UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

SCHEDULE TO
(RULE 14d-100)

 

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) or 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 7)

 

REVLON, INC.

(Name of Subject Company (Issuer))

 

REVLON, INC.

(Name of Filing Person (Offeror))

 

Class A Common Stock, par value $0.01 per share
(Titles of Classes of Securities)

 

761525609
(CUSIP Numbers of Classes of Securities)

 

 

 

 

ROBERT K. KRETZMAN, ESQ.
EXECUTIVE VICE PRESIDENT, HUMAN RESOURCES,
CHIEF LEGAL OFFICER AND GENERAL COUNSEL
REVLON, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10017
(212) 527-4000

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Filing Person)

 

COPIES TO:

 

FRANKLIN M. GITTES, ESQ. AND ALAN C. MYERS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE
NEW YORK, NEW YORK 10036
(212) 735-3000

 

CALCULATION OF FILING FEE

 

 

 

 

 

Amount previously paid: $16,084

Filing party: Revlon, Inc.

Form or registration No.: Schedule TO

Date filed: August 10, 2009

 

o Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

 

Check the appropriate boxes below to designate any transactions to which the statement relates:

 

o Third-party tender offer subject to Rule 14d-1.

 

þ Issuer tender offer subject to Rule 13e-4.

 

þ Going-private transaction subject to Rule 13e-3.

 

o Amendment to Schedule 13D under Rule 13d-2.

 

Check the following box if the filing is a final amendment reporting the results of the tender offer: o

 

 

This Amendment No. 7 (“Amendment No. 7”) amends the Tender Offer Statement and Schedule 13E-3 Transaction Statement on Schedule TO filed on August 10, 2009, as amended by Amendment No. 1 to the Tender Offer Statement and Schedule 13E-3 on Schedule TO filed on August 11, 2009, Amendment No. 2 to the Tender Offer Statement and Schedule 13E-3 on Schedule TO filed on August 19, 2009, Amendment No. 3 to the Tender Offer Statement and Schedule 13E-3 Transaction Statement on Schedule TO filed on August 27, 2009, Amendment No. 4 to the Tender Offer Statement and Schedule 13E-3 Transaction Statement on Schedule TO filed on September 3, 2009, Amendment No. 5 to the Tender Offer Statement and Schedule 13E-3 Transaction Statement on Schedule TO filed on September 11, 2009 and Amendment No. 6 to the Tender Offer Statement and Schedule 13E-3 Transaction Statement on Schedule TO filed on September 18, 2009 (as amended from time to time, the “Schedule TO”), which relates to the offer by Revlon, Inc., a Delaware corporation (together with its subsidiaries, “Revlon” or the “Issuer”), to exchange (the “Exchange Offer”) each share of Revlon’s Class A common stock, par value $0.01 per share (the “Class A Common Stock”), for one (1) share of Revlon’s newly issued Series A preferred stock, par value $0.01 per share (the “Series A Preferred Stock”), from the holders thereof (the “Holders”), upon the terms and subject to the conditions set forth in the Offer to Exchange, dated August 10, 2009, as amended and restated on August 27, 2009, September 3, 2009 and September 24, 2009 (as amended and restated, the “Third Amended and Restated Offer to Exchange”), and in the related Amended and Restated Letter of Transmittal (“Letter of Transmittal”). A copy of the Letter of Transmittal is filed as Exhibit (a)(1)(K) to the Schedule TO.

 

Introduction

 

This Amendment No. 7 is filed solely to announce that the terms of the Exchange Offer have been amended as set forth herein, to extend the Expiration Date of the Exchange Offer until 11:59 p.m., New York City time, on October 7, 2009, during which time the Holders will be permitted to tender their shares of Revlon’s Class A Common Stock or, if already tendered, withdraw such shares and to supplement the Exhibit Index with additional exhibits.

