"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Debt or other obligations
relating to such properties or assets or received in any other noncash form)
therefrom, in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required or estimated in good
faith to be required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any Debt
which is secured by any assets subject to such Asset Disposition, in
accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law be
repaid out of the proceeds from or in connection with such Asset Disposition
and (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition; provided, however, that in connection with an Asset
Disposition to a Subsidiary of the Company (other than a Wholly Owned
Recourse Subsidiary), Net Available Cash will be deemed to be a percentage of
Net Available Cash (as calculated above) equal to (A) 100% minus (B) the
Company's percentage ownership in such Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts
or commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or estimated in
good faith to be payable as a result thereof.
"Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital Stock
of such corporation convertible solely into non-convertible common stock of
such corporation; provided, however, that Non-Convertible Capital Stock shall
not include any Redeemable Stock or Exchangeable Stock.
"Non-Recourse Debt" means Debt or that portion of Debt (i) as to which
neither the Company nor its Subsidiaries (other than a Non-Recourse
Subsidiary) (A) provide credit support (including any undertaking, agreement
or instrument which would constitute Debt), (B) is directly or indirectly
liable or (C) constitute the lender and (ii) no default with respect to which
(including any rights which the holders thereof may have to take enforcement
action against the assets of a Non-Recourse Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Company or
its Subsidiaries (other than Non-Recourse Subsidiaries) to declare a default
on such other Debt or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of the Company (i) which has
been designated as such by the Company, (ii) which has no Debt other than
Non-Recourse Debt and (iii) which is in the same line of business as the
Company and its Wholly Owned Recourse Subsidiaries existing on the Issue Date
or in businesses reasonably related thereto.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of Vice
Presidential designation), and by the Treasurer, an Assistant Treasurer,
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee. One of the Officers signing an Officers' Certificate given pursuant
to the last paragraph under "--Defaults" above shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or to Parent or one of its Subsidiaries or the
Trustee).
"Parent" means Revlon, Inc., a Delaware corporation, and any other Person
which acquires or owns directly or indirectly 80% or more of the voting power
of the Voting Stock of the Company.
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"Pari Passu Debt" means the following obligations, whether outstanding on
the Issue Date or thereafter created, incurred or assumed, and whether at any
time owing actually or contingent:
(i) all obligations consisting of the Bank Debt, the Senior Notes, the 9
3/8% Senior Notes and the 9 1/2% Senior Notes;
(ii) all obligations consisting of the principal of and premium (if any)
and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to
the Company), and all fees, expenses and other amounts in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which the Company is responsible or liable;
(iii) all Capital Lease Obligations of the Company;
(iv) all obligations of the Company (A) for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (B) under interest rate swaps, caps, collars, options and
similar arrangements and foreign currency hedges entered into in respect
of any obligations described in clauses (i), (ii) and (iii) or (C) Issued
or assumed as the deferred purchase price of property and all conditional
sale obligations of the Company and all obligations of the Company under
any title retention agreement;
(v) all obligations of other Persons of the type referred to in clauses
(ii), (iii) and (iv) and all dividends of other persons for the payment of
which, in either case, the Company is responsible or liable as obligor,
guarantor or otherwise, including by means of any agreement which has the
economic effect of a guarantee; and
(vi) all obligations consisting of Refinancings of any obligation
described in clauses (i), (ii), (iii), (iv) or (v);
unless, in the case of any particular obligation, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are subordinate in right of payment to the
Senior Notes. However, Pari Passu Debt will not include (1) any obligation of
the Company to any Subsidiary or any Permitted Affiliate Debt, (2) any
liability for Federal, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any indebtedness, guarantee or
obligation of the Company (including the Senior Subordinated Notes) that is
subordinate or junior in any respect to any other indebtedness, guarantee or
obligation of the Company or (5) that portion of any Debt which at the time
of Issuance is issued in violation of the Senior Notes Indenture; provided,
however, that in the case of this clause (5), (A) any Debt Issued to any
person who had no actual knowledge that the Issuance of such Debt was not
permitted under the Senior Notes Indenture and who received on the date of
Issuance thereof a certificate from an officer of the Company to the effect
that the Issuance of such Debt would not violate the Senior Notes Indenture
shall constitute Pari Passu Debt and (B) any Debt arising from the honoring
by a bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business shall
constitute Pari Passu Debt provided that such Debt would normally be
extinguished within three Business Days of Issuance.
"Permitted Affiliate" means any individual that is a director or officer
of the Company, of Parent, of a Subsidiary of the Company or of an
Unrestricted Affiliate; provided, however, that such individual is not also a
director or officer of Mafco Holdings or any Person that controls Mafco
Holdings.
"Permitted Affiliate Debt" means (i) Debt Issued to an Affiliate of the
Company representing amounts owing by the Company pursuant to the Tax Sharing
Agreement and (ii) Debt Issued to an Affiliate of the Company to the extent
of cash actually received by the Company, which cash either is required to be
advanced or contributed to the Company pursuant to the terms of the Credit
Agreement or any Refinancing thereof or, if not advanced or contributed to
the Company, would lead to a default under the Credit Agreement or any
Refinancing thereof.
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"Permitted Holders" means Ronald O. Perelman (or in the event of his
incompetence or death, his estate, heirs, executor, administrator, committee
or other personal representative (collectively, "heirs")) or any Person
controlled, directly or indirectly, by Ronald O. Perelman or his heirs.
"Permitted Transactions" means (i) any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property
or the rendering of any service between the Company or any Subsidiary of the
Company, on the one hand, and any Affiliate of the Company or any legal or
beneficial owner of 10% or more of the voting power of Voting Stock of the
Company or an Affiliate of any such owner, on the other hand, existing on, or
pursuant to an agreement in effect on, the Issue Date and disclosed on a
schedule to the Senior Notes Indenture and any amendments thereto which do
not adversely affect the rights of the Holders and (ii) any Tax Sharing
Agreement.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other
entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Senior Note as of any date means the principal of the
Senior Note as of such date.
"Public Equity Offering" means an underwritten public offering of equity
securities of the Company or Revlon, Inc. pursuant to an effective
registration statement under the Securities Act.
"Put Amount" as of any date means, with respect to each $1,000 principal
amount of Senior Notes, 101% of the outstanding principal amount thereof as
of the date of repurchase.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed on or prior to the first anniversary of the Stated
Maturity of the Senior Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated
Maturity of the Senior Notes.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue Debt in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Refinancing Costs" means, with respect to any Debt being Refinanced, any
premium actually paid thereon and reasonable costs and expenses, including
underwriting discounts, in connection with such Refinancing.
"Registration Agreement" means the Registration Agreement dated January
28, 1998 among Revlon Escrow, the Company and the Initial Purchasers.
"Registered Exchange Offer" has the meaning ascribed thereto in the
Registration Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" has the meaning ascribed thereto in the
Registration Agreement.
"Significant Subsidiary" means (i) any Subsidiary (other than a
Non-Recourse Subsidiary) of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's most recent
quarterly consolidated balance sheet, constituted at least 5% of the
Company's total assets on a consolidated basis as of such date, in each case
determined in accordance with GAAP, or (B) had revenues for the 12-month
period ending on the date of the Company's most recent quarterly consolidated
statement of income which constituted at least 5% of the Company's total
revenues on a consolidated basis for such period, or (ii) any Subsidiary of
the Company (other than a Non-Recourse Subsidiary) which, if merged with all
Defaulting Subsidiaries (as defined below) of the Company, would at the time
of determination either (A) have had assets which, as of the date of the
Company's most recent quarterly consolidated balance sheet, would have
constituted at least 10% of the Company's total assets on a
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consolidated basis as of such date or (B) have had revenues for the 12-month
period ending on the date of the Company's most recent quarterly consolidated
statement of income which would have constituted at least 10% of the
Company's total revenues on a consolidated basis for such period (each such
determination being made in accordance with GAAP). "Defaulting Subsidiary"
means any Subsidiary of the Company (other than a Non-Recourse Subsidiary)
with respect to which an event described under clauses (vi), (vii) or (viii)
in "--Defaults" above has occurred and is continuing.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision
(but excluding any provision providing for the repurchase of such security at
the option of the holder thereof upon the happening of any contingency).
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the date hereof or hereafter Issued) which is subordinate or
junior in right of payment to the Senior Notes.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
"Tax Sharing Agreement" means (i) that certain agreement dated June 24,
1992, as amended, among the Company, certain of its Subsidiaries, Revlon
Holdings, Inc., Revlon, Inc. and Mafco Holdings, and (ii) any other tax
allocation agreement between the Company or any of its Subsidiaries with any
direct or indirect shareholder of the Company with respect to consolidated or
combined tax returns including the Company or any of its Subsidiaries but
only to the extent that amounts payable from time to time by the Company or
any such Subsidiary under any such agreement do not exceed the corresponding
tax payments that the Company or such Subsidiary would have been required to
make to any relevant taxing authority had the Company or such Subsidiary not
joined in such consolidated or combined returns, but instead had filed
returns including only the Company or its Subsidiaries (provided that any
such agreement may provide that, if the Company or any such Subsidiary ceases
to be a member of the affiliated group of corporations of which Mafco
Holdings is the common parent for purposes of filing a consolidated Federal
income tax return (such cessation, a "Deconsolidation Event"), then the
Company or such Subsidiary shall indemnify such direct or indirect
shareholder with respect to any Federal, state or local income, franchise or
other tax liability (including any related interest, additions or penalties)
imposed on such shareholder as the result of an audit or other adjustment
with respect to any period prior to such Deconsolidation Event that is
attributable to the Company, such Subsidiary or any predecessor business
thereof (computed as if the Company, such Subsidiary or such predecessor
business, as the case may be, were a stand-alone entity that filed separate
tax returns as an independent corporation), but only to the extent that any
such tax liability exceeds any liability for taxes recorded on the books of
the Company or such Subsidiary with respect to any such period).
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or
any agency thereof, in each case, maturing within 360 days of the date of
acquisition thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company (including the Trustee)
which is organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States of America
having capital, surplus and undivided profits aggregating in excess of $250.0
million and whose debt is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by any registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a
nationally recognized broker-dealer, (iv) investments in commercial paper,
maturing not more than 90 days after the date of acquisition, issued by
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a corporation (other than an Affiliate or Subsidiary of the Company)
organized and in existence under the laws of the United States of America or
any foreign country recognized by the United States of America with a rating
at the time as of which any investment therein is made of "P-2" (or higher)
according to Moody's Investors Service, Inc. or "A-2" (or higher) according
to Standard and Poor's Corporation, (v) securities with maturities of six
months or less from the date of acquisition backed by standby or direct pay
letters of credit issued by any bank satisfying the requirements of clause
(ii) above and (vi) securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's
Corporation or "A" by Moody's Investors Service, Inc.
"Trustee" means the party named in the Senior Notes Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Unrestricted Affiliate" means a Person (other than a Subsidiary of the
Company) controlled (as defined in the definition of an "Affiliate") by the
Company, in which no Affiliate of the Company (other than (x) a Wholly Owned
Recourse Subsidiary of the Company, (y) a Permitted Affiliate and (z) another
Unrestricted Affiliate) has an Investment.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States of America is pledged
and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Recourse Subsidiary" means a Subsidiary of the Company
(other than a Non-Recourse Subsidiary) all the Capital Stock of which (other
than directors' qualifying shares) is owned by (i) the Company, (ii) the
Company and one or more Wholly Owned Recourse Subsidiaries or (iii) one or
more Wholly Owned Recourse Subsidiaries.
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THE SENIOR SUBORDINATED NOTES
The New Senior Subordinated Notes will be issued under the Senior
Subordinated Notes Indenture, dated as of February 1, 1998, between Revlon
Escrow and U.S. Bank Trust National Association (formerly known as First Trust
National Association), as trustee (the "Trustee"), as supplemented by the
First Supplemental Indenture thereto among the Company, Revlon Escrow and
the Trustee dated as of March 4, 1998, copies of which are filed as exhibits
to the Registration Statement of which this Prospectus is a part. The
Company assumed the obligations of Revlon Escrow under the Senior Subordinated
Notes Indenture pursuant to such supplemental indenture on March 4, 1998.
The following summary, which describes certain provisions of the Senior
Subordinated Notes Indenture and the Senior Subordinated Notes, does
not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Trust Indenture Act of 1939, as in effect on
the date of the original issue of the Senior Subordinated Notes (the "TIA"),
and all the provisions of the Senior Subordinated Notes Indenture and the
Senior Subordinated Notes, including the definitions therein of terms not
defined in this Prospectus. Certain terms used herein are defined below under
"--Certain Definitions." The New Senior Subordinated Notes are identical in
all material respects to the terms of the Old Senior Subordinated Notes,
except for certain transfer restrictions and registration rights relating to
the Old Senior Subordinated Notes and except that, if the Exchange Offer is
not consummated by August 3, 1998, the interest rate on the Old Senior
Subordinated Notes from and including such date until but excluding the date
of consummation of the Exchange Offer will increase by 0.5%. See
"--Registration Rights."
General
The Old Senior Subordinated Notes are, and the New Senior Subordinated
Notes will be, unsecured obligations of the Company, and will mature on
February 1, 2008. The Old Senior Subordinated Notes are, and the New Senior
Subordinated Notes will be, subordinated in right of payment to all existing
and future Senior Debt. The Trustee authenticated and delivered Old Senior
Subordinated Notes for original issue in an aggregate principal amount of
$650,000,000. The New Senior Subordinated Notes will be treated as a
continuation of the Old Senior Subordinated Notes, which bear interest at a
rate equal to 8 5/8% per annum payable from February 2, 1998 semiannually in
arrears on February 1 and August 1 of each year, commencing August 1, 1998,
to the persons who are registered holders thereof at the close of business on
the January 15 or July 15 next preceding such interest payment date. The rate
per annum at which the Old Senior Subordinated Notes will bear interest may
increase under certain circumstances described below under "--Registration
Rights."
All interest on the Senior Subordinated Notes will be computed on the
basis of a 360-day year of twelve 30-day months. Principal and interest will
be payable at the office of the Trustee, but, at the option of the Company,
interest may be paid by check mailed to the registered holders of the Senior
Subordinated Notes at their registered addresses. The Senior Subordinated
Notes will be transferable and exchangeable at the office of the Trustee and
will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof.
Any Old Senior Subordinated Notes that remain outstanding after the
consummation of the Exchange Offer, together with the Senior Subordinated
Exchange Notes issued in connection with the Exchange Offer, will be treated
as a single class of securities under the Senior Subordinated Notes
Indenture.
Optional Redemption
Except as set forth below, the Senior Subordinated Notes will not be
redeemable at the option of the Company prior to February 1, 2003. On and
after such date, the Senior Subordinated Notes may be redeemed at the option
of the Company, at any time as a whole, or from time to time in part, at the
following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest (if any) to the date of redemption (subject
to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date):
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if redeemed during the 12-month period commencing February 1:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- -------- ----------------
<S> <C>
2003 104.313%
2004 102.875
2005 101.438
2006 100.000%
</TABLE>
In addition, the Senior Subordinated Notes may be redeemed at the option
of the Company in connection with the occurrence of a Change of Control at
any time as a whole, at a redemption price equal to the sum of (i) the then
outstanding principal amount thereof, plus (ii) accrued and unpaid interest
(if any) to the date of redemption, plus (iii) the Applicable Premium.
Prior to February 1, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the Senior Subordinated Notes with, and to the
extent the Company actually receives, the net proceeds of one or more Public
Equity Offerings from time to time, at 108 5/8% of the principal amount
thereof, plus in either case accrued interest to the date of redemption;
provided, however, that at least $422.5 million aggregate principal amount of
the Senior Subordinated Notes must remain outstanding after each such
redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of Senior Subordinated Notes
to be redeemed at his registered address. Senior Subordinated Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Senior Subordinated Notes (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Senior Subordinated Notes
(or such portions thereof) called for redemption.
The following definitions are used to determine the Applicable Premium:
"Applicable Premium" means, with respect to a Senior Subordinated Note at
any time, the greater of (i) 1.0% of the then outstanding principal amount of
such Senior Subordinated Note at such time and (ii) the excess of (A) the
present value of the required interest and principal payments due on such
Senior Subordinated Note, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the then outstanding principal
amount of such Senior Subordinated Note at such time.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two Business Days prior to the
date fixed for repayment or, in the case of defeasance, prior to the date of
deposit (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining average life to Stated Maturity of the Senior Subordinated Notes;
provided, however, that if the average life to Stated Maturity of the Senior
Subordinated Notes is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly yields of United States Treasury
securities for which such yields are given, except that if the average life
to Stated Maturity of the Senior Subordinated Notes is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
Sinking Fund
There will be no mandatory sinking fund payments for the Senior
Subordinated Notes.
Subordination
The payment of the principal, premium (if any) and interest on the Senior
Subordinated Notes is subordinated in right of payment, as set forth in the
Senior Subordinated Notes Indenture, to the payment when due of all Senior
Debt of the Company. However, payment from the money or the proceeds of U.S.
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Government Obligations held in any defeasance trust described under
"--Defeasance" below is not subordinated to any Senior Debt or subject to the
restrictions defined therein. As of December 31, 1997, after giving effect to
the Refinancing Transactions, the aggregate principal amount of outstanding
Senior Debt would have been approximately $902.6 million. Although the Senior
Subordinated Notes Indenture contains limitations on the amount of additional
Debt which the Company may incur, under certain circumstances the amount of
such Debt could be substantial and, in any case, such Debt may be Senior
Debt. See "--Limitation on Debt." A substantial portion of the operations of
the Company is conducted through its Subsidiaries. Claims of creditors of
such Subsidiaries, including trade creditors, secured creditors and creditors
holding guarantees issued by such Subsidiaries (including holders of Bank
Debt), and claims of preferred stockholders (if any) of such Subsidiaries
generally will have priority with respect to the assets and earnings of such
Subsidiaries over the claims of creditors of the Company, including holders
of the Senior Subordinated Notes, even though such obligations may not
constitute Senior Debt. The domestic Subsidiaries of the Company have
guaranteed the Company's obligations under the Credit Agreement. The Senior
Subordinated Notes, therefore, will be effectively subordinated to the
outstanding indebtedness and other liabilities of the Subsidiaries of the
Company. As of December 31, 1997, after giving effect to the Refinancing
Transactions, the outstanding indebtedness of the Company's Subsidiaries
would have been approximately $235.6 million. Although the Subordinated Notes
Indenture limits the incurrence of Debt and preferred stock of the
Subsidiaries of the Company, such limitation is subject to a number of
significant qualifications; moreover, the Senior Subordinated Notes Indenture
does not impose any limitation on the incurrence by such Subsidiaries of
liabilities that are not considered Debt under the Senior Subordinated Notes
Indenture. See "--Limitation on Debt."
Only indebtedness of the Company that is Senior Debt will rank senior to
the Senior Subordinated Notes in accordance with the provisions of the Senior
Subordinated Notes Indenture. The Senior Subordinated Notes will in all
respects rank pari passu with all future Senior Subordinated Debt of the
Company. The Company has covenanted in the Senior Subordinated Notes
Indenture that it will not issue, assume, guarantee, incur or otherwise
become liable for (collectively, "issue"), directly or indirectly, any Debt
which is subordinate or junior in ranking in any respect to Senior Debt
unless such Debt is Senior Subordinated Debt or is expressly subordinated in
right of payment to the Senior Subordinated Notes. Unsecured Debt is not
deemed to be subordinate or junior to secured Debt merely because it is
unsecured.
"Senior Debt" is defined to mean the following obligations, whether
outstanding on the Issue Date or thereafter created, incurred or assumed, and
whether at any time owing actually or contingent: (i) all obligations
consisting of the Bank Debt, the 9 1/2% Senior Notes, the 9 3/8% Senior Notes
and the Senior Notes; (ii) all obligations consisting of the principal of and
premium (if any) and accrued and unpaid interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Company), and all fees, expenses and other amounts in respect
of (A) indebtedness of the Company for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which the Company is responsible or liable; (iii) all Capital
Lease Obligations of the Company; (iv) all obligations of the Company (A) for
the reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction, (B) under interest rate swaps, caps, collars,
options and similar arrangements and foreign currency hedges entered into in
respect of any obligations described in clauses (i), (ii) and (iii) or (C)
Issued or assumed as the deferred purchase price of property and all
conditional sale obligations of the Company and all obligations of the
Company under any title retention agreement; (v) all obligations of other
Persons of the type referred to in clauses (ii), (iii) and (iv) and all
dividends of other persons for the payment of which, in either case, the
Company is responsible or liable as obligor, guarantor or otherwise,
including by means of any agreement which has the economic effect of a
guarantee; and (vi) all obligations consisting of Refinancings of any
obligation described in clauses (i), (ii), (iii), (iv) or (v); unless, in the
case of any particular obligation, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that
such obligations are not superior in right of payment to the Senior
Subordinated Notes. However, Senior Debt will not include (1) any obligation
of the Company to any Subsidiary or any Permitted Affiliate Debt, (2) any
liability for Federal, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (4) any indebtedness, guarantee
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or obligation of the Company that is subordinate or junior in any respect to
any other indebtedness, guarantee or obligation of the Company, (5) that
portion of any Debt which at the time of Issuance is issued in violation of
the Senior Subordinated Notes Indenture; provided, however, that in the case
of clause (5), (A) any Debt Issued to any person who had no actual knowledge
that the Issuance of such Debt was not permitted under the Senior
Subordinated Notes Indenture and who received on the date of Issuance thereof
a certificate from an officer of the Company to the effect that the Issuance
of such Debt would not violate the Senior Subordinated Notes Indenture shall
constitute Senior Debt and (B) any Debt arising from the honoring by a bank
or other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business shall constitute Senior
Debt provided that such Debt would normally be extinguished within three
Business Days of Issuance or (6) any Senior Subordinated Notes.
The Company may not pay principal of, or premium (if any) or interest on,
the Senior Subordinated Notes or make any deposit pursuant to the provisions
described under "--Defeasance" below and may not repurchase, redeem or
otherwise retire any Senior Subordinated Notes (collectively, "pay the Senior
Subordinated Notes") if (i) any Senior Debt is not paid when due or (ii) any
other default on Senior Debt occurs and the maturity of such Senior Debt is
accelerated in accordance with its terms unless, in either case, the default
has been cured or waived and any such acceleration has been rescinded or such
Senior Debt has been paid in full. During the continuance of any default
(other than a default described in clause (i) or (ii) of the preceding
sentence) with respect to any Designated Senior Debt pursuant to which the
maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace period, the Company may not pay the Senior
Subordinated Notes for a period (a "Payment Blockage Period") commencing upon
the receipt by the Company and the Trustee of written notice of such default
from the Representative of such Designated Senior Debt specifying an election
to effect a Payment Blockage Period (a "Payment Blockage Notice") and ending
179 days thereafter (or earlier if such Payment Blockage Period is terminated
(i) by written notice to the Trustee and the Company from the Representative
which gave such Payment Blockage Notice, (ii) by repayment in full of such
Designated Senior Debt or (iii) because the default specified in such Payment
Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the
provisions contained in the first sentence of "--Subordination"), unless the
holders of such Designated Senior Debt or the Representative of such holders
have accelerated the maturity of such Designated Senior Debt, the Company may
resume payments (including any missed payments) on the Senior Subordinated
Notes after the end of such Payment Blockage Period. Not more than one
Payment Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior Debt
during such period. However, if any Payment Blockage Notice within such
360-day period is given by or on behalf of any holders of any Designated
Senior Debt (other than the Bank Debt), the Representative of the Bank Debt
may give another Payment Blockage Notice within such period. In no event,
however, may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any
consecutive 360-day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar
proceeding relating to the Company or its property, the holders of Senior
Debt will be entitled to receive payment in full before the holders of the
Senior Subordinated Notes are entitled to receive any payment.
Notwithstanding the foregoing, the subordination provisions will not have
any effect on the right of the holders to accelerate the maturity of the
Senior Subordinated Notes. If payment of the Senior Subordinated Notes is
accelerated because of an Event of Default, the Company or the Trustee will
promptly notify the holders of the Designated Senior Debt or their
Representatives of the acceleration.
By reason of such subordination provision contained in the Senior
Subordinated Notes Indenture, in the event of insolvency, creditors of the
Company who are holders of Senior Debt may recover more, ratably, than the
holders of the Senior Subordinated Notes, and creditors of the Company who
are not holders of Senior Debt or of Senior Subordinated Debt (including the
Senior Subordinated Notes) may recover less, ratably than holders of Senior
Debt and may recover more, ratably, than the holders of Senior Subordinated
Debt.
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Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of Senior Subordinated Notes will have the right to
require the Company to repurchase all or any part of such holder's Senior
Subordinated Notes at a repurchase price equal to their Put Amount as of the
date of repurchase plus accrued and unpaid interest to the date of
repurchase:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person will be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock of
the Company; provided, however, that the Permitted Holders "beneficially own"
(as so defined), directly or indirectly, in the aggregate a lesser percentage
of the total voting power of the Voting Stock of the Company than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Company (for the purposes of this clause (i), such other
Person will be deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation, if such other Person beneficially
owns, directly or indirectly, more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders beneficially own,
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors of such parent
corporation); or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved
by a vote of 66 2/3% of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; provided, that prior to the mailing of the notice to holders of
Senior Subordinated Notes provided for in the following paragraph, but in any
event within 30 days following any Change of Control, the Company covenants
to (i) repay in full all Bank Debt or to offer to repay in full all Bank Debt
and to repay the Bank Debt of each lender who has accepted such offer or (ii)
obtain the requisite consent under the Bank Debt to permit the repurchase of
the Senior Subordinated Notes as provided for below. The Company must first
comply with the covenant in the preceding sentence before it will be required
to purchase Senior Subordinated Notes in connection with a Change of Control.
Within 45 days following any Change of Control, the Company will mail a
notice to each holder with a copy to the Trustee stating (i) that a Change of
Control has occurred and that such holder has the right to require the
Company to repurchase all or any part of such holder's Senior Subordinated
Notes at a repurchase price in cash equal to their Put Amount as of the date
of repurchase plus accrued and unpaid interest to the date of repurchase;
(ii) the circumstances and relevant facts regarding such Change of Control;
(iii) the repurchase date (which will be no earlier than 30 days nor later
than 60 days from the date such notice is mailed); and (iv) the instructions,
determined by the Company consistent with this provision, that a holder must
follow in order to have its Senior Subordinated Notes repurchased.
Holders electing to have a Senior Subordinated Note repurchased will be
required to surrender the Senior Subordinated Note, with an appropriate form
duly completed, to the Company at the address specified in the notice at
least 10 Business Days prior to the purchase date. Holders will be entitled
to withdraw their election if the Trustee or the Company receives not later
than three Business Days prior to the purchase date, a facsimile transmission
or letter setting forth the name of the holder, the principal amount of the
Senior Subordinated Note which was delivered for purchase by the holder and a
statement that such holder is withdrawing his election to have such Senior
Subordinated Note repurchased.
On the repurchase date, all Senior Subordinated Notes repurchased by the
Company shall be delivered to the Trustee for cancellation, and the Company
shall pay the repurchase price plus accrued
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and unpaid interest to the holders entitled thereto. Upon surrender of a
Senior Subordinated Note that is repurchased under this provision in part,
the Company shall execute and the Trustee shall authenticate for the holder
thereof (at the Company's expense) a new Senior Subordinated Note having a
principal amount equal to the principal amount of the Senior Subordinated
Note surrendered less the portion of the principal amount of the Senior
Subordinated Note repurchased.
The Company's ability to pay cash to holders of Senior Subordinated Notes
upon a repurchase may be limited by the Company's then existing financial
resources. The Company will comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in
connection with any offer required to be made by the Company to repurchase
the Senior Subordinated Notes as a result of a Change of Control.
The Credit Facilities contain, and future indebtedness of the Company may
contain, prohibitions on the occurrence of certain events that would
constitute a Change of Control or require such indebtedness to be purchased
upon a Change of Control. Moreover, the exercise by the holders of their
right to require the Company to repurchase the Senior Subordinated Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not. Finally, the Company's ability to pay cash to the holders of
Senior Subordinated Notes following the occurrence of a Change of Control may
be limited by the Company's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make
any required repurchases and there can be no assurance that the Company would
be able to obtain financing to make such repurchases. The provisions relating
to the Company's obligation to make an offer to repurchase the Senior
Subordinated Notes as a result of a Change of Control may be waived or
modified with the written consent of the holders of a majority in principal
amount of the Senior Subordinated Notes.
Certain Covenants
Set forth below are certain covenants contained in the Senior Subordinated
Notes Indenture:
Limitation on Debt. (a) The Company shall not, and shall not permit any
Subsidiary of the Company to, Issue, directly or indirectly, any Debt;
provided, however, that the Company and its Subsidiaries shall be permitted
to Issue Debt if, at the time of such Issuance, the Consolidated EBITDA
Coverage Ratio for the period of the most recently completed four consecutive
fiscal quarters ending at least 45 days prior to the date such Debt is Issued
exceeds the ratio of 2.0 to 1.0.
(b) Notwithstanding the foregoing, the Company and its Subsidiaries may
Issue the following Debt:
(1) Debt Issued pursuant to the Credit Agreement, any Refinancing thereof,
or any other credit agreement, indenture or other agreement, in an aggregate
principal amount not to exceed $950 million outstanding at any one time;
(2) Debt (other than Debt described in clause (1) above) Issued for
working capital and general corporate purposes in an aggregate principal
amount at the time of such Issue which, when taken together with the
aggregate principal amount then outstanding of all other Debt Issued pursuant
to this clause (2), will not exceed the sum of (x) 50% of the book value of
the inventory of the Company and its consolidated Subsidiaries and (y) 80% of
the book value of the accounts receivable of the Company and its consolidated
Subsidiaries, in each case as determined in accordance with GAAP;
(3) Debt (other than Debt described in clauses (1) and (2) above) in
respect of the undrawn portion of the face amount of or unpaid reimbursement
obligations in respect of letters of credit for the account of the Company or
any of its Subsidiaries in an aggregate amount at any time outstanding not to
exceed the excess of (i) $150 million over (ii) the undrawn portion of the
face amount of or unpaid reimbursement obligations in respect of letters of
credit Issued under the Credit Agreement or any Refinancing thereof or any
other credit agreement, indenture or other agreement pursuant to clause (1)
above;
(4) Debt of the Company Issued to and held by a Wholly Owned Recourse
Subsidiary of the Company and Debt of a Subsidiary of the Company Issued to
and held by the Company or a Wholly Owned Recourse Subsidiary; provided,
however, that any subsequent Issuance or transfer of any Capital
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Stock that results in any such Wholly Owned Recourse Subsidiary ceasing to be
a Wholly Owned Recourse Subsidiary or any subsequent transfer of such Debt
(other than to the Company or a Wholly Owned Recourse Subsidiary) will be
deemed, in each case, to constitute the Issuance of such Debt by the Company
or of such Debt by such Subsidiary;
(5) the Senior Notes, the Senior Subordinated Notes and Debt Issued to
Refinance any Debt permitted by this clause (5); provided, however, that, in
the case of a Refinancing, the principal amount of the Debt so Issued shall
not exceed the principal amount of the Debt so Refinanced plus any
Refinancing Costs thereof; provided further, however, that any Debt Issued
pursuant to this clause (5) to Refinance the Senior Subordinated Notes or any
Refinancing thereof shall consist of Senior Subordinated Debt or Subordinated
Obligations;
(6) Debt (other than Debt described in clause (1), (2), (3), (4) or (5)
above or (11) below) of the Company or any of its Subsidiaries outstanding or
committed on the Issue Date and Debt Issued to Refinance any Debt permitted
by this clause (6), or by paragraph (a) above; provided, however, that in the
case of a Refinancing, the principal amount of the Debt so Issued will not
exceed the principal amount of the Debt so Refinanced plus any Refinancing
Costs thereof;
(7) Debt Issued and arising out of purchase money obligations for property
acquired in an amount not to exceed, for the period through June 30, 1998,
$15 million, plus for each period of twelve consecutive months ending on June
30 thereafter, $15 million; provided, however, that any such amounts which
are available to be utilized during any such twelve month period and are not
so utilized may be utilized during any succeeding period;
(8) Debt of a Subsidiary of the Company Issued and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company (other than
Debt Issued as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary of
the Company or was acquired by the Company);
(9) Debt Issued to Refinance Debt referred to in the foregoing clause (8)
or this clause (9); provided, however, that the principal amount of the Debt
so Issued shall not exceed the principal amount of the Debt so Refinanced
plus any Refinancing Costs thereof;
(10) Non-Recourse Debt of a Non-Recourse Subsidiary; provided, however,
that if any such Debt thereafter ceases to be Non-Recourse Debt of a
Non-Recourse Subsidiary, then such event will be deemed for the purposes of
this covenant to constitute the Issuance of such Debt by the issuer thereof;
(11) Permitted Affiliate Debt; and
(12) Debt (other than Debt described in clauses (1) through (11) above and
paragraph (a) above) in an aggregate principal amount outstanding at any time
not to exceed $150 million.
(c) To the extent the Company or any Subsidiary of the Company guarantees
any Debt of the Company or of a Subsidiary of the Company, such guarantee and
such Debt will be deemed to be the same indebtedness and only the amount of
such Debt will be deemed to be outstanding. If the Company or a Subsidiary of
the Company guarantees any Debt of a Person that, subsequent to the Issuance
of such guarantee, becomes a Subsidiary, such guarantee and the Debt so
guaranteed will be deemed to be the same indebtedness, which will be deemed
to have been Issued when the guarantee was Issued and will be deemed to be
permitted to the extent the guarantee was permitted when Issued.
Limitation on Liens. The Company shall not, and shall not permit any
Subsidiary of the Company to, create or suffer to exist any Lien upon any of
its property or assets (including Capital Stock or Debt of any Subsidiary of
the Company) now owned or hereafter acquired by it, securing any Debt (other
than Senior Debt or Debt of a Subsidiary of the Company) unless
contemporaneously therewith effective provision is made to secure the Senior
Subordinated Notes equally and ratably with such Debt with a Lien on the same
assets securing such Debt for so long as such Debt is secured by such Lien;
provided, however, that if such Debt is a Subordinated Obligation, the Lien
securing such Debt shall be subordinate and junior to the Lien securing the
Senior Subordinated Notes with the same or lesser relative priority as such
Subordinated Obligation shall have with respect to the Senior Subordinated
Notes.
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Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any Subsidiary of the Company, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) or to the holders of its Capital Stock
(except dividends or distributions payable solely in its Non-Convertible
Capital Stock or in options, warrants or other rights to purchase its
Non-Convertible Capital Stock and except dividends or distributions payable
to the Company or a Subsidiary of the Company and, if a Subsidiary of the
Company is not wholly owned, to its other equity holders to the extent they
are not Affiliates of the Company), (ii) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior
to scheduled maturity, scheduled repayment or scheduled sinking fund payment
any Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final
maturity, in each case within one year of the date of acquisition) or (iv)
make any Investment in (A) an Affiliate of the Company other than a
Subsidiary of the Company and other than an Affiliate of the Company which
will become a Subsidiary of the Company as a result of any such Investment,
or (B) a Non-Recourse Subsidiary (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted Payment") if at the time
the Company or such Subsidiary makes such Restricted Payment (the amount of
any such Restricted Payment, if other than in cash, as determined in good
faith by the Board of Directors, the determination of which shall be
evidenced by a resolution of the Board of Directors):
(1) a Default shall have occurred and be continuing (or would result
therefrom); or
(2) the Company is not able to incur $1.00 of additional Debt in
accordance with the provisions of paragraph (a) of "--Limitation on Debt"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments after the Issue Date would exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company accrued during the
period (treated as one accounting period) from January 1, 1998, to the end of
the most recent fiscal quarter ending at least 45 days prior to the date of
such Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(b) the aggregate Net Cash Proceeds received by the Company from the Issue
or sale of its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) subsequent to the Issue Date (other than an Issuance or sale to a
Subsidiary of the Company or an employee stock ownership plan or other trust
established by the Company or any Subsidiary for the benefit of their
employees);
(c) the aggregate Net Cash Proceeds received by the Company from the Issue
or sale of its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) to an employee stock ownership plan subsequent to January 1, 1998;
provided, however, that if such employee stock ownership plan incurs any
Debt, such aggregate amount shall be limited to an amount equal to any
increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such employee stock ownership plan with respect
to Debt incurred by it to finance the purchase of such Capital Stock;
(d) the amount by which Debt of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Debt of the Company convertible or
exchangeable for Capital Stock (other than Redeemable Stock or Exchangeable
Stock) of the Company (less the amount of any cash, or other property,
distributed by the Company upon such conversion or exchange);
(e) the aggregate net cash proceeds received by the Company subsequent to
the Issue Date as capital contributions (which shall not be deemed to include
any net cash proceeds received in connection with (i) the issuance of any
Permitted Affiliate Debt, (ii) the Initial Cash Payment and (iii) any
contribution designated at the time it is made as a restricted contribution
(a "Restricted Contribution");
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(f) to the extent that an Investment made by the Company or a Subsidiary
subsequent to the Issue Date has theretofore been included in the calculation
of the amount of Restricted Payments, the aggregate cash repayments to the
Company or a Subsidiary of such Investment to the extent not included in
Consolidated Net Income of the Company; and
(g) $26 million.
Notwithstanding the foregoing, the Company may take actions to make a
Restricted Payment in anticipation of the occurrence of any of the events
described in this paragraph (a) or paragraph (b) below; provided, however,
that the making of such Restricted Payment shall be conditional upon the
occurrence of such event.
(b) Paragraph (a) shall not prohibit the following:
(i) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent Issue or sale of, Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock and other than Capital Stock issued or
sold to a Subsidiary or an employee stock ownership plan) or of a cash
capital contribution to the Company; provided, however, that (A) such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from clauses (3)(b) and (3)(c) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations from Net
Available Cash to the extent permitted by "--Limitation on Sales of Assets
and Subsidiary Stock" below, provided, however, that such purchase,
repurchase, or redemption, defeasance or other acquisition or retirement for
value shall be excluded in the calculation in the amount of Restricted
Payments;
(iv) dividends paid within 60 days after the date of declaration thereof,
or Restricted Payments made within 60 days after the making of a binding
commitment in respect thereof, if at such date of declaration or of such
commitment such dividend or other Restricted Payment would have complied with
paragraph (a); provided, however, that at the time of payment of such
dividend or the making of such Restricted Payment, no other Default shall
have occurred and be continuing (or result therefrom); provided further,
however, that such dividend or other Restricted Payment shall be included in
the calculation of the amount of Restricted Payments;
(v) dividends in an aggregate amount per annum not to exceed 6% of the
aggregate Net Cash Proceeds received by the Company in connection with all
Public Equity Offerings occurring after February 15, 1993; provided, however,
that such amount shall be included in the calculation of the amount of
Restricted Payments;
(vi) so long as no Default has occurred and is continuing or would result
from such transaction, (x) amounts paid or property transferred pursuant to
the Permitted Transactions and (y) dividends or distributions, redemptions of
Capital Stock and other Restricted Payments in an aggregate amount not to
exceed the sum of the Initial Cash Payment and all Restricted Contributions,
provided, however, that in the case of clause (y), such dividends,
distributions, redemptions of Capital Stock and other Restricted Payments are
not prohibited by the Credit Agreement or any Refinancing thereof (whether
pursuant to its terms or as a result of waiver, amendment, termination or
otherwise); provided further, however, that such amounts paid, property
transferred, dividends, distributions, redemptions and Restricted Payments
shall be excluded in the calculation of the amount of Restricted Payments;
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(vii) so long as no Default has occurred and is continuing or would result
from such transaction, Restricted Payments in an aggregate amount not to
exceed the sum of (x) $25 million and (y) $5 million per annum (net of any
applicable cash exercise price actually received by the Company) made from
time to time to finance the purchase by the Company or Parent of its common
stock (for not more than fair market value) in connection with the delivery
of such common stock to grantees under any stock option plan of the Company
or Parent upon the exercise by such grantees of stock options or stock
appreciation rights settled with common stock or upon the grant of shares of
restricted common stock pursuant thereto; provided, however, that (A) amounts
available pursuant to this clause (vii) to be utilized for Restricted
Payments during any such year may be carried forward and utilized in any
succeeding year and (B) no Restricted Payments shall be permitted pursuant to
this clause unless, at the time of such purchase, the issuance by the Company
or Parent of new shares of common stock to such optionee would cause more
than 19.9% of the total voting power or more than 19.9% of the total value of
the stock of the Company or Parent to be held by Persons other than members
of the Mafco Consolidated Group (the term "stock" for purposes of this clause
shall have the same meaning as such term had for purposes of Section 1504 of
the Code); provided further, however, that such amounts shall be excluded in
the calculation of the amount of Restricted Payments;
(viii) any purchase, repurchase, redemption, defeasance or other
acquisition by any Non-Recourse Subsidiary of Non-Recourse Debt of such
Non-Recourse Subsidiary; provided, however, that the amount of such purchase,
repurchase, redemption, defeasance or other acquisition shall be excluded in
the calculation of the amount of Restricted Payments;
(ix) so long as no Default shall have occurred and be continuing, amounts
paid to Parent to the extent necessary to enable Parent to pay actual
expenses, other than those paid to Affiliates of the Company, incidental to
being a publicly reporting, but non-operating, company; provided, however,
that such amounts paid shall be excluded in the calculation of the amount of
Restricted Payments; or
(x) any loan to a Permitted Affiliate entered into in the ordinary course
of business; provided, however, that such Permitted Affiliate holds, directly
or indirectly, no more than 10% of the outstanding Capital Stock of the
Company.
Limitation on Restrictions on Distributions from Subsidiaries. The Company
shall not, and shall not permit any Subsidiary of the Company to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary of the Company to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Debt owed to the Company, (ii) make any loans or advances to the Company
or (iii) transfer any of its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Subsidiary of the
Company pursuant to an agreement relating to any Debt Issued by such
Subsidiary on or prior to the date on which such Subsidiary was acquired by
the Company (other than Debt Issued as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary of the Company or was acquired by the Company)
and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting an
Issuance of Bank Debt or a Refinancing of any other Debt Issued pursuant to
an agreement referred to in clause (1) or (2) above or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or (2)
above or this clause (3); provided, however, that any such encumbrance or
restriction with respect to any Subsidiary is no less favorable to the
holders of Senior Subordinated Notes than the least favorable of the
encumbrances and restrictions with respect to such Subsidiary contained in
the agreements referred to in clause (1) or (2) above, as determined in good
faith by the Board of Directors of the Company, the determination of which
shall be evidenced by a resolution of such Board of Directors;
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(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease;
(5) in the case of clause (iii) above, restrictions contained in security
agreements securing Debt of a Subsidiary (other than security agreements
securing Debt of a Subsidiary Issued in connection with any agreement
referred to in clause (1), (2) or (3) above) and restrictions contained in
agreements relating to a disposition of property of a Subsidiary, to the
extent such restrictions restrict the transfer of the property subject to
such agreements;
(6) any encumbrance or restriction binding on a Foreign Subsidiary
contained in an agreement pursuant to which such Foreign Subsidiary has
Issued Debt consisting of working capital borrowings; and
(7) any encumbrance or restriction relating to a Non-Recourse Subsidiary.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) to, make any Asset Disposition unless:
(i) the Company or such Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors of the Company, the determination of
which shall be conclusive and evidenced by a resolution of the Board of
Directors of the Company (including as to the value of all non-cash
consideration), of the Capital Stock and assets subject to such Asset
Disposition;
(ii) at least 75% of the consideration consists of cash, cash equivalents,
readily marketable securities which the Company intends, in good faith, to
liquidate promptly after such Asset Disposition or the assumption of
liabilities (including, in the case of the sale of the Capital Stock of a
Subsidiary of the Company, liabilities of the Company or such Subsidiary);
and
(iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Subsidiary, as the case may
be):
(A) first, to the extent the Company is required by the terms of any
Senior Debt or Debt of a Subsidiary of the Company, to prepay, repay or
purchase Senior Debt or Debt of a Wholly Owned Recourse Subsidiary or
additionally, in the case of an Asset Disposition by a Subsidiary that is not
a Wholly Owned Recourse Subsidiary, Debt of such Subsidiary (in each case
other than Debt owed to the Company or an Affiliate of the Company) in
accordance with the terms of such Debt;
(B) second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), at the Company's election, to
either (1) the optional prepayment, repayment or repurchase of Senior Debt or
Debt of a Wholly Owned Recourse Subsidiary or, additionally in the case of an
Asset Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, Debt of such Subsidiary (in each case other than Debt owed to the
Company or an Affiliate of the Company) which the Company is not required by
the terms thereof to prepay, repay or repurchase (whether or not the related
loan commitment is permanently reduced in connection therewith), or (2) the
investment by the Company or any Wholly Owned Recourse Subsidiary (or,
additionally in the case of an Asset Disposition by a Subsidiary that is not
a Wholly Owned Recourse Subsidiary, the investment by such Subsidiary) in
assets to replace the assets that were the subject of such Asset Disposition
or in assets that (as determined by the Board of Directors of the Company,
the determination of which shall be conclusive and evidenced by a resolution
of such Board of Directors) will be used in the businesses of the Company and
its Wholly Owned Recourse Subsidiaries (or, additionally in the case of an
Asset Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the businesses of such Subsidiary) existing on the Issue Date or
in businesses reasonably related thereto, in all cases, within the later of
one year from the date of such Asset Disposition or the receipt of such Net
Available Cash; and
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to
purchase Senior Subordinated Notes and other Senior Subordinated Debt
designated by the Company pursuant to and subject to the conditions of
paragraph (b) below;
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provided, however, that in connection with an offer pursuant to clause (C)
above, if the principal amount and premium of such Senior Subordinated Notes
and such Senior Subordinated Debt, together with accrued and unpaid interest
tendered for acceptance pursuant to such offer exceeds the balance of Net
Available Cash, then the Company will accept for purchase the Senior
Subordinated Notes and such Senior Subordinated Debt of each such tendering
holder on a pro rata basis in accordance with the principal amount so
tendered.
Notwithstanding the foregoing provisions of this paragraph (a), the
Company and the Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this paragraph (a) except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this paragraph (a) exceed $10,000,000. Pending
application of Net Available Cash pursuant to this paragraph (a), such Net
Available Cash shall be (i) invested in Temporary Cash Investments or (ii)
used to make an optional prepayment under any revolving credit facility
constituting Senior Debt or Debt of a Wholly Owned Recourse Subsidiary (or,
additionally in the case of a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, Debt of such Subsidiary), whether or not the related loan
commitment is permanently reduced in connection therewith.
(b) In the event of an Asset Disposition that requires the purchase of
Senior Subordinated Notes pursuant to paragraph (a)(iii)(C), the Company will
be required to purchase Senior Subordinated Notes and Senior Subordinated
Debt designated by the Company tendered pursuant to an offer by the Company
for the Senior Subordinated Notes and such Senior Subordinated Debt (the
"Offer") at a purchase price of 100% of the principal amount without premium,
plus accrued interest to the Purchase Date (or in respect of other Senior
Subordinated Debt such lesser price, if any, as may be provided for by the
terms of such Senior Subordinated Debt) in accordance with the procedures
(including prorationing in the event of oversubscription) set forth in
paragraph (c) below, provided that the procedures for making an offer to
holders of other Senior Subordinated Debt will be as provided for by the
terms of such Senior Subordinated Debt. If (x) the aggregate purchase price
of Senior Subordinated Notes and other Senior Subordinated Debt tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Senior Subordinated Notes and Senior Subordinated Debt, (y)
the Company shall not be obligated to make an offer pursuant to the last
sentence of this paragraph, or (z) the Company shall be unable to purchase
Senior Subordinated Notes from holders thereof in an Offer because of the
provisions of applicable law or of the Company's or its Subsidiaries' loan
agreements, indentures or other contracts governing Senior Debt or Debt of
Subsidiaries (in which case the Company need not make an Offer) the Company
shall apply the remaining Net Available Cash to (i) invest in assets to
replace the assets that were the subject of the Asset Disposition or in
assets that (as determined by the Board of Directors of the Company, the
determination of which shall be conclusive and evidenced by a resolution of
such Board of Directors) will be used in the businesses of the Company and
its Wholly Owned Recourse Subsidiaries (or, additionally in the case of an
Asset Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the business of such Subsidiary) existing on the Issue Date or in
businesses reasonably related thereto or (ii) in the case of clause (x) or
(y) above, prepay, repay or repurchase Debt of the Company or Debt of a
Wholly Owned Recourse Subsidiary or, additionally in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse Subsidiary,
Debt of such Subsidiary which the Company or such Wholly Owned Recourse
Subsidiary or Subsidiary is not required by the terms thereof to prepay,
repay, repurchase or redeem (in each case other than Debt owed to the Company
or an Affiliate of the Company), whether or not the related loan commitment
is permanently reduced in connection therewith. The Company shall not be
required to make an Offer for Senior Subordinated Notes and Senior
Subordinated Debt pursuant to this provision if the Net Available Cash
available therefor (after application of the proceeds as provided in clause
(A) and clause (B) of paragraph (a)(iii) above) are less than $10,000,000 for
any particular Asset Disposition (which lesser amounts shall not be carried
forward for purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within five days after the last date by
which the Company must have applied Net Available Cash pursuant to paragraph
(a)(iii)(B) above, the Company shall be obligated to deliver to the Trustee
and send, by first-class mail to each Holder, a written notice stating that
the
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Holder may elect to have his Senior Subordinated Notes purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice
shall specify a purchase date not less than 30 days nor more than 60 days
after the date of such notice (the "Purchase Date") and shall contain
information concerning the business of the Company which the Company in good
faith believes will enable such holders to make an informed decision (which
at a minimum will include (i) the most recently filed Annual Report on Form
10-K (including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and any
Current Report on Form 8-K of the Company filed subsequent to such Quarterly
Report, other than Current Reports describing Asset Dispositions otherwise
described in the offering materials (or corresponding successor reports), and
(ii) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Senior Subordinated Notes
pursuant to the Offer, together with the information contained in clause (2)
below.
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of paragraph (a) above. On
such date, the Company shall also irrevocably deposit with the Trustee or
with a paying agent (or, if the Company is acting as its own paying agent,
segregate and hold in trust) in immediately available funds an amount equal
to the Offer Amount to be held for payment in accordance with the provisions
of this covenant. The amount so deposited, at the option of, and pursuant to
the specific written direction of, the Company, may be invested in Temporary
Cash Investments the maturity date of which is not later than the Purchase
Date. The Company shall be entitled to any interest or dividends accrued,
earned or paid on such Temporary Cash Investments. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), the Company
shall deliver to the Trustee for cancellation the Senior Subordinated Notes
or portions thereof which have been properly tendered to and are to be
accepted by the Company. The Trustee shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price.
In the event that the aggregate purchase price of the Senior Subordinated
Notes and Senior Subordinated Debt delivered by the Company to the Trustee is
less than the Offer Amount, the Trustee shall deliver the excess to the
Company promptly after the expiration of the Offer Period.
(3) Holders electing to have a Senior Subordinated Note purchased will be
required to surrender the Senior Subordinated Note, with an appropriate form
duly completed, to the Company at the address specified in the notice at
least ten Business Days prior to the Purchase Date. Holders will be entitled
to withdraw their election if the Trustee or the Company receives not later
than three Business Days prior to the Purchase Date, a facsimile transmission
or letter setting forth the name of the holder, the principal amount of the
Senior Subordinated Note which was delivered for purchase by the holder and a
statement that such holder is withdrawing his election to have such Senior
Subordinated Note purchased. If at the expiration of the Offer Period the
aggregate principal amount of Senior Subordinated Notes surrendered by
holders exceeds the Offer Amount, the Company shall select the Senior
Subordinated Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Senior Subordinated
Notes in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Senior Subordinated Notes are purchased only in
part will be Issued new Senior Subordinated Notes equal in principal amount
to the unpurchased portion of the Senior Subordinated Notes surrendered.
(4) At the time the Company delivers Senior Subordinated Notes to the
Trustee which are to be accepted for purchase, the Company will also deliver
an Officers' Certificate stating that such Senior Subordinated Notes are to
be accepted by the Company pursuant to and in accordance with the terms of
this covenant. A Senior Subordinated Note shall be deemed to have been
accepted for purchase at the time the Trustee, directly or through an agent,
mails or delivers payment therefor to the surrendering holder.
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(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Senior Notes
pursuant to this covenant. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this provision,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this covenant
by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company shall not, and
shall not permit any of its Subsidiaries (other than a Non-Recourse
Subsidiary) to, conduct any business or enter into any transaction or series
of similar transactions (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of the
Company or any legal or beneficial owner of 10% or more of the voting power
of the Voting Stock of the Company or with an Affiliate of any such owner
unless
(i) the terms of such business, transaction or series of transactions are
(A) set forth in writing and (B) at least as favorable to the Company or such
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with
an unrelated third Person and
(ii) to the extent that such business, transaction or series of
transactions (other than Debt Issued by the Company which is permitted under
"--Limitation on Debt") is known by the Board of Directors of the Company or
of such Subsidiary to involve an Affiliate of the Company or a legal or
beneficial owner of 10% or more of the voting power of the Voting Stock of
the Company or an Affiliate of such owner, then
(A) with respect to a transaction or series of related transactions, other
than any purchase or sale of inventory in the ordinary course of business (an
"Inventory Transaction"), involving aggregate payments or other consideration
in excess of $5.0 million, such transaction or series of related transactions
has been approved (and the value of any noncash consideration has been
determined) by a majority of those members of the Board of Directors of the
Company having no personal stake in such business, transaction or series of
transactions and
(B) with respect to a transaction or series of related transactions, other
than any Inventory Transaction, involving aggregate payments or other
consideration in excess of $20.0 million (with the value of any noncash
consideration being determined by a majority of those members of the Board of
Directors of the Company having no personal stake in such business,
transaction or series of transactions), such transaction or series of related
transactions has been determined, in the written opinion of a nationally
recognized investment banking firm to be fair, from a financial point of
view, to the Company or such Subsidiary, as the case may be.
(b) The provisions of paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to "--Limitation
on Restricted Payments";
(ii) any transaction between the Company and any of its Subsidiaries;
provided, however, that no portion of any minority interest in any such
Subsidiary is owned by (x) any Affiliate (other than the Company, a Wholly
Owned Recourse Subsidiary of the Company, a Permitted Affiliate or an
Unrestricted Affiliate) of the Company or (y) any legal or beneficial owner
of 10% or more of the voting power of the Voting Stock of the Company or any
Affiliate of such owner (other than the Company, any Wholly Owned Recourse
Subsidiary of the Company or an Unrestricted Affiliate);
(iii) any transaction between Subsidiaries of the Company; provided,
however, that no portion of any minority interest in any such Subsidiary is
owned by (x) any Affiliate (other than the Company, a Wholly Owned Recourse
Subsidiary of the Company, a Permitted Affiliate or an Unrestricted
Affiliate) of the Company or (y) any legal or beneficial owner of 10% or more
of the voting power of the Voting Stock of the Company or any Affiliate of
such owner (other than the Company, any Wholly Owned Recourse Subsidiary of
the Company or an Unrestricted Affiliate);
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(iv) any transaction between the Company or a Subsidiary of the Company
and its own employee stock ownership plan;
(v) any transaction with an officer or director of the Company, of Parent
or of any Subsidiary of the Company entered into in the ordinary course of
business (including compensation or employee benefit arrangements with any
such officer or director); provided, however, that such officer holds,
directly or indirectly, no more than 10% of the outstanding Capital Stock of
the Company;
(vi) any business or transaction with an Unrestricted Affiliate;
(vii) any transaction which is a Permitted Transaction; and
(viii) any transaction pursuant to which Mafco Holdings will provide the
Company and its Subsidiaries at their request and at the cost to Mafco
Holdings with certain allocated services to be purchased from third party
providers, such as legal and accounting services, insurance coverage and
other services.
Limitation on Other Senior Subordinated Debt. The Company shall not Issue,
directly or indirectly, any Debt which is subordinate or junior in ranking in
any respect to Senior Debt unless such Debt is Senior Subordinated Debt or is
expressly subordinated in right of payment to the Senior Subordinated Notes.
Commission Reports. Notwithstanding that the Company may not be required
to be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file or cause to be filed with the Commission
and provide the Trustee and holders of the Senior Subordinated Notes with the
information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe)
with respect to the Company specified in Sections 13 and 15(d) of the
Exchange Act. The Company also will comply with the other provisions of TIA
Section 314(a).
Successor Company
(a) The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any person, unless:
(i) the resulting, surviving or transferee person (if not the Company) is
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and such Person expressly assumes
by a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the
Senior Subordinated Notes Indenture and the Senior Subordinated Notes; (ii)
immediately after giving effect to such transaction (and treating any Debt
which becomes an obligation of the resulting, surviving or transferee Person
or any of its Subsidiaries as a result of such transaction as having been
issued by such Person or such Subsidiary at the time of such transaction), no
Default has occurred and is continuing; (iii) immediately after giving effect
to such transaction, the resulting, surviving or transferee Person would be
able to incur at least $1.00 of Debt pursuant to paragraph (a) of the
"--Limitation on Debt" covenant; (iv) immediately after giving effect to such
transaction, the resulting, surviving or transferee Person has a Consolidated
Net Worth in an amount which is not less than the Consolidated Net Worth of
the Company immediately prior to such transaction; and (v) the Company
delivers to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Senior Subordinated Notes
Indenture; provided, that nothing in this paragraph shall prohibit a Wholly
Owned Recourse Subsidiary from consolidating with or merging with or into, or
conveying, transferring or leasing all or substantially all its assets to,
the Company.
(b) The resulting, surviving or transferee Person will be the successor
Company and shall succeed to, and be substituted for, and may exercise every
right and power of, the predecessor Company under the Senior Subordinated
Notes Indenture and thereafter, except in the case of a lease, the
predecessor Company will be discharged from all obligations and covenants
under the Senior Subordinated Notes Indenture and the Senior Subordinated
Notes.
Defaults
An Event of Default is defined in the Senior Subordinated Notes Indenture
as (i) a default in the payment of interest on the Senior Subordinated Notes
when due, continued for 30 days whether or not
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such payment is prohibited by the provisions for subordination in the Senior
Subordinated Notes Indenture, (ii) a default in the payment of principal of
any Senior Subordinated Note when due at its Stated Maturity, upon
redemption, upon required purchase, upon declaration or otherwise whether or
not such payment is prohibited by the provisions for subordination in the
Senior Subordinated Notes Indenture, (iii) the failure by the Company to
comply with its obligations described under "--Successor Company" above, (iv)
the failure by the Company to comply for 30 days after notice with any of the
covenants described under "--Limitation on Debt," "--Limitation on Liens,"
"--Limitation on Restricted Payments," "--Limitation on Restrictions on
Distributions from Subsidiaries," "--Limitations on Sales of Assets and
Subsidiary Stock," "--Limitation on Transactions with Affiliates,"
"--Limitation on Other Senior Subordinated Debt," "--Change of Control"
(other than a failure to purchase Senior Subordinated Notes) or "--Commission
Reports" above, (v) the failure by the Company to comply for 60 days after
notice with the other agreements applicable to it contained in the Senior
Subordinated Notes Indenture or the Senior Subordinated Notes (other than
those referred to in clauses (i), (ii), (iii) and (iv) of this paragraph),
(vi) Debt of the Company or any Significant Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default and the total principal amount of the portion of
such Debt that is unpaid or accelerated exceeds $25 million or its foreign
currency equivalent and such default continues for 10 days after notice as
specified in the last sentence of this paragraph (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization
of the Company or a Significant Subsidiary (the "bankruptcy provisions") or
(viii) any judgment or decree for the payment of money in excess of $25
million or its foreign currency equivalent is entered against the Company or
a Significant Subsidiary and is not discharged and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or decree or
(B) there is a period of 60 days following the entry of such judgment or
decree during which such judgment or decree is not discharged, waived or the
execution thereof stayed and, in the case of (B), such default continues for
10 days after the notice specified in the next sentence (the "judgment
default provision"). However, a default under clauses (iv), (v), (vi) and
(viii) (B) will not constitute an Event of Default until the Trustee or the
holders of 25% in principal amount of the outstanding Senior Subordinated
Notes notify the Company of the default and the Company does not cure such
default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the outstanding Senior
Subordinated Notes by notice to the Company and to the Representatives of
Bank Debt may declare the principal of and accrued but unpaid interest on all
the Senior Subordinated Notes to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the principal of and
interest on all the Senior Subordinated Notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any holders of the Senior Subordinated Notes. Under certain
circumstances, the holders of a majority in principal amount of the
outstanding Senior Subordinated Notes may rescind any such acceleration with
respect to the Senior Subordinated Notes and its consequences. If payment of
the Senior Subordinated Notes is accelerated because of an Event of Default,
the Company or the Trustee must promptly notify the holders of the Designated
Senior Debt of the acceleration.
Subject to the provisions of the Senior Subordinated Notes Indenture
relating to the duties of the Trustee, in case an Event of Default occurs and
is continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Senior Subordinated Notes Indenture at the request
or direction of any of the holders of the Senior Subordinated Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense which might be incurred in compliance
with such request or direction. Except to enforce the right to receive
payment of principal or interest when due, no holder of a Senior Subordinated
Note may pursue any remedy with respect to the Senior Subordinated Notes
Indenture or the Senior Subordinated Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing,
(ii) holders of at least 25% in principal amount of the outstanding Senior
Subordinated Notes have requested the Trustee in writing to pursue the
remedy, (iii) such holders have offered the Trustee reasonable security or
indemnity against
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any loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt thereof and the offer of security or
indemnity and (v) the holders of a majority in principal amount of the
outstanding Senior Subordinated Notes have not given the Trustee a direction
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the
outstanding Senior Subordinated Notes are given the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law
or the Senior Subordinated Notes Indenture or that the Trustee determines is
unduly prejudicial to the rights of any other holder of a Senior Subordinated
Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Senior
Subordinated Notes notice of the Default within 90 days after it occurs and,
if the Escrowed Securities have not yet been released, shall mail to the
Escrow Agent notice of the Default within one Business Day after the Trustee
has knowledge of such Default. Except in the case of a Default in the payment
of principal of or interest on any Senior Subordinated Note, the Trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding notice is in the interests of the holders
of the Senior Subordinated Notes. In addition, the Company is required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Company also is required to deliver to
the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what
action the Company is taking or proposes to take in respect thereof.
Amendment
Subject to certain exceptions, the Senior Subordinated Notes Indenture may
be amended with the consent of the holders of a majority in principal amount
of the Senior Subordinated Notes then outstanding and any past default or
noncompliance with any provisions may be waived with the consent of the
holders of a majority in principal amount of the Senior Subordinated Notes
then outstanding. However, without the consent of each holder of an
outstanding Senior Subordinated Note affected, no amendment may, among other
things, (i) reduce the principal amount of Senior Subordinated Notes whose
holders must consent to an amendment, (ii) reduce the rate of or extend the
time for payment of interest on any Senior Subordinated Note, (iii) reduce
the principal of or extend the Stated Maturity of any Senior Subordinated
Note, (iv) reduce the premium payable upon the redemption of any Senior
Subordinated Note or change the time at which any Senior Subordinated Note
may be redeemed as described under "--Optional Redemption" above, (v) make
any Senior Subordinated Note payable in money other than that stated in the
Senior Subordinated Note, (vi) make any change to the provision which
protects the right of any holder of the Senior Subordinated Notes to receive
payment of principal of and interest on such holder's Senior Subordinated
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such holder's Senior
Subordinated Notes, (vii) make any change to the subordination provisions of
the Senior Subordinated Notes Indenture that adversely affects the rights of
any holder of a Senior Subordinated Note under the subordination provisions
or (viii) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
Without the consent of or notice to any holder of the Senior Subordinated
Notes, the Company and the Trustee may amend the Senior Subordinated Notes
Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of
the Company under the Senior Subordinated Notes Indenture if in compliance
with the provisions described under "--Successor Company" above, to provide
for uncertificated Senior Subordinated Notes in addition to or in place of
certificated Senior Subordinated Notes (provided that the uncertificated
Senior Subordinated Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated
Senior Subordinated Notes are described in Section 163(f)(2)(B) of the Code),
to add guarantees with respect to the Senior Subordinated Notes, to secure
the Senior Subordinated Notes, to add to the covenants of the Company for the
benefit of the holders of the Senior
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Subordinated Notes or to surrender any right or power conferred upon the
Company, to provide for issuance of the Senior Subordinated Exchange Notes
under the Senior Subordinated Notes Indenture (including to provide for
treatment of the Senior Subordinated Exchange Notes and the Senior
Subordinated Notes as a single class of securities) in connection with the
Exchange Offer, or to comply with any requirement of the SEC in connection
with the qualification of the Senior Subordinated Notes Indenture under the
TIA or to otherwise comply with the TIA, to make any change in the provisions
described under "--Subordination" above, that would limit or terminate the
benefits available to any holder of Senior Debt (or Representatives therefor)
or to make any change that does not adversely affect the rights of any holder
of the Senior Subordinated Notes. However, an amendment may not make any
change that adversely affects the rights under "--Subordination" of any
holder of Senior Debt then outstanding unless the holders of such Senior Debt
(or any group or Representative thereof authorized to give a consent) consent
to such change.
The consent of the holders of the Senior Subordinated Notes is not
necessary under the Senior Subordinated Notes Indenture to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Senior Subordinated Notes Indenture becomes
effective, the Company is required to mail to holders of the Senior
Subordinated Notes a notice briefly describing such amendment. However, the
failure to give such notice to all holders of the Senior Subordinated Notes,
or any defect therein, will not impair or affect the validity of the
amendment.
A consent to any amendment or waiver under the Senior Subordinated Notes
Indenture by any holder of Senior Subordinated Notes given in connection with
a tender of such holder's Senior Subordinated Notes will not be rendered
invalid by such tender.
Transfer
The Senior Subordinated Notes will be issued in registered form and will
be transferable only upon the surrender of the Senior Subordinated Notes
being transferred for registration of transfer. The Company may require
payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection with certain transfers and
exchanges. See "Book Entry; Delivery and Form."
Defeasance
The Company at any time may terminate all its obligations under the Senior
Subordinated Notes and the Senior Subordinated Notes Indenture ("legal
defeasance"), except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of the
Senior Subordinated Notes, to replace mutilated, destroyed, lost or stolen
Senior Subordinated Notes and to maintain a registrar and paying agent in
respect of the Senior Subordinated Notes. The Company at any time may
terminate certain of its obligations under the covenants described under
"--Certain Covenants," "--Defaults" and "--Change of Control" above, the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries, or the judgment default provision and
the 30-day covenant compliance provision described under "--Defaults" above
and the limitations contained in clause (ii), (iii) and (iv) described under
paragraph (a) of "--Successor Company" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Senior Subordinated Notes may not
be accelerated because of an Event of Default with respect thereto. If the
Company exercises its covenant defeasance option, payment of the Senior
Subordinated Notes may not be accelerated because of an Event of Default
specified in clause (iv), (vi), (vii) (with respect only to Significant
Subsidiaries) or (viii) under "--Defaults" above, or because of the failure
of the Company to comply with clause (ii), (iii) or (iv) described under
paragraph (a) of "--Successor Company" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money
or U.S. Government Obligations for the payment of principal
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and interest (if any) on the Senior Subordinated Notes to redemption or
maturity, as the case may be, and must comply with certain other conditions,
including (unless the Senior Subordinated Notes will mature or be redeemed
within 60 days) delivering to the Trustee an Opinion of Counsel to the effect
that holders of the Senior Subordinated Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal
Revenue Service or other change in applicable federal income tax law).
Concerning the Trustee
U.S. Bank Trust National Association (formerly known as First Trust National
Association) is to be the Trustee under the Senior Subordinated Notes Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Senior Subordinated Notes.
Governing Law
The Senior Subordinated Notes Indenture provides that it and the Senior
Senior Subordinated Notes will be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable
principles of conflicts of law to the extent that the application of the law
of another jurisdiction would be required thereby.
Certain Definitions
The following are certain definitions used in the Senior Subordinated
Notes Indenture and applicable to the description of the Senior Subordinated
Notes Indenture and the Senior Subordinated Notes set forth herein.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director
or officer (A) of such specified Person, (B) of any Subsidiary of such
specified Person or (C) of any Person described in clause (i) above. For
purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Subsidiary of the Company (other than directors'
qualifying shares and other than Capital Stock of a Non-Recourse Subsidiary),
property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Subsidiaries
(other than a Non-Recourse Subsidiary) (including any disposition by means of
a merger, consolidation or similar transaction) other than (i) a disposition
by a Subsidiary of the Company to the Company or by the Company or a
Subsidiary of the Company to a Wholly Owned Recourse Subsidiary, (ii) a
disposition of property or assets by the Company or its Subsidiaries at fair
market value in the ordinary course of business, (iii) a disposition by the
Company or its Subsidiaries of obsolete assets in the ordinary course of
business, (iv) a disposition subject to or permitted by the provisions
described in "--Limitation on Restricted Payments" above, (v) an issuance of
employee stock options and (vi) a disposition by the Company or its
Subsidiaries in which the Company or its Subsidiaries receive as
consideration Capital Stock of (or similar interests in) a Person engaged in,
or assets that will be used in, the businesses of the Company and its Wholly
Owned Recourse Subsidiaries, or additionally, in the case of a disposition by
a Subsidiary of the Company that is not a Wholly Owned Recourse Subsidiary,
the business of such Subsidiary, existing on the Issue Date or in businesses
reasonably related thereto, as determined by the Board of Directors of the
Company, the determination of which shall be conclusive and evidenced by a
resolution of the Board of Directors of the Company.
"Bank Debt" means any and all amounts payable by the Company or any of its
Subsidiaries under or in respect of the Credit Agreement or any Refinancing
thereof, or any other agreements with lenders party to the foregoing,
including principal, premium (if any), interest (including interest accruing
on or
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after the filing of any petition in bankruptcy or for reorganization relating
to the Company), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof;
provided, however, that nothing in this definition shall permit the Company
or any of its Subsidiaries to Issue any Debt that is not permitted pursuant
to "--Limitation on Debt" above.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of
a balance sheet of such Person prepared in accordance with GAAP; the amount
of such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Revlon Consumer Products Corporation, a Delaware
corporation, and its successors.
"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio of
(i) the aggregate amount of EBITDA for such period to (ii) Consolidated
Interest Expense for such period; provided, however, that (1) if the Company
or any Subsidiary of the Company has Issued any Debt since the beginning of
such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated EBITDA Coverage Ratio is an Issuance of
Debt, or both, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Debt as if
such Debt had been Issued on the first day of such period and the discharge
of any other Debt Refinanced or otherwise discharged with the proceeds of
such new Debt as if such discharge had occurred on the first day of such
period, (2) if since the beginning of such period the Company or any
Subsidiary of the Company shall have made any Asset Disposition, EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of the
Company or any Subsidiary of the Company Refinanced or otherwise discharged
with respect to the Company and its continuing Subsidiaries in connection
with such Asset Dispositions for such period (or if the Capital Stock of any
Subsidiary of the Company is sold, the Consolidated Interest Expense for such
period directly attributable to the Debt of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such Debt
after such sale) and (3) if since the beginning of such period the Company or
any Subsidiary of the Company (by merger or otherwise) shall have made an
Investment in any Subsidiary of the Company (or any Person which becomes a
Subsidiary of the Company) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto, as if such Investment or
acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto, and the amount of
Consolidated Interest Expense associated with any Debt Issued in connection
therewith, the pro forma calculations shall be determined in good faith by a
responsible financial or accounting Officer of the Company. If any Debt bears
a floating rate of interest and is being given pro forma effect, the interest
on such Debt shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period.
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"Consolidated Interest Expense" means, for any period, the sum of (a) the
interest expense, net of any interest income, of the Company and its
consolidated Subsidiaries (other than Non-Recourse Subsidiaries) for such
period as determined in accordance with GAAP consistently applied, plus (b)
Preferred Stock dividends in respect of Preferred Stock of the Company or any
Subsidiary of the Company (other than a Non-Recourse Subsidiary) held by
Persons other than the Company or a Wholly Owned Recourse Subsidiary, plus
(c) the cash contributions to an employee stock ownership plan of the Company
and its Subsidiaries (other than Non-Recourse Subsidiaries) to the extent
such contributions are used by an employee stock ownership plan to pay
interest.
"Consolidated Net Income" means with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
consolidated Subsidiaries for such period as determined in accordance with
GAAP, adjusted to the extent included in calculating such net income (or
loss), by excluding (i) all extraordinary gains or losses; (ii) the portion
of net income (or loss) of such Person and its consolidated Subsidiaries
attributable to minority interests in unconsolidated Persons except to the
extent that, in the case of net income, cash dividends or distributions have
actually been received by such Person or one of its consolidated Subsidiaries
(subject, in the case of a dividend or distribution received by a Subsidiary
of such Person, to the limitations contained in clause (v) below) and, in the
case of net loss, such Person or any Subsidiary of such Person has actually
contributed, lent or transferred cash to such unconsolidated Person; (iii)
net income (or loss) of any other Person attributable to any period prior to
the date of combination of such other Person with such Person or any of its
Subsidiaries on a "pooling of interests" basis; (iv) net gains or losses in
respect of dispositions of assets by such Person or any of its Subsidiaries
(including pursuant to a sale-and-leaseback arrangement) other than in the
ordinary course of business; (v) the net income of any Subsidiary of such
Person to the extent that the declaration of dividends or distributions by
that Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its shareholders; (vi) any net
income or loss of any Non-Recourse Subsidiary, except that such Person's
equity in the net income of any such Non-Recourse Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Non-Recourse Subsidiary during such
period to such Person as a dividend or other distribution; and (vii) the
cumulative effect of a change in accounting principles; provided, however,
that in using Consolidated Net Income for purposes of calculating the
Consolidated EBITDA Coverage Ratio at any time, net income of a Subsidiary of
the type described in clause (v) of this definition shall not be excluded.
"Consolidated Net Worth" of any Person means, at any date, all amounts
which would, in conformity with GAAP, be included under shareholders' equity
on a consolidated balance sheet of such Person as at such date, less (x) any
amounts attributable to Redeemable Stock and (y) any amounts attributable to
Exchangeable Stock.
"Credit Agreement" means the Amended and Restated Credit Agreement dated
as of May 30, 1997 by and among the Company, The Chase Manhattan Bank, N.A.,
Citibank, N.A. and Lehman Commercial Paper Inc., as agents, and the Banks
named therein, as the same may be amended or restated from time to time.
"Debt" of any Person means, without duplication,
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable and other accrued current
liabilities arising in the ordinary course of business);
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(iv) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment (including liquidation preference) or other
repurchase of, in the case of a Subsidiary of the Company, any Preferred
Stock and, in the case of any other Person, any Redeemable Stock (but
excluding in each case any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through (v)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including guarantees of
such obligations and dividends; and
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means, with respect to the Senior Subordinated Notes issuable
or issued in whole or in part in global form, The Depository Trust Company,
until a successor shall have been appointed and become such pursuant to the
applicable provisions of the Senior Subordinated Notes Indenture and,
thereafter, "Depository" shall mean or include such successor.
"Designated Senior Debt" means (i) the Bank Debt, the 9 1/2% Senior Notes,
the Senior Notes and (ii) any other Senior Debt which, at the time of
determination has an aggregate principal amount outstanding of, or
commitments to lend up to, at least $25 million and is specifically
designated in the instrument evidencing such Senior Debt as "Designated
Senior Debt" by the Company.
"EBITDA" means, for any period, the Consolidated Net Income of the Company
for such period, plus the following to the extent included in calculating
such Consolidated Net Income: (i) income tax expense, (ii) Consolidated
Interest Expense, (iii) depreciation expense, (iv) amortization expense, (v)
all other noncash charges (excluding any noncash charge to the extent that it
requires an accrual of or a reserve for cash disbursements for any future
period) and (vi) foreign currency gains or losses.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock of a Person which by its
terms or otherwise is required to be exchanged or converted or is
exchangeable or convertible at the option of the holder into another security
(other than Capital Stock of such Person which is neither Exchangeable Stock
nor Redeemable Stock).
"Foreign Subsidiary" means any Subsidiary of the Company which (i) is
organized under the laws of any jurisdiction outside of the United States,
(ii) is organized under the laws of Puerto Rico or the U.S. Virgin Islands,
(iii) has substantially all its operations outside of the United States, or
(iv) has substantially all its operations in Puerto Rico or the U.S. Virgin
Islands.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, except that for purposes of
calculating the Consolidated EBITDA Coverage Ratio, it shall mean generally
accepted accounting principles in the United States as in effect on the Issue
Date.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt or other obligation of any other
Person and any obligation, direct or indirect,
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contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation of
such other Person (whether arising by virtue of partnership arrangements, or
by agreement to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the obligee
of such Debt or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"guarantee" used as a verb has a corresponding meaning.
"holder" or "Securityholder" means the Person in whose name a Senior
Subordinated Note is registered on the Registrar's books.
"Initial Cash Payment" means the $100 million received by the Company
prior to the Issuance of the 10 1/2% Senior Subordinated Notes.
"Investment" in any Person means any loan or advance to, any net payment
on a guarantee of, any acquisition of Capital Stock, equity interest,
obligation or other security of, or capital contribution or other investment
in, such Person. Investments shall exclude advances to customers and
suppliers in the ordinary course of business. The term "Invest" used as verb
has a corresponding meaning. For purposes of the definitions of "Non-Recourse
Subsidiary" and "Restricted Payment" and for purposes of "--Limitation on
Restricted Payments" above, (i) "Investment" shall include a designation
after the Issue Date of a Subsidiary of the Company as a Non-Recourse
Subsidiary, and such Investment shall be valued at an amount equal to the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of such Subsidiary at the time
that such Subsidiary is designated a Non-Recourse Subsidiary; and (ii) any
property transferred to or from a Non-Recourse Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors of the Company, and if
such property so transferred (including in a series of related transactions)
has a fair market value, as so determined by the Board of Directors, in
excess of $10,000,000, such determination shall be confirmed by an
independent appraiser.
"Issue" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Capital Stock of a Person existing
at the time such Person becomes a Subsidiary of another Person (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Subsidiary at the time it becomes a Subsidiary of such other Person.
The term "Issuance" or "Issued" has a corresponding meaning.
"Issue Date" means the date of original issue of the Senior Subordinated
Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York or in the
state where the principal office of the Trustee is located.
"Lien" means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien.
"Mafco Holdings" means Mafco Holdings Inc., a Delaware corporation, and
its successors.
"Mafco Consolidated Group" means the "Affiliated Group" (within the
meaning of Section 1504(a)(1) of the Code) of which Mafco Holdings is the
common parent.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Debt or other obligations
relating to such properties or assets or received in any other noncash form)
therefrom, in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required or estimated in good
faith to be required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any Debt
which is secured by any assets subject to such Asset Disposition, in
accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a
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necessary consent to such Asset Disposition, or by applicable law be repaid
out of the proceeds from or in connection with such Asset Disposition and
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition; provided, however, that in connection with an Asset Disposition
to a Subsidiary of the Company (other than a Wholly Owned Recourse
Subsidiary), Net Available Cash will be deemed to be a percentage of Net
Available Cash (as calculated above) equal to (A) 100% minus (B) the
Company's percentage ownership in such Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts
or commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or estimated in
good faith to be payable as a result thereof.
"Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital Stock
of such corporation convertible solely into non-convertible common stock of
such corporation; provided, however, that Non-Convertible Capital Stock shall
not include any Redeemable Stock or Exchangeable Stock.
"Non-Recourse Debt" means Debt or that portion of Debt (i) as to which
neither the Company nor its Subsidiaries (other than a Non-Recourse
Subsidiary) (A) provide credit support (including any undertaking, agreement
or instrument which would constitute Debt), (B) is directly or indirectly
liable or (C) constitute the lender and (ii) no default with respect to which
(including any rights which the holders thereof may have to take enforcement
action against the assets of a Non-Recourse Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Company or
its Subsidiaries (other than Non-Recourse Subsidiaries) to declare a default
on such other Debt or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of the Company (i) which has
been designated as such by the Company, (ii) which has no Debt other than
Non-Recourse Debt and (iii) which is in the same line of business as the
Company and its Wholly Owned Recourse Subsidiaries existing on the Issue Date
or in businesses reasonably related thereto.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of Vice
Presidential designation), and by the Treasurer, an Assistant Treasurer,
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee. One of the Officers signing an Officers' Certificate given pursuant
to the last paragraph under "--Defaults" above shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or to Parent or one of its Subsidiaries or the
Trustee.)
"Parent" means Revlon, Inc., a Delaware corporation, and any other Person
which acquires or owns directly or indirectly 80% or more of the voting power
of the Voting Stock of the Company.
"Permitted Affiliate" means any individual that is a director or officer
of the Company, of Parent, of a Subsidiary of the Company or of an
Unrestricted Affiliate; provided, however, that such individual is not also a
director or officer of Mafco Holdings or any Person that controls Mafco
Holdings.
"Permitted Affiliate Debt" means (i) Debt Issued to an Affiliate of the
Company representing amounts owing by the Company pursuant to the Tax Sharing
Agreement and (ii) Debt Issued to an Affiliate of the Company to the extent
of cash actually received by the Company, which cash either is required to be
advanced or contributed to the Company pursuant to the terms of the Credit
Agreement or any Refinancing thereof or, if not advanced or contributed to
the Company, would lead to a default under the Credit Agreement or any
Refinancing thereof.
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"Permitted Holders" means Ronald O. Perelman (or in the event of his
incompetence or death, his estate, heirs, executor, administrator, committee
or other personal representative (collectively, "heirs")) or any Person
controlled, directly or indirectly, by Ronald O. Perelman or his heirs.
"Permitted Transactions" means (i) any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property
or the rendering of any service between the Company or any Subsidiary of the
Company, on the one hand, and any Affiliate of the Company or any legal or
beneficial owner of 10% or more of the voting power of Voting Stock of the
Company or an Affiliate of any such owner, on the other hand, existing on, or
pursuant to an agreement in effect on, the Issue Date and disclosed on a
schedule to the Senior Subordinated Notes Indenture and any amendments
thereto which do not adversely affect the rights of the holders and (ii) any
Tax Sharing Agreement.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other
entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Senior Subordinated Note as of any date means the
principal of the Senior Subordinated Note as of such date.
"Public Equity Offering" means an underwritten public offering of equity
securities of the Company or Revlon, Inc. pursuant to an effective
registration statement under the Securities Act.
"Put Amount" as of any date means, with respect to each $1,000 principal
amount of Senior Subordinated Notes, 101% of the outstanding principal amount
thereof as of the date of repurchase.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed on or prior to the first anniversary of the Stated
Maturity of the Senior Subordinated Notes or is redeemable at the option of
the holder thereof at any time on or prior to the first anniversary of the
Stated Maturity of the Senior Subordinated Notes.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue Debt in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Refinancing Costs" means, with respect to any Debt being Refinanced, any
premium actually paid thereon and reasonable costs and expenses, including
underwriting discounts, in connection with such Refinancing.
"Registration Agreement" means the Registration Agreement dated January
28, 1998 among Revlon Escrow, the Company and the Initial Purchasers.
"Registered Exchange Offer" has the meaning ascribed thereto in the
Registration Agreement.
"Representative" means any trustee, agent or representative (if any) for
an issue of Senior Debt.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Subordinated Debt" means the Senior Subordinated Notes and any
other indebtedness, guarantee or obligation of the Company that specifically
provides that such indebtedness, guarantee or obligation is to rank pari
passu in right of payment with the Senior Subordinated Notes and is not
subordinated in right of payment by its terms to any indebtedness, guarantee
or obligation of the Company which is not Senior Debt.
"Shelf Registration Statement" has the meaning ascribed thereto in the
Registration Agreement.
"Significant Subsidiary" means (i) any Subsidiary (other than a
Non-Recourse Subsidiary) of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's
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most recent quarterly consolidated balance sheet, constituted at least 5% of
the Company's total assets on a consolidated basis as of such date, in each
case determined in accordance with GAAP, or (B) had revenues for the 12-month
period ending on the date of the Company's most recent quarterly consolidated
statement of income which constituted at least 5% of the Company's total
revenues on a consolidated basis for such period, or (ii) any Subsidiary of
the Company (other than a Non-Recourse Subsidiary) which, if merged with all
Defaulting Subsidiaries (as defined below) of the Company, would at the time
of determination either (A) have had assets which, as of the date of the
Company's most recent quarterly consolidated balance sheet, would have
constituted at least 10% of the Company's total assets on a consolidated
basis as of such date or (B) have had revenues for the 12-month period ending
on the date of the Company's most recent quarterly consolidated statement of
income which would have constituted at least 10% of the Company's total
revenues on a consolidated basis for such period (each such determination
being made in accordance with GAAP). "Defaulting Subsidiary" means any
Subsidiary of the Company (other than a Non-Recourse Subsidiary) with respect
to which an event described under clauses (vi), (vii) or (viii) in
"--Defaults" above has occurred and is continuing.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision
(but excluding any provision providing for the repurchase of such security at
the option of the holder thereof upon the happening of any contingency).
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the date hereof or hereafter Issued) which is subordinate or
junior in right of payment to the Senior Subordinated Notes.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
one or more Subsidiaries of such Person.
"Tax Sharing Agreement" means (i) that certain agreement dated June 24,
1992, as amended, among the Company, certain of its Subsidiaries, Revlon
Holdings, Inc., Revlon, Inc. and Mafco Holdings, and (ii) any other tax
allocation agreement between the Company or any of its Subsidiaries with any
direct or indirect shareholder of the Company with respect to consolidated or
combined tax returns including the Company or any of its Subsidiaries but
only to the extent that amounts payable from time to time by the Company or
any such Subsidiary under any such agreement do not exceed the corresponding
tax payments that the Company or such Subsidiary would have been required to
make to any relevant taxing authority had the Company or such Subsidiary not
joined in such consolidated or combined returns, but instead had filed
returns including only the Company or its Subsidiaries (provided that any
such agreement may provide that, if the Company or any such Subsidiary ceases
to be a member of the affiliated group of corporations of which Mafco
Holdings is the common parent for purposes of filing a consolidated Federal
income tax return (such cessation, a "Deconsolidation Event"), then the
Company or such Subsidiary shall indemnify such direct or indirect
shareholder with respect to any Federal, state or local income, franchise or
other tax liability (including any related interest, additions or penalties)
imposed on such shareholder as the result of an audit or other adjustment
with respect to any period prior to such Deconsolidation Event that is
attributable to the Company, such Subsidiary or any predecessor business
thereof (computed as if the Company, such Subsidiary or such predecessor
business, as the case may be, were a stand-alone entity that filed separate
tax returns as an independent corporation), but only to the extent that any
such tax liability exceeds any liability for taxes recorded on the books of
the Company or such Subsidiary with respect to any such period).
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or
any agency thereof, in each case, maturing within 360 days of the date of
acquisition thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing
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within 180 days of the date of acquisition thereof issued by a bank or trust
company (including the Trustee) which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America having capital, surplus and undivided profits
aggregating in excess of $250,000,000 and whose debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money-market fund sponsored by any registered broker dealer or
mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a nationally recognized broker-dealer, (iv)
investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an Affiliate or
Subsidiary of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-2" (or higher) according to Moody's Investors Service,
Inc. or "A-2" (or higher) according to Standard and Poor's Corporation, (v)
securities with maturities of six months or less from the date of acquisition
backed by standby or direct pay letters of credit issued by any bank
satisfying the requirements of clause (ii) above and (vi) securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poor's Corporation or "A" by Moody's
Investors Service, Inc.
"Trustee" means the party named in the Senior Subordinated Notes Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Unrestricted Affiliate" means a Person (other than a Subsidiary of the
Company) controlled (as defined in the definition of an "Affiliate") by the
Company, in which no Affiliate of the Company (other than (x) a Wholly Owned
Recourse Subsidiary of the Company, (y) a Permitted Affiliate and (z) another
Unrestricted Affiliate) has an Investment.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States of America is pledged
and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Recourse Subsidiary" means a Subsidiary of the Company
(other than a Non-Recourse Subsidiary) all the Capital Stock of which (other
than directors' qualifying shares) is owned by (i) the Company, (ii) the
Company and one or more Wholly Owned Recourse Subsidiaries or (iii) one or
more Wholly Owned Recourse Subsidiaries.
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REGISTRATION RIGHTS
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes. Revlon Escrow and the Company entered into a
registration agreement (the "Registration Agreement") with the Initial
Purchasers for the benefit of the holders of the Old Notes, pursuant to which
Revlon Escrow and the Company agreed that they would, at their cost, by July
2, 1998, use their best efforts to cause a registration statement (the
"registration statement") to be declared effective under the Securities Act
relating to the exchange of Old Notes for registered notes. The Registration
Statement of which this Prospectus is a part constitutes the registration
statement for purposes of the Registration Agreement. Upon the Registration
Statement being declared effective, the Company will offer the New Notes in
exchange for surrender of the Old Notes. The Company will keep the Exchange
Offer open for not less than 30 days (or longer if required by applicable
law) after the date notice of the Exchange Offer is mailed to the holders of
the Old Notes. For each Old Note surrendered to the Company pursuant to the
Exchange Offer, the holder of such Old Note will receive a New Note having a
principal amount equal to that of the surrendered Old Note. Under existing
Commission interpretations, the New Notes would in general be freely
transferable after the Exchange Offer without further registration under the
Securities Act; provided, however, that in the case of broker-dealers, a
prospectus meeting the requirements of the Securities Act be delivered as
required. The Company has agreed for a period of 180 days after consummation
of the Exchange Offer to make available a prospectus meeting the requirements
of the Securities Act to any broker-dealer for use in connection with any
resale of any such New Notes acquired as described below. A broker-dealer
which delivers such a prospectus to purchasers in connection with such
resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Agreement (including certain indemnification rights and obligations).
In the event that applicable interpretations of the staff of the
Commission do not permit the Company to effect such an Exchange Offer, or if
for any other reason the Exchange Offer is not consummated by August 3, 1998,
the Company will, at its cost, (a) as promptly as practicable, file a shelf
registration statement with respect to the resale of the Old Notes (the
"Shelf Registration Statement") covering resales of the Old Notes, (b) use
its best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act and (c) use its best efforts to keep
effective the Shelf Registration Statement until two years after its
effective date. The Company will, in the event of the Shelf Registration
Statement, provide to each holder of the Old Notes copies of the prospectus,
which is a part of the Shelf Registration Statement, notify each such holder
when the Shelf Registration Statement for the Old Notes has become effective
and take certain other actions as are required to permit unrestricted resales
of the Old Notes. A holder of Old Notes who sells such Old Notes pursuant to
the Shelf Registration Statement generally would be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus
to purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by
the provisions of the Registration Agreement which are applicable to such a
holder (including certain indemnification obligations).
If by August 3, 1998, neither (i) the Exchange Offer is consummated nor
(ii) the Shelf Registration Statement is declared effective, the rate per
annum at which the Old Notes bear interest will increase by 0.5% from and
including such date, until but excluding the earlier of (i) the consummation
of the Exchange Offer and (ii) the effective date of a Shelf Registration
Statement.
The summary herein of certain provisions of the Registration Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Agreement, a
copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus constitutes a part.
DESCRIPTION OF OTHER INDEBTEDNESS
Each of the following summaries of certain indebtedness of the Company is
subject to and qualified in its entirety by reference to the detailed
provisions of the respective agreements and instruments to which each summary
relates. Copies of such agreements and instruments are filed as exhibits to,
or
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incorporated by reference in, the Registration Statement of which this
Prospectus constitutes a part. Capitalized terms used below and not defined
have the meanings set forth in the respective agreements.
CREDIT AGREEMENT
In May 1997, the Company entered into the Credit Agreement. The proceeds
of loans made under the Credit Agreement were used for the purpose of
repaying the loans outstanding under the 1996 Credit Agreement and for the
redemption of the Sinking Fund Debentures and were and will be used for
general corporate purposes or, in the case of the Acquisition Facility (as
defined herein), the financing of acquisitions.
The Credit Agreement provides up to $750.0 million and is comprised of
five senior secured facilities: $200.0 million in two term loan facilities
(the "Term Loan Facilities"), a $300.0 million multi-currency facility (the
"Multi-Currency Facility"), a $200.0 million revolving acquisition facility
which may be increased to $400.0 million under certain circumstances with the
consent of the lenders holding at least a majority of the aggregate
commitments then in effect under the Credit Agreement (the "Acquisition
Facility") and a $50.0 million special standby letter of credit facility (the
"Special LC Facility" and together with the Term Loan Facilities, the
Multi-Currency Facility and the Acquisition Facility, the "Credit
Facilities"). The Multi-Currency Facility is available (i) to the Company, in
revolving credit loans denominated in U.S. dollars (the "Revolving Credit
Loans"), (ii) to the Company, in swing line loans, in an aggregate principal
amount at any one time outstanding not to exceed $30.0 million, which shall
be made as Alternate Base Rate Loans, (iii) to the Company, in standby and
commercial letters of credit denominated in U.S. dollars (the "Operating
Letters of Credit") and (iv) to the Company and certain of its international
subsidiaries designated from time to time in revolving credit loans and
bankers' acceptances denominated in U.S. Dollars and other currencies (the
"Local Loans"). Loans under the Credit Facilities denominated in U.S. dollars
bear interest at a rate equal to, generally at the applicable borrower's
option, either (A) the Alternate Base Rate plus the current applicable margin
of 1/4% (or 1 1/4% for Local Loans); or (B) the Eurodollar Rate plus the
current applicable margin of 1 1/4%, or a combination of the foregoing. Loans
under the Credit Facilities (other than Local Loans) denominated in foreign
currencies bear interest at a rate equal to the Eurocurrency Rate plus the
current applicable margin of 1 1/4%; and Local Loans denominated in foreign
currencies bear interest at a rate equal to, generally at the applicable
borrower's option, either (A) the Eurocurrency Rate plus the current
applicable margin of 1 1/4% or (B) the applicable Local Rate plus the current
applicable margin of 1 1/4%, or a combination of the foregoing. The
applicable margin is reduced (or increased, but not above 3/4% for Alternate
Base Rate Loans not constituting Local Loans and 1 3/4% for other loans) in
the event the Company attains (or fails to attain) certain leverage ratios.
The Company pays the lenders a commitment fee of 3/8% of the unused portion
of the Credit Facilities, subject to reduction (or increase, but not above
1/2%) based on attaining (or failing to attain) certain leverage ratios.
Under the Multi-Currency Facility, the Company pays the lenders a local
administrative fee of 1/4% per annum on the aggregate principal amount of
specified Local Loans. The Company also paid certain facility and other fees
to the lenders and agents upon the closing in May 1997 of the Credit
Agreement. Prior to its termination date, the commitments under the Credit
Facilities will generally be reduced by, among other things: (i) the net
proceeds (including net proceeds in excess of an aggregate of $25.0 million
from certain specified dispositions since May 30, 1997) in excess of $10.0
million each year received during such year from sales of capital stock of
Holdings (or certain subsidiaries of Holdings) or of assets by Holdings (or
certain of its subsidiaries), the Company or any of its subsidiaries, subject
to certain limited exceptions, (ii) the net proceeds from the sales of
material collateral security granted to the lenders, (iii) the net proceeds
from the incurrence by certain subsidiaries of Holdings, the Company or any
of its subsidiaries of certain additional debt, (iv) 50% of the excess cash
flow of the Company and its subsidiaries (unless certain leverage ratios are
attained) less certain reductions in the Acquisition Facility and (v) certain
scheduled reductions in the case of the Term Loan Facilities, which will
commence on May 31, 1998 in the aggregate amount of $1.0 million annually
over the remaining life of the Credit Agreement, and the Acquisition
Facility, which will commence on December 31, 1999 in the amount of $25.0
million, $60.0 million during 2000, $90.0 million during 2001 and $25.0
million during 2002 (which reductions will be proportionately increased if
the Acquisition Facility is increased). The Credit Agreement will terminate
on May 30, 2002. As of December 31, 1997, the Company had approximately $200
million outstanding under the Term Loan Facilities, $102.7 million
outstanding under the Multi-Currency Facility, $41.9 million outstanding
under the Acquisition Facility
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and $34.8 million of issued but undrawn letters of credit under the Special
LC Facility. The weighted average interest rates on the Term Loan Facilities,
the Multi-Currency Facility and the Acquisition Facility were 7.1%, 5.4% and
5.7% per annum, respectively, as of December 31, 1997.