 

Amendment to Offer to Exchange

 

The Offer to Exchange dated August 10, 2009 and attached as Exhibit (a)(1)(A) to the Schedule TO, as amended by the Amended and Restated Offer to Exchange dated August 27, 2009 and attached as Exhibit (a)(1)(G) to the Schedule TO and the Second Amended and Restated Offer to Exchange dated September 3, 2009 and attached as Exhibit (a)(1)(H) to the Schedule TO is hereby amended by the Third Amended and Restated Offer to Exchange dated September 24, 2009 and attached as Exhibit (a)(1)(J) to the Schedule TO.

 

The information set forth in the Third Amended and Restated Offer to Exchange, and the related Letter of Transmittal, is hereby incorporated by reference in answer to all items in this Schedule TO, and is supplemented by the information specifically provided herein, except as otherwise set forth below.

 

Amendment to Schedule TO

 

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet,” “Certain Questions and Answers About the Exchange Offer,” “Terms of the Exchange Offer,” “Special Factors,” “Material United States Federal Income Tax Considerations,” “Selected Historical Financial and Operating Data,” “Description of Series A Preferred Stock,” “Material Differences Between Class A Common Stock and Series A Preferred Stock,” “The Contribution and Stockholder Agreement” and “Senior Subordinated Term Loan Agreement” is incorporated herein by reference.

 

(b) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Reasons for the Board’s Position as to the Exchange Offer; Factors Considered” and “Interests of Certain Persons in the Transactions” is incorporated herein by reference.

 

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Purpose of the Exchange Offer,” “Special Factors — Reasons for the Revisions to the Exchange Offer,” “Special Factors — Purpose of and Reasons for the Exchange Offer” and “Special Factors — Alternatives to the Exchange Offer” is incorporated herein by reference.

 

(b) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Use of Proceeds” is incorporated herein by reference.

 

(c) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Special Factors — Certain Effects of the Exchange Offer” is incorporated herein by reference.

 

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Financing” and “Terms of the Exchange Offer — Source of Funds” is incorporated herein by reference.

 

(b) Not applicable.

 

(d) Not applicable.

 

 

(a),(b) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Selected Historical and Unaudited Pro Forma Consolidated Financial Data” and “Selected Historical Financial and Operating Data” and the financial statements and information contained in the reports set forth in the section of the Third Amended and Restated Offer to Exchange titled “Documents Incorporated by Reference” are incorporated herein by reference. A copy of any or all of the documents containing such information and financial statements may be inspected, and copies thereof obtained, upon written or oral request. Requests should be directed to the Issuer’s Secretary, at Revlon, Inc., 237 Park Avenue, 14th floor, New York, New York 10017, attention: Michael T. Sheehan (or via email to michael.sheehan@revlon.com).

 

 

(a)(1) None.

 

(a)(2) None.

 

(a)(3) Not applicable.

 

(a)(4) Not applicable.

 

(a)(5) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Stockholder and Derivative Litigation” is incorporated herein by reference.

 

(b) Based on preliminary information from the Exchange Agent, as of 5:00 p.m., New York City time, on Thursday, September 10, 2009, a total of 8,436,516 shares of Revlon Class A Common Stock were tendered pursuant to the Exchange Offer (including shares tendered pursuant to guaranteed delivery procedures).

 

On September 11, 2009, Revlon issued a press release announcing that it has extended the expiration date of the Exchange Offer. The deadline for tendering shares of Revlon Class A Common Stock in exchange for shares of Revlon Series A Preferred Stock has been extended from 5:00 p.m., New York City time, on September 10, 2009 to 5:00 p.m., New York City time, on September 17, 2009, unless further extended.

 

Procedures for tendering shares during this extension of the Exchange Offer shall be the same as during the Exchange Offer, including the guaranteed delivery procedures.

 

The full text of the press release is attached as Exhibit (a)(5)(J) to the Schedule TO and is incorporated herein by reference.