The Credit Facilities, subject to certain exceptions and limitations, are
supported by guarantees from Holdings and certain of its subsidiaries,
Revlon, Inc., the Company and the domestic subsidiaries of the Company (other
than Cosmetic Center). The obligations of the Company under the Credit
Facilities and the obligations under the aforementioned guarantees are
secured, subject to certain limitations, by (i) mortgages on Holdings'
Edison, New Jersey and the Company's Phoenix, Arizona facilities; (ii) the
capital stock of the Company and its domestic subsidiaries and 66% of the
capital stock of its first tier foreign subsidiaries and the capital stock of
certain subsidiaries of Holdings; (iii) domestic intellectual property and
certain other domestic intangibles of (x) the Company and its domestic
subsidiaries (other than Cosmetic Center) and (y) Holdings and certain of its
subsidiaries; (iv) domestic inventory and accounts receivable of (x) the
Company and its domestic subsidiaries (other than Cosmetic Center) and (y)
Holdings and certain of its subsidiaries; and (v) the assets of certain
foreign subsidiary borrowers under the Multi-Currency Facility (to support
their borrowings only). The Credit Agreement provides that the liens on the
stock and personal property referred to above may be shared from time to time
with specified types of other obligations incurred or guaranteed by the
Company, such as interest rate hedging obligations, working capital lines and
the Yen Credit Agreement.
The Credit Agreement contains various material restrictive covenants
prohibiting the Company and its subsidiaries from (i) incurring additional
indebtedness or guarantees, with certain exceptions, (ii) making dividend,
tax sharing (see "Relationship with MacAndrews & Forbes -- Tax Sharing
Agreement") and other payments or loans to Revlon, Inc. or other affiliates,
with certain exceptions, including among others, permitting the Company (x)
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 Commission filing fees and other
miscellaneous expenses related to being a public holding company, and (y) to
pay dividends or make distributions in certain circumstances to finance the
purchase by Revlon, Inc. of its common stock in connection with the delivery
of such common stock to grantees under any stock option plan, provided that
the aggregate amount of such dividends and distributions taken together with
any purchases of Revlon, Inc. common stock on the market to satisfy matching
obligations under the excess savings plan may not exceed $6.0 million per
annum, (iii) creating liens or other encumbrances on their properties, assets
or revenues, granting negative pledges or selling or otherwise disposing of
any of their assets except in the ordinary course of business, all subject to
certain limited exceptions, (iv) with certain exceptions, engaging in merger
or acquisition transactions, (v) prepaying indebtedness, subject to certain
limited exceptions, (vi) making investments, subject to certain limited
exceptions and (vii) entering into transactions with affiliates of the
Company other than upon terms no less favorable to the Company or its
subsidiaries than it would obtain in an arms' length transaction. In addition
to the foregoing, the Credit Agreement contains financial covenants requiring
the Company and its subsidiaries to maintain minimum interest coverage, and
covenants which limit the leverage ratio of the Company and its subsidiaries
and the amount of capital expenditures.
"Events of Default" under the Credit Agreement include (i) a default in
the payment when due of any principal of the loans under the Credit
Agreement, (ii) a default in the payment of interest on the loans, or any
other amounts payable under the Credit Agreement for five days after the due
date thereof, (iii) the failure to comply with the covenants in the Credit
Agreement or the ancillary security documents, subject in certain instances
to grace periods, (iv) the institution of any bankruptcy, insolvency or
similar proceeding by or against the Company or any of its subsidiaries, (v)
a default by Revlon, Inc. or any of its subsidiaries under any debt
instruments in excess of $5.0 million, if the effect of such default is to
cause or permit the acceleration of the maturity of the obligation under such
instruments, (vi) the agreements by certain affiliates of the Company
providing that such affiliates will not demand payment of or retain proceeds
of any payment on account of certain indebtedness of the Company held by such
affiliates, ceasing to be valid and enforceable or if an affiliate which
holds indebtedness of the Company fails to execute such agreement, (vii) the
acceleration of, or failure to pay principal or interest when due under, any
of REV Holdings' debt instruments in excess of $500,000, (viii) failure to
pay one or more judgments in an aggregate of $5.0 million or more and such
judgments shall not have been vacated, stayed, satisfied or bonded pending
appeal within 60 days from the entry thereof, (ix) the occurrence of a change
of control
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such that (x) Revlon, Inc. shall cease to own 100% of the capital stock of
the Company, (y) in the event that Ronald O. Perelman (and heirs and
affiliates) shall cease to control the Company, any other person (or group of
persons acting in concert) either (A) controls the Company or (B) owns more
than 25% of the voting stock of the Company or (z) the directors of the
Company in May 1997 (or other directors nominated by at least two-thirds of
such continuing directors) shall cease to constitute at least two-thirds of
the Board of Directors of the Company, (x) the failure of the Company to have
received from Revlon, Inc. any cash capital contributions in the amount equal
to the net proceeds of certain equity offerings of certain parents of the
Company, (xi) the Company or any of its subsidiaries paying any amount to any
parent of the Company and its subsidiaries in respect of federal capital
gains taxes other than pursuant to a promissory note for certain amounts of
such capital gains, (xii) any representation or warranty of the borrower, any
guarantor or any pledgor failing to be correct in all material respects when
made or confirmed, and (xiii) Revlon, Inc. having any meaningful assets or
indebtedness (with certain exceptions) or Revlon, Inc. conducting any
meaningful business other than those that are customary for a publicly traded
holding company which is not itself an operating company.
THE 9 1/2% SENIOR NOTES
On June 4, 1993, the Company issued and sold $200.0 million principal
amount of its 9 1/2% Senior Notes. The 9 1/2% Senior Notes were sold in a
registered offering under the Securities Act and applicable state securities
laws. The 9 1/2% Senior Notes bear interest at 9 1/2% per annum, payable
semiannually on each June 1 and December 1. The 9 1/2% Senior Notes are
senior unsecured obligations of the Company and mature on June 1, 1999.
The 9 1/2% Senior Notes may not be redeemed prior to maturity. Upon a
Change of Control (as defined in the indenture pursuant to which the 9 1/2%
Senior Notes were issued (the "9 1/2% Senior Notes Indenture")), and subject
to certain conditions, each holder of 9 1/2% Senior Notes will have the right
to require the Company to repurchase all or a portion of such holder's 9 1/2%
Senior Notes at 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase. In addition, under certain
circumstances in the event of an Asset Disposition (as defined in the 9 1/2%
Senior Notes Indenture), the Company will be obligated to make offers to
purchase the 9 1/2% Senior Notes.
The 9 1/2% Senior Notes Indenture contains various material restrictive
covenants that limit (i) the issuance of additional debt and redeemable stock
by the Company, (ii) the issuance of debt and preferred stock by the
Company's subsidiaries, (iii) the incurrence of liens on the assets of the
Company and its subsidiaries which do not equally and ratably secure the 9
1/2% Senior Notes, (iv) the payment of dividends on and redemption of capital
stock of the Company and its subsidiaries, investments in affiliates and the
redemption of certain subordinated obligations of the Company, except that
the 9 1/2% Senior Notes Indenture permits the Company 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 Commission filing fees and other miscellaneous
expenses related to being a public holding company, and to pay dividends or
make distributions up to $5.0 million per annum 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. Amended and Restated 1996 Stock Plan, (v) the sale of assets
and subsidiary stock, (vi) transactions with affiliates and (vii)
consolidations, mergers and transfers of all or substantially all of the
Company's assets. The 9 1/2% Senior Notes Indenture also prohibits certain
restrictions on distributions from subsidiaries. All of these limitations and
prohibitions, however, are subject to a number of important qualifications.
Events of default under the 9 1/2% Senior Notes Indenture include, among
other things, (i) a default continuing for 30 days in the payment of interest
when due, (ii) a default in the payment of any principal when due, (iii) the
failure to comply with the covenants in the 9 1/2% Senior Notes Indenture,
subject in certain instances to grace periods, (iv) a failure to pay other
indebtedness of the Company or a Significant Subsidiary (as defined in the 9
1/2% Senior Notes Indenture) in excess of $25 million upon final maturity or
as a result of such indebtedness becoming accelerated and such default
continues for a period of 10 days after notice thereof, (v) certain events of
bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary and (vi) the failure to pay any judgment in excess of $25 million.
YEN CREDIT AGREEMENT
Pacific Finance & Development Corp., a subsidiary of the Company ("Pacific
Finance"), is the borrower under the Yen Credit Agreement, which had a
principal balance of approximately yen 4.3 billion
137
<PAGE>
as of December 31, 1997 (approximately $33.3 million U.S. dollar equivalent
as of December 31, 1997). The applicable interest rate is the Euro Yen Rate
plus an applicable margin, which ranges from 0.75% to 1.75% based on certain
financial performance ratios of the Company. The applicable interest rate at
December 31, 1997 under the Yen Credit Agreement was the Euro-Yen rate plus
1.25% which approximated 1.9%. In June 1997, the Company amended and restated
the Yen Credit Agreement to extend the term to December 31, 2000, subject to
earlier termination under certain circumstances. In accordance with the terms
of the Yen Credit Agreement, as amended and restated, approximately yen 539
million (approximately $4.2 million U.S. dollar equivalent as of December 31,
1997) is due in each of March 1998, 1999, and 2000 and yen 2.7 billion
(approximately $20.7 million U.S. dollar equivalent as of December 31, 1997)
is due on December 31, 2000.
Borrowings under the Yen Credit Agreement are secured by a first mortgage
on certain real property in Tokyo, Japan owned by Revlon Real Estate
Kabushiki Kaisha, a pledge by Revlon International Corporation of all of the
common stock of Revlon Real Estate Kabushiki Kaisha and a pledge of a note
payable by the Company to Pacific Finance and a pledge of all of the common
stock of Cosmetic Center owned by the Company. In addition, the Company has
guaranteed the obligations of Pacific Finance to repay any amounts due under
the Yen Credit Agreement.
The Yen Credit Agreement contains certain material restrictive covenants
prohibiting Pacific Finance from (with certain limited exceptions) incurring
material obligations, creating liens, engaging in any new activities or
consolidating with, or merging into, any other entity or selling, leasing or
otherwise transferring or permitting the transfer of all or any substantial
part of its assets to any other entity. Events of default under the Yen
Credit Agreement include, among other things, (i) a default in the payment of
all or any principal when due, (ii) a default continuing for three business
days in the payment of interest or other amounts due under the Yen Credit
Agreement or a failure to comply with any covenant (subject to grace periods
in certain instances), (iii) a default or breach by the Company, Pacific
Finance or Revlon Real Estate Kabushiki Kaisha with respect to the Credit
Agreement or any other indebtedness with an outstanding principal amount in
excess of $10.0 million (or the foreign currency equivalent) beyond the
period of cure provided under such indebtedness, (iv) a judgment or order for
the payment of money in excess of $5.0 million (or the foreign currency
equivalent) being entered against the Company or certain subsidiaries of the
Company, including Pacific Finance, which is not covered by insurance and
which remains unsatisfied for 30 days and (v) each of Pacific Finance and
Revlon International Corporation shall cease to be wholly-owned subsidiaries
of the Company or Revlon Real Estate Kabushiki Kaisha shall cease to be a
wholly-owned subsidiary of Revlon International Corporation or Ronald O.
Perelman shall cease to "control" (as used in Rule 405 under the Securities
Act of 1933) Pacific Finance, the Company, Revlon International Corporation,
Revlon Real Estate Kabushiki Kaisha or Cosmetic Center and certain events of
bankruptcy, insolvency or reorganization relating to the Company or certain
subsidiaries of the Company, including Pacific Finance.
OTHER INDEBTEDNESS
The Company also maintains working capital lines in various countries
outside the United States for use in its international operations. As of
December 31, 1997, the aggregate amount outstanding under these lines was
approximately $42.7 million having varied interest rates ranging from 2.5% to
12.0%, converted into U.S. dollars at the applicable exchange rates on such
date. Most of these working capital lines are short-term facilities that
contain customary events of default and few restrictive covenants. The
obligations under several of these foreign working capital lines are
guaranteed by the Company.
138
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax considerations
applicable to the exchange of Old Notes for New Notes and the ownership and
disposition of the New Notes by holders who acquire the New Notes pursuant to
the Exchange Offer. This discussion is based on laws, regulations, rulings
and decisions now in effect, all of which are subject to change. The
discussion does not cover all aspects of federal taxation that may be
relevant to, or the actual tax effect that any of the matters described
herein will have on, particular holders, and does not address state, local,
foreign or other tax laws. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, taxpayers
subject to the alternative minimum tax and foreign partners) may be subject
to special rules not discussed below. The description assumes that holders of
the New Notes will hold the New Notes as "capital assets" (generally,
property held for investment purposes) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR IN DETERMINING THE FEDERAL,
STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER OF THE
EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE
NEW NOTES.
EXCHANGE OF NOTES
The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer will not be treated as an "exchange" for federal income tax purposes
because the New Notes do not differ materially in kind or extent from the Old
Notes, and because the exchange will occur by operation of the terms of the
Old Notes. Rather the New Notes received by a holder will be treated as a
continuation of the Old Notes in the hands of such holder. As a result, no
gain or loss will be recognized on the exchange of Old Notes for New Notes
pursuant to the Exchange Offer.
DISPOSITION OF NEW NOTES
If a New Note is redeemed, sold or otherwise disposed of, the holder
thereof will generally recognize gain or loss equal to the difference between
the amount realized on the redemption, sale or other disposition of such New
Note and the holder's adjusted basis in the New Note. Such gain or loss will
be capital gain or loss, provided that the holder held the New Note as a
capital asset, and will be long-term capital gain or loss if the U.S. Holder
has held the New Note for more than one year at the time of disposition. In
certain circumstances, U.S. Holders that are individuals may be entitled to
preferential treatment for net long-term capital gains, particularly in the
case of capital assets held for 18 months or more at the time of disposition.
Subject to the market discount rules discussed below, such gain or loss will
be capital gain or loss and will be long-term capital gain or loss if, on the
date of the sale, a holder has a holding period for the New Notes (which
would include the holding period of the Old Notes) of more than one year.
Under the market discount rules of the Code, an exchanging holder (other
than a holder who made the election described below) who purchased an Old
Note with "market discount" (generally defined as the amount by which the
adjusted issue price of the Old Note on the holder's date of purchase exceeds
the holder's purchase price) will be required to treat any gain recognized on
the redemption, sale or other disposition of the New Note received in the
exchange as ordinary income to the extent of the market discount that accrued
during the holding period of such New Note (which would include the holding
period of the Old Note). A holder who has elected under applicable Code
provisions to include market discount in income annually as such discount
accrues will not, however, be required to treat any gain recognized as
ordinary income under these rules. Holders should consult their tax advisors
as to the portion of any gain that would be taxable as ordinary income under
these provisions.
139
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form
of one or more registered Notes in global form without coupons (each a
"Global Note"). Each Global Note will be deposited with, or on behalf of, DTC
and registered in the name of Cede & Co., as nominee of DTC, or will remain
in the custody of the Trustee pursuant to the FAST Balance Certificate
Agreement between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a member of the
Federal Reserve System, (iii) a "clearing corporation" within the meaning of
the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to
hold securities for its participation (collectively, the "Participants") and
facilitates the clearance and settlement of securities transactions between
Participants through electronic book-entry changes to the accounts of its
Participants, thereby eliminating the need for physical transfer and delivery
of certificates. DTC's Participants include securities brokers and dealers
(including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Holders who are not Participants may beneficially own securities
held by or on behalf of the Depository only through Participants or Indirect
Participants.
The Company expects that pursuant to procedures established by DTC (i)
upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with an interest in the
Global Note and (ii) ownership of the Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interest in negotiable instruments can only
be perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes or to pledge the Notes as
collateral will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indentures. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global
Note registered in their names, will not receive or be entitled to receive
physical delivery of certificated securities (the "Certificated Securities"),
and will not be considered the owners or Holders thereof under the Indentures
for any purpose, including with respect to giving of any directions,
instruction or approval to the Trustee thereunder. As a result, the ability
of a person having a beneficial interest in Notes represented by a Global
Note to pledge or transfer such interest to persons or entities that do not
participate in DTC's system or to otherwise take action with respect to such
interest, may be affected by the lack of a physical certificate evidencing
such interest.
Accordingly, each holder owning a beneficial interest in a Global Note
must rely on the procedures of DTC and, if such holder is not a Participant
or an Indirect Participant, on the procedures of the Participant through
which such holder owns its interest, to exercise any rights of a holder of
Notes under the Indenture or such Global Note. The Company understands that
under existing industry practice, in the event the Company requests any
action of holders of Notes or a holder that is an owner of a beneficial
interest in a Global Note desires to take any action that DTC, as the holder
of such Global Note, is entitled to take, DTC would authorize the
Participants to take such action and the Participant would authorize holders
owning through such Participants to take such action or would otherwise act
upon the instruction of such holders. Neither the Company nor the Trustee
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest
on, any Notes represented by a Global Note registered in the name of DTC or
its nominee on the applicable record date will be payable
140
<PAGE>
by the Trustee to or at the direction of DTC or its nominee in its capacity
as the registered holder of the Global Note representing such Notes under the
Indentures. Under the terms of the Indentures, the Company and the Trustee
may treat the persons in whose names the Notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving such
payment and for any and all other purposes whatsoever. Consequently, neither
the Company nor the Trustee has or will have any responsibility or liability
for the payment of such amounts to beneficial owners of interest in the
Global Note (including principal, premium, if any, and interest), or to
immediately credit the accounts of the relevant Participants with such
payment, in amounts proportionate to their respective holdings in principal
amount of beneficial interest in the Global Note as shown on the records of
DTC. Payments by the Participants and the Indirect Participants to the
beneficial owners of interests in the Global Note will be governed by
standing instructions and customary practice and will be the responsibility
of the Participants or the Indirect Participants and DTC.
CERTIFICATED SECURITIES
If (i) DTC notifies the Company in writing that it is no longer willing or
able to act as a depository or DTC ceases to be registered as a clearing
agency under the Exchange Act and the Company is unable to locate a qualified
successor within 90 days, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of its Global Notes, Certificated
Securities will be issued to each person that DTC identifies as the
beneficial owner of the Notes represented by the Global Notes. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of such person or persons (or the nominee of any thereof), and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC
or any Participant or Indirect Participant in identifying the beneficial
owners of the related Notes and each such person may conclusively rely on,
and shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Notes to be issued).
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Notes. Any broker-dealer that resells New Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
141
<PAGE>
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of the Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
document in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for New Notes in the Exchange
Offer on terms which may differ from those contained in the Registration
Agreement. This Prospectus, as it may be amended or supplemented from time to
time, may be used by the Company in connection with any such additional
exchange offers. Such additional exchange offers will take place from time to
time until all outstanding Old Notes have been exchanged for New Notes
pursuant to the terms and conditions contained herein.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
New Notes will be passed upon for the Company by Paul, Weiss, Rifkind,
Wharton & Garrison, New York, New York. Skadden, Arps, Slate, Meagher & Flom
LLP has acted as counsel for the Company in connection with the Exchange
Offer. Skadden, Arps, Slate, Meagher & Flom LLP and Paul, Weiss, Rifkind,
Wharton & Garrison have from time to time represented, and may continue to
represent, MacAndrews & Forbes and certain of its affiliates (including the
Company and Revlon, Inc.) in connection with certain legal matters.
EXPERTS
The financial statements and schedule of the Company and its subsidiaries
as of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997, have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
142
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report .................................................................. F-2
AUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and 1996 ................................. F-3
Consolidated Statements of Operations for each of the years in the three-year period ended
December 31, 1997 ........................................................................... F-4
Consolidated Statements of Stockholder's Deficiency for each of the years in the three-year
period ended December 31, 1997 .............................................................. F-5
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 31, 1997 ........................................................................... F-6
Notes to Consolidated Financial Statements.................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Revlon Consumer Products Corporation:
We have audited the accompanying consolidated balance sheets of Revlon
Consumer Products Corporation and its subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations,
stockholder's deficiency and cash flows for each of the years in the
three-year period ended December 31, 1997. In connection with our audits of
the consolidated financial statements we have also audited the financial
statement schedule as listed on the index on page F-1. These consolidated
financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Revlon
Consumer Products Corporation and its subsidiaries as of December 31, 1997
and 1996 and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1997, in conformity
with generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
New York, New York
January 23, 1998
F-2
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 42.8 $ 38.6
Trade receivables, less allowances of $25.9 and
$24.9, respectively .............................................. 493.9 426.8
Inventories ....................................................... 349.3 281.1
Prepaid expenses and other ........................................ 99.3 75.3
-------------- --------------
Total current assets ............................................. 985.3 821.8
Property, plant and equipment, net.................................. 378.2 381.1
Other assets ....................................................... 143.7 139.2
Intangible assets, net ............................................. 329.2 280.6
-------------- --------------
Total assets ..................................................... $1,836.4 $1,622.7
============== ==============
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current liabilities:
Short-term borrowings--third parties .............................. $ 42.7 $ 27.1
Current portion of long-term debt--third parties................... 5.5 8.8
Accounts payable................................................... 195.5 161.9
Accrued expenses and other ........................................ 366.1 366.2
-------------- --------------
Total current liabilities ........................................ 609.8 564.0
Long-term debt--third parties ...................................... 1,427.8 1,321.8
Long-term debt--affiliates ......................................... 30.9 30.4
Other long-term liabilities ........................................ 224.6 202.8
Stockholder's deficiency:
Preferred stock, par value $1.00 per share; 1,000 shares
authorized, 546 issued and outstanding............................ 54.6 54.6
Common stock, par value $1.00 per share; 1,000 shares authorized,
issued and outstanding ........................................... -- --
Capital deficiency ................................................ (230.8) (231.1)
Accumulated deficit since June 24, 1992 ........................... (256.8) (301.6)
Adjustment for minimum pension liability .......................... (4.5) (12.4)
Currency translation adjustment ................................... (19.2) (5.8)
-------------- --------------
Total stockholder's deficiency ................................... (456.7) (496.3)
-------------- --------------
Total liabilities and stockholder's deficiency ................... $1,836.4 $1,622.7
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales......................................... $2,390.9 $2,169.5 $1,940.0
Cost of sales..................................... 832.1 726.5 653.0
---------- ---------- ----------
Gross profit..................................... 1,558.8 1,443.0 1,287.0
Selling, general and administrative expenses ..... 1,336.7 1,241.6 1,141.4
Business consolidation costs and other, net ...... 7.6 -- --
---------- ---------- ----------
Operating income................................. 214.5 201.4 145.6
---------- ---------- ----------
Other expenses (income):
Interest expense................................. 136.2 133.4 142.6
Interest and net investment income............... (3.0) (3.4) (4.9)
Gain on sale of subsidiary stock ................ (6.0) -- --
Amortization of debt issuance costs.............. 6.7 8.3 11.0
Foreign currency losses, net..................... 6.4 5.7 10.9
Miscellaneous, net............................... 5.1 6.3 1.8
---------- ---------- ----------
Other expenses, net............................. 145.4 150.3 161.4
---------- ---------- ----------
Income (loss) before income taxes................. 69.1 51.1 (15.8)
Provision for income taxes........................ 9.4 25.5 25.4
---------- ---------- ----------
Income (loss) before extraordinary item ......... 59.7 25.6 (41.2)
Extraordinary items--early extinguishment of
debt.............................................. (14.9) (6.6) --
---------- ---------- ----------
Net income (loss)................................. $ 44.8 $ 19.0 $ (41.2)
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIENCY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
CURRENCY
PREFERRED CAPITAL ACCUMULATED OTHER TRANSLATION
STOCK DEFICIENCY DEFICIT (A) ADJUSTMENTS ADJUSTMENT
----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995................. $54.6 $(414.7) $(279.4) $(10.9) $ (5.8)
Net loss................................ (41.2)
Adjustment for minimum pension
liability.............................. (6.1)
Net capital contribution ............... 0.4 (d)
Currency translation adjustment ........ 0.8
----------- ------------ ------------- ------------- -------------
Balance, December 31, 1995............... 54.6 (414.3) (320.6) (17.0) (5.0)
Net income.............................. 19.0
Contribution from parent ............... 187.8 (e)
Adjustment for minimum pension
liability.............................. 4.6
Net capital distribution ............... (0.5)(d)
Currency translation adjustment ........ (0.8)(c)
Acquisition of business ................ (4.1)(b)
----------- ------------ ------------- ------------- -------------
Balance, December 31, 1996............... 54.6 (231.1) (301.6) (12.4) (5.8)
Net income.............................. 44.8
Adjustment for minimum pension
liability.............................. 7.9
Net capital contribution ............... 0.3 (d)
Currency translation adjustment ........ (13.4)
----------- ------------ ------------- ------------- -------------
Balance, December 31, 1997............... $54.6 $(230.8) $(256.8) $ (4.5) $(19.2)
=========== ============ ============= ============= =============
</TABLE>
(a) Represents net loss since June 24, 1992, the effective date of the
transfer agreements referred to in Note 15.
(b) Represents amounts paid to Revlon Holdings Inc. for the Tarlow
Advertising Division ("Tarlow") (See Note 15).
(c) Includes $2.1 of gains related to the Company's simplification of its
international corporate structure.
(d) Represents changes in capital from the acquisition of the Bill Blass
business (See Note 15).
(e) Represents the capital contribution from Revlon, Inc. with the funds
from its initial public equity offering (the "Revlon IPO").
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................ $ 44.8 $ 19.0 $ (41.2)
Adjustments to reconcile net income (loss) to net cash provided by (used
for) operating activities:
Depreciation and amortization............................................... 103.8 90.9 88.4
Extraordinary item.......................................................... 14.9 6.6 --
Gain on sale of subsidiary stock ........................................... (6.0) -- --
Gain on sale of certain fixed assets, net................................... (4.4) -- (2.2)
Change in assets and liabilities:
Increase in trade receivables.............................................. (70.3) (67.7) (44.1)
Increase in inventories.................................................... (21.4) (5.3) (15.1)
Decrease (increase) in prepaid expenses and other current assets .......... 1.3 (7.9) 4.5
Increase in accounts payable............................................... 21.6 10.8 10.2
Decrease in accrued expenses and other current liabilities................. (4.2) (10.2) (12.2)
Other, net ................................................................ (73.0) (45.8) (40.4)
--------- --------- ----------
Net cash provided by (used for) operating activities......................... 7.1 (9.6) (52.1)
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................................... (56.5) (58.0) (54.3)
Acquisition of businesses, net of cash acquired.............................. (60.4) (7.1) (21.2)
Proceeds from the sale of certain fixed assets............................... 8.5 -- 3.0
--------- --------- ----------
Net cash used for investing activities....................................... (108.4) (65.1) (72.5)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings--third parties ............. 18.0 5.8 (122.9)
Proceeds from the issuance of long-term debt--third parties.................. 802.3 266.4 493.7
Repayment of long-term debt--third parties................................... (707.5) (366.6) (236.3)
Net contribution from parent ................................................ 0.3 187.3 0.4
Proceeds from the issuance of debt--affiliates............................... 120.7 115.0 157.4
Repayment of debt--affiliates................................................ (120.2) (115.0) (151.0)
Acquisition of business from affiliate....................................... -- (4.1) --
Payment of debt issuance costs............................................... (4.5) (10.9) (15.7)
--------- --------- ----------
Net cash provided by financing activities.................................... 109.1 77.9 125.6
--------- --------- ----------
Effect of exchange rate changes on cash and cash equivalents................. (3.6) (0.9) (0.1)
--------- --------- ----------
Net increase in cash and cash equivalents................................... 4.2 2.3 0.9
Cash and cash equivalents at beginning of period............................ 38.6 36.3 35.4
--------- --------- ----------
Cash and cash equivalents at end of period.................................. $ 42.8 $ 38.6 $ 36.3
========= ========= ==========
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest .................................................................. $ 142.2 $ 139.0 $ 148.2
Income taxes, net of refunds............................................... 10.6 15.4 18.8
Supplemental schedule of noncash investing activities:
In connection with business acquisitions, liabilities were assumed
(including minority interest) as follows:
Fair value of assets acquired.............................................. $ 132.7 $ 9.7 $ 27.3
Cash paid.................................................................. (64.5) (7.2) (21.6)
--------- --------- ----------
Liabilities assumed........................................................ $ 68.2 $ 2.5 $ 5.7
========= ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:
Revlon Consumer Products Corporation ("Products Corporation" and together
with its subsidiaries, the "Company") was formed in April 1992. The Company
operates in a single business segment with many different products, which
include an extensive array of glamorous, exciting and innovative cosmetic and
skin care, fragrance and personal care products, and professional products
(products for use in and resale by professional salons). In the United States
and increasingly in international markets, the Company's products are sold
principally in the self-select distribution channel. The Company also sells
certain products in the demonstrator-assisted distribution channel, sells
consumer and professional products to United States military exchanges and
commissaries, operates retail outlet stores and has a licensing group.
Outside the United States, the Company also sells such consumer products
through department stores and specialty stores, such as perfumeries.
On June 24, 1992, Products Corporation succeeded to assets and liabilities
of the cosmetic and skin care, fragrance and personal care products business
of its then parent company whose name was changed from Revlon, Inc. to Revlon
Holdings Inc. ("Holdings"). Certain consumer products lines sold in
demonstrator-assisted distribution channels considered not integral to the
Company's business and which historically had not been profitable (the
"Retained Brands") and certain other assets and liabilities were retained by
Holdings.
The Consolidated Financial Statements of the Company presented herein
relate to the business to which the Company succeeded and include the assets,
liabilities and results of operations of such business. Assets, liabilities,
revenues, other income, costs and expenses which were identifiable
specifically to the Company are included herein and those identifiable
specifically to the retained and divested businesses of Holdings have been
excluded. Amounts which were not identifiable specifically to either the
Company or Holdings are included herein to the extent applicable to the
Company pursuant to a method of allocation generally based on the respective
proportion of the business of the Company to the applicable total of the
businesses of the Company and Holdings. The operating results of the Retained
Brands and divested businesses of Holdings have not been reflected in the
Consolidated Financial Statements of the Company. Management of the Company
believes that the basis of allocation and presentation is reasonable.
Although the Retained Brands were not transferred to Products Corporation
when the cosmetic and skin care, fragrance and personal care products
business of Holdings was transferred to Products Corporation, Products
Corporation's bank lenders required that all assets and liabilities relating
to such Retained Brands existing on the date of transfer (June 24, 1992),
other than the brand names themselves and certain other intangible assets, be
transferred to Products Corporation. Any assets and liabilities that had not
been disposed of or satisfied by December 31 of the applicable year have been
reflected in the Company's consolidated financial position as of such dates.
However, any new assets or liabilities generated by such Retained Brands
since the transfer date and any income or loss associated with inventory that
has been transferred to Products Corporation relating to such Retained Brands
have been and will be for the account of Holdings. In addition, certain
assets and liabilities relating to divested businesses were transferred to
Products Corporation on the transfer date and any remaining balances as of
December 31 of the applicable year have been reflected in the Company's
Consolidated Balance Sheets as of such dates. At December 31, 1997 and 1996,
the amounts reflected in the Company's Consolidated Balance Sheets aggregated
a net liability of $23.3 and $23.6, respectively, of which $4.9 and $5.2,
respectively, are included in accrued expenses and other and $18.4 as of both
dates is included in other long-term liabilities.
The Consolidated Financial Statements include the accounts of Products
Corporation and its subsidiaries after elimination of all material
intercompany balances and transactions. Further, the
F-7
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities, the disclosure of liabilities and the
reporting of revenues and expenses to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
Products Corporation is a direct wholly owned subsidiary of Revlon, Inc.,
which is an indirect majority owned subsidiary of MacAndrews & Forbes
Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned indirectly
through Mafco Holdings Inc. ("Mafco Holdings" and, together with MacAndrews
Holdings, "MacAndrews & Forbes") by Ronald O. Perelman.
CASH AND CASH EQUIVALENTS:
Cash equivalents (primarily investments in time deposits which have
original maturities of three months or less) are carried at cost, which
approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market value. Cost is
principally determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS:
Property, plant and equipment is recorded at cost and is depreciated on a
straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 20 to 40 years; buildings and improvements, 5 to
50 years; machinery and equipment, 3 to 17 years; and office furniture and
fixtures and capitalized software development costs, 2 to 12 years. Leasehold
improvements are amortized over their estimated useful lives or the terms of
the leases, whichever is shorter. Repairs and maintenance are charged to
operations as incurred, and expenditures for additions and improvements are
capitalized.
Included in other assets are permanent displays amounting to approximately
$107.7 and $81.8 (net of amortization) as of December 31, 1997 and 1996,
respectively, which are amortized over 3 to 5 years.
INTANGIBLE ASSETS RELATED TO BUSINESSES ACQUIRED:
Intangible assets related to businesses acquired principally represent
goodwill, the majority of which is being amortized on a straight-line basis
over 40 years. The Company evaluates, when circumstances warrant, the
recoverability of its intangible assets on the basis of undiscounted cash
flow projections and through the use of various other measures, which
include, among other things, a review of its image, market share and business
plans. Accumulated amortization aggregated $104.4 and $94.2 at December 31,
1997 and 1996, respectively.
REVENUE RECOGNITION:
The Company recognizes net sales upon shipment of merchandise. Net sales
comprise gross revenues less expected returns, trade discounts and customer
allowances. Cost of sales is reduced for the estimated net realizable value
of expected returns.
INCOME TAXES:
Income taxes are calculated using the liability method in accordance with
the provisions of Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes."
The Company is included in the affiliated group of which Mafco Holdings is
the common parent, and the Company's federal taxable income and loss will be
included in such group's consolidated tax return
F-8
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
filed by Mafco Holdings. The Company also may be included in certain state
and local tax returns of Mafco Holdings or its subsidiaries. For all periods
presented, federal, state and local income taxes are provided as if the
Company filed its own income tax returns. On June 24, 1992, Holdings, Revlon,
Inc., Products Corporation and certain of its subsidiaries and Mafco Holdings
entered into a tax sharing agreement, which is described in Notes 12 and 15.
PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
Products Corporation sponsors pension and other retirement plans in
various forms covering substantially all employees who meet eligibility
requirements. For plans in the United States, the minimum amount required
pursuant to the Employee Retirement Income Security Act, as amended, is
contributed annually. Various subsidiaries outside the United States have
retirement plans under which funds are deposited with trustees or reserves
are provided.
Products Corporation accounts for benefits such as severance, disability
and health insurance provided to former employees prior to their retirement,
if estimable, on a terminal basis in accordance with the provisions of SFAS
No. 5, "Accounting for Contingencies," as amended by SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which requires companies
to accrue for postemployment benefits when it is probable that a liability
has been incurred and the amount of such liability can be reasonably
estimated, which Products Corporation has concluded is generally when an
employee is terminated.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The
amounts charged against earnings in 1997, 1996 and 1995 were $29.7, $26.3 and
$22.3, respectively.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally translated into
United States dollars at the rates of exchange in effect at the balance sheet
date. Income and expense items are generally translated at the weighted
average exchange rates prevailing during each period presented. Gains and
losses resulting from foreign currency transactions are included in the
results of operations. Gains and losses resulting from translation of
financial statements of foreign subsidiaries and branches operating in
non-hyperinflationary economies are recorded as a component of stockholder's
deficiency. Foreign subsidiaries and branches operating in hyperinflationary
economies translate nonmonetary assets and liabilities at historical rates
and include translation adjustments in the results of operations.
Effective January 1997, the Company's operations in Mexico have been
accounted for as operating in a hyperinflationary economy. Effective July
1997, the Company's operations in Brazil have been accounted for as is
required for a non-hyperinflationary economy. The impact of the changes in
accounting for Brazil and Mexico were not material to the Company's operating
results in 1997.
SALE OF SUBSIDIARY STOCK:
The Company recognizes gains and losses on sales of subsidiary stock in
its Consolidated Statements of Operations.
CLASSES OF STOCK:
Products Corporation designated 1,000 shares of Preferred Stock as the
Series A Preferred Stock, of which 546 shares are outstanding and held by
Revlon, Inc. The holder of Series A Preferred Stock is not entitled to
receive any dividends. The Series A Preferred Stock is entitled to a
liquidation preference of
F-9
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
$100,000 per share before any distribution is made to the holders of Common
Stock. The holder of the Series A Preferred Stock does not have any voting
rights, except as required by law. The Series A Preferred Stock may be
redeemed at any time by Products Corporation, at its option, for $100,000 per
share. However, the terms of Products Corporation's various debt agreements
currently restrict Products Corporation's ability to effect such redemption.
STOCK-BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but
does not require companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen to account
for stock-based compensation plans using the intrinsic value method
prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of Revlon, Inc.'s stock at the date of the grant over the
amount an employee must pay to acquire the stock (See Note 14).
DERIVATIVE FINANCIAL INSTRUMENTS:
Derivative financial instruments are utilized by the Company to reduce
interest rate and foreign exchange risks. The Company maintains a control
environment which includes policies and procedures for risk assessment and
the approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue derivative financial
instruments for trading purposes.
The differentials to be received or paid under interest rate contracts
designated as hedges are recognized in income over the life of the contracts
as adjustments to interest expense. Gains and losses on terminations of
interest rate contracts designated as hedges are deferred and amortized into
interest expense over the remaining life of the original contracts or until
repayment of the hedged indebtedness. Unrealized gains and losses on
outstanding contracts designated as hedges are not recognized.
Gains and losses on contracts designated to hedge identifiable foreign
currency commitments are deferred and accounted for as part of the related
foreign currency transaction. Gains and losses on all other foreign currency
contracts are included in income currently. Transaction gains and losses have
not been material.
2. EXTRAORDINARY ITEMS
The extraordinary item in 1997 resulted from the write-off in the second
quarter of 1997 of deferred financing costs associated with the early
extinguishment of borrowings under a prior credit agreement and costs of
approximately $6.3 in connection with the redemption of Products
Corporation's 10 7/8% Sinking Fund Debentures due 2010 (the "Sinking Fund
Debentures"). The early extinguishment of borrowings under a prior credit
agreement and the redemption of the Sinking Fund Debentures were financed by
the proceeds from a new credit agreement which became effective in May 1997
(the "Credit Agreement"). The extraordinary item in 1996 resulted from the
write-off of deferred financing costs associated with the early
extinguishment of borrowings with the net proceeds from the Revlon IPO and
proceeds from a prior credit agreement.
3. BUSINESS CONSOLIDATION COSTS AND OTHER, NET
Business consolidation costs and other, net in 1997 include severance and
other costs in connection with the consolidation of certain warehouse,
distribution and headquarter operations related to the Cosmetic Center Merger
(See Note 4); severance, writedowns of certain assets to their estimated net
realizable value and other related costs to rationalize factory and warehouse
operations in certain United
F-10
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
States and International operations, partially offset by related gains from
the sales of certain factory operations of approximately $4.3 and an
approximately $12.7 settlement of a claim in the second quarter of 1997. The
business consolidation costs include $15.5 for the termination of
approximately 475 factory and administrative employees. By December 31, 1997
the Company terminated approximately 260 employees, made cash payments for
such terminations of approximately $7.7, and made cash payments for other
business consolidation costs of approximately $5.4. As of December 31, 1997,
the unpaid balance of the business consolidation accrual approximated $11.5,
which amount is included in accrued expenses and other.
4. ACQUISITIONS
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), a wholly
owned subsidiary of Products Corporation, and The Cosmetic Center, Inc.
("CCI") completed the merger of PFC with and into CCI (the "Cosmetic Center
Merger") with CCI (subsequent to the Cosmetic Center Merger, "Cosmetic
Center") surviving the Cosmetic Center Merger. In the Cosmetic Center Merger,
Products Corporation received in exchange for all of the capital stock of PFC
newly issued Class C Common Stock of Cosmetic Center constituting
approximately 85.0% of Cosmetic Center's outstanding common stock.
Accordingly, the Cosmetic Center Merger was accounted for as a reverse
acquisition using the purchase method of accounting, with PFC considered the
acquiring entity for accounting purposes even though Cosmetic Center is the
surviving legal entity. The deemed purchase consideration for the acquisition
was approximately $27.9 and the goodwill associated with the Cosmetic Center
Merger was approximately $10.5. The Company recognized a gain of $6.0
resulting from the sale of subsidiary stock pursuant to the Cosmetic Center
Merger. The results of the Company for the period ended December 31, 1997
include the results of operations of Cosmetic Center since the effective date
of the Cosmetic Center Merger.
The following represents certain summary unaudited pro forma information
as if the Cosmetic Center Merger had occurred as of the beginning of the
respective periods presented. The summary unaudited pro forma information
below combines the actual results of the Company (including Cosmetic Center
after the Cosmetic Center Merger) and the results of CCI prior to the
Cosmetic Center Merger, excluding non-recurring business consolidation costs
directly attributable to the Cosmetic Center Merger of $4.0 in 1997, and
reflects increased amortization of goodwill, increased interest expense and
certain income tax adjustments related to the Cosmetic Center Merger that
would have been incurred had the Cosmetic Center Merger occurred at such
dates. The unaudited summary pro forma information is not necessarily
indicative of the results of operations of the Company had the Cosmetic
Center Merger occurred at such dates, nor is it necessarily indicative of
future results.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Net sales........................ $2,426.5 $2,303.3
Operating income................. 216.4 195.1
Income before extraordinary
item............................ 60.6 16.3
</TABLE>
In 1997, the Company consummated other acquisitions for a combined
purchase price of $51.6, with resulting goodwill of $35.8. These acquisitions
were not significant to the Company's results of operations. Acquisitions
consummated in 1996 and 1995 were also not significant to the Company's
results of operations.
F-11
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
5. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- -------
<S> <C> <C>
Raw materials and
supplies.................. $ 82.6 $ 76.6
Work-in-process............ 14.9 19.4
Finished goods............. 251.8 185.1
-------- -------
$349.3 $281.1
======== =======
</TABLE>
6. PREPAID EXPENSES AND OTHER
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Prepaid
expenses........ $40.9 $43.1
Other............ 58.4 32.2
------- -------
$99.3 $75.3
======= =======
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Land and improvements....................................... $ 32.5 $ 37.5
Buildings and improvements.................................. 193.2 207.6
Machinery and equipment..................................... 208.5 194.9
Office furniture and fixtures and software development
costs...................................................... 85.5 59.4
Leasehold improvements...................................... 44.9 37.5
Construction-in-progress.................................... 30.6 43.7
--------- ---------
595.2 580.6
Accumulated depreciation.................................... (217.0) (199.5)
--------- ---------
$ 378.2 $ 381.1
========= =========
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and 1995
was $42.1, $39.1 and $38.6, respectively.
8. ACCRUED EXPENSES AND OTHER
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Advertising and promotional costs and accrual for sales
returns....................................................... $148.0 $137.4
Compensation and related benefits.............................. 76.6 95.5
Interest....................................................... 32.3 36.7
Taxes, other than federal income taxes......................... 32.1 35.0
Restructuring and business consolidation costs................. 18.6 6.9
Net liabilities assumed from Holdings.......................... 4.9 5.2
Other.......................................................... 53.6 49.5
-------- --------
$366.1 $366.2
======== ========
</TABLE>
F-12
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
9. SHORT-TERM BORROWINGS
Products Corporation maintained short-term bank lines of credit at
December 31, 1997 and 1996 aggregating approximately $82.3 and $72.7,
respectively, of which approximately $42.7 and $27.1 were outstanding at
December 31, 1997 and 1996, respectively. Interest rates on amounts borrowed
under such short-term lines at December 31, 1997 and 1996 varied from 2.5% to
12.0% and 2.2% to 12.1%, respectively. Compensating balances at December 31,
1997 and 1996 were approximately $6.2 and $7.4, respectively. Interest rates
on compensating balances at December 31, 1997 and 1996 varied from 0.4% to
8.1% and 0.4% to 7.9%, respectively.
10. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Working capital lines (a)................................. $ 344.6 $ 187.2
Bank mortgage loan agreement due 2000 (b)................. 33.3 41.7
9 1/2% Senior Notes due 1999 (c).......................... 200.0 200.0
9 3/8% Senior Notes due 2001 (d).......................... 260.0 260.0
10 1/2% Senior Subordinated Notes due 2003 (e) ........... 555.0 555.0
10 7/8% Sinking Fund Debentures due 2010 (f).............. -- 79.6
Advances from Holdings (g)................................ 30.9 30.4
Other mortgages and notes payable (8.6%-13.0%) due
through 2001............................................. 1.4 7.1
Cosmetic Center facility (h).............................. 39.0 --
---------- ---------
1,464.2 1,361.0
Less current portion...................................... (5.5) (8.8)
---------- ---------
$1,458.7 $1,352.2
========== =========
</TABLE>
(a) In May 1997, Products Corporation entered into the Credit Agreement
with a syndicate of lenders, whose individual members change from time to
time. The proceeds of loans made under the Credit Agreement were used to
repay the loans outstanding under the 1996 Credit Agreement and to redeem the
Sinking Fund Debentures.
The Credit Agreement provides up to $750.0 and is comprised of five senior
secured facilities: $200.0 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 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" and together with the Term Loan
Facilities, the Multi-Currency Facility and the Acquisition Facility, the
"Credit Facilities"). The Multi-Currency Facility is available (i) to
Products Corporation in revolving credit loans denominated in U.S. dollars
(the "Revolving Credit Loans"), (ii) to Products Corporation in standby and
commercial letters of credit denominated in U.S. dollars (the "Operating
Letters of Credit") and (iii) to Products Corporation and certain of its
international subsidiaries designated from time to time in revolving credit
loans and bankers' acceptances denominated in U.S. dollars and other
currencies (the "Local Loans"). At December 31, 1997 Products Corporation had
approximately $200.0 outstanding under the Term Loan Facilities, $102.7
outstanding under the Multi-Currency Facility, $41.9 outstanding under the
Acquisition Facility and $34.8 of issued but undrawn letters of credit under
the Special LC Facility.
The Credit Facilities (other than loans in foreign currencies) bear
interest as of December 31, 1997 at a rate equal to, at Products
Corporation's option, either (A) the Alternate Base Rate plus 1/4 of 1% (or
F-13
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
1.25% for Local Loans); or (B) the Eurodollar Rate plus 1.25%. Loans in
foreign currencies bear interest as of December 31, 1997 at a rate equal to
the Eurocurrency Rate or, in the case of Local Loans, the local lender rate,
in each case plus 1.25%. The applicable margin is reduced (or increased, but
not above 3/4 of 1% for Alternate Base Rate Loans not constituting Local
Loans and 1.75% for other loans) in the event Products Corporation attains
(or fails to attain) certain leverage ratios. Products Corporation pays the
lender a commitment fee as of December 31, 1997 of 3/8 of 1% of the unused
portion of the Credit Facilities, subject to reduction (or increase, but not
above 1/2 of 1%) based on attaining (or failing to attain) certain leverage
ratios. Under the Multi-Currency Facility, the Company pays the lenders an
administrative fee of 1/4% per annum on the aggregate principal amount of
specified Local Loans. Products Corporation also paid certain facility and
other fees to the lenders and agents upon closing of the Credit Agreement.
Prior to its termination date, the commitments under the Credit Facilities
will be reduced by: (i) the net proceeds in excess of $10.0 each year
received during such year from sales of assets by Holdings (or certain of its
subsidiaries), Products Corporation or any of its subsidiaries (and $25.0
with respect to certain specified dispositions), subject to certain limited
exceptions, (ii) certain proceeds from the sales of collateral security
granted to the lenders, (iii) the net proceeds from the issuance by Products
Corporation or any of its subsidiaries of certain additional debt, (iv) 50%
of the excess cash flow of Products Corporation and its subsidiaries (unless
certain leverage ratios are attained) and (v) certain scheduled reductions in
the case of the Term Loan Facilities, which will commence on May 31, 1998 in
the aggregate amount of $1.0 annually over the remaining life of the Credit
Agreement, and in the case of the Acquisition Facility, which will commence
on December 31, 1999 in the amount of $25.0 and in the amounts of $60.0
during 2000, $90.0 during 2001 and $25.0 during 2002 (which reductions will
be proportionately increased if the Acquisition Facility is increased). The
Credit Agreement will terminate on May 30, 2002. The weighted average
interest rates on the Term Loan Facilities, the Multi-Currency Facility and
the Acquisition Facility were 7.1%, 5.4% and 5.7% per annum, respectively, as
of December 31, 1997.
The Credit Facilities, subject to certain exceptions and limitations, are
supported by guarantees from Holdings and certain of its subsidiaries,
Revlon, Inc., Products Corporation and the domestic subsidiaries of Products
Corporation. The obligations of Products Corporation under the Credit
Facilities and the obligations under the aforementioned guarantees are
secured, subject to certain limitations, by (i) mortgages on Holdings'
Edison, New Jersey and Products Corporation's Phoenix, Arizona facilities;
(ii) the capital stock of Products Corporation and its domestic subsidiaries,
66% of the capital stock of its first tier foreign subsidiaries and the
capital stock of certain subsidiaries of Holdings; (iii) domestic
intellectual property and certain other domestic intangibles of (x) Products
Corporation and its domestic subsidiaries (other than Cosmetic Center) and
(y) certain subsidiaries of Holdings; (iv) domestic inventory and accounts
receivable of (x) Products Corporation and its domestic subsidiaries (other
than Cosmetic Center) and (y) certain subsidiaries of Holdings; and (v) the
assets of certain foreign subsidiary borrowers under the Multi-Currency
Facility (to support their borrowings only). The Credit Agreement provides
that the liens on the stock and personal property referred to above may be
shared from time to time with specified types of other obligations incurred
or guaranteed by Products Corporation, such as interest rate hedging
obligations, working capital lines and a subsidiary of Products Corporation's
Yen-denominated credit agreement (the "Yen Credit Agreement").
The Credit Agreement contains various material restrictive covenants
prohibiting Products Corporation from (i) incurring additional indebtedness
or guarantees, with certain exceptions, (ii) making dividend, tax sharing and
other payments or loans to Revlon, Inc. or other affiliates, with certain
exceptions, including among others, permitting Products Corporation 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
("Commission") filing fees and
F-14
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
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 common stock in connection with the
delivery of such common stock to grantees under any stock option plan,
provided that the aggregate amount of such dividends and distributions taken
together with any purchases of Revlon, Inc. common stock on the market to
satisfy matching obligations under an excess savings plan may not exceed $6.0
per annum, (iii) creating liens or other encumbrances on their assets or
revenues, granting negative pledges or selling or transferring any of their
assets except in the ordinary course of business, all subject to certain
limited exceptions, (iv) with certain exceptions, engaging in merger or
acquisition transactions, (v) prepaying indebtedness, subject to certain
limited exceptions, (vi) making investments, subject to certain limited
exceptions, and (vii) entering into transactions with affiliates of Products
Corporation other than upon terms no less favorable to Products Corporation
or its subsidiaries than it would obtain in an arms' length transaction. In
addition to the foregoing, the Credit Agreement contains financial covenants
requiring Products Corporation to maintain minimum interest coverage and
covenants which limit the leverage ratio of Products Corporation and the
amount of capital expenditures.
In January 1996, Products Corporation entered into a credit agreement (the
"1996 Credit Agreement"), which became effective upon consummation of the
Revlon IPO on March 5, 1996. The 1996 Credit Agreement included, among other
things, (i) a term to December 31, 2000 (subject to earlier termination in
certain circumstances), and (ii) credit facilities of $600.0 comprised of
four senior secured facilities: a $130.0 term loan facility, a $220.0
multi-currency facility, a $200.0 revolving acquisition facility and a $50.0
standby letter of credit facility. The weighted average interest rates on the
term loan facility and multi-currency facility were 8.1% and 7.0% per annum,
respectively, as of, December 31, 1996.
(b) The Pacific Finance & Development Corp., a subsidiary of Products
Corporation, is the borrower under a yen denominated credit agreement (the
"Yen Credit Agreement"), which had a principal balance of approximately yen
4.3 billion as of December 31, 1997 (approximately $33.3 U.S. dollar
equivalent as of December 31, 1997). In accordance with the terms of the Yen
Credit Agreement, approximately yen 539 million (approximately $5.2 U.S.
dollar equivalent) was paid in January 1996 and approximately yen 539 million
(approximately $4.6 U.S. dollar equivalent) was paid in January 1997. In June
1997, Products Corporation amended and restated the Yen Credit Agreement to
extend the term to December 31, 2000 subject to earlier termination under
certain circumstances. In accordance with the terms of the Yen Credit
Agreement, as amended and restated, approximately yen 539 million
(approximately $4.2 U.S. dollar equivalent as of December 31, 1997) is due in
each of March 1998, 1999 and 2000 and yen 2.7 billion (approximately $20.7
U.S. dollar equivalent as of December 31, 1997) is due on December 31, 2000.
The applicable interest rate at December 31, 1997 under the Yen Credit
Agreement was the Euro-Yen rate plus 1.25%, which approximated 1.9%. The
interest rate at December 31, 1996, was the Euro-Yen rate plus 2.5%, which
approximated 3.1%.
(c) The Senior Notes due 1999 (the "1999 Senior Notes") are senior
unsecured obligations of Products Corporation and rank pari passu in right of
payment to all existing and future Senior Debt (as defined in the indenture
relating to the 1999 Senior Notes (the "1999 Senior Note Indenture")). The
1999 Senior Notes bear interest at 9 1/2% per annum. Interest is payable on
June 1 and December 1.
The 1999 Senior Notes may not be redeemed prior to maturity. Upon a Change
of Control (as defined in the 1999 Senior Note Indenture) and subject to
certain conditions, each holder of 1999 Senior Notes will have the right to
require Products Corporation to repurchase all or a portion of such holder's
1999 Senior Notes at 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase. In addition, under
certain circumstances in the event of an Asset Disposition (as defined in the
1999 Senior Note Indenture), Products Corporation will be obligated to make
offers to purchase the 1999 Senior Notes.
F-15
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
The 1999 Senior Note Indenture contains various restrictive covenants
that, among other things, limit (i) the issuance of additional debt and
redeemable stock by Products Corporation, (ii) the issuance of debt and
preferred stock by Products Corporation's subsidiaries, (iii) the incurrence
of liens on the assets of Products Corporation and its subsidiaries which do
not equally and ratably secure the 1999 Senior Notes, (iv) the payment of
dividends on and redemption of capital stock of Products Corporation and its
subsidiaries and the redemption of certain subordinated obligations of
Products Corporation, except that the 1999 Senior Note Indenture permits
Products Corporation to pay dividends and make distributions to 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 Commission filing
fees and other miscellaneous expenses related to being a public holding
company, and to pay dividends or make distributions up to $5.0 per annum
(subject to allowable increases) 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 any stock option
plan, (v) the sale of assets and subsidiary stock, (vi) transactions with
affiliates and (vii) consolidations, mergers and transfers of all or
substantially all of Products Corporation's assets. The 1999 Senior Note
Indenture also prohibits certain restrictions on distributions from
subsidiaries. All of these limitations and prohibitions, however, are subject
to a number of important qualifications.
(d) The 9 3/8% Senior Notes due 2001 (the "Senior Notes") are senior
unsecured obligations of Products Corporation and rank pari passu in right of
payment to all existing and future Senior Debt (as defined in the indenture
relating to the Senior Notes (the "Senior Note Indenture")). The Senior Notes
bear interest at 9 3/8% per annum. Interest is payable on April 1 and October
1.
The Senior Notes may be redeemed at the option of Products Corporation in
whole or in part at any time on or after April 1, 1998 at the redemption
prices set forth in the Senior Note Indenture, plus accrued and unpaid
interest, if any, to the date of redemption. Upon a Change of Control (as
defined in the Senior Note Indenture), Products Corporation will have the
option to redeem the Senior Notes in whole or in part at a redemption price
equal to the principal amount thereof plus the Applicable Premium (as defined
in the Senior Note Indenture), plus accrued and unpaid interest, if any, to
the date of redemption, and, subject to certain conditions, each holder of
Senior Notes will have the right to require Products Corporation to
repurchase all or a portion of such holder's Senior Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase. In addition, under certain circumstances in the event of
an Asset Disposition (as defined in the Senior Note Indenture), Products
Corporation will be obligated to make offers to purchase the Senior Notes.
The Senior Note Indenture contains various restrictive covenants that,
among other things, limit (i) the issuance of additional indebtedness and
redeemable stock by Products Corporation, (ii) the issuance of indebtedness
and preferred stock by Products Corporation's subsidiaries, (iii) the
incurrence of liens on the assets of Products Corporation and its
subsidiaries which do not equally and ratably secure the Senior Notes, (iv)
the payment of dividends on capital stock of Products Corporation and its
subsidiaries and the redemption of capital stock and certain subordinated
obligations of Products Corporation, except that the Senior Note Indenture
permits Products Corporation to pay dividends and make distributions to
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
Commission filing fees and other miscellaneous expenses related to being a
public holding company, and to pay dividends or make distributions up to $5.0
per annum (subject to allowable increases) 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
any stock option plan, (v) the sale of assets and subsidiary stock, (vi)
transactions with affiliates and (vii) consolidations, mergers and transfers
of all or substantially all of Products Corporation's assets. The Senior Note
Indenture also prohibits certain restrictions on distributions from
subsidiaries of Products Corporation. All of these limitations and
prohibitions, however, are subject to a number of important qualifications
(See Note 19).
F-16
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
(e) The Senior Subordinated Notes due 2003 (the "Senior Subordinated
Notes") are unsecured obligations of Products Corporation and are
subordinated in right of payment to all existing and future Senior Debt (as
defined in the indenture relating to the Senior Subordinated Notes (the
"Senior Subordinated Note Indenture")). The Senior Subordinated Notes bear
interest at 10 1/2% per annum. Interest is payable on February 15 and August
15.
The Senior Subordinated Notes may be redeemed at the option of Products
Corporation in whole or in part at any time on or after February 15, 1998 at
the redemption prices set forth in the Senior Subordinated Note Indenture,
plus accrued and unpaid interest, if any, to the date of redemption. Upon a
Change of Control (as defined in the Senior Subordinated Note Indenture),
Products Corporation will have the option to redeem the Senior Subordinated
Notes in whole or in part at a redemption price equal to the principal amount
thereof plus the Applicable Premium (as defined in the Senior Subordinated
Note Indenture), plus accrued and unpaid interest, if any, to the date of
redemption, and, subject to certain conditions, each holder of Senior
Subordinated Notes will have the right to require Products Corporation to
repurchase all or a portion of such holder's Senior Subordinated Notes at
101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. In addition, under certain circumstances in
the event of an Asset Disposition (as defined in the Senior Subordinated Note
Indenture), Products Corporation will be obligated to make offers to purchase
the Senior Subordinated Notes.
The Senior Subordinated Note Indenture contains various restrictive
covenants that, among other things, limit (i) the issuance of additional
indebtedness and redeemable stock by Products Corporation, (ii) the issuance
of indebtedness and preferred stock by Products Corporation's subsidiaries,
(iii) the incurrence of liens on the assets of Products Corporation and its
subsidiaries to secure debt other than Senior Debt (as defined in the Senior
Subordinated Note Indenture) or debt of a subsidiary, unless the Senior
Subordinated Notes are equally and ratably secured, (iv) the payment of
dividends on capital stock of Products Corporation and its subsidiaries and
the redemption of capital stock and certain subordinated obligations of
Products Corporation, except that the Senior Subordinated Note Indenture
permits Products Corporation to pay dividends and make distributions to
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
Commission filing fees and other miscellaneous expenses related to being a
public holding company, and to pay dividends or make distributions up to $5.0
per annum (subject to allowable increases) 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
any stock option plan, (v) the sale of assets and subsidiary stock, (vi)
transactions with affiliates and (vii) consolidations, mergers and transfers
of all or substantially all of Products Corporation's assets. The Senior
Subordinated Note Indenture also prohibits certain restrictions on
distributions from subsidiaries of Products Corporation. All of these
limitations and prohibitions, however, are subject to a number of important
qualifications (See Note 19).
(f) Products Corporation redeemed all the outstanding $85.0 principal
amount of Sinking Fund Debentures during 1997 with the proceeds of borrowings
under the Credit Agreement.
(g) During 1992, Holdings made an advance of $25.0 to Products
Corporation. This advance was evidenced by a noninterest-bearing demand note
payable by Products Corporation, the payment of which was subordinated to the
obligations of Products Corporation under the credit agreement in effect at
that time. Holdings agreed not to demand payment under the note so long as
any indebtedness remained outstanding under the credit agreement in effect at
that time. In February 1995, the $13.3 in notes due to Products Corporation
under the Financing Reimbursement Agreement, referred to in Note 15, was
offset against the $25.0 note and Holdings agreed not to demand payment under
the resulting $11.7 note so long as certain indebtedness remains outstanding.
In October 1993, Products Corporation borrowed from
F-17
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
Holdings approximately $23.2 (as adjusted and subject to further adjustment
for certain expenses) representing amounts received by Holdings from an
escrow account relating to divestiture by Holdings of certain of its
predecessor businesses. In July 1995, Products Corporation borrowed from
Holdings approximately $0.8, representing certain amounts received by
Holdings relating to an arbitration arising out of the sale by Holdings of
certain of its businesses. In 1995, Products Corporation borrowed from
Holdings approximately $5.6, representing certain amounts received by
Holdings from the sale by Holdings of certain of its businesses. In June
1996, $10.9 in notes due to Products Corporation under the Financing
Reimbursement Agreement from Holdings was offset against the $11.7 demand
note (referred to above) payable by Products Corporation to Holdings. In June
1997, Products Corporation borrowed from Holdings approximately $0.5,
representing certain amounts received by Holdings from the sale of a brand
and the inventory relating thereto. At December 31, 1997 the balance of $30.9
is evidenced by noninterest-bearing promissory notes payable to Holdings that
are subordinated to Products Corporation's obligations under the Credit
Agreement.
(h) In connection with the Cosmetic Center Merger, on April 25, 1997
Cosmetic Center entered into a loan and security agreement (the "Cosmetic
Center Facility"). Cosmetic Center paid the then outstanding balance of $14.0
on CCI's former credit agreement with borrowings under the Cosmetic Center
Facility. On April 28, 1997, Cosmetic Center used approximately $21.2 of
borrowings under the Cosmetic Center Facility to fund the cash election
associated with the Cosmetic Center Merger. The Cosmetic Center Facility,
which expires on April 30, 1999, provides up to $70.0 of revolving credit
tied to a borrowing base of 65% of Cosmetic Center's eligible inventory, as
defined in the Cosmetic Center Facility. Borrowings under the Cosmetic Center
Facility are collateralized by Cosmetic Center's accounts receivable and
inventory and proceeds therefrom. Under the Cosmetic Center Facility,
Cosmetic Center may borrow at the London Inter-Bank Offered Rate ("LIBOR")
plus 2.25% or at the lending bank's prime rate plus 0.5%. Cosmetic Center
also pays a commitment fee equal to one-quarter of one percent per annum.
Interest is payable on a monthly basis except for interest on LIBOR rate
loans with a maturity of less than three months, which is payable at the end
of the LIBOR rate loan period and interest on LIBOR rate loans with a
maturity of more than three months, which is payable every three months. If
Cosmetic Center terminates the Cosmetic Center Facility, Cosmetic Center is
obligated to pay a prepayment penalty of $0.7 if the termination occurs
before the first anniversary date of the Cosmetic Center Facility and $0.2 if
the termination occurs after the first anniversary date. The Cosmetic Center
Facility contains various restrictive covenants and requires Cosmetic Center
to maintain a minimum tangible net worth and an interest coverage ratio. At
December 31, 1997, approximately $39.0 was outstanding under the Cosmetic
Center Facility with an interest rate of 8.1%.
Products Corporation borrows funds from its affiliates from time to time
to supplement its working capital borrowings at interest rates more favorable
to Products Corporation than the rate under the Credit Agreement. No such
borrowings were outstanding at December 31, 1997 or 1996.
The aggregate amounts of long-term debt maturities and sinking fund
requirements (at December 31, 1997), in the years 1998 through 2002 are $5.5,
$244.4, $26.2, $278.5 and $354.6, respectively, and $555.0 thereafter.
11. FINANCIAL INSTRUMENTS
As of December 31, 1997, Products Corporation was party to a series of
interest rate swap agreements totaling a notional amount of $225.0 in which
Products Corporation agreed to pay on such notional amount a variable
interest rate equal to the six month LIBOR to its counterparties and the
counterparties agreed to pay on such notional amounts fixed interest rates
averaging approximately 6.03% per annum. Products Corporation entered into
these agreements in 1993 and 1994 (and in the first quarter of 1996 extended
a portion equal to a notional amount of $125.0 through December 2001) to
convert the interest rate on $225.0 of fixed-rate indebtedness to a variable
rate. If Products Corporation had
F-18
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
terminated these agreements, which Products Corporation considered to be held
for other than trading purposes, on December 31, 1997 and 1996, a loss of
approximately $0.1 and $3.5, respectively, would have been realized. Certain
other swap agreements were terminated in 1993 for a gain of $14.0 that was
amortized over the original lives of the agreements through 1997. The
amortization of the 1993 realized gain in 1997, 1996 and 1995 was
approximately $3.1, $3.2 and $3.2, respectively. Cash flow from the
agreements outstanding at December 31, 1997 was approximately break even for
1997. In anticipation of repayment of the hedged indebtedness, Products
Corporation terminated these agreements in January 1998 and realized a gain
of approximately $1.6, which will be recognized upon repayment of the hedged
indebtedness.
Products Corporation enters into forward foreign exchange contracts and
option contracts from time to time to hedge certain cash flows denominated in
foreign currencies. At December 31, 1997 and 1996, Products Corporation had
forward foreign exchange contracts denominated in various currencies of
approximately $90.1 and $62.0, respectively, and option contracts of
approximately $94.9 outstanding at December 31, 1997. Such contracts are
entered into to hedge transactions predominantly occurring within twelve
months. If Products Corporation had terminated these contracts on December
31, 1997 and 1996, no material gain or loss would have been realized.
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same issues or on the current rates offered to
the Company for debt of the same remaining maturities. The estimated fair
value of long-term debt at December 31, 1997 and 1996 was approximately $39.0
and $37.3 more than the carrying value of $1,464.2 and $1,361.0,
respectively. Because considerable judgment is required in interpreting
market data to develop estimates of fair value, the estimates are not
necessarily indicative of the amounts that could be realized or would be paid
in a current market exchange. The effect of using different market
assumptions or estimation methodologies may be material to the estimated fair
value amounts.
Products Corporation also maintains standby and trade letters of credit
with certain banks for various corporate purposes under which Products
Corporation is obligated, of which approximately $40.6 and $40.9 (including
amounts available under credit agreements in effect at that time) were
maintained at December 31, 1997 and 1996, respectively. Included in these
amounts are $27.7 and $26.4, respectively, in standby letters of credit which
support Products Corporation's self-insurance programs (See Note 15). The
estimated liability under such programs is accrued by Products Corporation.
The carrying amounts of cash and cash equivalents, trade receivables,
accounts payable and short-term borrowings approximate their fair values.
12. INCOME TAXES
In June 1992, Holdings, Revlon, Inc., Products Corporation and certain of
its subsidiaries, and Mafco Holdings entered into a tax sharing agreement (as
subsequently amended, the "Tax Sharing Agreement"), pursuant to which Mafco
Holdings has agreed to indemnify Revlon, Inc. and Products Corporation
against federal, state or local income tax liabilities of the consolidated or
combined group of which Mafco Holdings (or a subsidiary of Mafco Holdings
other than Revlon, Inc. and Products Corporation or its subsidiaries) is the
common parent for taxable periods beginning on or after January 1, 1992
during which Revlon, Inc. and Products Corporation or a subsidiary of
Products Corporation is a member of such group. Pursuant to the Tax Sharing
Agreement, for all taxable periods beginning on or after January 1, 1992,
Products Corporation will pay to Revlon, Inc., which in turn will pay Mafco
Holdings, amounts equal to the taxes that such corporation would otherwise
have to pay if they were to file separate federal, state or local income tax
returns (including any amounts determined to be due as a result of a
redetermination arising from an audit or otherwise of the consolidated or
combined tax liability relating to any such period which is attributable to
Products Corporation), except that Products Corporation will
F-19
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
not be entitled to carry back any losses to taxable periods ending prior to
January 1, 1992. No payments are required by Products Corporation or Revlon,
Inc. if and to the extent 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. Since the payments to
be made by Products Corporation under the Tax Sharing Agreement will be
determined by the amount of taxes that Products Corporation would otherwise
have to pay if it were to file separate federal, state or local income tax
returns, the Tax Sharing Agreement will benefit Mafco Holdings to the extent
Mafco Holdings can offset the taxable income generated by Products
Corporation against losses and tax credits generated by Mafco Holdings and
its other subsidiaries. As a result of net operating tax losses and
prohibitions under the Credit Agreement there were no federal tax payments or
payments in lieu of taxes pursuant to the Tax Sharing Agreement for 1997,
1996 or 1995. Products Corporation has a liability of $0.9 to Revlon, Inc. in
respect of federal taxes for 1997 under the Tax Sharing Agreement.
Pursuant to the asset transfer agreement referred to in Note 15, Products
Corporation assumed all tax liabilities of Holdings other than (i) certain
income tax liabilities arising prior to January 1, 1992 to the extent such
liabilities exceeded reserves on Holdings' books as of January 1, 1992 or
were not of the nature reserved for and (ii) other tax liabilities to the
extent such liabilities are related to the business and assets retained by
Holdings.
The Company's income (loss) before income taxes and the applicable
provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- ------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic................................ $ 84.6 $10.6 $(39.4)
Foreign ................................ (15.5) 40.5 23.6
-------- ------- ---------
$ 69.1 $51.1 $(15.8)
======== ======= =========
Provision (benefit) for income taxes:
Federal................................. $ 0.9 $ -- $ --
State and local......................... 1.2 1.2 3.4
Foreign................................. 7.3 24.3 22.0
-------- ------- ---------
$ 9.4 $25.5 $ 25.4
======== ======= =========
Current................................. $ 30.5 $22.7 $ 37.1
Deferred................................ 10.4 6.6 3.0
Benefits of operating loss
carryforwards.......................... (32.6) (4.7) (15.4)
Carryforward utilization applied to
goodwill............................... 1.1 1.0 0.8
Effect of enacted change of tax rates .. -- (0.1) (0.1)
-------- ------- ---------
$ 9.4 $25.5 $ 25.4
======== ======= =========
</TABLE>
F-20
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
The effective tax rate on income (loss) before income taxes is reconciled
to the applicable statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate............ 35.0% 35.0% (35.0)%
State and local taxes, net of federal income
tax benefit................................. 1.2 1.6 14.0
Foreign and U.S. tax effects attributable to
operations outside the U.S. ................ 12.9 35.4 87.0
Nondeductible amortization expense........... 4.4 5.7 15.7
U.S. loss without benefit.................... -- -- 79.1
Change in domestic valuation allowance ...... (40.2) (29.0) --
Nontaxable gain on sale of subsidiary stock . (3.1) -- --
Other ....................................... 3.4 1.2 --
-------- -------- ---------
Effective rate............................... 13.6% 49.9% 160.8%
======== ======== =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to doubtful
accounts............................................... $ 3.3 $ 3.9
Inventories............................................. 11.7 12.5
Net operating loss carryforwards........................ 222.2 269.2
Restructuring and related reserves...................... 9.4 10.2
Employee benefits....................................... 29.0 31.7
State and local taxes................................... 13.1 12.8
Self-insurance.......................................... 3.8 3.6
Advertising, sales discounts and returns and coupon
redemptions............................................ 26.0 23.6
Other................................................... 26.2 23.9
--------- ---------
Total gross deferred tax assets........................ 344.7 391.4
Less valuation allowance............................... (298.9) (347.0)
--------- ---------
Net deferred tax assets................................ 45.8 44.4
Deferred tax liabilities:
Plant, equipment and other assets....................... (49.7) (43.0)
Inventories............................................. (0.2) (0.2)
Other................................................... (4.5) (7.2)
--------- ---------
Total gross deferred tax liabilities................... (54.4) (50.4)
--------- ---------
Net deferred tax liability............................. $ (8.6) $ (6.0)
========= =========
</TABLE>
The valuation allowance for deferred tax assets at January 1, 1997 was
$347.0. The valuation allowance decreased by $48.1 and $10.2 during the years
ended December 31, 1997 and 1996, respectively, and increased by $19.2 during
the year ended December 31, 1995.
F-21
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
During 1997, 1996 and 1995, certain of the Company's foreign subsidiaries
used operating loss carryforwards to credit the current provision for income
taxes by $4.0, $4.7 and $15.4, respectively. Certain other foreign operations
generated losses during the years 1997, 1996 and 1995 for which the potential
tax benefit was reduced by a valuation allowance. During 1997, the Company
used domestic operating loss carryforwards to credit the current provision
for income taxes by $16.6 and the deferred provision for income taxes by
$12.0. At December 31, 1997, the Company had tax loss carryforwards of
approximately $578.9 which expire in future years as follows: 1998-$21.1;
1999-$25.3; 2000-$9.3; 2001-$15.9; and beyond-$386.4; unlimited-$120.9. The
Company will receive a benefit only to the extent it has taxable income
during the carryforward periods in the applicable jurisdictions.
Appropriate United States and foreign income taxes have been accrued on
foreign earnings that have been or are expected to be remitted in the near
future. Unremitted earnings of foreign subsidiaries which have been, or are
currently intended to be, permanently reinvested in the future growth of the
business aggregated approximately $18.7 at December 31, 1997, excluding those
amounts which, if remitted in the near future, would not result in
significant additional taxes under tax statutes currently in effect.
13. POSTRETIREMENT BENEFITS
PENSIONS:
Products Corporation uses a September 30 date for measurement of plan
obligations and assets.
The following tables reconcile the funded status of Products Corporation's
significant pension plans with the respective amounts recognized in the
Consolidated Balance Sheets at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------
OVERFUNDED UNDERFUNDED
PLANS PLANS TOTAL
------------ ------------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation as of September 30,
1997, includes vested benefits of $304.5 ......... $(269.3) $(45.2) $(314.5)
============ ============= ==========
Projected benefit obligation as of September 30,
1997 for service rendered.......................... $(309.3) $(55.5) $(364.8)
Fair value of plan assets as of September 30, 1997 .. 305.0 1.9 306.9
------------ ------------- ----------
Plan assets less than projected benefit obligation .. (4.3) (53.6) (57.9)
Amounts contributed to plans during fourth quarter
1997................................................ 0.3 0.6 0.9
Unrecognized net (assets) obligation................. (1.3) 0.2 (1.1)
Unrecognized prior service cost ..................... 6.5 3.2 9.7
Unrecognized net loss................................ 0.2 12.7 12.9
Adjustment to recognize additional minimum
liability........................................... -- (6.5) (6.5)
------------ ------------- ----------
Prepaid (accrued) pension cost..................... $ 1.4 $(43.4) $ (42.0)
============ ============= ==========
</TABLE>
F-22
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------
OVERFUNDED UNDERFUNDED
PLANS PLANS TOTAL
------------ ------------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation as of September 30,
1996, includes vested benefits of $286.9........... $(163.7) $(131.4) $(295.1)
============ ============= ==========
Projected benefit obligation as of September 30,
1996 for service rendered.......................... $(198.1) $(141.4) $(339.5)
Fair value of plan assets as of September 30, 1996 .. 173.3 81.6 254.9
------------ ------------- ----------
Plan assets less than projected benefit obligation .. (24.8) (59.8) (84.6)
Amounts contributed to plans during fourth quarter
1996................................................ 0.2 0.5 0.7
Unrecognized net (assets) obligation................. (1.5) 0.2 (1.3)
Unrecognized prior service cost...................... 5.2 3.9 9.1
Unrecognized net loss................................ 20.2 20.5 40.7
Adjustment to recognize additional minimum
liability........................................... -- (15.3) (15.3)
------------ ------------- ----------
Accrued pension cost............................... $ (0.7) $ (50.0) $ (50.7)
============ ============= ==========
</TABLE>
The weighted average discount rate assumed was 7.75% for 1997 and 1996 for
domestic plans. For foreign plans, the weighted average discount rate was
7.1% and 7.9% for 1997 and 1996, respectively. The rate of future
compensation increases was 5.3% for 1997 and 1996 for domestic plans and was
a weighted average of 5.3% and 5.1% for 1997 and 1996, respectively, for
foreign plans. The expected long-term rate of return on assets was 9.0% for
1997 and 1996 for domestic plans and a weighted average of 10.1% for 1997 and
10.4% for 1996 for foreign plans.
Plan assets consist primarily of common stock, mutual funds and fixed
income securities, which are stated at fair market value and cash equivalents
which are stated at cost, which approximates fair market value.
In accordance with the provisions of SFAS No. 87, "Employers' Accounting
for Pensions," the Company recorded an additional liability to the extent
that, for certain U.S. plans, the unfunded accumulated benefit obligation
exceeded recorded liabilities. At December 31, 1997, the additional liability
was recognized by recording an intangible asset to the extent of unrecognized
prior service costs of $1.0, a due from affiliates of $1.0 and a charge to
stockholder's deficiency of $4.5. At December 31, 1996, the additional
liability was recognized by recording an intangible asset to the extent of
unrecognized prior service costs of $1.8, a due from affiliates of $1.1, and
a charge to stockholder's deficiency of $12.4.
Net periodic pension cost for the pension plans consisted of the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 11.7 $ 10.6 $ 8.2
Interest cost on projected benefit obligation . 26.0 24.3 21.7
Actual return on plan assets ................... (55.8) (30.4) (27.3)
Net amortization and deferrals ................. 35.6 15.1 13.4
-------- -------- --------
17.5 19.6 16.0
Portion allocated to Holdings .................. (0.3) (0.3) (0.3)
-------- -------- --------
Net periodic pension cost of the Company ...... $ 17.2 $ 19.3 $ 15.7
======== ======== ========
</TABLE>
F-23
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
A substantial portion of the Company's employees in the United States are
covered by defined benefit retirement plans. To the extent that aggregate
pension costs could be identified as relating to the Company or to Holdings,
such costs have been so apportioned. The components of the net periodic
pension cost applicable solely to the Company are not presented as it is not
practical to segregate such information between Holdings and the Company. In
1997 and 1996, there was a settlement loss of $0.2 and $0.3, respectively,
and a curtailment loss of $0.1 and $1.0, respectively, resulting from
workforce reductions.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company also has sponsored an unfunded retiree benefit plan, which
provides death benefits payable to beneficiaries of certain key employees and
former employees. Participation in this plan is limited to participants
enrolled as of December 31, 1993. The Company also administers a medical
insurance plan on behalf of Holdings, the cost of which has been apportioned
to Holdings. Net periodic postretirement benefit cost for each of the years
ended December 31, 1997, 1996 and 1995 was $0.7 which consists primarily of
interest on the accumulated postretirement benefit obligation. The Company's
date of measurement of Plan obligations is September 30. At December 31, 1997
and 1996, the portion of accumulated benefit obligation attributable to
retirees was $7.3 and $6.9, respectively, and to other fully eligible
participants, $1.4 and $1.3, respectively. The amount of unrecognized gain at
December 31, 1997 and 1996 was $1.9 and $1.2, respectively. At December 31,
1997 and 1996, the accrued postretirement benefit obligation recorded on the
Company's Consolidated Balance Sheets was $10.6 and $9.4, respectively. Of
these amounts, $1.9 and $2.0 was attributable to Holdings and was recorded as
a receivable from affiliates at December 31, 1997 and 1996, respectively. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation at September 30, 1997 and 1996 was 7.75%.
14. STOCK COMPENSATION PLAN
At December 31, 1997 and 1996, Revlon, Inc. had a stock-based compensation
plan (the "Plan"), which is described below. Products Corporation applies APB
Opinion No. 25 and related Interpretations in accounting for the Plan. Under
APB Opinion No. 25, because the exercise price of Revlon, Inc.'s employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation cost has been recognized. Had compensation cost for
Revlon, Inc.'s Plan been determined consistent with SFAS No. 123, Products
Corporation's net income for 1997 of $44.8 ($19.0 in 1996) would have been
reduced to the pro forma amounts of $32.5 for 1997 ($15.8 in 1996). The fair
value of each option grant is estimated on the date of the grant using the
Black-Scholes option-pricing model assuming no dividend yield, expected
volatility of approximately 39% in 1997 and 31% in 1996; weighted average
risk-free interest rate of 6.54% in 1997 and 5.99% in 1996; and a seven year
expected average life for the Plan's options issued in 1997 and 1996. The
effects of applying SFAS No. 123 in this pro forma disclosure are not
necessarily indicative of future amounts.
Under the Plan, Revlon, Inc. may grant options to its employees for up to
an aggregate of 5.0 million shares of Class A Common Stock. Non-qualified
options granted under the Plan have a term of 10 years during which the
holder can purchase shares of Class A Common Stock at an exercise price which
must be not less than the market price on the date of the grant. Options
granted in 1996 to certain executive officers will not vest as to any portion
until the third anniversary of the grant date and will thereupon become 100%
vested, except that upon termination of employment by Revlon, Inc. other than
for "cause," death or "disability" under the applicable employment agreement,
such options will vest with respect to 25% of the shares subject thereto (if
the termination is between the first and second anniversaries of the grant)
and 50% of the shares subject thereto (if the termination is between the
second and third
F-24
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
anniversaries of the grant). Primarily all other option grants, including
options granted to certain executive officers in 1997 will vest 25% each year
beginning on the first anniversary of the date of grant and will become 100%
vested on the fourth anniversary of the date of grant. During 1997, Revlon,
Inc. granted to Mr. Perelman, Chairman of the Executive Committee, an option
to purchase 300,000 shares of Revlon, Inc.'s Class A Common Stock, which will
vest in full on the fifth anniversary of the grant date. At December 31, 1997
there were 98,450 options exercisable under the Plan. At December 31, 1996
there were no options exercisable under the Plan.
A summary of the status of the Plan as of December 31, 1997 and 1996 and
changes during the years then ended is presented below:
<TABLE>
<CAPTION>
SHARES WEIGHTED AVERAGE
(000) EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at 2/28/96 . -- --
Granted ................. 1,010.2 $24.37
Exercised ............... -- --
Forfeited ............... (119.1) 24.00
---------
Outstanding at 12/31/96 891.1 24.37
Granted ................. 1,485.5 32.64
Exercised ............... (12.1) 24.00
Forfeited ............... (85.1) 29.33
---------
Outstanding at 12/31/97 2,279.4 29.57
=========
</TABLE>
The weighted average fair value of each option granted during 1997 and
1996 approximated $16.42 and $11.00, respectively.
The following table summarizes information about the Plan's options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------
WEIGHTED
RANGE NUMBER AVERAGE WEIGHTED
OF OUTSTANDING YEARS AVERAGE
EXERCISE PRICES (000) REMAINING EXERCISE PRICE
- ---------------- ------------- ----------- --------------
<S> <C> <C> <C>
$24.00 to $29.88 817.9 8.17 $24.05
31.38 to 33.88 1,067.8 9.02 31.40
34.88 to 50.75 393.7 9.38 36.10
-------------
24.00 to 50.75 2,279.4 8.78 29.57
=============
</TABLE>
15. RELATED PARTY TRANSACTIONS
TRANSFER AGREEMENTS
In June 1992, Revlon, Inc. and Products Corporation entered into an asset
transfer agreement with Holdings and certain of its wholly owned subsidiaries
(the "Asset Transfer Agreement"), and Revlon, Inc. and Products Corporation
entered into a real property asset transfer agreement with Holdings (the
"Real Property Transfer Agreement" and, together with the Asset Transfer
Agreement, the "Transfer Agreements"), and pursuant to such agreements, on
June 24, 1992 Holdings transferred assets to Products Corporation and
Products Corporation assumed all the liabilities of Holdings, other than
certain specifically excluded assets and liabilities (the liabilities
excluded are referred to as the "Excluded Liabilities"). Holdings retained
the Retained Brands. Holdings agreed to indemnify Revlon, Inc. and
F-25
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
Products Corporation against losses arising from the Excluded Liabilities,
and Revlon, Inc. and Products Corporation agreed to indemnify Holdings
against losses arising from the liabilities assumed by Products Corporation.
The amounts reimbursed by Holdings to Products Corporation for the Excluded
Liabilities for 1997, 1996 and 1995 were $0.4, $1.4 and $4.0, respectively.
OPERATING SERVICES AGREEMENT
In June 1992, Revlon, Inc., Products Corporation and Holdings entered into
an operating services agreement (as amended and restated, and as subsequently
amended, the "Operating Services Agreement") pursuant to which Products
Corporation manufactures, markets, distributes, warehouses and administers,
including the collection of accounts receivable, the Retained Brands for
Holdings. Pursuant to the Operating Services Agreement, Products Corporation
is reimbursed an amount equal to all of its and Revlon, Inc.'s direct and
indirect costs incurred in connection with furnishing such services, net of
the amounts collected by Products Corporation with respect to the Retained
Brands, payable quarterly. The net amounts reimbursed by Holdings to Products
Corporation for such direct and indirect costs for 1997, 1996 and 1995 were
$1.4, $5.1 and $8.6, respectively. Holdings also pays Products Corporation a
fee equal to 5% of the net sales of the Retained Brands, payable quarterly.
The fees paid by Holdings to Products Corporation pursuant to the Operating
Services Agreement for services with respect to the Retained Brands for 1997,
1996 and 1995 were approximately $0.3, $0.6 and $1.7, respectively.
REIMBURSEMENT AGREEMENTS
Revlon, Inc., Products Corporation and MacAndrews Holdings have entered
into reimbursement agreements (the "Reimbursement Agreements") pursuant to
which (i) MacAndrews Holdings is obligated to provide (directly or through
affiliates) certain professional and administrative services, including
employees, to Revlon, Inc. and its subsidiaries, including Products
Corporation, and purchase services from third party providers, such as
insurance and legal and accounting services, on behalf of Revlon, Inc. and
its subsidiaries, including Products Corporation, to the extent requested by
Products Corporation, and (ii) Products Corporation is obligated to provide
certain professional and administrative services, including employees, to
MacAndrews Holdings (and its affiliates) and purchase services from third
party providers, such as insurance and legal and accounting services, on
behalf of MacAndrews Holdings (and its affiliates) to the extent requested by
MacAndrews Holdings, provided that in each case the performance of such
services does not cause an unreasonable burden to MacAndrews Holdings or
Products Corporation, as the case may be. The Company reimburses MacAndrews
Holdings for the allocable costs of the services purchased for or provided to
the Company and its subsidiaries and for reasonable out-of-pocket expenses
incurred in connection with the provision of such services. MacAndrews
Holdings (or such affiliates) reimburses the Company for the allocable costs
of the services purchased for or provided to MacAndrews Holdings (or such
affiliates) and for the reasonable out-of-pocket expenses incurred in
connection with the purchase or provision of such services. In addition, in
connection with certain insurance coverage provided by MacAndrews Holdings,
Products Corporation obtained letters of credit under the Special LC Facility
(which aggregated approximately $27.7 as of December 31, 1997) to support
certain self-funded risks of MacAndrews Holdings and its affiliates,
including the Company, associated with such insurance coverage. The costs of
such letters of credit are allocated among, and paid by, the affiliates of
MacAndrews Holdings, including the Company, which participate in the
insurance coverage to which the letters of credit relate. The Company expects
that these self-funded risks will be paid in the ordinary course and,
therefore, it is unlikely that such letters of credit will be drawn upon.
MacAndrews Holdings has agreed to indemnify Products Corporation to the
extent amounts are drawn under any of such letters of credit with respect to
claims for which neither Revlon, Inc. nor Products Corporation is
responsible. The net amounts reimbursed by MacAndrews Holdings to the Company
for the services provided under the Reimbursement Agreements for 1997, 1996
F-26
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
and 1995 were $4.0, $2.2 and $3.0, respectively. Each of Revlon, Inc. and
Products Corporation, on the one hand, and MacAndrews Holdings, on the other,
has agreed to indemnify the other party for losses arising out of the
provision of services by it under the Reimbursement Agreements other than
losses resulting from its willful misconduct or gross negligence. The
Reimbursement Agreements may be terminated by either party on 90 days'
notice. The Company does not intend to request services under the
Reimbursement Agreements unless their costs would be at least as favorable to
the Company as could be obtained from unaffiliated third parties.
TAX SHARING AGREEMENT
Holdings, Revlon, Inc., Products Corporation and certain of its
subsidiaries and Mafco Holdings are parties to the Tax Sharing Agreement,
which is described in Note 12. Since payments to be made under the Tax
Sharing Agreement will be determined by the amount of taxes that Products
Corporation would otherwise have to pay if it were to file separate federal,
state or local income tax returns, the Tax Sharing Agreement will benefit
Mafco Holdings to the extent Mafco Holdings can offset the taxable income
generated by Products Corporation against losses and tax credits generated by
Mafco Holdings and its other subsidiaries.
FINANCING REIMBURSEMENT AGREEMENT
Holdings and Products Corporation entered into a financing reimbursement
agreement (the "Financing Reimbursement Agreement") in 1992, which expired on
June 30, 1996, pursuant to which Holdings agreed to reimburse Products
Corporation for Holdings' allocable portion of (i) the debt issuance cost and
advisory fees related to the capital restructuring of Holdings, and (ii)
interest expense attributable to the higher cost of funds paid by Products
Corporation under the credit agreement in effect at that time as a result of
additional borrowings for the benefit of Holdings in connection with the
assumption of certain liabilities by Products Corporation under the Asset
Transfer Agreement and the repurchase of certain subordinated notes from
affiliates. The amount of interest to be reimbursed by Holdings for 1994 was
approximately $0.8 and was evidenced by noninterest-bearing promissory notes
originally due and payable on June 30, 1995. In February 1995, the $13.3 in
notes then payable by Holdings to Products Corporation under the Financing
Reimbursement Agreement was offset against a $25.0 note payable by Products
Corporation to Holdings and Holdings agreed not to demand payment under the
resulting $11.7 note payable by Products Corporation so long as any
indebtedness remained outstanding under the credit agreement then in effect.
In February 1995, the Financing Reimbursement Agreement was amended and
extended to provide that Holdings would reimburse Products Corporation for a
portion of the debt issuance costs and advisory fees related to the credit
agreement then in effect (which portion was approximately $4.7 and was
evidenced by a noninterest-bearing promissory note payable on June 30, 1996)
and 1 1/2% per annum of the average balance outstanding under the credit
agreement then in effect and the average balance outstanding under working
capital borrowings from affiliates through June 30, 1996 and such amounts
were evidenced by a noninterest-bearing promissory note payable on June 30,
1996. The amount of interest to be reimbursed by Holdings for 1995 was
approximately $4.2. As of December 31, 1995, the aggregate amount of notes
payable by Holdings under the Financing Reimbursement Agreement was $8.9. In
June 1996, $10.9 in notes due to Products Corporation, which included $2.0 of
interest reimbursement from Holdings in 1996, under the Financing
Reimbursement Agreement was offset against an $11.7 demand note payable by
Products Corporation to Holdings.
OTHER
Pursuant to a lease dated April 2, 1993 (the "Edison Lease"), Holdings
leases to Products Corporation the Edison research and development facility
for a term of up to 10 years with an annual rent
F-27
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
of $1.4 and certain shared operating expenses payable by Products Corporation
which, together with the annual rent, are not to exceed $2.0 per year.
Pursuant to an assumption agreement dated February 18, 1993, Holdings agreed
to assume all costs and expenses of the ownership and operation of the Edison
facility as of January 1, 1993, other than (i) the operating expenses for
which Products Corporation is responsible under the Edison Lease and (ii)
environmental claims and compliance costs relating to matters which occurred
prior to January 1, 1993 up to an amount not to exceed $8.0 (the amount of
such claims and costs for which Products Corporation is responsible, the
"Environmental Limit"). In addition, pursuant to such assumption agreement,
Products Corporation agreed to indemnify Holdings for environmental claims
and compliance costs relating to matters which occurred prior to January 1,
1993 up to an amount not to exceed the Environmental Limit and Holdings
agreed to indemnify Products Corporation for environmental claims and
compliance costs relating to matters which occurred prior to January 1, 1993
in excess of the Environmental Limit and all such claims and costs relating
to matters occurring on or after January 1, 1993. Pursuant to an occupancy
agreement, during 1997, 1996 and 1995 Products Corporation rented from
Holdings a portion of the administration building located at the Edison
facility and space for a retail store of Products Corporation. Products
Corporation provides certain administrative services, including accounting,
for Holdings with respect to the Edison facility pursuant to which Products
Corporation pays on behalf of Holdings costs associated with the Edison
facility and is reimbursed by Holdings for such costs, less the amount owed
by Products Corporation to Holdings pursuant to the Edison Lease and the
occupancy agreement. The net amount reimbursed by Holdings to Products
Corporation for such costs with respect to the Edison facility for 1997, 1996
and 1995 was $0.7, $1.1 and $1.2, respectively.
During 1997, a subsidiary of Products Corporation sold an inactive
subsidiary to an affiliate for approximately $1.0.
Effective July 1, 1997, Holdings contributed to Products Corporation
substantially all of the assets and liabilities of the Bill Blass business
not already owned by Products Corporation. The contributed assets
approximated the contributed liabilities and were accounted for at historical
cost in a manner similar to that of a pooling of interests and, accordingly,
prior period financial statements were restated as if the contribution took
place prior to the beginning of the earliest period presented.
In the fourth quarter of 1996, a subsidiary of Products Corporation
purchased an inactive subsidiary from an affiliate for net cash consideration
of approximately $3.0 in a series of transactions in which Products
Corporation expects to realize foreign tax benefits in future years.
Effective January 1, 1996, Products Corporation acquired from Holdings
substantially all of the assets of Tarlow in consideration for the assumption
of substantially all of the liabilities and obligations of Tarlow. Net
liabilities assumed were approximately $3.4. The assets acquired and
liabilities assumed were accounted for at historical cost in a manner similar
to that of a pooling of interests and, accordingly, prior period financial
statements have been restated as if the acquisition took place at the
beginning of the earliest period. Products Corporation paid $4.1 to Holdings
which was accounted for as an increase in capital deficiency. A nationally
recognized investment banking firm rendered its written opinion that the
terms of the purchase are fair from a financial standpoint to Products
Corporation.
Products Corporation leases certain facilities to MacAndrews & Forbes or
its affiliates pursuant to occupancy agreements and leases. These included
space at Products Corporation's New York headquarters and at Products
Corporation's offices in London during 1997, 1996 and 1995; in Tokyo during
1996 and 1995 and in Hong Kong during 1997. The rent paid by MacAndrews &
Forbes or its affiliates to Products Corporation for 1997, 1996 and 1995 was
$3.8, $4.6 and $5.3, respectively.
In July 1995, Products Corporation borrowed from Holdings approximately
$0.8, representing certain amounts received by Holdings relating to an
arbitration arising out of the sale by Holdings of
F-28
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
certain of its businesses. In 1995, Products Corporation borrowed from
Holdings approximately $5.6, representing certain amounts received by
Holdings from the sale by Holdings of certain of its businesses. In June
1997, Products Corporation borrowed from Holdings approximately $0.5,
representing certain amounts received by Holdings from the sale of a brand
and inventory relating thereto. Such amounts are evidenced by
noninterest-bearing promissory notes. Holdings agreed not to demand payment
under such notes so long as any indebtedness remains outstanding under the
Credit Agreement.
The Credit Agreement is supported by, among other things, guarantees from
Holdings and certain of its subsidiaries. The obligations under such
guarantees are secured by, among other things, (i) the capital stock and
certain assets of certain subsidiaries of Holdings and (ii) a mortgage on
Holdings' Edison, New Jersey facility.
Products Corporation borrows funds from its affiliates from time to time
to supplement its working capital borrowings. No such borrowings were
outstanding as of December 31, 1997, 1996 or 1995. The interest rates for
such borrowings are more favorable to Products Corporation than interest
rates under the Credit Agreement and, for borrowings occurring prior to the
execution of the Credit Agreement, the credit facility in effect at the time
of such borrowing. The amount of interest paid by Products Corporation for
such borrowings for 1997, 1996 and 1995 was $0.6, $0.5 and $1.2,
respectively.