Based on preliminary information from the Exchange Agent, as of 5:00 p.m., New York City time, on Thursday, September 17, 2009, a total of 8,583,248 shares of Revlon Class A Common Stock were tendered pursuant to the Exchange Offer (including shares tendered pursuant to guaranteed delivery procedures).

 

On September 18, 2009, Revlon issued a press release announcing that it has extended the expiration date of the Exchange Offer. The deadline for tendering shares of Revlon Class A Common Stock in exchange for shares of Revlon Series A Preferred Stock has been extended from 5:00 p.m., New York City time, on September 17, 2009 to 5:00 p.m., New York City time, on September 24, 2009, unless further extended.

 

Procedures for tendering shares during this extension of the Exchange Offer shall be the same as during the Exchange Offer, including the guaranteed delivery procedures.

 

The full text of the press release is attached as Exhibit (a)(5)(K) to the Schedule TO and is incorporated herein by reference.

 

The Company has been advised that to date approximately 8,577,754 shares of Revlon Class A Common Stock had been tendered in the Exchange Offer.

 

On September 24, 2009, Revlon issued a press release announcing that it has extended the expiration date of the Exchange Offer. The deadline for tendering shares of Revlon Class A Common Stock in exchange for shares of Revlon Series A Preferred Stock has been extended from 5:00 p.m., New York City time, on September 24, 2009 to 11:59 p.m., New York City time, on October 7, 2009, unless further extended.

 

Procedures for tendering shares during this extension of the Exchange Offer shall be the same as during the Exchange Offer, including the guaranteed delivery procedures.

 

The full text of the press release is attached as Exhibit (a)(5)(L) to the Schedule TO and is incorporated herein by reference.

 

 

The Exhibit Index attached hereto is incorporated by reference. For the avoidance of doubt, each of Exhibit (d)(1) and Exhibit (d)(3) is hereby deleted in its entirety.

 

 

Schedule 13e-3 Item 1. Summary Term Sheet.

 

The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet” is incorporated herein by reference.

 

Schedule 13e-3 Item 2. Subject Company Information.

 

(a) The issuer of the securities subject to the Exchange Offer is Revlon, Inc., a Delaware corporation. The Issuer’s executive offices are located at 237 Park Avenue, New York, New York 10017. The Issuer’s telephone number is (212) 527-4000.

 

(b) The subject security is the Issuer’s Class A Common Stock. As of July 31, 2009, 48,443,072 shares of Class A Common Stock were issued and outstanding.

 

(c) The information concerning the principal market in which the shares of Class A Common Stock are traded and certain high and low sales prices for the shares of Class A Common Stock in the principal market in which the shares of Class A Common Stock are traded is set forth in the section of the Third Amended and Restated Offer to Exchange titled “Markets and Market Price,” which is incorporated herein by reference.

 

(d) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Markets and Market Price” is incorporated herein by reference.

 

(e) None.

 

(f) None.

 

Schedule 13e-3 Item 3. Identity and Background of Filing Person.

 

(a) Revlon, Inc. is the filing person and the subject company. The business address and telephone number of the Issuer are set forth under part (a) under the caption “Schedule 13e-3 Item 2. Subject Company Information” in this Item 13 of this Schedule TO. The information regarding the directors and executive officers of the Issuer is set forth in Annex D of the Third Amended and Restated Offer to Exchange is incorporated herein by reference.

 

(b) Not applicable.

 

(c) The information regarding the directors and executive officers of the Issuer is set forth in Annex D of the Third Amended and Restated Offer to Exchange, which is incorporated herein by reference.

 

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet,” “Certain Questions and Answers About the Exchange Offer,” “Terms of the Exchange Offer,” “Special Factors,” “Material United States Federal Income Tax Considerations,” “Selected Historical Financial and Operating Data,” “Anticipated Accounting Treatment,” “Description of Series A Preferred Stock,” “Material Differences Between Class A Common Stock and Series A Preferred Stock,” “The Contribution and Stockholder Agreement” and “Senior Subordinated Term Loan Agreement” is incorporated herein by reference.

 

(c) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet,” “Certain Questions and Answers About the Exchange Offer” and “Special Factors” is incorporated herein by reference.

 

(d) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet” and “Appraisal Rights” is incorporated herein by reference.

 

(e) None.

 

(f) Not applicable.

 

Schedule 13e-3 Item 5. Past Contacts, Transactions, Negotiations and Agreements.

 

(a),(b),(c) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Background of the Transactions,” “Interests of Certain Persons in the Transactions” and “Past Contacts, Transactions, Negotiations and Agreements” is incorporated herein by reference.

 

(e) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Past Contacts, Transactions, Negotiations and Agreements,” “Interests of Certain Persons in the Transactions,” “The Contribution and Stockholder Agreement” and “Senior Subordinated Term Loan Amendment” is incorporated herein by reference.

 

Schedule 13e-3 Item 6. Purposes of the Transaction and Plans or Proposals.

 

(b) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Use of Proceeds” is incorporated herein by reference.

 

(c)(1-8) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Certain Effects of the Exchange Offer” and “Terms of the Exchange Offer — Future Purchases” is incorporated herein by reference.

 

Schedule 13e-3 Item 7. Purposes, Alternatives, Reasons and Effects.

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Reasons for the Revisions to the Exchange Offer,” “Summary Term Sheet — Purpose of the

Exchange Offer” and “Special Factors — Purpose of and Reasons for the Exchange Offer” is incorporated herein by reference.

 

(b) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Special Factors — Alternatives to the Exchange Offer” is incorporated herein by reference.

 

(c) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Purpose of and Reasons for the Exchange Offer” and “Special Factors — Reasons for the Board’s Position as to the Exchange Offer; Factors Considered” is incorporated herein by reference.

 

(d) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Effect on Ownership Structure of Revlon,” “Summary Term Sheet — Interest of the MacAndrews & Forbes Participants with Respect to the Exchange Offer,” “Interests of Certain Persons in the Transactions — Interests of the MacAndrews & Forbes Participants in the Exchange Offer,” “Special Factors — Certain Effects of the Exchange Offer” and “Material United States Federal Income Tax Considerations” is incorporated herein by reference.

 

Schedule 13e-3 Item 8. Fairness of the Transaction.

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — No Board Recommendation,” “Special Factors — Position of Revlon as to the Fairness of the Exchange Offer,” and “Special Factors — Preliminary Draft Report of Special Committee’s Financial Advisor” is incorporated herein by reference.

 

(b) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Special Factors” is incorporated herein by reference.

 

(c) The transaction is not structured so that the acceptance of the Exchange Offer by at least a majority of the unaffiliated security holders is a condition to closing. The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Conditions to the Exchange Offer” and “Terms of the Exchange Offer — Conditions to the Exchange Offer” is incorporated herein by reference.

 

(d) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Background of the Transactions,” “Special Factors — Reasons for the Board’s Position as to the Exchange Offer; Factors Considered,” “Special Factors — Position of Revlon as to the Fairness of the Exchange Offer,” “Special Factors — Position of the MacAndrews & Forbes Participants as to the Fairness of the Exchange Offer” and “Special Factors — Preliminary Draft Report of Special Committee’s Financial Advisor” is incorporated herein by reference.

 

(e) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Background of the Transactions” and “Special Factors — Reasons for the Board’s Position as to the Exchange Offer; Factors Considered” is incorporated herein by reference.

 

(f) None.

 

Schedule 13e-3 Item 9. Reports, Opinions, Appraisals and Negotiations.

 

(a),(b) The presentations attached to the Schedule TO as Exhibits (c)(1) and (c)(2) and the information set forth in the section of the Third Amended and Restated Third Amended and Restated Offer to Exchange titled “Special Factors — Preliminary Draft Report of Special Committee’s Financial Advisor” and “Special Factors — Report of MacAndrews & Forbes’ Financial Advisor” are incorporated herein by reference.