In November 1993, Products Corporation assigned to Holdings a lease for
warehouse space in New Jersey (the "N.J. Warehouse") between Products
Corporation and a trust established for the benefit of certain family members
of the Chairman of the Executive Committee. The N.J. Warehouse had become
vacant as a result of divestitures and restructuring of Products Corporation.
The lease has annual lease payments of approximately $2.3 and terminates on
June 30, 2005. In consideration for Holdings assuming all liabilities and
obligations under the lease, Products Corporation paid Holdings $7.5 (for
which a liability was previously recorded) in three installments of $2.5 each
in January 1994, January 1995 and January 1996. A nationally recognized
investment banking firm rendered its written opinion that the terms of the
lease transfer were fair from a financial standpoint to Products Corporation.
During 1996 and 1995, Products Corporation paid certain costs associated with
the N.J. Warehouse on behalf of Holdings and was reimbursed by Holdings for
such amounts. The amounts reimbursed by Holdings to Products Corporation for
such costs were $0.2 and $0.2 for 1996 and 1995, respectively.
During 1997, 1996 and 1995, Products Corporation used an airplane owned by
a corporation of which Messrs. Gittis, Drapkin and, during 1995 and 1996,
Levin were the sole stockholders, for which Products Corporation paid
approximately $0.2, $0.2 and $0.4 for 1997, 1996 and 1995, respectively.
During 1997, Products Corporation purchased products from an affiliate,
for which it paid approximately $0.9.
During 1997, Products Corporation provided licensing services to an
affiliate, for which Products Corporation has been paid approximately $0.7.
An affiliate of Products Corporation assembles lipstick cases for Products
Corporation. Products Corporation paid approximately $0.9, $1.0 and $1.0 for
such services for 1997, 1996 and 1995, respectively.
In January 1995, Products Corporation agreed to license certain of its
trademarks to a former affiliate of MacAndrews & Forbes. The amount paid to
Products Corporation pursuant to such license for 1995 was less than $0.1.
The affiliate purchased $1.1 of wigs from Products Corporation during 1995.
Products Corporation terminated the license with the affiliate during 1995.
16. COMMITMENTS AND CONTINGENCIES
The Company currently leases manufacturing, executive, including research
and development, and sales facilities and various types of equipment under
operating lease agreements. Rental expense was
F-29
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
$57.3, $51.7 and $49.3 for the years ended December 31, 1997, 1996 and 1995,
respectively. Minimum rental commitments under all noncancelable leases,
including those pertaining to idled facilities and the Edison research and
development facility, with remaining lease terms in excess of one year from
December 31, 1997 aggregated $201.1; such commitments for each of the five
years subsequent to December 31, 1997 are $43.2, $39.8, $34.6, $29.3 and
$26.7, respectively. Such amounts exclude the minimum rentals to be received
in the future under noncancelable subleases of $4.2.
The Company and its subsidiaries are defendants in litigation and
proceedings involving various matters. In the opinion of the Company's
management, based upon advice of its counsel handling such litigation and
proceedings, adverse outcomes, if any, will not result in a material effect
on the Company's consolidated financial condition or results of operations.
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
1ST 2ND 3RD 4TH
QUARTER(B) QUARTER(B) QUARTER QUARTER
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ............................... $492.9 $572.4 $623.5 $702.1
Gross profit ............................ 326.6 370.5 406.4 455.3
(Loss) income before extraordinary item (25.4) 9.4 33.1 42.6
Net (loss) income ....................... (25.4) (5.5)(a) 33.1 42.6
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996(B)
-------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ............................... $464.8 $518.3 $571.7 $614.7
Gross profit ............................ 311.7 347.5 378.4 405.4
(Loss) income before extraordinary item (29.0) 1.5 21.0 32.1
Net (loss) income ....................... (35.6)(c) 1.5 21.0 32.1
</TABLE>
(a) Includes the extraordinary charges of $14.9 resulting from the
write-off in the second quarter of 1997 of deferred financing costs
associated with the early extinguishment of borrowings and the redemption of
Products Corporation's Sinking Fund Debentures.
(b) Effective July 1, 1997, Holdings contributed to Products Corporation
substantially all of the assets and liabilities of the Bill Blass business
not already owned by Products Corporation. The contributed assets
approximated the contributed liabilities and were accounted for at historical
cost in a manner similar to that of a pooling of interests and, accordingly,
prior period financial statements were restated as if the contribution took
place prior to the beginning of the earliest period presented.
(c) Includes an extraordinary charge of $6.6 resulting from the write-off
of deferred financing costs associated with the early extinguishment of
borrowings.
18. GEOGRAPHIC SEGMENTS
The Company manages its business on the basis of one reportable segment.
See Note 1 for a brief description of the Company's business. As of December
31, 1997, the Company had operations established in 26 countries outside of
the United States and its products are sold throughout the world. The Company
is exposed to the risk of changes in social, political and economic
conditions inherent in foreign operations and the Company's results of
operations and the value of its foreign assets are affected
F-30
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
by fluctuations in foreign currency exchange rates. The Company's operations
in Brazil have accounted for approximately 5.5%, 6.1% and 6.1% of the
Company's net sales for 1997, 1996 and 1995, respectively. Net sales by
geographic area are presented by attributing revenues from external customers
on the basis of where the products are sold. During 1996, one customer and
its affiliates accounted for approximately 10.1% of the Company's
consolidated net sales. This data is presented in accordance with SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which the Company has retroactively adopted for all periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
GEOGRAPHIC AREAS
Net sales:
United States $1,452.5 $1,259.7 $1,115.4
International 938.4 909.8 824.6
---------- ---------- ----------
$2,390.9 $2,169.5 $1,940.0
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Long-lived
assets:
United States .. $ 570.6 $ 555.0
International ... 280.5 245.9
---------- ----------
$851.1 $800.9
========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
CLASSES OF SIMILAR PRODUCTS:
Net sales:
Cosmetics, skin care and
fragrances ....................... $1,408.3 $1,262.0 $1,080.5
Personal care and professional ... 982.6 907.5 859.5
---------- ---------- ----------
$2,390.9 $2,169.5 $1,940.0
========== ========== ==========
</TABLE>
19. SUBSEQUENT EVENT (UNAUDITED)
On February 2, 1998, an affiliate of the Company, Revlon Escrow Corp.,
issued notes in the aggregate amount of $900.0 (the "Notes"). The net
proceeds of $880 (net of discounts, fees and expenses) were deposited with an
escrow agent and substantially all of such proceeds will be used to fund the
redemptions by Products Corporation of its Senior Subordinated Notes and the
Senior Notes, including prepayment premiums for early redemptions. Products
Corporation will assume the obligations of Revlon Escrow Corp. under the
Notes upon consummation of such redemptions. In connection with the early
redemptions of the Senior Notes and Senior Subordinated Notes, the Company
expects to record an extraordinary loss of up to $52 in 1998.
F-31
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Available Information................... 3
Prospectus Summary...................... 4
Risk Factors ........................... 19
Use of Proceeds ........................ 25
Capitalization ......................... 26
Selected Historical and Pro Forma
Financial Data ........................ 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................ 30
The Exchange Offer...................... 39
Business ............................... 46
Management ............................. 65
Ownership of Common Stock .............. 75
Relationship with MacAndrews
& Forbes .............................. 75
Description of the Notes................ 80
Description of Other Indebtedness ..... 134
Certain U.S. Federal Income Tax
Considerations ........................ 139
Book-Entry; Delivery and Form .......... 140
Plan of Distribution.................... 141
Legal Matters .......................... 142
Experts................................. 142
Index to Consolidated Financial
Statements ............................ F-1
</TABLE>
$900,000,000
[REVLON LOGO]
REVLON CONSUMER
PRODUCTS CORPORATION
$250,000,000
8 1/8% SENIOR EXCHANGE NOTES
DUE 2006
$650,000,000
8 5/8% SENIOR SUBORDINATED
EXCHANGE NOTES DUE 2008
PROSPECTUS
April 3, 1998
<PAGE>
Appendix of Graphic Material Omitted from Prospectus
Page
No. Description
--- -----------
54 Bar chart of the Company's market share for color cosmetics in the
United States self-select distribution channel, depicting the Com
pany's market share of 17.3%, 19.5%, 21.4% and 21.6% for 1994, 1995,
1996 and 1997, respectively.
54 Bar chart of the Company's market share for face makeup in the United
States self-select distribution channel, depicting the Com pany's
market share of 13.1%, 15.7%, 19.1% and 21.2% for 1994, 1995, 1996 and
1997, respectively.
54 Bar chart of the Company's market share for foundation in the United
States self-select distribution channel, depicting the Company's
market share of 15.4%, 20.0%, 25.3% and 26.8% for 1994, 1995, 1996 and
1997, respectively.
55 Bar chart of the Company's market share for eye makeup in the United
States self-select distribution channel, depicting the Com pany's
market share of 10.9%, 10.9%, 12.7% and 12.8% for 1994, 1995, 1996 and
1997, respectively.
55 Bar chart of the Company's market share for lip makeup in the United
States self-select distribution channel, depicting the Company's
market share of 29.4%, 33.5%, 32.6% and 31.4% for 1994, 1995, 1996 and
1997, respectively.
55 Bar chart of the Company's market share for nail enamel in the United
States self-select distribution channel, depicting the Company's
market share of 21.6%, 22.4%, 24.6% and 22.8% for 1994, 1995, 1996 and
1997, respectively.
<PAGE>
56 Bar chart of the market share for overall color cosmetics market
for the Company's Almay brand in the United States self-select
distribution channel, depicting the Almay brand's market share of
5.4%, 5.6%, 6.0% and 6.4% for 1994, 1995, 1996 and 1997, respectively.
57 Bar chart depicting the growth in retail sales for the Company and its
Almay brand in the United States self-select distribution channel for
color cosmetics, lip makeup, face makeup, nail enamel and eye makeup
compared with overall growth in retail sales in such product
categories for 1997 over 1996, as follows:
Category Revlon Almay
-------- ------ -----
Total color............. 7.9% 9.0% 15.3%
Lip makeup.............. 4.7 1.0 40.6
Face makeup............. 4.4 15.9 10.3
Nail.................... 29.6 19.8 2.7
Eye..................... 6.9 6.9 13.7
2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is a table of the Commission registration fee and
estimates of all other expenses to be incurred in connection with the
issuance and distribution of the securities described in this Registration
Statement:
<TABLE>
<CAPTION>
<S> <C>
Commission registration fee......... $265,500
Printing and engraving expenses .... $165,000
Legal fees and expenses............. $200,000
Accounting fees and expenses ....... $ 50,000
Miscellaneous....................... $100,000
------------
Total............................. $780,500
============
</TABLE>
- ------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or was
an officer, director, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided that such officer or director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe
his conduct was unlawful. A Delaware corporation may indemnify officers and
directors against expenses (including attorneys' fees) in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director actually and reasonably incurred.
Article X of the By-laws of the Registrant, a copy of which is filed as
Exhibit 3.2 to this Registration Statement, allows the Registrant to maintain
director and officer liability insurance on behalf of any person who is or
was a director or officer of the Registrant or such person who serves or
served as a director, officer, employee or agent, of another corporation,
partnership or other enterprise at the request of the Registrant. Article X
of the Registrant's By-Laws provides for indemnification of the officers and
directors of the Registrant to the fullest extent permitted by applicable
law.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article
Sixth of the Certificate of Incorporation of the Registrant, a copy of which
is filed as Exhibit 3.1 to this Registration Statement, provides that no
director of the Registrant shall be personally liable to the Registrant or
its shareholders for monetary damages for any breach of his fiduciary duty as
a director; provided, however, that such clause shall not apply to any
liability of a director (1) for any breach of the Director's duty of loyalty
to the Registrant or its stockholders, (2) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law, (3) pursuant to Section 174 of the Delaware Corporation Law, or (4) for
any transaction from which the director derived an improper personal benefit.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On February 2, 1998, the Revlon Escrow sold $250,000,000 aggregate
principal amount of the Old Senior Notes and $650,000,000 aggregate principal
amount of the Old Senior Subordinated Notes to Bear, Stearns & Co. Inc. and
Lehman Brothers Inc. (collectively, the "Initial Purchasers") less an
aggregate discount to the Initial Purchasers of $13,633,000. Such
transactions were exempt from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act") in reliance on section 4(2) of
such Act on the basis that such transactions did not involve a public
offering. In accordance with the agreement pursuant to which the Initial
Purchasers purchased the Old Notes, such Initial Purchasers agreed to offer
and sell such notes only to "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act) and to a limited number of institutional
"accredited investors" (as defined in Rule 501(A)(1), (2), (3) or (7) under
the Securities Act). Except for the transactions described above, there have
not been any recent sales of unregistered securities by Revlon Escrow or the
Registrant.
The Registrant will have assumed Revlon Escrow's obligations under the Old
Notes prior to the commencement of the Exchange Offer.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C>
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.3 to the
Form 10 of the Company filed with the Securities and Exchange Commission on August 7, 1992 (File
No. 1-11334)).
3.2 Certificate of Amendment of Certificate of Incorporation as filed on February 18, 1993.
(Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K for the year ended
December 31, 1992 of the Company (the "1992 10-K")).
3.3 Amended and Restated By-Laws of the Company dated January 30, 1997. (Incorporated by reference to
Exhibit 3.3 to the Annual Report on Form 10-K for the year ended December 31, 1996 of the
Company).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of February 1, 1998, between Revlon Escrow and U.S. Bank Trust National
Association (formerly known as First Trust National Association), as Trustee, relating to
Company's 8 1/8% Senior Notes Due 2006 (the "Senior Notes Indenture").
4.2 First Supplemental Indenture, dated April 1, 1998, among Revlon Escrow, the Company and the
Trustee, amending the Senior Notes Indenture.
+4.3 Indenture, dated as of February 1, 1998, between Revlon Escrow and U.S. Bank Trust National
Association (formerly known as First Trust National Association), as Trustee, relating to the
Company's 8 5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Indenture").
+4.4 First Supplemental Indenture, dated March 4, 1998, among Revlon Escrow, the Company and the
Trustee, amending the Senior Subordinated Indenture.
4.5 Indenture dated as of June 1, 1993, between the Company and NationsBank of Georgia, National
Association, as Trustee, relating to the Company's 9 1/2% Senior Notes Due 1999. (Incorporated by
reference to Exhibit 4.31 to the Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1993 of the Company).
II-2
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
4.6 Second Amended and Restated Credit Agreement dated as of December 22, 1994, between Pacific
Finance & Development Corp. and the Long-Term Credit Bank of Japan, Ltd. (the "Yen Credit
Agreement"). (Incorporated by reference to Exhibit 4.32 to the Annual Report on Form 10-K for the
year ended December 31, 1994 of the Company (the "1994 10-K")).
4.7 First Amendment and Consent, dated as of March 10, 1997, with respect to the Yen Credit
Agreement. (Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997 of Revlon, Inc. (the "Revlon 1997 First Quarter 10-Q")).
4.8 Third Amended and Restated Credit Agreement, dated as of June 30, 1997, between Pacific Finance
and Development Corporation and the Long-Term Credit Bank, Ltd. (Incorporated by reference to
Exhibit 4.11 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 of
Revlon, Inc. (the "Revlon 1997 Second Quarter 10-Q")).
4.9 Amended and Restated Credit Agreement, dated as of May 30, 1997, among the Company, The Chase
Manhattan Bank, Citibank N.A., Lehman Commerical Paper Inc., Chase Securities Inc. and the
lenders party thereto (the "Credit Agreement"). (Incorporated by reference to Exhibit 4.23 to
Amendment No. 2 to the Form S-1 of Revlon Worldwide (Parent) Corporation, filed with the
Securities and Exchange Commission on June 26, 1997 (File No. 333-23451)).
4.10 First Amendment, dated as of January 29, 1998, to the Credit Agreement. (Incorporated by
reference to Exhibit 4.8 to the Annual Report for the year ended December 31, 1997 of Revlon,
Inc. (the "Revlon 1997 10-K")).
5. OPINIONS.
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company.
10. MATERIAL CONTRACTS.
10.1 Purchase and Sale Agreement and Amendment thereto by and between the Company and Holdings, each
dated as of February 18, 1993, relating to the Edison, New Jersey facility. (Incorporated by
reference to Exhibit 4.22 to the 1992 10-K).
10.2 Asset Transfer Agreement, dated as of June 24, 1992, among Holdings, National Health Care Group,
Inc., Charles of the Ritz Group Ltd., the Company and Revlon, Inc. (Incorporated by reference to
Exhibit 10.1 to the Amendment No. 1 to the Revlon Form S-1 filed with the Securities and Exchange
Commission on June 29, 1992 (File No. 33-47100)(the "Revlon 1992 Amendment No. 1").
10.3 Real Property Asset Transfer Agreement, dated as of June 24, 1992, among Holdings, Revlon, Inc.
and the Company. (Incorporated by reference to Exhibit 10.2 to the Revlon 1992 Amendment No. 1).
10.4 Assumption Agreement and Amendment thereto by and between the Company and Holdings, each dated as
of February 18, 1993, relating to the Edison, New Jersey facility. (Incorporated by reference to
Exhibit 4.23 to the 1992 10-K).
10.5 Tax Sharing Agreement, dated as of June 24, 1992, among Mafco Holdings, Revlon, Inc., the Company
and certain subsidiaries of the Company (the "Tax Sharing Agreement"). (Incorporated by reference
to Exhibit 10.5 to the Revlon 1992 Amendment No. 1).
10.6 First Amendment, dated as of February 28, 1995, to the Tax Sharing Agreement. (Incorporated by
reference to Exhibit 10.5 to the 1994 10-K).
10.7 Second Amendment, dated as of January 1, 1997, to the Tax Sharing Agreement. (Incorporated by
reference to Exhibit 10.7 to the Annual Report on Form 10-K for the year ended December 31, 1996
of Revlon, Inc. (the "Revlon 1996 10-K")).
II-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
10.8 Agreement by The Cosmetic Center, Inc. to be bound by the Tax Sharing Agreement, dated April 25,
1997. (Incorporated by reference to Exhibit 10.8 to the Revlon 1997 10-K).
10.9 Second Amended and Restated Operating Services Agreement by and among Holdings, Revlon, Inc. and
the Company, as of January 1, 1996 (the "Operating Services Agreement"). (Incorporated by
reference to Exhibit 10.8 to the Revlon 1996 10-K).
10.10 Amendment to the Operating Services Agreement, dated as of July 1, 1997. (Incorporated by
reference to Exhibit 10.10 to the Revlon 1997 10-K).
10.11 Employment Agreement dated as of January 1, 1996 between the Company and Jerry W. Levin (the
"Levin Employment Agreement"). (Incorporated by reference to Exhibit 10.10 to the Annual Report
on Form 10-K for the year ended December 31, 1995 of the Company (the "1995 10-K").
10.12 Amendment, effective June 30, 1997, to the Levin Employment Agreement. (Incorporated by reference
to Exhibit 10.12 to the Revlon 1997 10-K).
10.13 Employment Agreement dated as of January 1, 1997 between the Company and George Fellows.
(Incorporated by reference to Exhibit 10.10 to the Revlon 1997 First Quarter 10-Q).
10.14 Employment Agreement dated as of January 1, 1996 between the Company and William J. Fox.
(Incorporated by reference to Exhibit 10.12 to the 1995 10-K).
10.15 Employment Agreement dated as of January 1, 1996 between RIROS Corporation and Carlos Colomer
Casellas (the "Colomer Employment Agreement"). (Incorporated by reference to Exhibit 10.13 to the
1995 10-K).
10.16 Amendment, effective January 1, 1998, to the Colomer Employment Agreement. (Incorporated by
reference to Exhibit 10.16 to the Revlon 1997 10-K).
10.17 Employment Agreement dated as of January 1, 1998 between the Company and M. Katherine Dwyer.
(Incorporated by reference to Exhibit 10.17 to the Revlon 1997 10-K).
10.18 Revlon Employees' Savings, Investment and Profit Sharing Plan effective as of January 1, 1997.
(Incorporated by reference to Exhibit 10.18 to the Revlon 1997 10-K).
10.19 Revlon Employees' Retirement Plan as amended and restated December 19, 1994. (Incorporated by
reference to Exhibit 10.15 to the 1994 10-K).
10.20 Amended and Restated Revlon Pension Equalization Plan, effective January 1, 1996. (Incorporated
by reference to Exhibit 10.17 to the Amendment No. 4 to the Revlon Form S-1 filed with the
Securities and Exchange Commission on February 26, 1996 (File No. 33-99558)).
10.21 Executive Supplemental Medical Expense Plan Summary dated July 1991. (Incorporated by reference
to Exhibit 10.18 to the Form S-1 of Revlon, Inc. filed with the Securities and Exchange
Commission on May 22, 1992 (File No. 33-47100)(the "Revlon 1992 Form S-1").
10.22 Description of Post Retirement Life Insurance Program for Key Executives. (Incorporated by
reference to Exhibit 10.19 to the Revlon 1992 Form S-1).
10.23 Benefit Plans Assumption Agreement dated as of July 1, 1992, by and among Holdings, Revlon, Inc.
and the Company. (Incorporated by reference to Exhibit 10.25 to the 1992 10-K).
10.24 Revlon Executive Bonus Plan effective January 1, 1997. (Incorporated by reference to Exhibit
10.20 to the Revlon 1996 10-K).
10.25 Revlon Executive Deferred Compensation Plan, amended as of October 15, 1993. (Incorporated by
reference to Exhibit 10.25 to the Annual Report on Form 10-K for the year ended December 31, 1993
of the Company).
10.26 Revlon Executive Severance Policy effective January 1, 1996. (Incorporated by reference to
Exhibit 10.23 to the Amendment No. 3 to the Revlon 1995 Form S-1 filed with the Securities and
Exchange Commission on February 5, 1996).
II-4
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
10.27 Revlon, Inc. 1996 Stock Plan, amended and restated as of December 17, 1996. (Incorporated by
reference to Exhibit 10.23 to the Revlon 1996 10-K).
+10.28 Registration Agreement dated as of January 28, 1998 by and among Revlon Escrow Corp., the Company
and Bear, Stearns & Co. Inc. and Lehman Brothers Inc.
12. RATIO OF EARNINGS TO FIXED CHARGES.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for the Company.
21. SUBSIDIARIES.
21.1 Subsidiaries of the Company. (Incorporated by reference to Exhibit 21.1 to the Annual Report
on Form 10-K for the year ended December 31, 1997 of the Company).
23. CONSENTS.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company (included in
Exhibit 5.1).
24. POWERS OF ATTORNEY.
+24.1 Power of Attorney executed by Ronald O. Perelman.
+24.2 Power of Attorney executed by Howard Gittis.
+24.3 Power of Attorney executed by Irwin Engelman.
+24.4 Power of Attorney executed by Lawrence E. Kreider.
+24.5 Power of Attorney executed by George Fellows.
+24.6 Power of Attorney executed by Jerry W. Levin.
+24.7 Power of Attorney executed by William J. Fox.
+24.8 Power of Attorney executed by Frank Gehrmann.
+24.9 Power of Attorney executed by Donald G. Drapkin.
+24.10 Power of Attorney executed by Edward J. Landau, Esq.
25. FORM T-1.
+25.1 Statement of Eligibility and Qualification on Form T-1 of U.S. Bank Trust National Association
(formerly known as First Trust National Association), as Trustee under the Indenture relating to
the Company 8 1/8% Senior Exchange Notes due 2006 and the Company's 8 5/8% Senior Subordinated
Exchange Notes due 2008.
99. MISCELLANEOUS.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- ------------
+ Previously filed.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on April 3, 1998.
REVLON CONSUMER PRODUCTS
CORPORATION
By /s/ Wade H. Nichols III
--------------------------------
Wade H. Nichols III
Executive Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Executive April 3, 1998
- ------------------ Committe of the Board and
Ronald O. Perelman Director (Principal Executive
Officer)
/s/ George Fellows President, Chief Executive Officer April 3, 1998
- ------------------ and Director
George Fellows
* Chairman of the Board and April 3, 1998
- ------------------ Director
Jerry W. Levin
* Senior Executive Vice President April 3, 1998
- ------------------ and Director
William J. Fox
/s/ Frank J. Gehrmann Executive Vice President and April 3, 1998
- --------------------- Chief Financial Officer
Frank J. Gehrmann (Principal Financial Officer)
/s/ Lawrence E. Kreider Senior Vice President, Controller April 3, 1998
- ----------------------- and Chief Accounting Officer
Lawrence E. Kreider (Principal Accounting Officer)
* Director April 3, 1998
- ------------------
Donald G. Drapkin
* Director April 3, 1998
- ------------------
Irwin Engelman
II-7
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
* Director April 3, 1998
----------------------------
Howard Gittis
* Director April 3, 1998
----------------------------
Edward J. Landau
*Robert K. Kretzman, by signing his name hereto, does hereby execute this
Amendment No. 1 to the Registration Statement on behalf of the directors and
officers of the Registrant indicated above by asterisks, pursuant to
powers of attorney duly executed by such directors and officers and filed as
exhibits to the Registration Statement.
By /s/ Robert K. Kretzman
--------------------------------
Robert K. Kretzman
Attorney-in-fact
II-8
<PAGE>
SCHEDULE II
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COST AND OTHER AT END
OF YEAR EXPENSES DEDUCTIONS OF YEAR
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Applied against asset accounts:
Allowance for doubtful accounts ...... $12.9 $ 3.6 $ (4.5)(1) $12.0
Allowance for volume and early
payment discounts.................... $12.0 $46.8 $(44.9)(2) $13.9
YEAR ENDED DECEMBER 31, 1996:
Applied against asset accounts:
Allowance for doubtful accounts ...... $13.6 $ 7.1 $ (7.8)(1) $12.9
Allowance for volume and early
payment discounts.................... $10.1 $43.8 $(41.9)(2) $12.0
YEAR ENDED DECEMBER 31, 1995:
Applied against asset accounts:
Allowance for doubtful accounts ...... $11.1 $ 5.5 $ (3.0)(1) $13.6
Allowance for volume and early
payment discounts.................... $10.6 $33.3 $(33.8)(2) $10.1
</TABLE>
- ------------
Notes:
(1) Doubtful accounts written off, less recoveries, reclassifications and
foreign currency translation adjustments.
(2) Discounts taken, reclassifications and foreign currency translation
adjustments.
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C>
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.3 to the
Form 10 of the Company filed with the Securities and Exchange Commission on August 7, 1992 (File
No. 1-11334)).
3.2 Certificate of Amendment of Certificate of Incorporation as filed on February 18, 1993.
(Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K for the year ended
December 31, 1992 of the Company (the "1992 10-K")).
3.3 Amended and Restated By-Laws of the Company dated January 30, 1997. (Incorporated by reference to
Exhibit 3.3 to the Annual Report on Form 10-K for the year ended December 31, 1996 of the
Company).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of February 1, 1998, between Revlon Escrow and U.S. Bank Trust National
Association (formerly known as First Trust National Association), as Trustee, relating to
the Company's 8 1/8% Senior Notes Due 2006 (the "Senior Notes Indenture").
4.2 First Supplemental Indenture, dated April 1, 1998, among Revlon Escrow, the Company and the
Trustee, amending the Senior Notes Indenture.
+4.3 Indenture, dated as of February 1, 1998, between Revlon Escrow and U.S. Bank Trust National
Association (formerly known as First Trust National Association), as Trustee, relating to
the Company's 8 5/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Indenture").
+4.4 First Supplemental Indenture, dated March 4, 1998, among Revlon Escrow, the Company and the
Trustee, amending the Senior Subordinated Indenture.
4.5 Indenture dated as of June 1, 1993, between the Company and NationsBank of Georgia, National
Association, as Trustee, relating to the Company's 9 1/2% Senior Notes Due 1999. (Incorporated by
reference to Exhibit 4.31 to the Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1993 of the Company).
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
4.6 Second Amended and Restated Credit Agreement dated as of December 22, 1994, between Pacific
Finance & Development Corp. and the Long-Term Credit Bank of Japan, Ltd. (the "Yen Credit
Agreement"). (Incorporated by reference to Exhibit 4.32 to the Annual Report on Form 10-K for the
year ended December 31, 1994 of the Company (the "1994 10-K")).
4.7 First Amendment and Consent, dated as of March 10, 1997, with respect to the Yen Credit
Agreement. (Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997 of Revlon, Inc. (the "Revlon 1997 First Quarter 10-Q")).
4.8 Third Amended and Restated Credit Agreement, dated as of June 30, 1997, between Pacific Finance
and Development Corporation and the Long-Term Credit Bank, Ltd. (Incorporated by reference to
Exhibit 4.11 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 of
Revlon, Inc. (the "Revlon 1997 Second Quarter 10-Q")).
4.9 Amended and Restated Credit Agreement, dated as of May 30, 1997, among the Company, The Chase
Manhattan Bank, Citibank N.A., Lehman Commerical Paper Inc., Chase Securities Inc. and the
lenders party thereto (the "Credit Agreement"). (Incorporated by reference to Exhibit 4.23 to
Amendment No. 2 to the Form S-1 of Revlon Worldwide (Parent) Corporation, filed with the
Securities and Exchange Commission on June 26, 1997 (File No. 333-23451)).
4.10 First Amendment, dated as of January 29, 1998, to the Credit Agreement. (Incorporated by
reference to Exhibit 4.8 to the Annual Report for the year ended December 31, 1997 of Revlon,
Inc. (the "Revlon 1997 10-K")).
5. OPINIONS.
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company.
10. MATERIAL CONTRACTS.
10.1 Purchase and Sale Agreement and Amendment thereto by and between the Company and Holdings, each
dated as of February 18, 1993, relating to the Edison, New Jersey facility. (Incorporated by
reference to Exhibit 4.22 to the 1992 10-K).
10.2 Asset Transfer Agreement, dated as of June 24, 1992, among Holdings, National Health Care Group,
Inc., Charles of the Ritz Group Ltd., the Company and Revlon, Inc. (Incorporated by reference to
Exhibit 10.1 to the Amendment No. 1 to the Revlon Form S-1 filed with the Securities and Exchange
Commission on June 29, 1992 (File No. 33-47100)(the "Revlon 1992 Amendment No. 1").
10.3 Real Property Asset Transfer Agreement, dated as of June 24, 1992, among Holdings, Revlon, Inc.
and the Company. (Incorporated by reference to Exhibit 10.2 to the Revlon 1992 Amendment No. 1).
10.4 Assumption Agreement and Amendment thereto by and between the Company and Holdings, each dated as
of February 18, 1993, relating to the Edison, New Jersey facility. (Incorporated by reference to
Exhibit 4.23 to the 1992 10-K).
10.5 Tax Sharing Agreement, dated as of June 24, 1992, among Mafco Holdings, Revlon, Inc., the Company
and certain subsidiaries of the Company (the "Tax Sharing Agreement"). (Incorporated by reference
to Exhibit 10.5 to the Revlon 1992 Amendment No. 1).
10.6 First Amendment, dated as of February 28, 1995, to the Tax Sharing Agreement. (Incorporated by
reference to Exhibit 10.5 to the 1994 10-K).
10.7 Second Amendment, dated as of January 1, 1997, to the Tax Sharing Agreement. (Incorporated by
reference to Exhibit 10.7 to the Annual Report on Form 10-K for the year ended December 31, 1996
of Revlon, Inc. (the "Revlon 1996 10-K")).
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
10.8 Agreement by The Cosmetic Center, Inc. to be bound by the Tax Sharing Agreement, dated April 25,
1997. (Incorporated by reference to Exhibit 10.8 to the Revlon 1997 10-K).
10.9 Second Amended and Restated Operating Services Agreement by and among Holdings, Revlon, Inc. and
the Company, as of January 1, 1996 (the "Operating Services Agreement"). (Incorporated by
reference to Exhibit 10.8 to the Revlon 1996 10-K).
10.10 Amendment to the Operating Services Agreement, dated as of July 1, 1997. (Incorporated by
reference to Exhibit 10.10 to the Revlon 1997 10-K).
10.11 Employment Agreement dated as of January 1, 1996 between the Company and Jerry W. Levin (the
"Levin Employment Agreement"). (Incorporated by reference to Exhibit 10.10 to the Annual Report
on Form 10-K for the year ended December 31, 1995 of the Company (the "1995 10-K").
10.12 Amendment, effective June 30, 1997, to the Levin Employment Agreement. (Incorporated by reference
to Exhibit 10.12 to the Revlon 1997 10-K).
10.13 Employment Agreement dated as of January 1, 1997 between the Company and George Fellows.
(Incorporated by reference to Exhibit 10.10 to the Revlon 1997 First Quarter 10-Q).
10.14 Employment Agreement dated as of January 1, 1996 between the Company and William J. Fox.
(Incorporated by reference to Exhibit 10.12 to the 1995 10-K).
10.15 Employment Agreement dated as of January 1, 1996 between RIROS Corporation and Carlos Colomer
Casellas (the "Colomer Employment Agreement"). (Incorporated by reference to Exhibit 10.13 to the
1995 10-K).
10.16 Amendment, effective January 1, 1998, to the Colomer Employment Agreement. (Incorporated by
reference to Exhibit 10.16 to the Revlon 1997 10-K).
10.17 Employment Agreement dated as of January 1, 1998 between the Company and M. Katherine Dwyer.
(Incorporated by reference to Exhibit 10.17 to the Revlon 1997 10-K).
10.18 Revlon Employees' Savings, Investment and Profit Sharing Plan effective as of January 1, 1997.
(Incorporated by reference to Exhibit 10.18 to the Revlon 1997 10-K).
10.19 Revlon Employees' Retirement Plan as amended and restated December 19, 1994. (Incorporated by
reference to Exhibit 10.15 to the 1994 10-K).
10.20 Amended and Restated Revlon Pension Equalization Plan, effective January 1, 1996. (Incorporated
by reference to Exhibit 10.17 to the Amendment No. 4 to the Revlon Form S-1 filed with the
Securities and Exchange Commission on February 26, 1996 (File No. 33-99558)).
10.21 Executive Supplemental Medical Expense Plan Summary dated July 1991. (Incorporated by reference
to Exhibit 10.18 to the Form S-1 of Revlon, Inc. filed with the Securities and Exchange
Commission on May 22, 1992 (File No. 33-47100)(the "Revlon 1992 Form S-1").
10.22 Description of Post Retirement Life Insurance Program for Key Executives. (Incorporated by
reference to Exhibit 10.19 to the Revlon 1992 Form S-1).
10.23 Benefit Plans Assumption Agreement dated as of July 1, 1992, by and among Holdings, Revlon, Inc.
and the Company. (Incorporated by reference to Exhibit 10.25 to the 1992 10-K).
10.24 Revlon Executive Bonus Plan effective January 1, 1997. (Incorporated by reference to Exhibit
10.20 to the Revlon 1996 10-K).
10.25 Revlon Executive Deferred Compensation Plan, amended as of October 15, 1993. (Incorporated by
reference to Exhibit 10.25 to the Annual Report on Form 10-K for the year ended December 31, 1993
of the Company).
10.26 Revlon Executive Severance Policy effective January 1, 1996. (Incorporated by reference to
Exhibit 10.23 to the Amendment No. 3 to the Revlon 1995 Form S-1 filed with the Securities and
Exchange Commission on February 5, 1996).
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
10.27 Revlon, Inc. 1996 Stock Plan, amended and restated as of December 17, 1996. (Incorporated by
reference to Exhibit 10.23 to the Revlon 1996 10-K).
+10.28 Registration Agreement dated as of January 28, 1998 by and among Revlon Escrow Corp., the Company
and Bear, Stearns & Co. Inc. and Lehman Brothers Inc.
12. RATIO OF EARNINGS TO FIXED CHARGES.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for the Company.
21. SUBSIDIARIES.
21.1 Subsidiaries of the Company. (Incorporated by reference to Exhibit 21.1 to the Annual Report on
Form 10-K for the year ended December 31, 1997 of the Company).
23. CONSENTS.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company (included in
Exhibit 5.1).
24. POWERS OF ATTORNEY.
+24.1 Power of Attorney executed by Ronald O. Perelman.
+24.2 Power of Attorney executed by Howard Gittis.
+24.3 Power of Attorney executed by Irwin Engelman.
+24.4 Power of Attorney executed by Lawrence E. Kreider.
+24.5 Power of Attorney executed by George Fellows.
+24.6 Power of Attorney executed by Jerry W. Levin.
+24.7 Power of Attorney executed by William J. Fox.
+24.8 Power of Attorney executed by Frank Gehrmann.
+24.9 Power of Attorney executed by Donald G. Drapkin.
+24.10 Power of Attorney executed by Edward J. Landau, Esq.
25. FORM T-1.
+25.1 Statement of Eligibility and Qualification on Form T-1 of U.S. Bank Trust National Association
(formerly known as First Trust National Association), as Trustee under the Indenture relating to
the Company 8 1/8% Senior Exchange Notes due 2006 and the Company's 8 5/8% Senior Subordinated
Exchange Notes due 2008.
99. MISCELLANEOUS.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- ------------
+ Previously filed.
<PAGE>
Exhibit 4.1
===============================================================================
REVLON ESCROW CORP.
TO BE ASSUMED BY
REVLON CONSUMER PRODUCTS CORPORATION
8-1/8% SENIOR NOTES DUE 2006
AND
8-1/8% SENIOR EXCHANGE NOTES DUE 2006
-------------------
INDENTURE
DATED AS OF FEBRUARY 1, 1998
-------------------
FIRST TRUST NATIONAL ASSOCIATION
TRUSTEE
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions...............................................1
SECTION 1.02. Other Definitions........................................19
SECTION 1.03. Incorporation by Reference of Trust Indenture Act........19
SECTION 1.04. Rules of Construction....................................20
ARTICLE II
The Securities
SECTION 2.01. Form and Dating..........................................21
SECTION 2.02. Execution and Authentication.............................21
SECTION 2.03. Registrar and Paying Agent...............................22
SECTION 2.04. Paying Agent To Hold Money in Trust......................22
SECTION 2.05. Securityholder Lists.....................................23
SECTION 2.06. Transfer and Exchange....................................23
SECTION 2.07. Replacement Securities...................................24
SECTION 2.08. Outstanding Securities...................................24
SECTION 2.09. Temporary Securities.....................................24
SECTION 2.10 Cancellation.............................................25
SECTION 2.11. Defaulted Interest.......................................25
SECTION 2.12. CUSIP Numbers............................................25
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee.......................................25
SECTION 3.02. Selection of Securities To Be Redeemed...................26
SECTION 3.03. Notice of Redemption.....................................26
SECTION 3.04. Effect of Notice of Redemption...........................27
SECTION 3.05. Deposit of Redemption Price..............................27
SECTION 3.06. Securities Redeemed in Part..............................27
i
<PAGE>
Page
----
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities....................................28
SECTION 4.02. SEC Reports..............................................28
SECTION 4.03. Limitation on Debt.......................................28
SECTION 4.04. Limitation on Liens......................................31
SECTION 4.05. Limitation on Restricted Payments........................33
SECTION 4.06. Limitation on Restrictions on Distributions
from Subsidiaries.................................38
SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock.......39
SECTION 4.08. Limitation on Transactions with Affiliates...............44
SECTION 4.09. Change of Control........................................46
SECTION 4.10. Limitation on Other Business Operations..................47
SECTION 4.11. Senior Notes Assumption..................................47
SECTION 4.12. Compliance Certificate...................................47
SECTION 4.13. Further Instruments and Acts.............................48
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets................48
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default........................................49
SECTION 6.02. Acceleration.............................................51
SECTION 6.03. Other Remedies...........................................52
SECTION 6.04. Waiver of Past Defaults..................................52
SECTION 6.05. Control by Majority......................................52
SECTION 6.06. Limitation on Suits......................................52
SECTION 6.07. Rights of Holders To Receive Payment.....................53
SECTION 6.08. Collection Suit by Trustee...............................53
SECTION 6.09. Trustee May File Proofs of Claim.........................53
SECTION 6.10. Priorities...............................................54
ii
<PAGE>
Page
----
SECTION 6.11. Undertaking for Costs....................................54
SECTION 6.12. Waiver of Stay or Extension Laws.........................54
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee........................................55
SECTION 7.02. Rights of Trustee........................................56
SECTION 7.03. Individual Rights of Trustee.............................57
SECTION 7.04. Trustee's Disclaimer.....................................57
SECTION 7.05. Notice of Defaults.......................................57
SECTION 7.06. Reports by Trustee to Holders............................57
SECTION 7.07. Compensation and Indemnity...............................58
SECTION 7.08. Replacement of Trustee...................................58
SECTION 7.09. Successor Trustee by Merger..............................59
SECTION 7.10. Eligibility; Disqualification............................60
SECTION 7.11. Preferential Collection of Claims Against Company........60
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.........60
SECTION 8.02. Conditions to Defeasance.................................61
SECTION 8.03. Application of Trust Money...............................63
SECTION 8.04. Repayment to Company.....................................63
SECTION 8.05. Indemnity for Government Obligations.....................63
SECTION 8.06. Reinstatement............................................63
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders...............................64
SECTION 9.02. With Consent of Holders..................................65
SECTION 9.03. Compliance with Trust Indenture Act......................65
SECTION 9.04. Revocation and Effect of Consents and Waivers............65
SECTION 9.05. Notation on or Exchange of Securities....................66
iii
<PAGE>
Page
----
SECTION 9.06. Trustee To Sign Amendments...............................66
SECTION 9.07. Payment for Consent......................................66
ARTICLE X
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls.............................67
SECTION 10.02. Notices..................................................67
SECTION 10.03. Communication by Holders with Other Holders..............68
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.......68
SECTION 10.05. Statements Required in Certificate or Opinion............68
SECTION 10.06. When Securities Disregarded..............................69
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar.............69
SECTION 10.08. Legal Holidays...........................................69
SECTION 10.09. Governing Law............................................69
SECTION 10.10. No Recourse Against Others...............................69
SECTION 10.11. Successors...............................................69
SECTION 10.12. Multiple Originals.......................................69
SECTION 10.13. Table of Contents; Headings..............................69
Rule 144A/Regulation S Appendix
Exhibit A - Form of Face of Initial Note
Exhibit B - Form of Face of Exchange Note or Private Exchange Note
Schedule II - Permitted Transactions
iv
<PAGE>
INDENTURE dated as of February 1, 1998, between REVLON ESCROW
CORP., a Delaware corporation ("Escrow Corp."), and FIRST TRUST
NATIONAL ASSOCIATION, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director
or officer (A) of such specified Person, (B) of any Subsidiary of such
specified Person or (C) of any Person described in clause (i) above. For
purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Security at any time,
the greater of (i) 1.0% of the then outstanding principal amount of such
Security at such time and (ii) the excess of (A) the present value of the
required interest and principal payments due on such Security, computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
then outstanding principal amount of such Security at such time.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Subsidiary of RCPC (other than directors'
qualifying shares and other than Capital Stock of a Non-Recourse Subsidiary),
property or other assets (each referred to for the purposes of this definition
as a "disposition") by RCPC or any of its Subsidiaries (other than a
Non-Recourse Subsidiary) (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Subsidiary of RCPC to RCPC or by RCPC or a Subsidiary of RCPC to a Wholly Owned
Recourse Subsidiary, (ii) a disposition of property or assets by RCPC or its
Subsidiaries at fair market value in the ordinary course of business, (iii) a
disposition by RCPC or its Subsidiaries of obsolete assets in the ordinary
course of business, (iv) a disposition subject to or permitted by Section 4.05,
(v) an issuance of employee stock options and (vi) a disposition by RCPC or its
Subsidiaries in which RCPC or its Subsidiaries receive as consideration Capital
Stock of (or similar interests in) a Person engaged in, or assets that will be
used in, the businesses of RCPC and its Wholly Owned Recourse Subsidiaries, or
additionally, in the
<PAGE>
2
case of a disposition by a Subsidiary of RCPC that is not a Wholly Owned
Recourse Subsidiary, the business of such Subsidiary, existing on the Issue
Date or in businesses reasonably related thereto, as determined by the Board of
Directors of RCPC, the determination of which shall be conclusive and evidenced
by a resolution of the Board of Directors of RCPC.
"Bank Debt" means any and all amounts payable by RCPC or any of its
Subsidiaries under or in respect of the Credit Agreement or any Refinancing
thereof, or any other agreements with lenders party to the foregoing, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to
RCPC), fees, charges, expenses, reimbursement obligations, Guarantees and all
other amounts payable thereunder or in respect thereof; provided, however, that
nothing in this definition shall permit RCPC or any of its Subsidiaries to
Issue any Debt that is not permitted pursuant to Section 4.03.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board of Directors.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of the Company; provided,
<PAGE>
3
however, that the Permitted Holders "beneficially own" (as so defined),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other Person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of the
Company (for the purposes of this clause (i), such other Person shall be
deemed to beneficially own any Voting Stock of a specified corporation held
by a parent corporation, if such other Person beneficially owns, directly
or indirectly, more than 35% of the voting power of the Voting Stock of
such parent corporation and the Permitted Holders beneficially own,
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of such parent
corporation); or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the directors of the Company
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means (i) prior to the Senior Notes Assumption Date, Escrow
Corp., and (ii) from and after the Senior Notes Assumption Date, RCPC until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio
of (i) the aggregate amount of EBITDA for such period to (ii) Consolidated
Interest Expense for such period; provided, however, that (1) if RCPC or any
Subsidiary of RCPC has Issued any Debt since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated EBITDA Coverage Ratio is an Issuance of Debt, or both, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Debt as if such Debt had been Issued
on the first day of such period and the discharge of any other Debt Refinanced
or otherwise discharged with the proceeds of such new Debt as if such discharge
had occurred on the first day of such period, (2) if since the beginning of
such period RCPC or any Subsidiary of RCPC shall have made any Asset
Disposition, EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive) directly attributable to the assets which are the subject
of such Asset Disposition
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4
for such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated
Interest Expense directly attributable to any Debt of RCPC or any Subsidiary of
RCPC Refinanced or otherwise discharged with respect to RCPC and its continuing
Subsidiaries in connection with such Asset Dispositions for such period (or if
the Capital Stock of any Subsidiary of RCPC is sold, the Consolidated Interest
Expense for such period directly attributable to the Debt of such Subsidiary to
the extent RCPC and its continuing Subsidiaries are no longer liable for such
Debt after such sale) and (3) if since the beginning of such period RCPC or any
Subsidiary of RCPC (by merger or otherwise) shall have made an Investment in
any Subsidiary of RCPC (or any Person which becomes a Subsidiary of RCPC) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto, as if such Investment or acquisition occurred on the first day
of such period. For purposes of this definition, whenever pro forma effect is
to be given to an acquisition of assets, the amount of income or earnings
relating thereto, and the amount of Consolidated Interest Expense associated
with any Debt Issued in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
RCPC. If any Debt bears a floating rate of interest and is being given pro
forma effect, the interest on such Debt shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period.
"Consolidated Interest Expense" means, for any period, the sum of (a)
the interest expense, net of any interest income, of RCPC and its consolidated
Subsidiaries (other than Non-Recourse Subsidiaries) for such period as
determined in accordance with GAAP consistently applied, plus (b) Preferred
Stock dividends in respect of Preferred Stock of RCPC or any Subsidiary of RCPC
(other than a Non-Recourse Subsidiary) held by Persons other than RCPC or a
Wholly Owned Recourse Subsidiary, plus (c) the cash contributions to an
employee stock ownership plan of RCPC and its Subsidiaries (other than
Non-Recourse Subsidiaries) to the extent such contributions are used by an
employee stock ownership plan to pay interest.