 

(c) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Where Stockholders Can Find More Information” is incorporated herein by reference.

 

Schedule 13e-3 Item 10. Source and Amounts of Funds or Other Consideration.

 

(a) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Financing” and “Terms of the Exchange Offer — Source of Funds” is incorporated herein by reference.

 

(b) Not applicable.

 

(c) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — Fees and Expenses” and “Terms of the Exchange Offer — Fees and Expenses” is incorporated herein by reference.

 

(d) Not applicable.

 

Schedule 13e-3 Item 11. Interest in Securities of the Subject Company.

 

(a) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.

 

(b) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Transactions in Revlon Common Stock” is incorporated herein by reference.

 

Schedule 13e-3 Item 12. The Solicitation or Recommendation.

 

(d) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Summary Term Sheet — No Board Recommendation” and “Summary Term Sheet — Interest of the MacAndrews & Forbes Participants with Respect to the Exchange Offer,” the last paragraph of the section of the Third Amended and Restated Offer to Exchange titled “Special Factors — Reasons for the Board’s Position as to the Exchange Offer; Factors Considered” and the penultimate paragraph of “Interests of Certain Persons in the Transactions — Interests of the MacAndrews & Forbes Participants in the Exchange Offer” is incorporated herein by reference.

 

(e) The information set forth in the section of the Third Amended and Restated Offer to Exchange titled “Terms of the Exchange Offer — No Recommendation” is incorporated herein by reference.

 

Schedule 13e-3 Item 13. Financial Statements.

 

(a),(b) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Selected Historical and Unaudited Pro Forma Consolidated Financial Data” and “Selected Historical Financial and Operating Data” and the financial statements and information contained in the reports set forth in the section of the Third Amended and Restated Offer to Exchange titled “Documents Incorporated by Reference” are incorporated herein by reference. A copy of any or all of the documents containing such information and financial statements may be inspected, and copies thereof obtained, upon written or oral request. Requests should be directed to the Issuer’s Secretary, at Revlon, Inc., 237 Park Avenue, 14th Floor, New York, New York 10017, attention: Michael T. Sheehan (or via email to michael.sheehan@revlon.com).

 

 

(a) None.

 

(b) The information set forth in the sections of the Third Amended and Restated Offer to Exchange titled “Special Factors — Background of the Transactions” and “Interests of Certain Persons in the Transactions” is incorporated herein by reference.

 

Schedule 13e-3 Item 15. Additional Information.

 

(b) Based on preliminary information from the Exchange Agent, as of 5:00 p.m., New York City time, on Thursday, September 10, 2009, a total of 8,436,516 shares of Revlon Class A Common Stock were tendered pursuant to the Exchange Offer (including shares tendered pursuant to guaranteed delivery procedures).

On September 11, 2009, Revlon issued a press release announcing that it has extended the expiration date of the Exchange Offer. The deadline for tendering shares of Revlon Class A Common Stock in exchange for shares of Revlon Series A Preferred Stock has been extended from 5:00 p.m., New York City time, on September 10, 2009 to 5:00 p.m., New York City time, on September 17, 2009, unless further extended.

 

Procedures for tendering shares during this extension of the Exchange Offer shall be the same as during the Exchange Offer, including the guaranteed delivery procedures.

 

The full text of the press release is attached as Exhibit (a)(5)(J) to the Schedule TO and is incorporated herein by reference.

 

Based on preliminary information from the Exchange Agent, as of 5:00 p.m., New York City time, on Thursday, September 17, 2009, a total of 8,583,248 shares of Revlon Class A Common Stock were tendered pursuant to the Exchange Offer (including shares tendered pursuant to guaranteed delivery procedures).

 

On September 18, 2009, Revlon issued a press release announcing that it has extended the expiration date of the Exchange Offer. The deadline for tendering shares of Revlon Class A Common Stock in exchange for shares of Revlon Series A Preferred Stock has been extended from 5:00 p.m., New York City time, on September 17, 2009 to 5:00 p.m., New York City time, on September 24, 2009, unless further extended.

 

Procedures for tendering shares during this extension of the Exchange Offer shall be the same as during the Exchange Offer, including the guaranteed delivery procedures.

 

The full text of the press release is attached as Exhibit (a)(5)(K) to the Schedule TO and is incorporated herein by reference.

 

The Company has been advised that to date approximately 8,577,754 shares of Revlon Class A Common Stock had been tendered in the Exchange Offer.

 

On September 24, 2009, Revlon issued a press release announcing that it has extended the expiration date of the Exchange Offer. The deadline for tendering shares of Revlon Class A Common Stock in exchange for shares of Revlon Series A Preferred Stock has been extended from 5:00 p.m., New York City time, on September 24, 2009 to 11:59 p.m., New York City time, on October 7, 2009, unless further extended.

 

Procedures for tendering shares during this extension of the Exchange Offer shall be the same as during the Exchange Offer, including the guaranteed delivery procedures.

 

The full text of the press release is attached as Exhibit (a)(5)(L) to the Schedule TO and is incorporated herein by reference.

 

Schedule 13e-3 Item 16. Exhibits.

 

The Exhibit Index attached hereto is incorporated by reference. For the avoidance of doubt, each of Exhibit (d)(1) and Exhibit (d)(3) is hereby deleted in its entirety.

SIGNATURE

 

Revlon, Inc. is filing this Amendment No. 7 to its combined Schedule TO and Schedule 13E-3. After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

REVLON, INC.

 

Name:     Robert K. Kretzman, Esq.

Resources, Chief Legal Officer and

General Counsel

 

Date: September 24, 2009

The Exhibit Index of the Schedule TO is hereby amended and restated in its entirety as follows:

 

EXHIBIT INDEX

 

 

 

* — Filed herewith.

 

 

 

237 PARK AVENUE
NEW YORK, NEW YORK 10017

 

 

THIRD AMENDED AND RESTATED OFFER TO EXCHANGE
CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE
FOR
SERIES A PREFERRED STOCK, PAR VALUE $0.01 PER SHARE

 

 

THIS EXCHANGE OFFER WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME,
ON OCTOBER 7, 2009, UNLESS THE OFFER IS EXTENDED (SUCH DATE AND
TIME, AS IT MAY BE EXTENDED, THE “EXPIRATION DATE”).
TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.

 

Revlon, Inc., a Delaware corporation (together with its subsidiaries, “Revlon,” “we,” “us,” “our” or the “Company”), is offering to exchange its Class A common stock, par value $0.01 per share (the “Class A Common Stock”), for shares of newly-issued Series A preferred stock, par value $0.01 per share (the “Series A Preferred Stock”), on the terms and subject to the conditions set forth in this third amended and restated offer to exchange (this “Offer to Exchange”) and in the accompanying amended and restated letter of transmittal (the “Letter of Transmittal”). For each share of Class A Common Stock, we are offering to exchange one share of Series A Preferred Stock. We refer to this offer, on the terms and subject to the conditions set forth in this Offer to Exchange, as the “Exchange Offer.”

 

The Exchange Offer is subject to the conditions discussed under “Terms of the Exchange Offer — Conditions to the Exchange Offer” on page 85, including the condition that at least 7,500,000 shares of Class A Common Stock (representing approximately 37% of the Class A Common Stock not beneficially owned by MacAndrews & Forbes Holdings Inc. and its affiliates (collectively, “MacAndrews & Forbes”)) are tendered.

 

The Exchange Offer will expire at 11:59 p.m., New York City time, on October 7, 2009, unless the offer is extended. You may withdraw tendered Class A Common Stock at any time prior to the Expiration Date.

 

Each share of Series A Preferred Stock will have a liquidation preference of $5.21, will be entitled to receive a 12.75% annual dividend payable quarterly in cash and will be mandatorily redeemed after four years. Holders of