"Consolidated Net Income" means with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
consolidated Subsidiaries for such period as determined in accordance with
GAAP, adjusted to the extent included in calculating such net income (or loss),
by excluding (i) all extraordinary gains or losses; (ii) the portion of net
income (or loss) of such Person and its consolidated Subsidiaries attributable
to minority interests in unconsolidated Persons except to the extent that, in
the case of net income, cash dividends or distributions have actually been
received by such Person or one of its consolidated Subsidiaries (subject, in
the case of a dividend or distribution received by a Subsidiary of such Person,
to the limitations
<PAGE>
5
contained in clause (v) below) and, in the case of net loss, such Person or any
Subsidiary of such Person has actually contributed, lent or transferred cash to
such unconsolidated Person; (iii) net income (or loss) of any other Person
attributable to any period prior to the date of combination of such other
Person with such Person or any of its Subsidiaries on a "pooling of interests"
basis; (iv) net gains or losses in respect of dispositions of assets by such
Person or any of its Subsidiaries (including pursuant to a sale-and-leaseback
arrangement) other than in the ordinary course of business; (v) the net income
of any Subsidiary of such Person to the extent that the declaration of
dividends or distributions by that Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Subsidiary or its shareholders;
(vi) any net income or loss of any Non-Recourse Subsidiary, except that such
Person's equity in the net income of any such Non-Recourse Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Non-Recourse Subsidiary during such
period to such Person as a dividend or other distribution; and (vii) the
cumulative effect of a change in accounting principles; provided, however, that
in using Consolidated Net Income for purposes of calculating the Consolidated
EBITDA Coverage Ratio at any time, net income of a Subsidiary of the type
described in clause (v) of this definition shall not be excluded.
"Consolidated Net Worth" of any Person means, at any date, all amounts
which would, in conformity with GAAP, be included under shareholders' equity on
a consolidated balance sheet of such Person as at such date, less (x) any
amounts attributable to Redeemable Stock and (y) any amounts attributable to
Exchangeable Stock.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 30, 1997 by and among RCPC, The Chase Manhattan Bank, Citibank,
N.A. and Lehman Commercial Paper Inc., as agents, and the Banks named therein,
as the same may be amended or restated from time to time.
"Debt" of any Person means, without duplication,
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all
<PAGE>
6
obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities
arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment (including liquidation preference) or other
repurchase of, in the case of a Subsidiary of RCPC, any Preferred Stock
and, in the case of any other Person, any Redeemable Stock (but excluding
in each case any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including Guarantees of
such obligations and dividends; and
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in global form, The Depository Trust Company, until a
successor shall have been appointed and become such pursuant to the applicable
provisions of this Indenture and, thereafter, "Depository" shall mean or
include such successor.
"EBITDA" means, for any period, the Consolidated Net Income of RCPC
for such period, plus the following to the extent included in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, (v) all other
noncash charges (excluding any noncash
<PAGE>
7
charge to the extent that it requires an accrual of or a reserve for cash
disbursements for any future period) and (vi) foreign currency gains or losses.
"Escrow Agent" means the Escrow Agent from time to time under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of February 2,
1998, between Escrow Corp. and First Trust National Association, as escrow
agent thereunder, as amended from time to time.
"Escrowed Securities" has the meaning ascribed thereto in the Escrow
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the 8-1/8% Senior Exchange Notes Due 2006 of
the Company to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Agreement or otherwise.
"Exchangeable Stock" means any Capital Stock of a Person which by its
terms or otherwise is required to be exchanged or converted or is exchangeable
or convertible at the option of the holder into another security (other than
Capital Stock of such Person which is neither Exchangeable Stock nor Redeemable
Stock).
"Existing Senior Subordinated Securities" means RCPC's 10-1/2% Senior
Subordinated Notes Due 2003 and any securities exchanged therefor.
"Existing 9-3/8% Senior Securities" means RCPC's 9-3/8% Senior Notes
Due 2001 and any securities exchanged therefor.
"Existing 9-1/2% Senior Securities" means RCPC's 9-1/2% Senior Notes
Due 1999 and any securities exchanged therefor.
"Foreign Subsidiary" means any Subsidiary of RCPC which (i) is
organized under the laws of any jurisdiction outside of the United States, (ii)
is organized under the laws of Puerto Rico or the U.S. Virgin Islands, (iii)
has substantially all its operations outside of the United States, or (iv) has
substantially all its operations in Puerto Rico or the U.S. Virgin Islands.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, except that for purposes of calculating
the Consolidated EBITDA Coverage Ratio, it shall mean generally accepted
accounting principles in the United States as in effect on the Issue Date.
<PAGE>
8
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered
into for purposes of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person against
changes in interest rates or foreign exchange rates.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Cash Payment" means the $100 million received by RCPC prior
to the Issuance of the initial Existing Senior Subordinated Securities.
"Initial Notes" means the 8-1/8% Senior Notes Due 2006 of the Company
issued pursuant to this Indenture on the Issue Date.
"Initial Purchasers" means Bear, Stearns & Co. Inc. and Lehman
Brothers Inc.
"Investment" in any Person means any loan or advance to, any net
payment on a Guarantee of, any acquisition of Capital Stock, equity interest,
obligation or other security of, or capital contribution or other investment
in, such Person. Investments shall exclude advances to customers and suppliers
in the ordinary course of business. The term "Invest" used as verb has a
corresponding meaning. For purposes of the definitions of "Non-Recourse
Subsidiary" and "Restricted Payment" and for purposes of Section 4.05, (i)
"Investment" shall include a designation after the Issue Date of a Subsidiary
of RCPC as a Non-Recourse Subsidiary, and such Investment shall be valued at an
amount equal to the portion (proportionate to RCPC's equity interest in such
Subsidiary) of the fair market
<PAGE>
9
value of the net assets of such Subsidiary at the time that such Subsidiary is
designated a Non-Recourse Subsidiary; and (ii) any property transferred to or
from a Non-Recourse Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined in good faith by the Board of
Directors of RCPC, and if such property so transferred (including in a series
of related transactions) has a fair market value, as so determined by the Board
of Directors, in excess of $10,000,000, such determination shall be confirmed
by an independent appraiser.
"Issue" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary of another Person
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be issued by such Subsidiary at the time it becomes a Subsidiary of such other
Person. The term "Issuance" or Issued" has a corresponding meaning.
"Issue Date" means the date of original issue of the Initial Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York or in the
state where the principal office of the Trustee is located.
"Lien" means any mortgage, pledge, security interest, conditional sale
or other title retention agreement or other similar lien.
"Mafco Consolidated Group" means the "Affiliated Group" (within the
meaning of Section 1504(a)(1) of the Code) of which Mafco Holdings is the
common parent.
"Mafco Holdings" means Mafco Holdings Inc., a Delaware corporation,
and its successors.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Debt or other obligations
relating to such properties or assets or received in any other noncash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required or estimated in good faith to be
required to be accrued as a liability under GAAP, as a consequence of such
Asset Disposition, (ii) all payments made on any Debt which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a
<PAGE>
10
necessary consent to such Asset Disposition, or by applicable law be repaid out
of the proceeds from or in connection with such Asset Disposition and (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset
Disposition; provided, however, that in connection with an Asset Disposition to
a Subsidiary of RCPC (other than a Wholly Owned Recourse Subsidiary), Net
Available Cash will be deemed to be a percentage of Net Available Cash (as
calculated above) equal to (A) 100% minus (B) RCPC's percentage ownership in
such Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or estimated in
good faith to be payable as a result thereof.
"New Senior Subordinated Securities" means the 8-5/8% Senior
Subordinated Notes Due 2008 issued by Escrow Corp. on the Issue Date pursuant
to the Indenture dated as of February 1, 1998 between Escrow Corp. and the
Trustee and any securities exchanged therefor.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible
common stock of such corporation; provided, however, that Non-Convertible
Capital Stock shall not include any Redeemable Stock or Exchangeable Stock.
"Non-Recourse Debt" means Debt or that portion of Debt (i) as to which
neither RCPC nor its Subsidiaries (other than a Non-Recourse Subsidiary) (A)
provides credit support (including any undertaking, agreement or instrument
which would constitute Debt), (B) is directly or indirectly liable or (C)
constitutes the lender and (ii) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against
the assets of a Non-Recourse Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of RCPC or its Subsidiaries (other
than Non-Recourse Subsidiaries) to declare a default on such other Debt or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of RCPC (i) which has
been designated as such by RCPC, (ii) which has no Debt other than Non-Recourse
Debt and (iii) which is in the same line of business as RCPC and its Wholly
Owned Recourse Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto.
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11
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company or RCPC, as the case may be.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Vice Chairman, the President or a Vice President (regardless of Vice
Presidential designation), and by the Treasurer, an Assistant Treasurer,
Secretary or an Assistant Secretary, of the Company or RCPC, as the case may
be, and delivered to the Trustee. One of the Officers signing an Officers'
Certificate given pursuant to Section 4.12 shall be the principal executive,
financial or accounting officer of the Company or RCPC, as the case may be.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or to its Parent or one of its Subsidiaries or the
Trustee.)
"Parent" means Revlon, Inc., a Delaware corporation, and any other
Person which acquires or owns directly or indirectly 80% or more of the voting
power of the Voting Stock of RCPC.
"Pari Passu Debt" means the following obligations, whether outstanding
on the Issue Date or thereafter created, incurred or assumed, and whether at
any time owing actually or contingent:
(i) all obligations consisting of the Bank Debt, the Securities, the
Existing 9-3/8% Senior Securities and the Existing 9-1/2% Senior
Securities;
(ii) all obligations consisting of the principal of and premium (if
any) and accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization
relating to RCPC), and all fees, expenses and other amounts in respect of
(A) indebtedness of RCPC for money borrowed and (B) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which RCPC is responsible or liable;
<PAGE>
12
(iii) all Capital Lease Obligations of RCPC;
(iv) all obligations of RCPC (A) for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,
(B) under interest rate swaps, caps, collars, options and similar
arrangements and foreign currency hedges entered into in respect of any
obligations described in clauses (i), (ii) and (iii) or (C) Issued or
assumed as the deferred purchase price of property and all conditional sale
obligations of RCPC and all obligations of RCPC under any title retention
agreement;
(v) all obligations of other Persons of the type referred to in
clauses (ii), (iii) and (iv) and all dividends of other persons for the
payment of which, in either case, RCPC is responsible or liable as obligor,
guarantor or otherwise, including by means of any agreement which has the
economic effect of a Guarantee; and
(vi) all obligations consisting of Refinancings of any obligation
described in clauses (i), (ii), (iii), (iv) or (v);
unless, in the case of any particular obligation, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are subordinate in right of payment to the
Securities. However, Pari Passu Debt will not include (1) any obligation of
RCPC to any Subsidiary or any Permitted Affiliate Debt, (2) any liability for
Federal, state, local or other taxes owed or owing by RCPC, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing such
liabilities), (4) any indebtedness, Guarantee or obligation of RCPC (including
the New Senior Subordinated Securities) that is subordinate or junior in any
respect to any other indebtedness, Guarantee or obligation of RCPC or (5) that
portion of any Debt which at the time of Issuance is issued in violation of
this Indenture; provided, however, that in the case of this clause (5), (A) any
Debt Issued to any person who had no actual knowledge that the Issuance of such
Debt was not permitted under this Indenture and who received on the date of
Issuance thereof a certificate from an officer of RCPC to the effect that the
Issuance of such Debt would not violate this Indenture shall constitute Pari
Passu Debt and (B) any Debt arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business shall constitute Pari Passu Debt provided that
such Debt would normally be extinguished within three Business Days of
Issuance.
"Permitted Affiliate" means any individual that is a director or
officer of RCPC, of Parent, of a Subsidiary of RCPC or of an Unrestricted
Affiliate; provided,
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13
however, that such individual is not also a director or officer of Mafco
Holdings or any Person that controls Mafco Holdings.
"Permitted Affiliate Debt" means (i) Debt Issued to an Affiliate of
RCPC representing amounts owing by RCPC pursuant to the Tax Sharing Agreement
and (ii) Debt Issued to an Affiliate of RCPC to the extent of cash actually
received by RCPC, which cash either is required to be advanced or contributed
to RCPC pursuant to the terms of the Credit Agreement or any Refinancing
thereof or, if not advanced or contributed to RCPC, would lead to a default
under the Credit Agreement or any Refinancing thereof.
"Permitted Holders" means Ronald O. Perelman (or in the event of his
incompetence or death, his estate, heirs, executor, administrator, committee or
other personal representative (collectively, "heirs")) or any Person
controlled, directly or indirectly, by Ronald O. Perelman or his heirs.
"Permitted Transactions" means (i) any transaction or series of
similar transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service between RCPC or any Subsidiary of
RCPC, on the one hand, and any Affiliate of RCPC or any legal or beneficial
owner of 10% or more of the voting power of Voting Stock of RCPC or an
Affiliate of any such owner, on the other hand), existing on, or pursuant to an
agreement in effect on, the Issue Date and disclosed in Schedule II to this
Indenture and any amendments thereto which do not adversely affect the rights
of the Holders and (ii) any Tax Sharing Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security as of any date means the principal of the
Security as of such date.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Agreement, to the Initial Purchasers to issue and deliver to each
Initial Purchaser, in exchange for the Initial Notes held by the Initial
Purchaser as part of its initial distribution, a like aggregate principal
amount of Private Exchange Notes.
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14
"Private Exchange Notes" means the 8-1/8% Senior Private Exchange
Notes Due 2006 of the Company to be issued pursuant to this Indenture in
connection with a Private Exchange pursuant to the Registration Agreement.
"Public Equity Offering" means an underwritten public offering of
equity securities of RCPC or Revlon, Inc. pursuant to an effective registration
statement under the Securities Act.
"Put Amount" as of any date means, with respect to each $1,000
principal amount of Securities, 101% of the outstanding principal amount
thereof as of the date of repurchase.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"RCPC" means Revlon Consumer Products Corporation, a Delaware
corporation, and its successors.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of
the Stated Maturity of the Securities or is redeemable at the option of the
holder thereof at any time on or prior to the first anniversary of the Stated
Maturity of the Securities.
"Refinance" means, in respect of any Debt, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue Debt in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Refinancing Costs" means, with respect to any Debt being Refinanced,
any premium actually paid thereon and reasonable costs and expenses, including
underwriting discounts, in connection with such Refinancing.
"Refinancing Transactions" means, collectively, the Issuance of the
Initial Notes and the New Senior Subordinated Securities issued on the Issue
Date, the assumption thereof by RCPC and the redemption by RCPC of the Existing
9-3/8% Senior Securities and the Existing 10-1/2% Senior Subordinated
Securities.
"Registered Exchange Offer" means an offer by the Company, pursuant to
the Registration Agreement or otherwise, to certain Holders of Initial Notes,
to issue and deliver to such Holders, in exchange for Initial Notes, a like
aggregate Principal amount of Exchange Notes registered under the Securities
Act.
"Registration Agreement" means the Registration Agreement dated
January 28, 1998, between Escrow Corp., RCPC and the Initial Purchasers.
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15
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Initial Notes, the Exchange Notes and the
Private Exchange Notes, treated as a single class of securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes Assumption" means the assumption by RCPC of the
obligations of Escrow Corp. under this Indenture and the Securities pursuant to
the terms of the Supplemental Senior Notes Indenture.
"Senior Notes Assumption Date" means the effective date of the Senior
Notes Assumption pursuant to the terms of the Supplemental Senior Notes
Indenture.
"Shelf Registration Statement" has the meaning ascribed thereto in the
Appendix.
"Significant Subsidiary" means (i) any Subsidiary (other than a
Non-Recourse Subsidiary) of RCPC which at the time of determination either (A)
had assets which, as of the date of RCPC's most recent quarterly consolidated
balance sheet, constituted at least 5% of RCPC's total assets on a consolidated
basis as of such date, in each case determined in accordance with GAAP, or (B)
had revenues for the 12-month period ending on the date of RCPC's most recent
quarterly consolidated statement of income which constituted at least 5% of
RCPC's total revenues on a consolidated basis for such period, or (ii) any
Subsidiary of RCPC (other than a Non-Recourse Subsidiary) which, if merged with
all Defaulting Subsidiaries (as defined below) of RCPC, would at the time of
determination either (A) have had assets which, as of the date of RCPC's most
recent quarterly consolidated balance sheet, would have constituted at least
10% of RCPC's total assets on a consolidated basis as of such date or (B) have
had revenues for the 12-month period ending on the date of RCPC's most recent
quarterly consolidated statement of income which would have constituted at
least 10% of RCPC's total revenues on a consolidated basis for such period
(each such determination being made in accordance with GAAP). "Defaulting
Subsidiary" means any Subsidiary of RCPC (other than a Non-Recourse Subsidiary)
with respect to which an event described under Section 6.01(6), 6.01(7),
6.01(8) or 6.01(9) has occurred and is continuing.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency).
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16
"Subordinated Obligation" means any Debt of RCPC (whether outstanding
on the date hereof or hereafter Issued) which is subordinate or junior in right
of payment to the Securities.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Tax Sharing Agreement" means (i) that certain agreement dated June
24, 1992, as amended, among RCPC, certain of its Subsidiaries, Revlon Holdings
Inc., Revlon, Inc. and Mafco Holdings, and (ii) any other tax allocation
agreement between RCPC or any of its Subsidiaries with any direct or indirect
shareholder of RCPC with respect to consolidated or combined tax returns
including RCPC or any of its Subsidiaries but only to the extent that amounts
payable from time to time by RCPC or any such Subsidiary under any such
agreement do not exceed the corresponding tax payments that RCPC or such
Subsidiary would have been required to make to any relevant taxing authority
had RCPC or such Subsidiary not joined in such consolidated or combined
returns, but instead had filed returns including only RCPC or its Subsidiaries
(provided that any such agreement may provide that, if RCPC or any such
Subsidiary ceases to be a member of the affiliated group of corporations of
which Mafco Holdings is the common parent for purposes of filing a consolidated
Federal income tax return (such cessation, a "Deconsolidation Event"), then
RCPC or such Subsidiary shall indemnify such direct or indirect shareholder
with respect to any Federal, state or local income, franchise or other tax
liability (including any related interest, additions or penalties) imposed on
such shareholder as the result of an audit or other adjustment with respect to
any period prior to such Deconsolidation Event that is attributable to RCPC,
such Subsidiary or any predecessor business thereof (computed as if RCPC, such
Subsidiary or such predecessor business, as the case may be, were a stand-alone
entity that filed separate tax returns as an independent corporation), but only
to the extent that any such tax liability exceeds any liability for taxes
recorded on the books of RCPC or such Subsidiary with respect to any such
period).
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, in each case, maturing within 360 days of the date of acquisition
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company (including the Trustee) which is
organized under the laws of the United States of America, any state
<PAGE>
17
thereof or any foreign country recognized by the United States of America
having capital, surplus and undivided profits aggregating in excess of $250
million and whose debt is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by any registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a
nationally recognized broker-dealer, (iv) investments in commercial paper,
maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate or Subsidiary of the Company) organized
and in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-2" (or higher) according to
Moody's Investors Service, Inc. or "A-2" (or higher) according to Standard and
Poor's Corporation, (v) securities with maturities of six months or less from
the date of acquisition backed by standby or direct pay letters of credit
issued by any bank satisfying the requirements of clause (ii) above and (vi)
securities with maturities of six months or less from the date of acquisition
issued or fully Guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by Standard & Poor's Corporation or "A" by
Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the Issue Date.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two Business Days prior to the
date fixed for repayment or, in the case of defeasance, prior to the date of
deposit (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining average life to Stated Maturity of the Securities; provided, however,
that if the average life to Stated Maturity of the Securities is not equal to
the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
yields of United States Treasury securities for which such yields are given,
except that if the average life to Stated Maturity of the Securities is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
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18
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Affiliate" means a Person (other than a Subsidiary of
RCPC) controlled (as defined in the definition of an "Affiliate") by RCPC, in
which no Affiliate of RCPC (other than (x) a Wholly Owned Recourse Subsidiary
of RCPC, (y) a Permitted Affiliate and (z) another Unrestricted Affiliate) has
an Investment.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly Owned Recourse Subsidiary" means a Subsidiary of RCPC (other
than a Non-Recourse Subsidiary) all the Capital Stock of which (other than
directors' qualifying shares) is owned by (i) RCPC, (ii) RCPC and one or more
Wholly Owned Recourse Subsidiaries or (iii) one or more Wholly Owned Recourse
Subsidiaries.
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19
SECTION 1.02. Other Definitions.
DEFINED IN
TERM SECTION
---- -------
"Bankruptcy Law"......................................... 6.01
"covenant defeasance option"............................. 8.01(b)
"CUSIP".................................................. 2.12
"Custodian".............................................. 6.01
"DTC".................................................... 4.1
"Event of Default"....................................... 6.01
"legal defeasance option"................................ 8.01(b)
"Notice of Default"...................................... 6.01
"Offer".................................................. 4.07(b)
"Offer Amount"........................................... 4.07(c)(2)
"Offer Period"........................................... 4.07(c)(2)
"Outstanding"............................................ 2.08
"Paying Agent"........................................... 2.03
"Purchase Date".......................................... 4.07(c)(1)
"Registrar".............................................. 2.03
"Restricted Contribution"................................ 4.05(a)(3)(e)
"Restricted Payment"..................................... 4.05
"Supplemental Senior Notes Indenture".................... 5.01(c)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
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20
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP and all accounting calculations will be
determined in accordance with such principles;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured debt shall not be deemed to be subordinate or junior to
secured debt merely by virtue of its nature as unsecured debt;
(7) the principal amount of any noninterest bearing or other discount
security at any date of Issuance shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Issuance of Debt; provided, however, that the accretion of
principal on such security shall not be deemed to be the Issuance of Debt
if the issuer elects, at the time of original Issuance of such security, to
treat such accretion as if, on such date of original Issuance, there were
an additional Issuance of Debt in an aggregate principal amount equal to
the excess of the principal amount at maturity of such security over the
principal amount thereof that would be shown on a balance sheet of the
issuer dated on such date prepared in accordance with GAAP and, unless
redeemed or repurchased, the amount of such additional Issuance of Debt
shall be treated as being outstanding for all purposes under this Indenture
until such security is paid in full;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
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21
(9) whenever in this Indenture or the Securities it is provided that
the Put Amount or the Principal with respect to a Security shall be paid,
such provision shall be deemed to require (whether or not so expressly
stated) the simultaneous payment of any accrued and unpaid interest to the
date of payment on such Security payable pursuant to paragraph 1 of the
Securities.
ARTICLE II
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Notes, the Private Exchange Notes and the Exchange Notes are set forth in the
Rule 144A/Regulation S Appendix attached hereto (the "Appendix") which is
hereby incorporated in and expressly made part of this Indenture. The Initial
Notes and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit A to the Indenture which is hereby incorporated in and
expressly made a part of this Indenture. The Exchange Notes, the Private
Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B to the Indenture, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in the Appendix and Exhibits A and B are part of the terms
of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver (1) Initial Notes for
original issue in an aggregate principal amount of $250,000,000 and (2)
Exchange Notes or Private Exchange Notes for issue only in a Registered Offer
or a Private Exchange, respectively, pursuant to the Registration Agreement or
otherwise in exchange for a like principal amount of Initial Notes, in each
case upon a written order of the Company
<PAGE>
22
signed by two Officers. Such order shall specify the amount of the Securities
to be authenticated, the date on which the original issue of Securities is to
be authenticated and, if such order is being delivered other than on the Issue
Date, whether the Securities are to be Exchange Notes or Private Exchange
Notes. The aggregate principal amount of Securities outstanding at any time may
not exceed that amount except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as any Registrar, Paying Agent or agent for service of notices
and demands. The Company agrees to pay any authenticating agent compensation
for its services hereunder.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to Section
7.07. The Company or any of its domestically incorporated Wholly Owned Recourse
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. On or prior to each
due date of the Principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such Principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of Securityholders or the Trustee all money held by
the Paying Agent for the payment of Principal of or interest on the Securities
and shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall
<PAGE>
23
segregate the money held by it as Paying Agent and hold it as a separate trust
fund. The Company at any time may require a Paying Agent to pay all money held
by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer and in accordance with the provisions of the
Appendix. When a Security is presented to the Registrar or a co-registrar with
a request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of Section 8-401(1) of the Uniform Commercial
Code and the Appendix are met. When Securities are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall make the exchange as
requested if the same requirements are met. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-registrar's request. The Company may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of Principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and none of the
Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall
be affected by notice to the contrary.
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24
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall Issue
and the Trustee shall authenticate a replacement Security if the requirements
of Section 8-405 of the Uniform Commercial Code are met and the Holder
satisfies any other reasonable requirements of the Trustee. If required by the
Trustee or the Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company and the Trustee to protect the Company, the
Trustee, the Paying Agent, the Registrar and any co-registrar from any loss
which any of them may suffer if a Security is replaced. The Company and the
Trustee may charge the Holder for their expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become due and payable, the Company, in its discretion, may instead of issuing
a new Security, pay such Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
("Outstanding") at any time are all Securities authenticated and delivered by
the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not Outstanding. A Security
does not cease to be Outstanding because the Company or an Affiliate of the
Company holds the Security.
If a Security is paid or replaced pursuant to Section 2.07, it ceases
to be Outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all Principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, then on
and after that date such Securities (or portions thereof) cease to be
Outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities
<PAGE>
25
upon surrender of such temporary Securities at the office or agency of the
Company, without charge to the Holder.
SECTION 2.10 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of transfer,
exchange, payment or cancellation and deliver a certificate of such destruction
to the Company unless the Company directs the Trustee to deliver cancelled
Securities to the Company. The Company may not Issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the Persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities it shall notify the
Trustee in writing of the redemption date, the Principal amount of Securities
to be redeemed and the paragraph of the Securities pursuant to which the
redemption will occur.
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26
In the case of a redemption pursuant to paragraph 5 of the Securities,
the Company shall give each notice to the Trustee provided for in this Section
at least 60 days before the redemption date unless the Trustee consents to a
shorter period. Any notice delivered pursuant to paragraph 5 of the Securities
shall be accompanied by an Officers' Certificate to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption for
determining the Holders to whom notice of redemption will be sent pursuant to
Section 3.03 shall be selected by the Company and given to the Trustee, which
record date shall be not less than 15 days after the date of notice to the
Trustee unless the Trustee consents to a shorter period.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee in its discretion shall
select the Securities to be redeemed either on a pro rata basis or by lot or by
a method that complies with applicable legal and securities exchange
requirements, if any, and that the Trustee considers fair and appropriate. The
Trustee shall make the selection from Outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
Principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. In the case of a redemption
pursuant to paragraph 5 of the Securities, at least 30 days but not more than
60 days before a date for redemption of Securities, the Company shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the Outstanding Securities are to be redeemed,
the identification of the particular Securities to be redeemed as well as
the aggregate Principal amount of Securities to be redeemed and if any
Security is being redeemed in part, the portion of the Principal amount of
such Security to be
<PAGE>
27
redeemed and that after the redemption date and upon surrender of such
Security a new Security or Securities will be issued having a Principal
amount equal to the Principal amount of the Security surrendered less the
Principal amount of the portion of the Security redeemed;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities (or portion thereof) called for redemption
ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(8) the CUSIP number (if any) printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to
the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
having a Principal amount equal to the Principal amount of the Security
surrendered less the Principal amount of the portion of the Security so
redeemed.
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28
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay
the Principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
Principal and interest then due.
The Company shall pay interest on overdue Principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be
required to be subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, from and after the Senior Notes Assumption Date, the Company
shall file or cause to be filed with the SEC and provide the Trustee and
Securityholders with the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) with respect to the Company which are specified in Sections 13 and
15(d) of the Exchange Act. Prior to the Senior Notes Assumption Date, the
Company shall provide the Trustee and Securityholders information with respect
to RCPC that is substantially similar to that required to be provided to such
Persons after that date. The Company also shall comply with the other
provisions of TIA ss. 314(a).
SECTION 4.03. Limitation on Debt.
(a) Prior to the Senior Notes Assumption Date, Escrow Corp. shall not
Issue any Debt, other than the Securities and the New Senior Subordinated
Securities. RCPC shall not, and shall not permit any Subsidiary of RCPC to,
Issue, directly or indirectly, any Debt; provided, however, that RCPC and its
Subsidiaries shall be permitted to Issue Debt if, at the time of such Issuance,
the Consolidated EBITDA Coverage Ratio for the period of the most recently
completed four consecutive fiscal quarters ending at least 45 days prior to the
date such Debt is Issued exceeds the ratio of 2.0 to 1.0.
(b) Notwithstanding the foregoing, RCPC and its Subsidiaries may Issue
the following Debt:
(1) Debt Issued pursuant to the Credit Agreement, any Refinancing
thereof, or any other credit agreement, indenture or other
<PAGE>
29
agreement, in an aggregate principal amount not to exceed $950 million
outstanding at any one time;
(2) Debt (other than Debt described in clause (1) above) Issued for
working capital and general corporate purposes in an aggregate principal
amount at the time of such Issue which, when taken together with the
aggregate principal amount then outstanding of all other Debt Issued
pursuant to this clause (2), shall not exceed the sum of (x) 50% of the
book value of the inventory of RCPC and its consolidated Subsidiaries and
(y) 80% of the book value of the accounts receivable of RCPC and its
consolidated Subsidiaries, in each case as determined in accordance with
GAAP;
(3) Debt (other than Debt described in clauses (1) and (2) above) in
respect of the undrawn portion of the face amount of or unpaid
reimbursement obligations in respect of letters of credit for the account
of RCPC or any of its Subsidiaries in an aggregate amount at any time
outstanding not to exceed the excess of (i) $150 million over (ii) the
undrawn portion of the face amount of or unpaid reimbursement obligations
in respect of letters of credit Issued under the Credit Agreement or any
Refinancing thereof or any other credit agreement, indenture or other
agreement pursuant to clause (1) above;
(4) Debt of RCPC Issued to and held by a Wholly Owned Recourse
Subsidiary of RCPC and Debt of a Subsidiary of RCPC Issued to and held by
RCPC or a Wholly Owned Recourse Subsidiary; provided, however, that any
subsequent Issuance or transfer of any Capital Stock that results in any
such Wholly Owned Recourse Subsidiary ceasing to be a Wholly Owned Recourse
Subsidiary or any subsequent transfer of such Debt (other than to RCPC or a
Wholly Owned Recourse Subsidiary) shall be deemed, in each case, to
constitute the Issuance of such Debt by RCPC or of such Debt by such
Subsidiary;
(5) the Securities, the New Senior Subordinated Securities and Debt
Issued to Refinance any Debt permitted by this clause (5); provided,
however, that, in the case of a Refinancing, the principal amount of the
Debt so Issued shall not exceed the principal amount of the Debt so
Refinanced plus any Refinancing Costs thereof; provided further, however,
that any Debt Issued pursuant to this clause (5) to Refinance the New
Senior Subordinated Securities or any Refinancing thereof shall be
subordinated to the Securities to at least the same extent as the New
Senior Subordinated Securities are subordinated to the Securities;
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(6) Debt (other than Debt described in clause (1), (2), (3), (4) or
(5) above or (11) below) of RCPC or any of its Subsidiaries outstanding or
committed on the Issue Date and Debt Issued to Refinance any Debt permitted
by this clause (6) or by Section 4.03(a); provided, however, that, in the
case of a Refinancing, the principal amount of the Debt so Issued shall not
exceed the principal amount of the Debt so Refinanced plus any Refinancing
Costs thereof; provided further, however, that no Debt may be Issued
pursuant to this clause (6) for the purpose of Refinancing the Existing
9-3/8% Senior Securities or the Existing Senior Subordinated Securities;
(7) Debt Issued and arising out of purchase money obligations for
property acquired in an amount not to exceed, for the period through June
30, 1998, $15 million, plus for each period of twelve consecutive months
ending on June 30 thereafter, $15 million; provided, however, that any such
amounts which are available to be utilized during any such twelve month
period and are not so utilized may be utilized during any succeeding
period;
(8) Debt of a Subsidiary of RCPC Issued and outstanding on or prior to
the date on which such Subsidiary was acquired by RCPC (other than Debt
Issued as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary
of RCPC or was acquired by RCPC);
(9) Debt Issued to Refinance Debt referred to in the foregoing clause
(8) or this clause (9); provided, however, that the principal amount of the
Debt so Issued shall not exceed the principal amount of the Debt so
Refinanced plus any Refinancing Costs thereof;
(10) Non-Recourse Debt of a Non-Recourse Subsidiary; provided,
however, that if any such Debt thereafter ceases to be Non-Recourse Debt
of a Non-Recourse Subsidiary, then such event shall be deemed for the
purpose of this Section 4.03 to constitute the Issuance of such Debt by the
issuer thereof;
(11) Permitted Affiliate Debt; and
(12) Debt (other than Debt described in clauses (1) through (11) above
and in Section 4.03(a)) in an aggregate principal amount outstanding at any
time not to exceed $150 million.
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(c) To the extent RCPC or any Subsidiary of RCPC Guarantees any Debt
of RCPC or a Subsidiary of RCPC, such Guarantee and such Debt will be deemed to
be the same indebtedness and only the amount of the Debt will be deemed to be
outstanding. If RCPC or a Subsidiary of RCPC Guarantees any Debt of a Person
that, subsequent to the Issuance of such Guarantee, becomes a Subsidiary, such
Guarantee and the Debt so Guaranteed shall be deemed to be the same
indebtedness, which shall be deemed to have been Issued when the Guarantee was
Issued and shall be deemed to be permitted to the extent the Guarantee was
permitted when Issued.
SECTION 4.04. Limitation on Liens. Prior to the Senior Notes
Assumption Date, Escrow Corp. shall not create or suffer to exist any Lien upon
the Escrowed Securities other than the Lien of the Escrow Agreement. RCPC shall
not, and shall not permit any Subsidiary of RCPC to, create or suffer to exist
any Lien upon any of its property or assets (including Capital Stock or Debt of
any Subsidiary of RCPC) now owned or hereafter acquired by it, securing any
obligation unless contemporaneously therewith effective provision is made to
secure the Securities equally and ratably with such obligation with a Lien on
the same assets securing such obligation for so long as such obligation is
secured by such Lien. The preceding sentence shall not require RCPC or any
Subsidiary of RCPC to equally and ratably secure the Securities if the Lien
consists of the following:
(1) Liens existing as of the Issue Date;
(2) any Lien arising by reason of (i) any judgment, decree or order of
any court or arbitrator, so long as such judgment, decree or order is being
contested in good faith and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment, decree or order
shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired, (ii) taxes not
delinquent or which are being contested in good faith, for which adequate
reserves (as determined by RCPC) have been established, (iii) security for
payment of workers' compensation or other insurance, (iv) security for the
performance of tenders, contracts (other than contracts for the payment of
borrowed money) or leases in the ordinary course of business, (v) deposits
to secure public or statutory obligations, or in lieu of surety or appeal
bonds entered into in the ordinary course of business, (vi) operation of
law in favor of carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees, suppliers or similar Persons, incurred in the ordinary
course of business for sums which are not delinquent for a period of more
than 30 days or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof, (vii)
security for surety, appeal, reclamation, performance or other similar
bonds and (viii) security for Hedging Obligations;
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(3) Liens to secure the payment of all or a part of the purchase price
of, or Capital Lease Obligations with respect to, assets (including Capital
Stock) or property or business acquired or constructed after the Issue
Date; provided, however, that (i) the Debt secured by such Liens shall have
otherwise been permitted to be Issued under this Indenture and (ii) such
Liens shall not encumber any other assets or property of RCPC or any of its
Subsidiaries and shall attach to such assets or property within 180 days of
the completion of construction or acquisition of such assets or property;
(4) Liens on the assets or property of a Subsidiary of RCPC existing
at the time such Subsidiary became a Subsidiary of RCPC and not incurred as
a result of (or in connection with or in anticipation of) such Subsidiary
becoming a Subsidiary of RCPC; provided, however, that such Liens do not
extend to or cover any other property or assets of RCPC or any of its
Subsidiaries;
(5) Liens (i) on any assets of RCPC or any Subsidiary of RCPC securing
obligations in respect of any Debt permitted by Section 4.03(b)(1) or
4.03(b)(12), (ii) on any assets of RCPC or any Subsidiary of RCPC securing
obligations in respect of any Debt permitted by Section 4.03(b)(6) which is
Issued to Refinance the Existing 9-1/2% Senior Securities or any
Refinancing thereof, and (iii) on the inventory or receivables of RCPC or
any Subsidiary of RCPC securing obligations in respect of any Debt
permitted by Section 4.03(b)(2);
(6) leases and subleases of real property by RCPC and its Subsidiaries
(in any such case, as lessor) which do not interfere with the ordinary
conduct of the business of RCPC or any of its Subsidiaries, and which are
made on customary and usual terms applicable to similar properties;
(7) Liens securing Debt which is Issued to Refinance Debt which has
been secured by a Lien permitted under this Indenture and is permitted to
be Refinanced under this Indenture; provided, however, that such Liens do
not extend to or cover any property or assets of RCPC or any of its
Subsidiaries not securing the Debt so Refinanced, other than as otherwise
permitted by this Section 4.04;
(8) easements, reservations, licenses, rights-of-way, zoning
restrictions and covenants, conditions and restrictions and other similar
encumbrances or title defects which, in the aggregate, do not materially
detract from the use of the property subject thereto or materially
interfere with the ordinary conduct of the business of RCPC or any of its
Subsidiaries;
(9) Liens on assets of a Non-Recourse Subsidiary;
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(10) Liens on assets located outside the United States and Canada;
(11) Liens in favor of the United States of America for amounts paid
by RCPC or any of its Subsidiaries as progress payments under government
contracts entered into by them;
(12) other Liens incidental to the conduct of the business of RCPC and
its Subsidiaries or the ownership of any of their assets not incurred in
connection with Debt, including Liens arising in connection with
reimbursement obligations not constituting Debt in favor of issuers of
standby letters of credit for the account of RCPC or a Subsidiary, which
Liens do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business of
RCPC or any of its Subsidiaries;
(13) Liens granted in the ordinary course of business of RCPC or any
of its Subsidiaries in favor of issuers of documentary or trade letters of
credit for the account of RCPC or such Subsidiary or bankers' acceptances,
which Liens secure the reimbursement obligations of RCPC or such Subsidiary
on account of such letters of credit or bankers' acceptances; provided that
each such Lien is limited to (i) the assets acquired or shipped with the
support of such letter of credit or bankers' acceptances and (ii) any
assets of RCPC or such Subsidiary which are in the care, custody or control
of such issuer in the ordinary course of business; and
(14) Liens securing Debt which, together with all other Debt secured
by Liens (excluding Debt secured by Liens permitted by clauses (1) through
(13) above) at the time of determination does not exceed $25 million.
SECTION 4.05. Limitation on Restricted Payments. (a) RCPC shall not,
and shall not permit any Subsidiary of RCPC, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving RCPC) or to the holders of its Capital Stock (except
dividends or distributions payable solely in its Non-Convertible Capital Stock
or in options, warrants or other rights to purchase its Non-Convertible Capital
Stock and except dividends or distributions payable to RCPC or a Subsidiary of
RCPC and, if a Subsidiary of RCPC is not wholly owned, to its other equity
holders to the extent they are not Affiliates of RCPC), (ii) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of RCPC, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case within one year of the date of acquisition) or (iv) make any
Investment in (A) an Affiliate of RCPC other than a Subsidiary of RCPC and
other than an Affiliate of
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RCPC which will become a Subsidiary of RCPC as a result of any such Investment,
or (B) a Non-Recourse Subsidiary (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to as a "Restricted Payment") if at the time RCPC or such
Subsidiary makes such Restricted Payment (the amount of any such Restricted
Payment, if other than in cash, as determined in good faith by the Board of
Directors, the determination of which shall be evidenced by a resolution of the
Board of Directors):
(1) a Default shall have occurred and be continuing (or would result
therefrom); or
(2) RCPC is not able to incur $1.00 of additional Debt in accordance
with the provisions of Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments after the Issue Date would exceed the sum of:
(a) 50% of the Consolidated Net Income of RCPC accrued during the
period (treated as one accounting period) from January 1, 1998, to the
end of the most recent fiscal quarter ending at least 45 days prior to
the date of such Restricted Payment (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit);
(b) the aggregate Net Cash Proceeds received by RCPC from the
Issue or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) subsequent to the Issue Date (other than an
Issuance or sale to a Subsidiary of RCPC or an employee stock
ownership plan or other trust established by RCPC or any Subsidiary
for the benefit of their employees);
(c) the aggregate Net Cash Proceeds received by RCPC from the
Issue or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) to an employee stock ownership plan subsequent to
January 1, 1998; provided, however, that if such employee stock
ownership plan incurs any Debt, such aggregate amount shall be limited
to an amount equal to any increase in the Consolidated Net Worth of
RCPC resulting from principal repayments made by such employee stock
ownership plan with respect to Debt incurred by it to finance the
purchase of such Capital Stock;
(d) the amount by which Debt of RCPC is reduced on RCPC's balance
sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Debt of RCPC convertible
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or exchangeable for Capital Stock (other than Redeemable Stock or
Exchangeable Stock) of RCPC (less the amount of any cash, or other
property, distributed by RCPC upon such conversion or exchange);
(e) the aggregate net cash proceeds received by RCPC subsequent
to the Issue Date as capital contributions (which shall not be deemed
to include any net cash proceeds received in connection with (i) the
issuance of any Permitted Affiliate Debt, (ii) the Initial Cash
Payment and (iii) any contribution designated at the time it is made
as a restricted contribution (a "Restricted Contribution");
(f) to the extent that an Investment made by RCPC or a Subsidiary
subsequent to the Issue Date has theretofore been included in the
calculation of the amount of Restricted Payments, the aggregate cash
repayments to RCPC or a Subsidiary of such Investment to the extent
not included in Consolidated Net Income of RCPC; and
(g) $26 million.
Notwithstanding the foregoing, RCPC may take actions to make a
Restricted Payment in anticipation of the occurrence of any of the events
described in this Section 4.05(a) or Section 4.05(b); provided, however, that
the making of such Restricted Payment shall be conditional upon the occurrence
of such event.
(b) Section 4.05(a) shall not prohibit the following:
(i) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Capital Stock or Subordinated
Obligations of RCPC made by exchange for, or out of the proceeds of
the substantially concurrent Issue or sale of, Capital Stock of RCPC
(other than Redeemable Stock or Exchangeable Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan) or of a cash capital contribution to RCPC; provided,
however, that (A) such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from Section 4.05(a)(3)(b)
and Section 4.05(a)(3)(c);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
RCPC made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Subordinated Obligations; provided, however, that
such
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purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value shall be excluded in the calculation of the
amount of Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations from
Net Available Cash to the extent permitted by Section 4.07; provided,
however, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof, or Restricted Payments made within 60 days after the making
of a binding commitment in respect thereof, if at such date of
declaration or commitment such dividend or other Restricted Payment
would have complied with Section 4.05(a); provided, however, that at
the time of payment of such dividend or the making of such other
Restricted Payment, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however, that such
dividend or other Restricted Payment shall be included in the
calculation of the amount of Restricted Payments;
(v) dividends in an aggregate amount per annum not to exceed 6%
of the aggregate Net Cash Proceeds received by RCPC in connection with
all Public Equity Offerings occurring after February 15, 1993;
provided, however, that such amount shall be included in the
calculation of the amount of Restricted Payments;
(vi) so long as no Default has occurred and is continuing or
would result from such transaction, (x) amounts paid or property
transferred pursuant to the Permitted Transactions and (y) dividends,
distributions, redemptions of Capital Stock and other Restricted
Payments in an aggregate amount not to exceed the sum of the Initial
Cash Payment and all Restricted Contributions; provided, however, that
in the case of clause (y), such dividends, distributions, redemptions
of Capital Stock and other Restricted Payments are not prohibited by
the Credit Agreement or any Refinancing thereof (whether pursuant to
its terms or as a result of waiver, amendment, termination or
otherwise); provided further, however, that such amounts paid,
property transferred, dividends, distributions, redemptions and
Restricted Payments shall be excluded in the calculation of the amount
of Restricted Payments;
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(vii) so long as no Default has occurred and is continuing or
would result from such transaction, Restricted Payments in an
aggregate amount not to exceed the sum of (x) $25 million and (y) $5
million per annum (net of any applicable cash exercise price actually
received by RCPC) made from time to time to finance the purchase by
RCPC or Parent of its common stock (for not more than fair market
value) in connection with the delivery of such common stock to
grantees under any stock option plan of RCPC or Parent upon the
exercise by such grantees of stock options or stock appreciation
rights settled with common stock or upon the grant of shares of
restricted common stock pursuant thereto; provided, however, that (A)
amounts available pursuant to this clause (vii) to be utilized for
Restricted Payments during any such year may be carried forward and
utilized in any succeeding year and (B) no Restricted Payments shall
be permitted pursuant to this clause unless, at the time of such
purchase, the issuance by RCPC or Parent of new shares of common stock
to such optionee would cause more than 19.9% of the total voting power
or more than 19.9% of the total value of the stock of RCPC or Parent
to be held by Persons other than members of the Mafco Consolidated
Group (the term "stock" for purposes of this clause shall have the
same meaning as such term had for purposes of Section 1504 of the
Code); provided further, however, that such amounts shall be excluded
in the calculation of the amount of Restricted Payments;
(viii) any purchase, repurchase, redemption, defeasance or other
acquisition by any Non-Recourse Subsidiary of Non-Recourse Debt of
such Non-Recourse Subsidiary; provided, however, that the amount of
such purchase, repurchase, redemption, defeasance or other acquisition
shall be excluded in the calculation of the amount of Restricted
Payments;
(ix) any purchase of New Senior Subordinated Securities or
Existing Senior Subordinated Securities pursuant to the "Change of
Control" provisions thereof and any purchase of any other Subordinated
Obligations pursuant to an option given to a holder of such
Subordinated Obligation pursuant to a "Change of Control" covenant
which is no more favorable to the holders of such Subordinated
Obligations than the provisions of this Indenture relating to a Change
of Control are to Holders as determined in good faith by the Board of
Directors of RCPC, the determination of which shall be evidenced by a
resolution adopted by such Board of Directors; provided, however, that
no such purchase shall be permitted prior to the time when RCPC shall
have purchased all Securities tendered for purchase by Holders
electing to have their Securities purchased pursuant to Section 4.09;
provided further, however, that such purchases shall be excluded from
the calculation of Restricted Payments;
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(x) so long as no Default shall have occurred and be continuing,
amounts paid to Parent, to the extent necessary to enable Parent to
pay actual expenses, other than those paid to Affiliates of RCPC,
incidental to being a publicly reporting, but non-operating, company;
provided, however, that such amounts paid shall be excluded in the
calculation of the amount of Restricted Payments; or
(xi) any loan to a Permitted Affiliate entered into in the
ordinary course of business; provided, however, that such Permitted
Affiliate holds, directly or indirectly, no more than 10% of the
outstanding Capital Stock of RCPC.
SECTION 4.06. Limitation on Restrictions on Distributions from
Subsidiaries. RCPC shall not, and shall not permit any Subsidiary of RCPC to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary of RCPC to (i) pay
dividends or make any other distributions on its Capital Stock or pay any Debt
owed to RCPC, (ii) make any loans or advances to RCPC or (iii) transfer any of
its property or assets to RCPC, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Subsidiary of
RCPC pursuant to an agreement relating to any Debt Issued by such
Subsidiary on or prior to the date on which such Subsidiary was acquired by
RCPC (other than Debt Issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary of RCPC or was acquired by RCPC) and
outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting
an Issuance of Bank Debt or a Refinancing of any other Debt Issued pursuant
to an agreement referred to in clause (1) or (2) above or this clause (3)
or contained in any amendment to an agreement referred to in clause (1) or
(2) above or this clause (3); provided, however, that any such encumbrance
or restriction with respect to any Subsidiary is no less favorable to the
Securityholders than the least favorable of the encumbrances and
restrictions with respect to such Subsidiary contained in the agreements
referred to in clause (1) or (2) above, as determined in good faith by the
Board of Directors of RCPC, the determination of which shall be evidenced
by a resolution of such Board of Directors;
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(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease;
(5) in the case of clause (iii) above, restrictions contained in
security agreements securing Debt of a Subsidiary (other than security
agreements securing Debt of a Subsidiary Issued in connection with any
agreement referred to in clause (1), (2) or (3) above) and restrictions
contained in agreements relating to a disposition of property of a
Subsidiary, to the extent such restrictions restrict the transfer of the
property subject to such agreements;
(6) any encumbrance or restriction binding on a Foreign Subsidiary
contained in an agreement pursuant to which such Foreign Subsidiary has
Issued Debt consisting of working capital borrowings; and
(7) any encumbrance or restriction relating to a Non-Recourse
Subsidiary.
SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock.
(a) RCPC shall not, and shall not permit any Subsidiary of RCPC (other
than a Non-Recourse Subsidiary) to, make any Asset Disposition unless
(i) RCPC or such Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors of RCPC, the
determination of which shall be conclusive and evidenced by a
resolution of the Board of Directors of RCPC (including as to the
value of all noncash consideration), of the Capital Stock and assets
subject to such Asset Disposition;
(ii) at least 75% of the consideration consists of cash, cash
equivalents, readily marketable securities which RCPC intends, in good
faith, to liquidate promptly after such Asset Disposition or the
assumption of liabilities (including, in the case of the sale of the
Capital Stock of a Subsidiary of RCPC, liabilities of RCPC or such
Subsidiary); and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by RCPC (or such Subsidiary, as the case
may be):
(A) first, to the extent RCPC is required by the terms of
any Pari Passu Debt or Debt of a Subsidiary of RCPC to prepay,
repay or purchase Pari Passu Debt or Debt of a Wholly Owned
Recourse
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Subsidiary or additionally, in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, Debt of such Subsidiary (in each case other than Debt
owed to RCPC or an Affiliate of RCPC) in accordance with the
terms of such Debt;
(B) second, to the extent of the balance of such Net Avail
able Cash after application in accordance with clause (A), at
RCPC's election, to either (1) the optional prepayment, repayment
or repurchase of Pari Passu Debt or Debt of a Wholly Owned
Recourse Subsidiary or, additionally in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, Debt of such Subsidiary (in each case other than Debt
owed to RCPC or an Affiliate of RCPC) which RCPC is not required
by the terms thereof to prepay, repay or repurchase (whether or
not the related loan commitment is permanently reduced in
connection therewith), or (2) the investment by RCPC or any
Wholly Owned Recourse Subsidiary (or, additionally in the case of
an Asset Disposition by a Subsidiary that is not a Wholly Owned
Recourse Subsidiary, the investment by such Subsidiary) in assets
to replace the assets that were the subject of such Asset
Disposition or in assets that (as determined by the Board of
Directors of RCPC, the determination of which shall be conclusive
and evidenced by a resolution of such Board of Directors) will be
used in the businesses of RCPC and its Wholly Owned Recourse
Subsidiaries (or, additionally in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the businesses of such Subsidiary) existing on the
Issue Date or in businesses reasonably related thereto, in all
cases, within the later of one year from the date of such Asset
Disposition or the receipt of such Net Available Cash; and
(C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A)
and (B), to make an offer to purchase Securities and other Pari
Passu Debt designated by RCPC pursuant to and subject to the
conditions of Section 4.07(b);
provided, however, that in connection with an offer pursuant to clause (C)
above, if the principal amount and premium of such Securities and such Pari
Passu Debt, together with accrued and unpaid interest tendered for acceptance
pursuant to such offer exceeds the balance of Net Available Cash, then RCPC
will accept for purchase the Securities and such Pari Passu Debt of each such
tendering holder on a pro rata basis in accordance with the principal amount so
tendered.
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Notwithstanding the foregoing provisions of this Section 4.07(a), RCPC
and the Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this Section 4.07(a) except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this Section 4.07(a) exceed $10 million. Pending application of
Net Available Cash pursuant to this Section 4.07(a), such Net Available Cash
shall be (i) invested in Temporary Cash Investments or (ii) used to make an
optional prepayment under any revolving credit facility constituting Pari Passu
Debt or Debt of a Wholly Owned Recourse Subsidiary (or, additionally in the
case of a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt of
such Subsidiary), whether or not the related loan commitment is permanently
reduced in connection therewith.
(b) In the event of an Asset Disposition that requires the purchase of
Securities pursuant to Section 4.07(a)(iii)(C), RCPC will be required to
purchase Securities and other Pari Passu Debt designated by RCPC tendered
pursuant to an offer by RCPC for the Securities and such Pari Passu Debt (the
"Offer") at a purchase price of 100% of their principal amount, without
premium, plus accrued interest to the Purchase Date (or in respect of other
Pari Passu Debt such lesser price, if any, as may be provided for by the terms
of such Pari Passu Debt) in accordance with the procedures (including
prorationing in the event of oversubscription) set forth in Section 4.07(c),
provided that the procedures for making an offer to holders of other Pari Passu
Debt will be as provided for by the terms of such Pari Passu Debt. If (x) the
aggregate purchase price of Securities and other Pari Passu Debt tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Securities and Pari Passu Debt, (y) RCPC shall not be obligated
to make an offer pursuant to the last sentence of this paragraph, or (z) RCPC
shall be unable to purchase Securities from Holders thereof in an Offer because
of the provisions of applicable law or of RCPC's or its Subsidiaries' loan
agreements, indentures or other contracts governing Debt or Debt of
Subsidiaries (in which case RCPC need not make an Offer) RCPC shall apply the
remaining Net Available Cash to (i) invest in assets to replace the assets that
were the subject of the Asset Disposition or in assets that (as determined by
the Board of Directors of RCPC, the determination of which shall be conclusive
and evidenced by a resolution of such Board of Directors) will be used in the
businesses of RCPC and its Wholly Owned Recourse Subsidiaries (or, additionally
in the case of an Asset Disposition by a Subsidiary that is not a Wholly Owned
Recourse Subsidiary, the business of such Subsidiary) existing on the Issue
Date or in businesses reasonably related thereto or (ii) in the case of clause
(x) or (y) above, prepay, repay or repurchase Debt of RCPC or Debt of a Wholly
Owned Recourse Subsidiary or, additionally in the case of an Asset Disposition
by a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt of such
Subsidiary which RCPC or such Wholly Owned Recourse Subsidiary or Subsidiary is
not required by the terms thereof to prepay, repay, repurchase or redeem (in
each case other than Debt owed to RCPC or an Affiliate of RCPC), whether or not
the related loan commitment is permanently reduced in connection therewith.
RCPC shall not be required to make an Offer for Securities and
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42
other Pari Passu Debt pursuant to this Section if the Net Available Cash
available therefor (after application of the proceeds as provided in clause (A)
and clause (B) of Section 4.07(a)(iii)) are less than $10 million for any
particular Asset Disposition (which lesser amounts shall not be carried forward
for purposes of determining whether an Offer is required with respect to the
Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within five days after the last
date by which RCPC must have applied Net Available Cash pursuant to Section
4.07(a)(iii)(B), RCPC shall be obligated to deliver to the Trustee and
send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by RCPC either in whole
or in part (subject to prorationing as hereinafter described in the event
the Offer is oversubscribed) in integral multiples of $1,000 of Principal
amount, at the applicable purchase price. The notice shall specify a
purchase date not less than 30 days nor more than 60 days after the date of
such notice (the "Purchase Date") and shall contain information concerning
the business of RCPC which RCPC in good faith believes will enable such
Holders to make an informed decision (which at a minimum will include (i)
the most recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of RCPC, the most recent subsequently
filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of
RCPC filed subsequent to such Quarterly Report, other than Current Reports
describing Asset Dispositions otherwise described in the offering materials
(or corresponding successor reports), and (ii) if material, appropriate pro
forma financial information) and all instructions and materials necessary
to tender Securities pursuant to the Offer, together with the information
contained in clause (2) below.
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, RCPC shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.07(a). On
such date, RCPC shall also irrevocably deposit with the Trustee or with a
paying agent (or, if RCPC is acting as its own paying agent, segregate and
hold in trust) in immediately available funds an amount equal to the Offer
Amount to be held for payment in accordance with the provisions of this
Section. The amount so deposited, at the option of, and pursuant to the
specific written direction of, RCPC, may be invested in Temporary Cash
Investments the maturity date of which is not later than the Purchase Date.
RCPC shall be entitled to any interest or dividends accrued, earned or paid
on such Temporary Cash Investments. Upon the expiration of the period for
which the Offer remains open (the "Offer Period"), RCPC shall deliver to
the Trustee for
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43
cancellation the Securities or portions thereof which have been
properly tendered to and are to be accepted by RCPC. The Trustee shall, on
the Purchase Date, mail or deliver payment to each tendering Holder in the
amount of the purchase price. In the event that the aggregate purchase
price of the Securities and other Pari Passu Debt delivered by RCPC to the
Trustee is less than the Offer Amount, the Trustee shall deliver the excess
to RCPC promptly after the expiration of the Offer Period.
(3) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to RCPC at
the address specified in the notice at least ten Business Days prior to the
Purchase Date. Holders will be entitled to withdraw their election if the
Trustee or RCPC receives not later than three Business Days prior to the
Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the Principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate Principal amount of Securities surrendered by Holders
exceeds the Offer Amount, RCPC shall select the Securities to be purchased
on a pro rata basis (with such adjustments as may be deemed appropriate by
RCPC so that only Securities in denominations of $1,000, or integral
multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part will be Issued new Securities equal in Principal
amount to the unpurchased portion of the Securities surrendered.
(4) At the time RCPC delivers Securities to the Trustee which are to
be accepted for purchase, RCPC will also deliver an Officers' Certificate
stating that such Securities are to be accepted by RCPC pursuant to and in
accordance with the terms of this Section. A Security shall be deemed to
have been accepted for purchase at the time the Trustee, directly or
through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) RCPC shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, RCPC shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.08. Limitation on Transactions with Affiliates. (a) Prior to
the Senior Notes Assumption Date, Escrow Corp. shall not conduct any business
or enter into any transaction or series of similar transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Escrow Corp. or any legal or beneficial owner of
10% or more of the voting power of the Voting
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44
Stock of Escrow Corp. or with an Affiliate of any such owner other than to the
extent contemplated by the Escrow Agreement. RCPC shall not, and shall not
permit any of its Subsidiaries (other than a Non-Recourse Subsidiary) to,
conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of RCPC or any legal or
beneficial owner of 10% or more of the voting power of the Voting Stock of RCPC
or with an Affiliate of any such owner unless:
(i) the terms of such business, transaction or series of transactions
are (A) set forth in writing and (B) at least as favorable to RCPC or such
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with
an unrelated third Person and
(ii) to the extent that such business, transaction or series of
transactions (other than Debt Issued by RCPC which is permitted by Section
4.03) is known by the Board of Directors of RCPC to involve an Affiliate of
RCPC or a legal or beneficial owner of 10% or more of the voting power of
the Voting Stock of RCPC or an Affiliate of such owner, then
(A) with respect to a transaction or series of related
transactions, other than any purchase or sale of inventory in the
ordinary course of business (an "Inventory Transaction"), involving
aggregate payments or other consideration in excess of $5.0 million,
such transaction or series of related transactions has been approved
(and the value of any noncash consideration has been determined) by a
majority of those members of the Board of Directors of RCPC having no
personal stake in such business, transaction or series of transactions
and
(B) with respect to a transaction or series of related
transactions, other than any Inventory Transaction, involving
aggregate payments or other consideration in excess of $20.0 million
(with the value of any noncash consideration being determined by a
majority of those members of the Board of Directors of RCPC having no
personal stake in such business, transaction or series of
transactions), such transaction or series of related transactions has
been determined, in the written opinion of a nationally recognized,
investment banking firm to be fair, from a financial point of view, to
RCPC or such Subsidiary, as the case may be.
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45
(b) The provisions of Section 4.08(a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to
Section 4.05;
(ii) any transaction between RCPC and any of its Subsidiaries;
provided, however, that no portion of any minority interest in any such
Subsidiary is owned by (x) any Affiliate (other than RCPC, a Wholly Owned
Recourse Subsidiary of RCPC, a Permitted Affiliate or an Unrestricted
Affiliate) of RCPC or (y) any legal or beneficial owner of 10% or more of
the voting power of the Voting Stock of RCPC or any Affiliate of such owner
(other than RCPC, any Wholly Owned Recourse Subsidiary of RCPC or an
Unrestricted Affiliate);
(iii) any transaction between Subsidiaries of RCPC; provided,
however, that no portion of any minority interest in any such Subsidiary is
owned by (x) any Affiliate (other than RCPC, a Wholly Owned Recourse
Subsidiary of RCPC, a Permitted Affiliate or an Unrestricted Affiliate) of
RCPC or (y) any legal or beneficial owner of 10% or more of the voting
power of the Voting Stock of RCPC or any Affiliate of such owner (other
than RCPC, any Wholly Owned Recourse Subsidiary of RCPC or an Unrestricted
Affiliate);
(iv) any transaction between RCPC or a Subsidiary of RCPC and its
own employee stock ownership plan;
(v) any transaction with an officer or director of RCPC, of
Parent or of any Subsidiary of RCPC entered into in the ordinary course of
business (including compensation or employee benefit arrangements with any
such officer or director); provided, however, that such officer holds,
directly or indirectly, no more than 10% of the outstanding Capital Stock
of RCPC;
(vi) any business or transaction with an Unrestricted Affiliate;
(vii) any transaction which is a Permitted Transaction;
(viii) any transaction pursuant to which Mafco Holdings will
provide to the Company or RCPC and its Subsidiaries at their request and at
the cost to Mafco Holdings with certain allocated services to be purchased
from third party providers, such as legal and accounting services,
insurance coverage and other services; and
(ix) the Refinancing Transactions and the transactions
contemplated by the Escrow Agreement.
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46
SECTION 4.09. Change of Control.
(a) Upon a Change of Control, each Holder shall have the right to
require that the Company repurchase all or any part of such Holder's Securities
at a repurchase price in cash equal to their Put Amount as of the date of
repurchase plus accrued and unpaid interest to the date of repurchase, in
accordance with the terms contemplated in Section 4.09(b). Prior to the mailing
of the notice to Holders provided for in Section 4.09(b) but in any event
within 30 days following any Change of Control, the Company covenants to (i)
repay in full all Bank Debt or to offer to repay in full all Bank Debt and to
repay the Bank Debt of each lender who has accepted such offer or (ii) obtain
the requisite consent under the Bank Debt to permit the repurchase of the
Securities as provided for in Section 4.09(b). The Company shall first comply
with the covenant in the preceding sentence before it shall be required to
purchase Securities pursuant to this Section 4.09.
(b) Within 45 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to repurchase all or any part of such
Holder's Securities at a repurchase price in cash equal to their Put Amount
as of the date of repurchase plus accrued and unpaid interest to the date
of repurchase;
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with
this Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security repurchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least 10 Business Days prior
to the purchase date. Holders will be entitled to withdraw their election if
the Trustee or the Company receives not later than three Business Days prior to
the purchase date, a facsimile transmission or letter setting forth the name of
the Holder, the Principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security repurchased.
(d) On the repurchase date, all Securities repurchased by the Company
under this Section shall be delivered to the Trustee for cancellation, and the
Company
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47
shall pay the repurchase price plus accrued and unpaid interest to the Holders
entitled thereto. Upon surrender of a Security that is repurchased under this
Section in part, the Company shall execute and the Trustee shall authenticate
for the Holder thereof (at the Company's expense) a new Security having a
Principal amount equal to the Principal amount of the Security surrendered less
the portion of the Principal amount of the Security repurchased.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.10. Limitation on Other Business Operations. Prior to the
Senior Notes Assumption Date, Escrow Corp. shall not engage in any business
operations other than those in connection with the Issuance of the Securities,
the Refinancing Transactions and the transactions permitted by the Escrow
Agreement.
SECTION 4.11. Senior Notes Assumption. RCPC shall cause the Senior
Notes Assumption and the redemption of the Existing 9-3/8% Senior Securities to
occur no later than the later of (i) three Business Days after the 30th day
after the Issue Date and (ii) April 6, 1998.
SECTION 4.12. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default by the Company and whether or not the signers know of
any Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with TIA
ss. 314(a)(4). The Trustee shall have no responsibility or obligation to
monitor the Company's compliance with its obligations set forth in Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 and 4.11.
SECTION 4.13. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
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48
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. (a) The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (if not the Company)
shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and such
Person shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Securities and this Indenture;
(ii) except in the case of the Refinancing Transactions, immediately
after giving effect to such transaction (and treating any Debt which
becomes an obligation of the resulting, surviving or transferee Person or
any of its Subsidiaries as a result of such transaction as having been
Issued by such Person or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing;
(iii) except in the case of the Refinancing Transactions, immediately
after giving effect to such transaction, the resulting, surviving or
transferee Person would be able to incur at least $1.00 of Debt pursuant to
Section 4.03(a);
(iv) except in the case of the Refinancing Transactions, immediately
after giving effect to such transaction, the resulting, surviving or
transferee Person shall have a Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture;
provided that this Section 5.01 shall not prohibit a Wholly Owned Recourse
Subsidiary from consolidating with or merging with or into, or conveying,
transferring or leasing all or substantially all its assets to, the Company.
(b) The resulting, surviving or transferee Person shall be the
successor Company and shall succeed to, and be substituted for, and may
exercise every right and
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49
power of, the predecessor Company under this Indenture, and thereafter, except
in the case of a lease, the predecessor Company shall be discharged from all
obligations and covenants under the Indenture and the Securities.
(c) Upon consummation of the Senior Notes Assumption, RCPC shall
execute and deliver to the Trustee a supplemental indenture relating to the
Securities (the "Supplemental Senior Notes Indenture"), Officers' Certificate
and an Opinion of Counsel of the type referred to in clauses (i) and (v) above,
whereupon RCPC shall be the successor Company and shall succeed to, and be
substituted for, and may exercise every right and power of, the predecessor
Company hereunder and the predecessor Company shall be discharged from all
obligations and covenants under this Indenture and the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable and such default continues for a
period of 30 days;
(2) the Company (i) defaults in the payment of the Principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture or the
Securities;
(3) the Company fails to comply with Section 5.01 or 4.11;
(4) the Company or RCPC fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09 or 4.10 (other than a failure to purchase
Securities) or, in the case of Escrow Corp., the Escrow Agreement and such
failure continues for 30 days after the notice specified below;
(5) the Company or RCPC fails to comply with any of the other
agreements applicable to it in the Securities or this Indenture (other than
those referred to in (1), (2), (3) or (4) above) and such failure continues
for 60 days after the notice specified below;
(6) Debt of RCPC or any Significant Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the
holders thereof
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because of a default, the total principal amount of the portion of
such Debt that is unpaid or accelerated exceeds $25 million or its foreign
currency equivalent and such default continues for 10 days after the notice
specified below;
(7) the Company, RCPC or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company, RCPC or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company, RCPC or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company, RCPC or
any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of $25
million or its foreign currency equivalent is entered against the Company,
RCPC or any Significant Subsidiary and is not discharged and either (A) an
enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed and, in the case of (B),
such default continues for 10 days after the notice specified below.
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51
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9)(B) is not an Event of
Default until the Trustee or the Holders of at least 25% in Principal amount of
the Securities notify the Company of the Default and the Company does not cure
such Default within the time specified after receipt of such Notice. Such
Notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (4), (5), (6) or (9), its status and what action
the Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company or RCPC) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in Principal amount of the Securities
by notice to the Company and the Trustee, may declare the Principal of and
accrued interest on all the Securities to be due and payable immediately. If an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company or RCPC occurs, the Principal of and interest on all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in Principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of Principal or interest
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of Principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
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52
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
Principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of
the Principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
Principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee under this Indenture.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or, subject to Section 7.01, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all
losses, liabilities and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in Principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense which might be incurred in
compliance with such request or direction;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
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53
(5) the Holders of a majority in Principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of Principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in
payment of interest or Principal specified in Section 6.01(1) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of Principal and
interest remaining unpaid (together with interest on such unpaid interest to
the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee
under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for Principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for Principal and interest, respectively; and
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54
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in Principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise as a prudent man would exercise
or use under the circumstances in the conduct of such man's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture or are contemplated to be
performed
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55
by the Trustee in the Escrow Agreement and no implied covenants or
obligations shall be read into this Indenture or the Escrow Agreement
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such opinions or certificates which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating in any way to the
Trustee or its conduct or affecting the liability of or affording protection to
the Trustee shall be
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56
subject to the provisions of each paragraph of this Section and Section 7.02
(unless expressly not applicable) to the provisions of the TIA.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and to have
been signed or presented by the proper Person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights
or powers; provided, however, that the Trustee's conduct does not constitute
wilful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the Securities or of the proceeds from the Securities, and it shall not
be responsible for any statement of the Company in the Indenture or in any
document Issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs and, if the
Escrowed Securities have not yet been released, shall mail to the Escrow Agent
notice of the Default within one Business Day after the Trustee has knowledge
of such Default. Except in the case of a Default in payment of Principal of or
interest on any Security (including payments pursuant to the mandatory
redemption provisions of such Security), the Trustee may withhold the notice if
and so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. The Trustee shall
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the TIA at the times and in the
manner provided pursuant thereto. To the extent that any such report shall
cover the 12-month period ending each December 31 it shall be transmitted by
the next succeeding each July 15. The Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation as shall be agreed to in writing
from time to time by the Company and the Trustee for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability, damage, claim or expense (including attorneys' fees and expenses)
incurred by it in connection with the acceptance or administration of this
trust and the performance of its duties hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve
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58
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee may have separate counsel and the Company shall pay the fees
and expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee
through the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
Principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in Principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company, is removed by
Holders of a majority in Principal amount of the Securities and they do not
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
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If a successor Trustee does not accept appointment or take office
within 60 days after the retiring Trustee resigns or is removed, the retiring
Trustee, the Company or the Holders of a majority in Principal amount of the
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities
or certificates of interest or participation in other securities of the Company
are outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all Outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all Outstanding Securities have become due and payable and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity all Outstanding Securities, including interest thereon, if any (other
than Securities replaced pursuant to Section 2.07), and if in either case the
Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Sections 8.01(c) and 8.06, cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel as to the satisfaction of all conditions to such
satisfaction and discharge of this Indenture and at the cost and expense of the
Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 5.01(ii), (iii) and (iv)
and the operation of Section 6.01(4), 6.01(6), 6.01(7) (with respect to
Significant Subsidiaries only), 6.01(8) (with respect to Significant
Subsidiaries only) and 6.01(9) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities
may not be accelerated because of an Event of Default specified in 6.01(4),
6.01(6), 6.01(7) (with respect to Significant Subsidiaries only), 6.01(8) (with
respect to Significant Subsidiaries only) and 6.01(9) or because of the failure
of the Company to comply with Section 5.01(ii), (iii) and (iv).
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05
and 8.06 shall survive until the Securities have been paid in full. Thereafter,
the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
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SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of Principal and interest on
the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of Principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay Principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
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(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
VIII have been complied with.
Notwithstanding the foregoing provisions of this Section, the
conditions set forth in the foregoing paragraphs (2), (3), (4), (5), (6) and
(7) need not be satisfied so long as, at the time the Company makes the deposit
described in paragraph (1), (i) no Default under Section 6.01(1), 6.01(2),
6.01(7) or 6.01(8) has occurred and is continuing on the date of such deposit
and after giving effect thereto and (ii) either (x) a notice of redemption has
been mailed pursuant to Section 3.03 providing for redemption of all the
Securities not more than 60 days after such mailing and the provisions of
Section 3.01 with respect to such redemption shall have been complied with or
(y) the Stated Maturity of the Securities will occur within 60 days. If the
conditions in the preceding sentence are satisfied, the Company shall be deemed
to have exercised its covenant defeasance option.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of Principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of Principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
Principal and interest received on such U.S. Government Obligations.
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SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or Principal of any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are Issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add Guarantees with respect to the Securities or to secure the
Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to provide for issuance of the Exchange Notes and Private Exchange
Notes, which will have terms substantially identical in all material
respects to the Initial Notes (except that the interest rate and transfer
restrictions contained in the Initial Notes will be modified or eliminated
as appropriate), and which will be treated, together with any Outstanding
Initial Notes, as a single issue of securities;
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(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA or to otherwise comply with the
TIA;
(8) to make any change that does not adversely affect the rights of
any Securityholder.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company and the Trustee may
amend this Indenture or the Securities without notice to any Securityholder but
with the written consent of the Holders of at least a majority in Principal
amount of the Outstanding Securities. However, without the consent of each
Securityholder affected, an amendment may not:
(1) reduce the Principal amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the Principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article III;
(5) make any Security payable in money other than that stated in the
Security; or
(6) make any change in Section 6.04 or 6.07 or the second sentence of
this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
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SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. Any
amendment to this Indenture or the Securities shall become effective in
accordance with its terms when executed and delivered by the Company and the
Trustee provided that the Company has received the requisite consents prior
thereto. The Company shall not be obligated to execute any such amendment
regardless of whether such consents have been received. Any waiver shall become
effective when the requisite consents have been received or such later time as
the Company may elect by notice to the Trustee. A consent to an amendment or a
waiver by a Holder of a Security shall bind the Holder and every subsequent
Holder of that Security or portion of the Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent or waiver
is not made on the Security. However, any such Holder or subsequent Holder may
revoke the consent or waiver as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation prior to the time
that the Company receives the requisite number of consents to such proposed
amendment or waiver. After an amendment or waiver becomes effective, it shall
bind every Securityholder. A consent to any amendment or waiver hereunder by
any Holder given in connection with a tender of such Holder's Securities shall
not be rendered invalid by such tender.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent
or take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall
be entitled to give such consent or to revoke any consent previously given or
to take any such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall Issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to Issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the
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Trustee may but need not sign it. In signing such amendment the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and to receive,
and (subject to Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such amendment is
authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company, any Affiliate
of the Company nor any Subsidiary shall, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid or agreed to be paid to all Holders which
so consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or amendment.
ARTICLE X
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 10.02. Notices. Any notice or communication shall be in
writing and delivered in Person or mailed by first-class mail addressed as
follows:
if to the Company:
625 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
if to the Trustee:
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Richard Prokosch
Facsimile: (612) 244-0711
The Company or the Trustee by notice to the other party hereto may
designate additional or different addresses for subsequent notices or
communications.
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Any notice or communication mailed to a Securityholder shall be sent
by first-class mail to the Securityholder at the Securityholder's address as it
appears on the registration books of the Registrar and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed to a Securityholder in
the manner provided above, it is duly given, whether or not the addressee
receives it.
SECTION 10.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall furnish
to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with;
provided, however, that, in any case of such application or request as to which
the furnishing of such documents, certificates or opinions is specifically
required by any provision of this Indenture relating to such particular
application or request, no additional certificate or opinion need be furnished.
SECTION 10.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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68
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
SECTION 10.06. When Securities Disregarded. In determining whether the
Holders of the required Principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
Outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities Outstanding at the time shall be
considered in any such determination.
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 10.08. Legal Holidays. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 10.09. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 10.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or the Trustee shall not have
any liability for any obligations of the Company or the Trustee under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the Issue of the Securities.
SECTION 10.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
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69
SECTION 10.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 10.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
REVLON ESCROW CORP.
by /s/ Steven Berns
--------------------------------
Name: Steven Berns
Title: Vice President and Treasurer
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee,
by /s/ Richard Prokosch
--------------------------------
Name: Richard Prokosch
Title: Assistant Vice President
<PAGE>
RULE 144A/REGULATION S APPENDIX
PROVISIONS RELATING TO INITIAL NOTES,
PRIVATE EXCHANGE NOTES
AND EXCHANGE NOTES
1. Definitions
1.1 Definitions
Capitalized terms used but not defined in this Appendix shall have the same
meaning as set forth in the Indenture. For the purposes of this Appendix the
following terms shall have the meanings indicated below:
"Definitive Security" means a certificated Initial Note bearing the
restricted securities legend set forth in Section 2.3(e) and which is held by
an IAI in accordance with Section 2.1(c).
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Purchase Agreement" means the Purchase Agreement dated January 28,
1998, between the Company, RCPC and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Restricted Period" means the 40-day restricted period as set forth
under Rule 903(c)(3)(ii)(B) under the Securities Act.
"Securities Custodian" means the custodian with respect to a
Regulation S Global Security or a Restricted Global Security (as appointed by
the Depository), or any successor person thereto and shall initially be the
Trustee.
"Shelf Registration Statement" means the registration statement issued
by the Company or RCPC, as the case may be, in connection with the offer and
sale of Initial Notes or Private Exchange Notes, pursuant to the Registration
Agreement.
"Transfer Restricted Securities" means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(e) hereto.
<PAGE>
2
1.2 Other Definitions
Defined in
Term Section:
---- --------
"Cedel"................................................................2.1(a)
"Euroclear"............................................................2.1(a)
"Global Security"......................................................2.1(b)
"Participants".........................................................2.1(b)
"Regulation S".........................................................2.1(a)
"Regulation S Global Security".........................................2.1(a)
"Regulation S Temporary Global Security"...............................2.1(a)
"Restricted Global Security"...........................................2.1(a)
"Rule 144A"............................................................2.1(a)
2. The Securities.
2.1 Form and Dating.
The Initial Notes are being offered and sold by the Company pursuant
to the Purchase Agreement.
(a) Global Securities. Initial Notes offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in the
Purchase Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit A to the Indenture (each, a "Restricted Global
Security"), which shall be deposited on behalf of the purchasers of the Initial
Notes represented thereby with the Trustee, at its St. Paul, Minnesota office,
as custodian for the Depository (or with such other custodian as the Depository
may direct), and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate Principal amount of the Restricted Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depository or its nominee, as the case
may be, as hereinafter provided.
Initial Notes offered and sold in reliance on Regulation S under the
Securities Act ("Regulation S"), as provided in the Purchase Agreement, shall
be issued initially in the form of one or more temporary global Securities in
definitive, fully registered form without interest coupons and with the global
securities legend, restricted securities legend and the Regulation S temporary
global securities legend set forth in Exhibit A to the Indenture (the
"Regulation S Temporary Global Security"), which shall be deposited on behalf
of the purchasers of the Initial Notes represented thereby with the Trustee, as
custodian, for the Depository (or with such other custodian as the Depository
may direct), and registered in the name of the Depository or the
<PAGE>
3
nominee of the Depository duly executed by the Company and authenticated by the
Trustee as hereinafter provided. Beneficial interests in the Regulation S
Temporary Global Security may only be held for the accounts of designated
agents holding on behalf of the Euroclear System ("Euroclear") or Cedel, S.A.
("Cedel"). Upon the expiration of the Restricted Period, if requested in
writing by the Holder thereof, (A) the Company shall execute and the Trustee
shall authenticate and deliver, in accordance with Section 2.2, one or more
permanent global Securities in definitive, fully registered form without
interest coupons and with the global securities legend and restricted
securities legend set forth in Exhibit A to the Indenture (the "Regulation S
Global Security") in an aggregate Principal amount equal to the aggregate
principal amount of the Regulation S Temporary Global Security and (B)
concurrently with such authentication and delivery of the Regulation S Global
Security, (x) beneficial interests in the Regulation S Temporary Global
Security shall be exchanged for beneficial interests of like tenor and amount
in the Regulation S Global Security and (y) the Trustee shall cancel the
Regulation S Temporary Global Security in accordance with Section 2.3(f).
Beneficial interests in the Regulation S Global Security may be held through
Euroclear, Cedel or other participants having accounts at the Depository. The
aggregate principal amount of the Regulation S Global Security may from time to
time be increased or decreased by adjustments made on the records of the
Trustee and the Depository or its nominee, as the case may be, as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to the
Regulation S Temporary Global Security, the Regulation S Global Security and
the Restricted Global Security (the "Global Securities") deposited with or on
behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
Members of, or participants in, the Depository ("Participants") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Participants, the operation of
customary practices of such Depository governing the exercise of the rights of
a holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as set forth in this Section 2.1,
Section 2.3 and Section 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities. Purchasers of Initial Notes who are IAIs and are not
<PAGE>
4
QIBs and did not purchase Initial Notes sold in reliance on Regulation S will
receive Definitive Securities; provided, however, that upon transfer of such
Definitive Securities to a QIB or in accordance with Regulation S, such
Definitive Securities will, unless the relevant Global Security has previously
been exchanged, be exchanged for an interest in a Global Security pursuant to
the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver the
Securities in accordance with Section 2.02 of the Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal Principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section 2.3(b)
or pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Definitive Securities are being transferred (x)
pursuant to an exemption from registration in accordance with Rule
144; or (y) in reliance on another exemption from the registration
requirements of the Securities Act; or (z) to an IAI that is acquiring
the Security for its own account, or for the account of such an IAI,
in each case for investment purposes and not with a view to, or
<PAGE>
5
for offer or sale in connection with, any distribution in
violation of the Securities Act: (i) a certification to that effect
(in the form set forth on the reverse of the Security) and such other
certifications as the Trustee may reasonably request and (ii) in the
case of clause (z), if the aggregate principal amount of such
Definitive Securities being transferred is less than $250,000, an
opinion of counsel addressed to the Company as to the compliance with
the restrictions set forth in the legend set forth in Section 2.3(e).
(b) Restrictions on Transfer of a Definitive Security for a Beneficial
Interest in a Global Security. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a QIB
in accordance with Rule 144A, or (B) outside the United States in an
offshore transaction within the meaning of Regulation S and in compliance
with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to the Regulation S Global Security or the Restricted Global
Security, as the case may be, to reflect an increase in the aggregate
Principal amount of the Securities represented by such Global Security,
such instructions to contain information regarding the Depository account
(or in the case of the Registration S Global Security only, the Euroclear
or Cedel account) to be credited with such increase;
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian
(including the rules of Euroclear and Cedel, if applicable), the aggregate
principal amount of Securities represented by the Regulation S Global Security
or the Restricted Global Security, as the case may be, to be increased by the
aggregate Principal amount of the Definitive Security to be exchanged and shall
credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in such Global Security equal to the
Principal amount of the Definitive Security so cancelled. If no applicable
Global Securities are then outstanding, then, unless one of the conditions
described in Section 2.4(a) shall have occurred, the Company shall issue and
the Trustee shall authenticate, upon written order of the Company in the form
of an Officers' Certificate, a new Regulation S Global Security or Restricted
Global Security, as the case may be, in the appropriate Principal amount.
(c) Transfer and Exchange of Global Securities. (i) The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in
<PAGE>
6
accordance with this Indenture (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Depository therefor,
including the rules and procedures of Euroclear and Cedel, if applicable. A
transferor of a beneficial interest in a Global Security to another Global
Security shall deliver to the Registrar:
(A) if applicable, instructions given in accordance with the
Depository's procedures directing the Trustee to credit or cause
to be credited a beneficial interest in the applicable Global
Security in an amount equal to the beneficial interest in the
Global Security to be exchanged; and
(B) a written order given in accordance with the
Depository's procedures containing information regarding the
Euroclear, Cedel or other participant account of the Depository
to be credited with such increase.
The Registrar shall, in accordance with such instructions, instruct
the Depository to increase and reduce, as applicable, the Principal amount
of each applicable Global Security to the extent required and to credit to
the account of the Person specified in such instructions a beneficial
interest in the applicable Global Security and to debit the account of the
Person making the transfer the beneficial interest in the Global Security
being transferred.
(ii) Notwithstanding any other provisions of this Appendix (other than
the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iii) Prior to the commencement of the Registered Exchange Offer or
the effectiveness of the Shelf Registration Statement, transfers of
interests in the Regulation S Global Security to "U.S. persons" (as defined
in Regulation S) shall be limited to transfers to QIBs pursuant to Rule
144A which Persons shall thereby acquire a beneficial interest in the
Restricted Global Security. The Company shall advise the Trustee as to the
commencement of the Registered Exchange Offer or the effectiveness of the
Shelf Registration Statement and the Trustee may rely conclusively thereon.
(iv) In the event that a Global Security is exchanged, in whole or in
part, for Securities in definitive registered form pursuant to Section 2.4
or Section 2.09 of the Indenture, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be exchanged only in
accordance with such procedures as are substantially consistent with the
provisions of this Section 2.3 (including the certification
<PAGE>
7
requirements set forth on the reverse of the Initial Notes intended to
ensure that such transfers comply with the Securities Act) and such other
procedures as may from time to time be adopted by the Company.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Subject to Section 2.3(c)(iii), any person having a beneficial
interest in a Transfer Restricted Security that is a Global Security may
transfer such beneficial interest to an IAI that is acquiring the Security
for its own account, or for the account of such an IAI, in each case for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act;
provided, however, (A) that no such transfer shall be made with respect to
the Regulation S Temporary Global Security or prior to the receipt by the
Trustee of any certification required pursuant to Rule 903(c)(3)(ii)(B)
under the Securities Act, and (B) that any written order or such other form
of instructions as is customary for the Depository, from the Depository or
its nominee on behalf of any Person having a beneficial interest in such
Global Security shall be accompanied by (i) a certification from the
transferee or transferor with respect to the transfer (in the form set
forth on the reverse of the Security) and such other certifications as the
Trustee may reasonably request and (ii) if the aggregate Principal amount
of the applicable Global Security being transferred is less than $250,000,
an opinion of counsel addressed to the Company as to the compliance with
the restrictions set forth in the legend set forth in Section 2.3(e).
Upon receipt by the Trustee of such information and documents, the
Trustee or the Securities Custodian, at the direction of the Trustee, will
cause, in accordance with the standing instructions and procedures existing
between the Depository and the Securities Custodian, including the rules
and procedures of Euroclear or Cedel, if applicable, the aggregate
Principal amount of the Global Security to be reduced on its books and
records and, following such reduction, the Company will execute and the
Trustee will authenticate and deliver to the transferee a Definitive
Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.3(d) shall be
registered in such names and in such authorized denominations as Euroclear
or Cedel, if applicable, and the Depository, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Definitive Securities to the
persons in whose names such Securities are so registered in accordance with
the instructions of the Depository.
(e) Legend.
<PAGE>
8
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES (A) TO
OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY ONLY (1) TO
THE COMPANY, (2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (5) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH A(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR (6)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING
CASES TO THE APPLICABLE STATE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THAT IT
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
<PAGE>
9
Each Regulation S Global Security will also bear the following
additional legend:
"PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE
EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF
INTERESTS IN THE REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE
LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A."
Each Regulation S Temporary Global Security will also bear the
following additional legend:
"THE RIGHTS ATTACHED TO THIS REGULATION S TEMPORARY GLOBAL SECURITY,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a certificated Security
that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
certificated Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made following a sale
or transfer in reliance on Rule 144 (such certification to be in the
form set forth on the reverse of the Security).
(iii) After a transfer of any Initial Notes or Private Exchange Notes
during the period of the effectiveness of a Shelf Registration Statement
with respect to such Initial Notes or Private Exchange Notes, as the case
may be, all requirements pertaining to legends on such Initial Note or such
Private Exchange Note will cease to apply, the requirements requiring any
such Initial Note or such Private Exchange Note issued to certain Holders
be issued in global form will cease to apply, and an Initial Note or
Private Exchange Note in global form or a certificated Initial Note or
Private Exchange
<PAGE>
10
Note, in either case, without legends will be available to the
transferee of the Holder of such Initial Notes or Private Exchange Notes
upon exchange of such transferring Holder's Initial Note or Private
Exchange Note or directions to transfer such Holder's interest in the
Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Notes pursuant to which Holders of such Initial Notes are
offered Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form will cease to apply and Initial
Notes with the restricted securities legend set forth in Exhibit A of the
Indenture will be available to Holders of such Initial Notes that do not
exchange their Initial Notes, and Exchange Notes in global form without any
restrictive legends will be available to Holders that exchange such Initial
Notes in a Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Notes pursuant to which Holders of such Initial Notes are offered
Private Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form will still apply, and Private
Exchange Notes in global form with the Restricted Securities Legend set
forth in Exhibit A of the Indenture will be available to Holders that
exchange such Initial Notes in such Private Exchange.
(f) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or cancelled, such
Global Security shall be returned to the Depository for cancelation or retained
and cancelled by the Trustee. At any time prior to such cancelation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or cancelled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such
reduction.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depository or other Person with respect to the accuracy of the records of
the Depository or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders
<PAGE>
11
under the Securities shall be given or made only to or upon the order
of the registered Holders (which shall be the Depository or its nominee in
the case of a Global Security). The rights of beneficial owners in any
Global Security shall be exercised only through the Depository subject to
the applicable rules and procedures of the Depository. The Trustee may rely
and shall be fully protected in relying upon information furnished by the
Depository with respect to its members, participants and any beneficial
owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
(a) A beneficial interest in a Global Security deposited with the
Depository or with the Trustee as custodian for the Depository pursuant to
Section 2.1 shall be transferred to the holder thereof, upon such holder's
written request to the Trustee, in the form of certificated Securities in an
aggregate Principal amount equal to the Principal amount of such beneficial
interest; provided, however, that no such transfer shall be made (i) with
respect to the Regulation S Temporary Global Security or (ii) prior to the
receipt by the Trustee of any certification required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act.
(b) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred, as a whole, to the beneficial owners thereof in the form of
certificated Securities in an aggregate Principal amount equal to the principal
amount of such Global Security, in exchange for such Global Security, if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed
by the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture; provided, however, that no such
transfer shall be made (i) with respect to the Regulation S Temporary Global
Security or (ii) prior to the receipt by the Trustee of any certification
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act.
(c) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to the
Trustee located in St. Paul, Minnesota to be so transferred, in whole or from
time to time in part, without charge, and the
<PAGE>
12
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Notes of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depository shall direct. Any certificated
Initial Note delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(e), bear the restricted
securities legend set forth in Exhibit A of the Indenture.
(d) Subject to the provisions of Section 2.4(c), the registered Holder
of a Global Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through
Participants, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(e) In the event of the occurrence of any of the events specified in
Section 2.4(a) or 2.4(b), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE>
EXHIBIT A
to
INDENTURE
[FORM OF FACE OF INITIAL NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES (A) TO OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS SECURITY ONLY (1) TO THE COMPANY, (2)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS WITHIN THE MEANING OF REGULATION S UNDER
<PAGE>
2
THE SECURITIES ACT THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (5) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH A(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR (6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE
FOREGOING CASES TO THE APPLICABLE STATE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THAT IT WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
[Regulation S Global Security/Additional Legend]
PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE EFFECTIVENESS
OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF INTERESTS IN THE REGULATION S
GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED
INSTITUTIONAL BUYERS PURSUANT TO RULE 144A.
[Regulation S Temporary Global Security/Additional Legend]
THE RIGHTS ATTACHED TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES,
ARE AS SPECIFIED IN THE INDENTURE.
<PAGE>
3
[*/]
No. $
CUSIP:
8-1/8% Senior Note Due 2006
Revlon Escrow Corp., a Delaware corporation, promises to pay to
, or registered assigns, the principal sum of Dollars on February 1,
2006.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: REVLON ESCROW CORP.,
by
--------------------------------
[Title]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
---------------------------
Authorized Signatory
<PAGE>
4
- --------------
*/ [If the Security is to be issued in global form add the Global Securities
Legend from Exhibit A and the attachment from such Exhibit A captioned "[TO BE
ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL
SECURITY".]
<PAGE>
5
[FORM OF REVERSE SIDE OF INITIAL NOTE]
8-1/8% Senior Note Due 2006
1. Interest
Revlon Escrow Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the Principal amount
of this Security at the rate per annum shown above; provided, however, that if
(a) by March 19, 1998, neither the Shelf Registration Statement nor the
Exchange Offer Registration Statement has been filed with the SEC, interest
will accrue on the Securities from and including such date until but excluding
the earlier of (i) the date on which the Shelf Registration Statement or the
Exchange Offer Registration Statement is filed and (ii) August 3, 1998 at a
rate of 8-5/8% per annum and (b) by August 3, 1998, neither (i) the Registered
Exchange Offer is consummated nor (ii) the Shelf Registration Statement is
declared effective, interest will accrue on the Securities from and including
such date until but excluding the earlier of (i) the consummation of the
Registered Exchange Offer and (ii) the effective date of the Shelf Registration
Statement at a rate of 8-5/8% per annum. The Company will pay interest
semiannually on February 1 and August 1 of each year, commencing August 1,
1998; provided, however, that interest accruing on this Security prior to the
consummation of the Registered Exchange Offer will be paid to the holder of
this Security, the Exchange Note, or the Private Exchange Note, as the case may
be, on the record date next preceding the interest payment date following the
consummation of the Registered Exchange Offer. Interest on the Securities will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from February 2, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Company shall pay interest
on overdue Principal at the rate borne by the Securities plus 1% per annum, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Method of Payment
The Company will pay interest referred to in paragraph 1 above (except
defaulted interest) on the Securities to the persons who are registered holders
of Securities at the close of business on the January 15 and July 15 next
preceding the interest payment date even if Securities are cancelled after the
record date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect Principal payments. The Company will
pay Principal, interest and premium, if any, in money of the United States that
at the time of payment is legal tender for payment of public and private debts.
However, the Company may pay Principal, interest and premium, if any, by check
payable in such money. It may mail an interest check to a Holder's registered
address.
<PAGE>
6
3. Paying Agent and Registrar
Initially, First Trust National Association, as trustee ("Trustee"),
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice. The Company or any of
its domestically incorporated Wholly Owned Recourse Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
February 1, 1998 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $250,000,000 aggregate Principal amount (subject to Section 2.07 of
the Indenture). This Security is one of the Initial Notes referred to in the
Indenture. The Securities constitute "Designated Senior Debt" of the Company
for purposes of the Company's Indenture dated as of February 1, 1998 with First
Trust National Association, as trustee. The Securities include the Initial
Notes, the Exchange Notes and the Private Exchange Notes issued in exchange for
the Initial Notes pursuant to the Indenture. The Initial Notes, the Exchange
Notes and the Private Exchange Notes are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on,
among other things, the issuance of debt and redeemable stock by the Company
and RCPC, the issuance of debt and preferred stock by the Subsidiaries of RCPC,
the payment of dividends and other distributions and acquisitions or
retirements of RCPC's Capital Stock and Subordinated Obligations, the
incurrence by RCPC and its Subsidiaries of Liens on its property and assets
which do not equally and ratably secure the Securities, the sale or transfer of
assets and Subsidiary stock by RCPC and transactions with Affiliates. In
addition, the Indenture limits the ability of RCPC and its Subsidiaries to
restrict distributions and dividends from Subsidiaries.
5. Optional Redemption
Except as set forth in this paragraph 5, the Company may not redeem
the Securities prior to February 1, 2002. On and after such date, the
Securities may be redeemed at the option of the Company in whole at any time or
in part from time to time at the following redemption prices (expressed in
percentages of Principal amount), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date):
<PAGE>
7
if redeemed during the 12-month periods beginning February 1,
Period Percentages
------ -----------
2002.......................................................104.063%
2003.......................................................102.708
2004.......................................................101.354
2005.......................................................100.000
In addition, the Securities may be redeemed at the option of the
Company in connection with the occurrence of a Change of Control at any time as
a whole at a redemption price equal to the sum of (i) the then outstanding
aggregate Principal amount thereof, plus (ii) accrued and unpaid interest (if
any) to the redemption date, plus (iii) the Applicable Premium.
Prior to February 1, 2001, the Company, at its option, may redeem up
to 35% of the aggregate Principal amount of the Securities with, and to the
extent the Company actually receives, the net proceeds of one or more Public
Equity Offerings from time to time, at a redemption price of 108-1/8% of the
Principal amount thereof, plus accrued interest to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the related interest payment date); provided, however, that at
least $162,500,000 aggregate Principal amount of the Securities must remain
outstanding after each such redemption. A "Public Equity Offering" means an
underwritten public offering of equity securities of RCPC or Revlon, Inc.
pursuant to an effective registration statement under the Securities Act.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
<PAGE>
8
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to the
Put Amount of the Securities to be repurchased plus accrued and unpaid interest
to the repurchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date) as
provided in, and subject to the terms of, the Indenture.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of Principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of Principal and interest on the Securities to redemption or maturity,
as the case may be.
<PAGE>
9
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in Principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in Principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article V of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add Guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act,
or to otherwise comply with the Act, or to provide for the issuance of the
Exchange Notes or the Private Exchange Notes, or to make any change that does
not adversely affect the rights of any Securityholder. A consent to any
amendment or waiver of any provision in the Indenture or in the Securities by
any Holder given in connection with a tender of such Holder's Securities shall
not be rendered invalid by such tender.
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of Principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon declaration or otherwise, or failure by the Company to
repurchase Securities when required; (iii) failure by the Company or RCPC, as
applicable, to comply with other agreements in the Indenture or the Securities
or the Escrow Agreement, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any grace period
after final maturity) of other Debt of RCPC or any Significant Subsidiary if
the amount accelerated (or so unpaid) exceeds $25 million and continues for 10
days after the required notice to the Company; (v) certain events of bankruptcy
or insolvency with respect to the Company, RCPC or any Significant Subsidiary;
and (vi) certain judgments or decrees for the payment of money in excess of $25
million. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in Principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in Principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
<PAGE>
10
(except a Default in payment of Principal or interest) if it determines that
withholding notice is in their interest.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
or the Trustee under the Securities or the Indenture or for any claim based on,
in respect of or by reason of such obligations or their creation. By accepting
a Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
11
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in
it the text of this Security in larger type. Requests may be made to the
Company at:
625 Madison Avenue
New York, New York 10022
Attention of Chief Financial Officer
<PAGE>
12
- -------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- -------------------------------------------------------------------------------
Date: Your Signature:
----------------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this
Security.)
- -------------------------------------------------------------------------------
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A,
<PAGE>
13
in each case pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) [ ] inside the United States to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933) that, prior to
such transfer, furnishes to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter can be obtained from the Trustee) and, if such
transfer is in respect of an aggregate Principal amount of
Securities at the time of transfer of less than $250,000, an
opinion of counsel acceptable to the Company that such transfer
is in compliance with the restrictions set forth in the legend on
the Securities; or
(6) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however, that if box
(4), (5) or (6) is checked, the Trustee may require, prior to registering
any such transfer of the Securities, such legal opinions, certifications
and other information as the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933, such as the exemption provided by Rule 144 under such Act.
-----------------------------------
Signature
Signature Guarantee:
- ----------------------------------- -----------------------------------
Signature must be guaranteed Signature
- -------------------------------------------------------------------------------
<PAGE>
14
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
----------------------- -----------------------------------
NOTICE: To be executed by
an executive officer
<PAGE>
15
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following officer of Trustee or
Global Security Global Security such decrease or increase) Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
16
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.07 or 4.09 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.07 or 4.09 of the Indenture, state the amount
in Principal amount: $
Date: Your Signature:
------------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this Security.)
Signature Guarantee:
--------------------------------------
(Signature must be guaranteed.)
<PAGE>
1
EXHIBIT B
to
INDENTURE
[FORM OF FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
[*/]
[**/]
No. $
CUSIP:
8-1/8% Senior Exchange Note Due 2006
Revlon Escrow Corp., a Delaware corporation, promises to pay to , or
registered assigns, the principal sum of Dollars on February 1, 2006.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: REVLON ESCROW CORP.,
by
---------------------------------
[Title]
by
---------------------------------
[Title]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee, certifies
that this is one of the
Securities referred
to in the Indenture.
by
---------------------------------
Authorized Signatory
<PAGE>
2
- --------------
*/ [If the Security is to be issued in global form add the Global Securities
Legend from Exhibit A and the attachment from such Exhibit A captioned "[TO BE
ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL
SECURITY".]
**/ [If the Security is a Private Exchange Note issued in a Private Exchange to
an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit A and replace the Assignment Form
included in this Exhibit B with the Assignment Form included in such Exhibit
A.]
<PAGE>
3
[FORM OF REVERSE SIDE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
8-1/8% Senior Exchange Note Due 2006
1. Interest
Revlon Escrow Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the Principal amount
of this Security at the rate per annum shown above (without duplication of the
interest that accrued on the Initial Note in exchange for which this Security
was issued)[; provided, however, that if (a) by March 19, 1998, neither the
Shelf Registration Statement nor the Exchange Offer Registration Statement has
been filed with the SEC, interest will accrue on the Securities from and
including such date until but excluding the earlier of (i) the date on which
the Shelf Registration Statement or the Exchange Offer Registration Statement
is filed and (ii) August 3, 1998 at a rate of 8-5/8% per annum and (b) by
August 3, 1998, neither (i) the Registered Exchange Offer is consummated nor
(ii) the Shelf Registration Statement is declared effective, interest will
accrue on the Securities from and including such date until but excluding the
earlier of (i) the consummation of the Registered Exchange Offer and (ii) the
effective date of the Shelf Registration Statement at a rate of 8-5/8% per
annum.].1/ The Company will pay interest semiannually on February 1 and August
1 of each year, commencing August 1, 1998. Interest on the Securities will
accrue from the most recent date to which interest has been paid on the Initial
Notes, or, if no interest has been paid on the Initial Notes, the Exchange
Notes or the Private Exchange Notes, as the case may be, from February 2, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue Principal at the rate borne
by the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest referred to in paragraph 1 above (except
defaulted interest) on the Exchange Notes or Private Exchange Notes to the
persons who are registered holders of Securities at the close of business on
the January 15 and July 15 next preceding the interest payment date even if
Exchange Notes or Private Exchange Notes are
- --------------
1/ Insert if at the time of issuance of the Exchange Note or Private Exchange
Note (as the case may be) neither the Registered Exchange Offer has been
consummated nor a Shelf Registration Statement has been declared effective
in accordance with the Registration Agreement.
<PAGE>
4
cancelled after the record date and on or before the interest payment date. The
Company will pay interest referred to in paragraph 1 of the Initial Notes
(except defaulted interest) on the Initial Notes in exchange for which the
Exchange Notes or Private Exchange Notes were issued to the Persons who, at the
close of business on the January 15 or the July 15 next preceding each interest
payment date, are registered holders of such Initial Notes, if such record date
occurs prior to such exchange, or registered holders of the Exchange Notes or
Private Exchange Notes, if such record date occurs on or after the date of such
exchange, even if Exchange Notes or Private Exchange Notes are cancelled after
the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect Principal payments. The
Company will pay Principal, interest and premium, if any, in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay Principal, interest and
premium, if any, by check payable in such money. It may mail an interest check
to a Holder's registered address.
3. Paying Agent and Registrar
Initially, First Trust National Association, as trustee ("Trustee"),
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice. The Company or any of
its domestically incorporated Wholly Owned Recourse Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
February 1, 1998 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $250,000,000 aggregate Principal amount (subject to Section 2.07 of
the Indenture). This Security is one of the Exchange Notes referred to in the
Indenture. The Securities constitute "Designated Senior Debt" of the Company
for purposes of the Company's Indenture dated as of February 1, 1998 with First
Trust National Association, as trustee. The Securities include the Initial
Notes, Exchange Notes and the Private Exchange Notes, if any, issued in
exchange for the Initial Notes pursuant to the Indenture. The Initial Notes,
the Exchange Notes and the Private Exchange Notes are treated as a single class
of securities under the Indenture. The
<PAGE>
5
Indenture imposes certain limitations on, among other things, the issuance of
debt and redeemable stock by the Company and RCPC, the issuance of debt and
preferred stock by the Subsidiaries of RCPC, the payment of dividends and other
distributions and acquisitions or retirements of RCPC's Capital Stock and
Subordinated Obligations, the incurrence by RCPC and its Subsidiaries of Liens
on its property and assets which do not equally and ratably secure the
Securities, the sale or transfer of assets and Subsidiary stock by RCPC and
transactions with Affiliates. In addition, the Indenture limits the ability of
RCPC and its Subsidiaries to restrict distributions and dividends from
Subsidiaries.
5. Optional Redemption
Except as set forth in this paragraph 5, the Company may not redeem
the Securities prior to February 1, 2002. On and after such date, the
Securities may be redeemed at the option of the Company in whole at any time or
in part from time to time at the following redemption prices (expressed in
percentages of Principal amount), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date):
if redeemed during the 12-month period beginning February 1,
Period Percentage
------ ----------
2002.........................................................104.063%
2003.........................................................102.708
2004.........................................................101.354
2005.........................................................100.000
In addition, the Securities may be redeemed at the option of the
Company in connection with the occurrence of a Change of Control at any time as
a whole, at a redemption price equal to the sum of (i) the then outstanding
aggregate Principal amount thereof, plus (ii) accrued and unpaid interest (if
any) to the redemption date, plus (iii) the Applicable Premium.
Prior to February 1, 2001, the Company, at its option, may redeem up
to 35% of the aggregate Principal amount of the Securities with, and to the
extent the Company actually receives, the net proceeds of one or more Public
Equity Offerings, at any time or from time to time, at a redemption price of
108-1/8% of the Principal amount thereof, plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date);
provided, however, that at least $162,500,000 aggregate Principal amount of the
Securities must remain outstanding after each such redemption. A "Public Equity
Offering" means an underwritten
<PAGE>
6
public offering of equity securities of RCPC or Revlon, Inc. pursuant to an
effective registration statement under the Securities Act.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to the
Put Amount of the Securities to be repurchased plus accrued and unpaid interest
to the repurchase date (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
<PAGE>
7
10. Unclaimed Money
If money for the payment of Principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of Principal and interest on the Securities to redemption or maturity,
as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in Principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in Principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article V of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add Guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act,
or to otherwise comply with the Act or to provide for the issuance of the
Exchange Notes or the Private Exchange Notes, or to make any change that does
not adversely affect the rights of any Securityholder. A consent to any
amendment or waiver of any provision in the Indenture or in the Securities by
any Holder given in connection with a tender of such Holder's Securities shall
not be rendered invalid by such tender.
<PAGE>
8
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of Principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon declaration or otherwise, or failure by the Company to
repurchase Securities when required; (iii) failure by the Company or RCPC, as
applicable, to comply with other agreements in the Indenture or the Securities
or the Escrow Agreement, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any grace period
after final maturity) of other Debt of RCPC or any Significant Subsidiary if
the amount accelerated (or so unpaid) exceeds $25 million and continues for 10
days after the required notice to the Company; (v) certain events of bankruptcy
or insolvency with respect to the Company, RCPC or any Significant Subsidiary;
and (vi) certain judgments or decrees for the payment of money in excess of $25
million. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in Principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in Principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of Principal or interest) if it determines that
withholding notice is in their interest.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
or the Trustee under the Securities or the Indenture or for any claim based on,
in respect of or by reason of such obligations or their creation. By accepting
a Security, each Securityholder waives and
<PAGE>
9
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. Holders' Compliance with Registration Agreement
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
20. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
<PAGE>
10
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN
IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO THE
COMPANY AT:
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
ATTENTION OF CHIEF FINANCIAL OFFICER
<PAGE>
11
- -------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
- -------------------------------------------------------------------------------
Date: Your Signature:
------------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this
Security.)
- -------------------------------------------------------------------------------
<PAGE>
12
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE COMPANY
PURSUANT TO SECTION 4.07 OR 4.09 OF THE INDENTURE, CHECK THE BOX:
[ ]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY
THE COMPANY PURSUANT TO SECTION 4.07 OR 4.09 OF THE INDENTURE, STATE THE AMOUNT
IN PRINCIPAL AMOUNT: $
DATE: YOUR SIGNATURE:
------------------- -----------------------------------
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY.)
SIGNATURE GUARANTEE:
-----------------------------------------------------------
(SIGNATURE MUST BE GUARANTEED BY A MEMBER FIRM OF THE NEW
YORK STOCK EXCHANGE OR A COMMERCIAL BANK OR TRUST COMPANY.)
<PAGE>
1
SCHEDULE II
Permitted Transactions
1. Asset Transfer Agreement by and among Revlon, Inc. (now known as Revlon
Holdings Inc.), Charles of the Ritz Group Ltd., National Health Care
Group Inc., New Revlon, Inc. (now known as Revlon, Inc.) and Revlon
Consumer Products Corporation dated as of June 24, 1992 (and the
ancillary agreements thereto).
2. Real Property Asset Transfer Agreement by and among Revlon, Inc., (now
known as Revlon Holdings Inc.), New Revlon, Inc. (now known as Revlon,
Inc.) and Revlon Consumer Products Corporation dated as of June 24, 1992.
3. Benefit Plans Assumption Agreement dated as of July 1, 1992 by and among
Revlon Holdings Inc. (formerly known as Revlon, Inc.) , Revlon, Inc.,
(formerly known as New Revlon, Inc) and Revlon Consumer Products
Corporation.
4. Second Amended and Restated Operating Services Agreement by and among
Revlon Holdings Inc., Revlon, Inc. and Revlon Consumer Products
Corporation dated June 24, 1996 (Amended and Restated as of January 1,
1996) (the "Operating Services Agreement").
5. Amendment to the Operating Services Agreement dated as of July 1, 1997.
6. Reimbursement and Expense Allocation Agreement dated May 3, 1996 by and
among MacAndrews & Forbes Holdings Inc., Revlon, Inc. and Revlon Consumer
Products Corporation.
7. Reimbursement Agreement by and among MacAndrews & Forbes Holdings Inc.,
New Revlon, Inc. and Revlon Consumer Products Corporation dated June 24,
1992.
8. Tax Sharing Agreement by and among Mafco Holdings, Inc., Revlon Holdings
Inc., Revlon, Inc. and Revlon Consumer Products Corporation, as amended
by the First Amendment dated as of February 28, 1995 and the Second
Amendment dated as of January 1, 1997.
9. Purchase and Sale Agreement, as amended, dated as of February 18, 1993 by
and between Revlon Consumer Products Corporation and Revlon Holdings Inc.
(Transfer of Edison facility).
10. Reassignment and Release Agreement dated as of November 4, 1993 between
Revlon Consumer Products Corporation, Revlon Holdings Inc. and SJDH
Truman Drive Trust. (Transfer of 1 Truman Drive, Edison, New Jersey).
<PAGE>
2
11. Lease Agreement between Revlon Holdings Inc. and Revlon Consumer Products
Corporation dated April 2, 1993 (Edison R&D facility).
12. Occupancy Memorandum dated as of July 1, 1997 by and between MacAndrews &
Forbes Group Incorporated and Revlon Consumer Products Corporation (625
Madison Avenue)
13. Occupancy Agreement dated as of January 1, 1995 between Revlon Holdings
Inc. and Revlon Consumer Products Corporation (Administration Building,
Plant and Company store).
14. Occupancy Memorandum dated as of February 28, 1995 between Revlon
International Corporation and MacAndrews & Forbes Group Incorporated
(Occupancy of 88 Brook Street).
15. Airplane Usage Memorandum dated November 16, 1994 between GDL Aviation
Inc. and Revlon Consumer Products Corporation.
16. Stock and Asset Purchase Agreement dated as of January 1, 1994 by and
between Revlon Consumer Products Corporation and Revlon Holdings Inc.
(New Essentials)
17. Asset Transfer Agreement dated as of September 1, 1993 by and between
Revlon Consumer Products Corporation and Revlon Holdings Inc. (Tarlow
Advertising Division).
18. Lipstick Assembly Agreement dated February 1, 1993 between Revlon, Inc.
and Tabacalera de Garcia, S.A. as amended by First Amendment to Lipstick
Assembly Agreement dated as of January 1, 1994 between Revlon Consumer
Products Corporation and Tabacalera de Garcia S.A.
19. Sublicense Agreement dated as of January 1, 1993 between Revlon Holdings
Inc., as Sublicensor, and Revlon Consumer Products Corporation, as
Sublicensee, (for all duty free shops throughout the world and in all
other channels of distribution in countries of the world other than the
U.S.) (Sublicense of Bill Blass trademark)
20. Sublicense Agreement (Bill Blass) dated as of July 1, 1997 between Revlon
Holdings Inc. And Revlon Consumer Products Corporation.
21. Occupancy Memorandum dated as of July 1, 1997 by and between MacAndrews &
Forbes Group Incorporated and The Coleman Company, Inc. (625 Madison
Avenue).
22. Assumption Agreement dated as of February 18, 1993 by and between Revlon
Holdings Inc. And Revlon Consumer Products Corporation (Edison Facility).
<PAGE>
3
23. Assignment and Assumption of Lease dated as of December 23, 1997 between
Revlon Consumer Products Corporation and The Cosmetic Center, Inc. (767
Fifth Avenue)
24. Assignment, Assumption and Indemnification Agreement dated as of July 1,
1997 by and between Revlon Holdings Inc. and Revlon Consumer Products
Corporation.
25. Transfer Agreement dated as of March 31, 1997 by and between Revlon
Consumer Products Corporation and The Coleman Company, Inc. (Coleman,
Japan).
26. Permitted Affiliate Debt.
<PAGE>
-------------------
REVLON CONSUMER PRODUCTS CORPORATION
REVLON ESCROW CORP.
8 1/8% Senior Notes due 2006
and
8 1/8% Senior Exchange Notes due 2006
-------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of April 1, 1998
Supplementing the Indenture, dated
as of February 1, 1998, Between
Revlon Escrow Corp. and
First Trust National Association, as Trustee
-------------------
U.S. BANK TRUST NATIONAL ASSOCIATION,
AS TRUSTEE
-------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of April 1, 1998 (the
"First Supplemental Indenture"), among REVLON CONSUMER PRODUCTS CORPORATION, a
Delaware corporation ("RCPC"), REVLON ESCROW CORP., a Delaware corporation
("Escrow Corp." or the "Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION
(formerly known as FIRST TRUST NA TIONAL ASSOCIATION) (the "Trustee"), as
Trustee under the Indenture referred to herein;
WHEREAS, the Company and the Trustee heretofore executed and
delivered an Indenture, dated as of February 1, 1998 (the "Indenture"), in
respect of the 8 1/8% Senior Notes due 2006, the Exchange Notes and the Private
Exchange Notes (collectively, the "Securities"); and
WHEREAS, pursuant to the Indenture, the Company issued, and
the Trustee authenticated and delivered, $250.0 million aggregate principal
amount of the Securities; and
WHEREAS, Section 4.11 of the Indenture requires that RCPC
cause the Senior Notes Assumption and the redemption of the Existing 9 3/8%
Senior Securities to occur no later than the later of (a) three Business Days
after the 30th day following the Issue Date or (b) April 6, 1998; and
WHEREAS, Section 5.01(c) of the Indenture provides that, upon
consummation of the Senior Notes Assumption, RCPC shall execute and deliver to
the Trustee, among other things, a Supplemental Senior Notes Indenture
whereupon RCPC shall be the successor Company and shall succeed to, and be
substituted for, and may exercise every right and power of the predecessor
Company under the Indenture and the Securities, and the predecessor Company
shall be discharged from all obligations and covenants under the Indenture and
the Securities; and
WHEREAS, Section 9.01(2) of the Indenture provides that the
Company and the Trustee may amend the Indenture and the Securities without
notice to or consent of any Holders of the Securities in order to comply with
Article V of the Indenture; and
WHEREAS, this First Supplemental Indenture has been duly
autho rized by all necessary corporate action on the part of each of RCPC and
Escrow Corp.
2
<PAGE>
NOW, THEREFORE, RCPC, Escrow Corp. and the Trustee agree as
follows for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
Assumption By Successor Corporation
SECTION 1.1. Assumption of the Securities. RCPC hereby
express ly assumes and agrees promptly to pay, perform and discharge when due
each and every debt, obligation, covenant and agreement incurred, made or to be
paid, performed or discharged by Escrow Corp. under the Indenture and the
Securities. RCPC hereby agrees to be bound by all the terms, provisions and
conditions of the Indenture and the Securities from the date hereof and that it
shall be the successor Company and shall succeed to, and be substituted for,
and may exercise every right and power of Escrow Corp., as the predecessor
Company, under the Indenture and the Securities.
SECTION 1.2. Discharge of Escrow Corp. Escrow Corp. is hereby
expressly discharged from all obligations and covenants under the Indenture and
the Securities.
SECTION 1.3. Trustee's Acceptance. The Trustee hereby accepts
this First Supplemental Indenture and agrees to perform the same under the
terms and conditions set forth in the Indenture.
ARTICLE II
Miscellaneous
SECTION 2.1. Effect of Supplemental Indenture. Upon the
execution and delivery of this First Supplemental Indenture by RCPC, Escrow
Corp. and the Trustee, the Indenture shall be supplemented in accordance
herewith, and this First Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Securities heretofore or
hereafter authenticated and delivered under the Indenture shall be bound
thereby.
3
<PAGE>
SECTION 2.2. Indenture Remains in Full Force and Effect.
Except as supplemented hereby, all provisions in the Indenture shall remain in
full force and effect.
SECTION 2.3. Indenture and Supplemental Indenture Construed
Together. This First Supplemental Indenture is an indenture supplemental to and
in implementation of the Indenture, and the Indenture and this First
Supplemental Indenture shall henceforth be read and construed together.
SECTION 2.4. Confirmation and Preservation of Indenture. The
Indenture as supplemented by this First Supplemental Indenture is in all
respects confirmed and preserved.
SECTION 2.5. Conflict with Trust Indenture Act. If any
provision of this First Supplemental Indenture limits, qualifies or conflicts
with any provision of the TIA that is required under the TIA to be part of and
govern any provision of this First Supplemental Indenture, the provision of the
TIA shall control. If any provi sion of this First Supplemental Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the provision of the TIA shall be deemed to apply to the Indenture as
so modified or to be excluded by this First Supplemental Indenture, as the case
may be.
SECTION 2.6. Severability. In case any provision in this
First Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 2.7. Terms Defined in the Indenture. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Indenture.
SECTION 2.8. Headings. The Article and Section headings of
this First Supplemental Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Supplemental Indenture
and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 2.9. Benefits of First Supplemental Indenture.
Nothing in this First Supplemental Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto and thereto
and their successors hereunder
4
<PAGE>
and thereunder and the Holders of the Securities, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this First Supplemental
Indenture or the Securities.
SECTION 2.10. Successors. All agreements of RCPC in this
First Supplemental Indenture shall bind its successors. All agreements of the
Trustee in this First Supplemental Indenture shall bind its successors.
SECTION 2.11. Trustee Not Responsible for Recitals. The
recitals contained herein shall be taken as the statements of Escrow Corp. and
RCPC, and the Trustee assumes no responsibility for their correctness.
SECTION 2.12. Certain Duties and Responsibilities of the
Trustee. In entering into this First Supplemental Indenture, the Trustee shall
be entitled to the benefit of every provision of the Indenture and the
Securities relating to the conduct or affecting the liability or affording
protection to the Trustee, whether or not elsewhere herein so provided.
SECTION 2.13. Governing Law. This First Supplemental
Indenture shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 2.14. Counterpart Originals. The parties may sign any
number of copies of this First Supplemental Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Supple
mental Indenture to be duly executed as of the date first written above.
REVLON CONSUMER PRODUCTS
CORPORATION
By: /s/ Robert Kretzman
--------------------------------------------
Name: Robert Kretzman
Title: Senior Vice President, Deputy
General Counsel and Secretary
REVLON ESCROW CORP.
By: /s/ Steven Berns
--------------------------------------------
Name: Steven Berns
Title: Vice President and Treasurer
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By: /s/ Richard Prokosch
--------------------------------------------
Name: Richard Prokosch
Title: Assistant Vice President
Corporate Finance
6
<PAGE>
[PAUL, WEISS, RIFKIND, WHARTON & GARRISON LETTERHEAD]
April 3, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Revlon Consumer Products Corporation
Registration Statement on Form S-1 (File No. 333-47875)
-------------------------------------------------------
Ladies and Gentlemen:
In connection with the above-captioned Registration Statement on Form
S-1 (the "Registration Statement") filed by Revlon Consumer Products
Corporation, a Delaware corporation (the "Company"), with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations under the Act (the "Securities
Act Rules"), we have been requested to render our opinion as to the legality of
the securities being registered by the Registration Statement. The Registration
Statement
<PAGE>
Securities and Exchange Commission 2
covers (i) $250,000,000 aggregate principal amount of the Company's 8 1/8%
Senior Exchange Notes due 2006 (the "Senior Exchange Notes") to be issued
pursuant to the Indenture, dated as of February 1, 1998 (the "Senior Notes
Indenture"), between Revlon Escrow Corp. ("Revlon Escrow") and U.S. Bank Trust
National Association (formerly know as First Trust National Association
("Trustee"), as Trustee, and as contemplated by the Registration Agreement,
dated February 2, 1998 (the "Registration Agreement"), by and among Revlon
Escrow and the signatories thereto and (ii) $650,000,000 aggregate principal
amount of the Company's 8 5/8% Senior Subordinated Exchange Notes due 2008 (the
"Senior Subordinated Exchange Notes") to be issued pursuant to the Indenture,
dated as of February 1, 1998 (the "Senior Subordinated Notes Indenture"),
between Revlon Escrow and the Trustee, and as contemplated by the Registration
Agreement. On March 4, 1998, the Company assumed the obligations of Revlon
Escrow under the Senior Subordinated Notes Indenture and on April 1, 1998, the
Company assumed the obligations of Revlon Escrow under the Senior Notes
Indenture.
In connection with the furnishing of this opinion, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the (i) Registration Statement; (ii) Senior Notes Indenture; (iii) Senior
Subordinated Notes Indenture; (iv) form of the Senior Exchange Notes which is
set forth as Exhibit B to the Senior Notes Indenture; and (v) form of the
Senior Subordinated Exchange Notes
<PAGE>
Securities and Exchange Commission 3
which is set forth as Exhibit B to the Senior Subordinated Notes Indenture
(collectively, the "Documents").
In addition, we have examined such corporate records and other
instruments as we have deemed necessary or appropriate and such other
certificates, agreements and documents as we deemed relevant and necessary as a
basis for the opinions expressed below.
In our examination of the documents listed above, we have assumed,
without independent investigation, the genuineness of all signatures, the
enforceability of the Documents against all parties thereto (other than the
Company in the case of the Senior Notes Indenture, the Senior Subordinated
Notes Indenture, the Senior Exchange Notes and the Senior Subordinated Exchange
Notes), the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as
certified, photostatic, reproduced or conformed copies of valid existing
agreements and other documents, the authenticity of all such latter documents
and the legal capacity of all individuals who have executed any of the
documents.
In expressing the opinions set forth below, we have assumed that the
Senior Exchange Notes will be in the form of Exhibit B to the Senior Notes
Indenture, the Senior Subordinated Exchange Notes will be in the form of
Exhibit B to the Senior Subordinated Notes Indenture and any information
omitted from such form and indicated as such by a blank space has been properly
added. In addition, we have relied upon the factual matters contained in the
representations and warranties of the
<PAGE>
Securities and Exchange Commission 4
Company made in any of the Documents and upon certificates of public officials
and officers of the Company.
Based upon the foregoing, and subject to the assumptions, exceptions
and qualifications set forth in this letter, we are of the opinion that:
1. The Senior Exchange Notes to be issued under the Senior Notes
Indenture, when issued, authenticated and delivered as provided in the Senior
Notes Indenture and as contemplated by the Registration Statement, will be
validly issued and delivered and will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms,
except as enforceability of such obligations may be subject to (a) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
other similar laws now or hereafter in effect affecting creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
2. The Senior Subordinated Exchange Notes to be issued pursuant to the
Senior Subordinated Notes Indenture, when issued, authenticated and delivered
as provided in the Senior Subordinated Notes Indenture and as contemplated by
the Registration Statement, will be validly issued and delivered and will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as enforceability of such
obligations may be subject to (a) bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or other similar laws now or
hereafter in effect affecting
<PAGE>
Securities and Exchange Commission 5
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
The opinions in this letter are limited to the laws of the State of
New York and the General Corporation Law of the State of Delaware. Please be
advised that no member of this firm is admitted to practice in the State of
Delaware. Our opinion is rendered only with respect to the laws, and the rules,
regulations and orders under such laws, which are currently in effect.
We hereby consent to the use of our name in the Registration Statement
and in the related Prospectus as the same appears in the caption "Legal
Matters" and to the use of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not admit that we come within the
category of persons whose consent is required by the Securities Act or the
Securities Act Rules.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE>
Exhibit 12.1
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
--------- -----------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations before income
taxes ................................................. $ 76.8 $ 69.1 $ 51.1 $ (15.8) $ (52.2) $(111.2)
Interest expense ........................................ 129.5 136.2 133.4 142.6 136.7 121.5
Amortization of debt issuance costs ..................... 5.7 6.7 8.3 11.0 8.4 8.0
Portion of rental expense deemed to represent interest .. 17.1 18.9 17.1 16.3 16.8 17.6
------ ------ ------ ------- ------- -------
Earnings before fixed charges ........................... $229.1 $230.9 $209.9 $ 154.1 $ 109.7 $ 35.9
====== ====== ====== ======= ======= =======
Interest expense ........................................ $129.5 $136.2 $133.4 $ 142.6 $ 136.7 $ 121.5
Amortization of debt issuance costs ..................... 5.7 6.7 8.3 11.0 8.4 8.0
Portion of rental expense deemed to represent interest .. 17.1 18.9 17.1 16.3 16.8 17.6
------ ------ ------ ------- ------- -------
Fixed charges ........................................... $152.3 $161.8 $158.8 $ 169.9 $ 161.9 $ 147.1
====== ====== ====== ======= ======= =======
Ratio of earnings to fixed charges ...................... 1.50 1.43 1.32 -- -- --
====== ====== ====== ======= ======= =======
Deficiency of earnings to fixed charges ................. $ -- $ -- $ -- $ 15.8 $ 52.2 $ 111.2
====== ====== ====== ======= ======= =======
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Revlon Consumer Products Corporation:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
New York, New York
April 2, 1998
<PAGE>
LETTER OF TRANSMITTAL
REVLON CONSUMER PRODUCTS CORPORATION
OFFER FOR ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
8 1/8% SENIOR EXCHANGE NOTES DUE 2006 AND
8 5/8% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
8 5/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008,
PURSUANT TO THE PROSPECTUS, DATED APRIL 3, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON MAY 5,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To:
U.S. BANK TRUST NATIONAL ASSOCIATION,
Exchange Agent
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Overnight Courier or Hand: By Facsimile:
U.S. Bank Trust National U.S. Bank Trust National (612) 244-1537
Association Association Confirm by Telephone:
Corporate Trust 180 East 5th Street (612) 244-1197
P.O. Box 64485 4th Floor Window
St. Paul, MN 55164-9549 St. Paul, MN 55101
Attention: Specialized Finance
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated April 3, 1998 (the "Prospectus"), of Revlon Consumer
Products Corporation, a Delaware corporation (the "Company"), and this Letter
of Transmittal (the "Letter"), which together constitute the Company's offer
(the "Exchange Offer") to exchange an aggregate principal amount of up to
$250,000,000 of its 8 1/8% Senior Exchange Notes due 2006 (the "New Senior
Notes") and an aggregate principal amount of $650,000,000 of its 8 5/8%
Senior Subordinated Exchange Notes due 2008 (the "New Senior Subordinated
Notes" and, together with the New Senior Notes, the "New Notes"), which have
been registered under the Securities Act of 1933, as amended, for a like
principal amount of the issued and outstanding 8 1/8% Senior Notes due 2006
(the "Old Senior Notes") and 8 5/8% Senior Subordinated Notes due 2008 (the
"Old Senior Subordinated Notes" and, together with the Old Senior Notes, the
"Old Notes") of the Company from the holders thereof.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. If the Exchange Offer is not consummated by August 3,
1998, the interest rate on the Old Notes from and including such date until
but excluding the date of consummation of the Exchange Offer will increase by
0.5%. Holders of Old Notes accepted for exchange will be deemed to have
waived the right to receive any other payments or accrued interest on the Old
Notes. The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company shall notify the holders of the Old Notes of
any extension by oral or written notice prior to 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration
Date.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Old Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus and an
Agent's Message (as defined herein) is not delivered. Holders of Old Notes
whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their
Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility (a "Book-Entry Confirmation") and all other documents required by
this Letter to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of
the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Exchange Agent.
<PAGE>
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -------------------------------------------------- --------------- --------------- --------------
AGGREGATE
PRINCIPAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
- -------------------------------------------------- --------------- --------------- --------------
- -------------------------------------------------- --------------- --------------- --------------
- -------------------------------------------------- --------------- --------------- --------------
- -------------------------------------------------- --------------- --------------- --------------
TOTAL
- -------------------------------------------------- --------------- --------------- --------------
*Need not be completed if Old Notes are being tendered by book-entry transfer.
**Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the
Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes
tendered must be in denominations of principal amount at maturity of $1,000 and any integral
multiple thereof. See Instruction 1.
- ---------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------------------------------------
Account Number Transaction Code Number
By crediting Old Notes to the Exchange Agent's Account at the Book-Entry
Facility in accordance with the Book-Entry Transfer Facility's Automated
Tender Offer Program ("ATOP") and by complying with applicable ATOP
procedures with respect to the Exchange Offer, including transmitting an
Agent's Message to the Exchange Agent in which the holder of Old Notes
acknowledges and agrees to be bound by the terms of this Letter, the
participant in ATOP confirms on behalf of itself and the beneficial owners
as if it had completed the information required herein and executed and
transmitted this Letter to the Exchange Agent.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
------------------------------------------------------------------------
Window Ticket Number (if any)
------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
------------------------------------------------------------------------
Name of Institution which guaranteed delivery
------------------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number Transaction Code Number
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes, it represents that the Old Notes
to be exchanged for New Notes were acquired by it as a result of
market-making or other trading activities and acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act of 1933,
as amended, in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended.
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes as are being tendered
hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the
Company. The undersigned hereby further represents that any New Notes
acquired in exchange for Old Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Notes,
whether or not such person is the undersigned, that neither the holder of
such Old Notes nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such New Notes and that
neither the holder of such Old Notes nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made
in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued in exchange for the Old Notes pursuant to
the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders
have no arrangement with any person to participate in the distribution of
such New Notes. However, the Company does not intend to request the SEC to
consider, and the SEC has not considered the Exchange Offer in the context of
a no-action letter and there can be no assurance that the staff of the SEC
would make a similar determination with respect to the Exchange Offer as in
other circumstances. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to
engage in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. If any holder is
an affiliate of the Company or is engaged in or intends to engage in or has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder (i) could
not rely on the applicable interpretations of the staff of the SEC and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. If the undersigned
is a broker-dealer that will receive New Notes for its own account in
exchange for Old Notes, it represents that the Old Notes to be exchanged for
the New Notes were acquired by it as a result of market-making or other
trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of
the undersigned hereunder shall be binding upon the successors, assigns,
heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer -- Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Notes, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated in
the box entitled "Special Delivery Instructions" below, please send the New
Notes (and, if applicable, substitute certificates representing Old Notes for
any Old Notes not exchanged) to the undersigned at the address shown above in
the box entitled "Description of the Old Notes."
3
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES
AS SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be issued in the name of and sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter above, or if
Old Notes delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at the
Book-Entry Transfer Facility other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s)
- -----------------------------------------------------------------------------
(PLEASE PRINT)
ADDRESS
- -----------------------------------------------------------------------------
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
- -----------------------------------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at
an address other than shown in the box entitled "Description of Old Notes" on
this Letter above.
Mail: New Notes and/or Old Notes to:
Name
- -----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
- -----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
- -----------------------------------------------------------------------------
Address
- -----------------------------------------------------------------------------
(ZIP CODE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
4
<PAGE>
<TABLE>
<CAPTION>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FROM W-9 ON REVERSE SIDE)
<S> <C>
Dated: .................................................................................................... , 1998
x .................................................................................................. , 1998
x .................................................................................................. , 1998
Signature(s) of Owner(s) Date
Area Code and Telephone Number.....................................................................
If a holder is tendering any Old Notes, this Letter must be signed by the registered holder(s) as the name(s)
appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s)
by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title.
See Instruction 3.
Name(s):....................................................................................................
............................................................................................................
(Please Type or Print)
Capacity:...................................................................................................
Address:....................................................................................................
............................................................................................................
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:....................................................................................
(Authorized Signature)
............................................................................................................
(Title)
............................................................................................................
(Name and Firm)
Date:................................................................................................. , 1998
</TABLE>
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
8 1/8% SENIOR NOTES DUE 2006 IN EXCHANGE FOR THE
8 1/8% SENIOR EXCHANGE NOTES DUE 2006 AND OFFER FOR THE
8 5/8% SENIOR SUBORDINATED NOTES DUE 2008 IN EXCHANGE FOR THE
8 5/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008 OF REVLON CONSUMER
PRODUCTS CORPORATION
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by noteholders either if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message
is not delivered. Certificates for all physically tendered Old Notes, or
Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed Letter (or manually signed facsimile hereof) and any other
documents required by this Letter, must be received by the Exchange Agent at
the address set forth herein on or prior to the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set
forth below. Old Notes tendered hereby must be in denominations of principal
amount at maturity of $1,000 and any integral multiple thereof. The term
"Agent's Message" means a message, transmitted to the Book-Entry Transfer
Facility and received by the Exchange Agent and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgement from the tendering Participant that
such Participant has received and agrees to be bound by this Letter and that
the Company may enforce this Letter against such Participant.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to
the Exchange Agent on or prior to the Expiration Date, or who cannot complete
the procedure for book-entry transfer on a timely basis, may tender their Old
Notes pursuant to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus.
Pursuant to such procedures, (i) such tender must be made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent must
receive from such Eligible Institution a properly completed and duly executed
Letter (or a facsimile thereof or an Agent's Message in lieu thereof) and
Notice of Guaranteed Delivery, substantially in the form provided by the
Company (by telegram, telex, facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Notes and the amount
of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, or a Book-Entry
Confirmation, and any other documents required by the Letter will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for
transfer, or Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate
principal amount at maturity of Old Notes to be tendered in the box above
entitled "Description of Old Notes--Principal Amount Tendered." A reissued
certificate representing the balance of nontendered Old Notes will be sent to
such tendering holder, unless otherwise provided in the appropriate box on
this Letter, promptly after the Expiration Date. ALL OF THE OLD NOTES
DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS
OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered bolder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates without any change whatsoever.
6
<PAGE>
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other
than the registered holder, then endorsements of any certificates transmitted
hereby or separate bond powers are required. Signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed
by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST
COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER
OF OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON
A SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL
DELIVERY INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different form the name or address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Holders tendering Old Notes by book-entry transfer may request
that Old Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such noteholder may designate hereon. If no
such instructions are given, such Old Notes not exchanged will be returned to
the name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 below, which in the case of a tendering holder who is an individual,
is his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption, such tendering holder may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, delivery to such tendering holder of New Notes may be subject to
backup withholding in an amount equal to 31% of all reportable payments made
after the exchange. If withholding results in an overpayment of taxes, a
refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, or
(ii) the holder has not been notified by the Internal Revenue
7
<PAGE>
Service that such holder is subject to backup withholding as a result of a
failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. If the tendering holder of Old Notes is a nonresident
alien or foreign entity not subject to backup withholding, such holder must
give the Company a completed Form W-8, Certificate of Foreign Status. These
forms may be obtained from the Exchange Agent. If the Old Notes are in more
than one name or are not in the name of the actual owner, such holder should
consult the W-9 Guidelines for information on which TIN to report. If such
holder does not have a TIN, such holder should consult the W-9 Guidelines for
instructions on applying for a TIN, check the box in Part 2 of the Substitute
Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box
and writing "applied for" on the form means that such holder has already
applied for a TIN or that such holder intends to apply for one in the near
future. If such holder does not provide its TIN to the Company within 60
days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If
however, New Notes and/or substitute Old Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Old Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will
be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Old Notes
for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Old Notes nor shall any of them incur any liability for failure to give any
such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11. INCORPORATION OF LETTER OF TRANSMITTAL.
This Letter shall be deemed to be incorporated in and acknowledged and
accepted by any tender through the Book-Entry Transfer Facility's ATOP
procedures by any Participant on behalf of itself and the beneficial owners
of any Old Notes so tendered.
8
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<CAPTION>
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN TIN:
THE BOX AT RIGHT AND CERTIFY BY -------------------------------
FORM W-9 SIGNING AND DATING BELOW Social security number or
DEPARTMENT OF THE Employer Identification Number
TREASURY INTERNAL
REVENUE SERVICE
PAYOR'S REQUEST ------------------------------------ ----------------------------------
FOR
TAXPAYER
IDENTIFICATION PART 2--TIN Applied For [ ]
NUMBER ("TIN")
AND CERTIFICATION
------------------------------------------------------------------------
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me).
(2) I am not subject to backup withholding either because: (a) I am
exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE DATE
--------------------------------------- ----------------
- -----------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS
that you are subject to backup withholding because of underreporting of interest or dividends
on your tax return and you have not been notified by the IRS that you are no longer subject to
backup withholding
- -----------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2
OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
---------------------------------------------------------------------------
Signature Date
9
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
REVLON CONSUMER PRODUCTS CORPORATION
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Revlon Consumer Products Corporation (the "Company")
made pursuant to the Prospectus, dated April 3, 1998 (the "Prospectus"), if
certificates for the outstanding 8 1/8% Senior Notes due 2006 (the "Old
Senior Notes") and 8 5/8% Senior Subordinated Notes due 2008 of the Company
(the "Old Senior Subordinated Notes" and, together with the Old Senior Notes,
the "Old Notes") are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Company prior to 5:00 p.m., New
York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail
or hand delivery to First Trust National Association (the "Exchange Agent")
as set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Old Senior Notes or Old Senior Subordinated Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
Delivery To:
U.S. BANK TRUST NATIONAL ASSOCIATION,
Exchange Agent
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile: By Overnight Courier or Hand:
U.S. Bank Trust National Association (612) 244-1537 U.S. Bank Trust National Association
Corporate Trust 180 East 5th Street
P.O. Box 64485 Confirm by Telephone: 4th Floor Window
St. Paul, MN 55164-9549 (612) 244-1197 St. Paul, MN 55101
Attention: Specialized Finance
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Senior Notes or Old Senior Subordinated
Notes set forth below, pursuant to the guaranteed delivery procedure
described in "The Exchange Offer--Guaranteed Delivery Procedures" section of
the Prospectus.
Principal Amount of Old Senior Notes
Tendered:*
$
- -----------------------------------------------------------------------------
Certificate Nos. (if available):
- -----------------------------------------------------------------------------
Total Principal Amount Represented by Old
Senior Notes Certificate(s):
$
- -----------------------------------------------------------------------------
Principal Amount of Old Senior Subordinated
Notes Tendered:*
$
- -----------------------------------------------------------------------------
Certificate Nos. (if available):
- -----------------------------------------------------------------------------
Total Principal Amount Represented by Old
Senior Subordinated Notes Certificate(s):
$
- -----------------------------------------------------------------------------
<PAGE>
If Old Senior Notes will be
delivered by book-entry transfer
to The Depository Trust Company,
provide account number.
Account Number
---------------------------------
If Old Senior Subordinated Notes
will be delivered by book-entry
transfer to The Depository Trust
Company, provide account number.
Account Number
---------------------------------
* Must be in denominations of principal amount at maturity of $1,000 and any
integral multiple thereof.
<PAGE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE
THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE
UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
X
- -----------------------------------------------------------------------------
X
- -----------------------------------------------------------------------------
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
--------------------------------------------------------------------------
Must be signed by the holder(s) of Old Senior Notes or Old Senior
Subordinated Notes as their name(s) appear(s) on certificates for Old Senior
Notes or Old Senior Subordinated Notes or on a security position listing, or
by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer
or other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Capacity:
- -----------------------------------------------------------------------------
Address(es):
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States, hereby guarantees that the certificates representing the
principal amount of Old Notes tendered hereby in proper form for transfer, or
timely confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures"
section of the Prospectus, together with a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantee and any other documents required by the
Letter of Transmittal, will be received by the Exchange Agent at the address
set forth above, no later than three New York Stock Exchange trading days
after the date of execution hereof.
Name of Firm:
- -----------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Zip Code)
Area Code and
Telephone No.:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Authorized Signature)
Name:
- -----------------------------------------------------------------------------
(Please Type or Print)
Title:
- -----------------------------------------------------------------------------
Dated: , 1998
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION
OFFER FOR ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
8 1/8% SENIOR EXCHANGE NOTES DUE 2006 AND
OFFER FOR ALL OUTSTANDING
8 5/8% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
8 5/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008
To: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Revlon Consumer Products Corporation (the "Company") is offering, upon and
subject to the terms and conditions set forth in the Prospectus, dated April
3, 1998 (the "Prospectus"), and the enclosed Letter of Transmittal (the
"Letter of Transmittal"), to exchange (the "Exchange Offer") its 8 1/8%
Senior Exchange Notes due 2006 and its 8 5/8% Senior Subordinated Exchange
Notes due 2008, which have been registered under the Securities Act of 1933,
as amended, for its outstanding 8 1/8% Senior Notes due 2006 and its
outstanding 8 5/8% Senior Subordinated Notes due 2008 (together, the "Old
Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Agreement dated
January 28, 1998, by and among the Company, Revlon Escrow Corp. and the
initial purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding
to your clients for whom you hold Old Notes registered in your name or in the
name of your nominee, or who hold Old Notes registered in their own names, we
are enclosing the following documents:
1. Prospectus dated April 3, 1998;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if certificates for Old Notes are not immediately available or time will not
permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON MAY 5, 1998, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them
to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures."
<PAGE>
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to
the beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer,
except as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to U.S.
Bank Trust National Association, the Exchange Agent for the Old Notes, at its
address and telephone number set forth on the front of the Letter of
Transmittal.
Very truly yours,
REVLON CONSUMER PRODUCTS CORPORATION
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF
EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
<PAGE>
REVLON CONSUMER PRODUCTS CORPORATION
OFFER FOR ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
8 1/8% SENIOR EXCHANGE NOTES DUE 2006 AND
OFFER FOR ALL OUTSTANDING
8 5/8% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
8 5/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008
To Our Clients:
Enclosed for your consideration is a Prospectus, dated April 3, 1998 (the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Revlon
Consumer Products Corporation (the "Company") to exchange its 8 1/8% Senior
Exchange Notes due 2006 and its 8 5/8% Senior Subordinated Exchange Notes due
2008, which have been registered under the Securities Act of 1933, as
amended, for its outstanding 8 1/8% Senior Notes due 2006 (the "Old Senior
Notes") and its 8 5/8% Senior Subordinated Notes due 2008 (the "Old Senior
Subordinated Notes" and, together with the Old Senior Notes, the "Old
Notes"), upon the terms and subject to the conditions described in the
Prospectus and the Letter of Transmittal. The Exchange Offer is being made in
order to satisfy certain obligations of the Company contained in the
Registration Agreement dated January 28, 1998, by and among the Company,
Revlon Escrow Corp. and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Old
Senior Notes or Old Senior Subordinated Notes carried by us in your account
but not registered in your name. A TENDER OF SUCH OLD SENIOR NOTES OR OLD
SENIOR SUBORDINATED NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender
on your behalf the Old Senior Notes or Old Senior Subordinated Notes held by
us for your account, pursuant to the terms and conditions set forth in the
enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Senior Notes or Old Senior Subordinated
Notes on your behalf in accordance with the provisions of the Exchange Offer.
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless extended by the Company. Any Old Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions
to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on May 5,
1998, unless extended by the Company.
If you wish to have us tender your Old Senior Notes or Old Senior
Subordinated Notes, please so instruct us by completing, executing and
returning to us the instruction form on the back of this letter. THE LETTER
OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED
DIRECTLY BY YOU TO TENDER OLD SENIOR NOTES OR OLD SENIOR SUBORDINATED NOTES.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Revlon
Consumer Products Corporation with respect to its Old Notes.
This will instruct you to tender the Old Senior Notes or Old Senior
Subordinated Notes held by you for the account of the undersigned, upon and
subject to the terms and conditions set forth in the Prospectus and the
related Letter of Transmittal.
Please tender the Old Senior Notes or Old Senior Subordinated Notes held
by you for my account as indicated below:
<TABLE>
<CAPTION>
<S> <C>
AGGREGATE PRINCIPAL AMOUNT OF OLD SENIOR NOTES
-------------------------------------------------
8 1/8% Senior Notes due 2006.............
-------------------------------------------------
[] Please do not tender any Old Senior
Notes held by you for my account.
AGGREGATE PRINCIPAL AMOUNT OF OLD SENIOR
SUBORDINATED NOTES
-------------------------------------------------
8 5/8% Senior Subordinated Notes due
2008....................................
-------------------------------------------------
[] Please do not tender any Old Senior
Subordinated Notes held by you for
my account.
Dated: , 1998
-------------------------------------------------
-------------------------------------------------
Signature(s)
-------------------------------------------------
--------------------------------------------------
-------------------------------------------------
Please print name(s) here
--------------------------------------------------
--------------------------------------------------
Address(es)
-------------------------------------------------
Area Code and Telephone Number
-------------------------------------------------
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Senior Notes or Old Senior Subordinated Notes held by us
for your account will be tendered unless we receive written instructions from
you to do so. Unless a specific contrary instruction is given in the space
provided, your signature(s) hereon shall constitute an instruction to us to
tender all the Old Senior Notes or Old Senior Subordinated Notes held by us
for your account.
2
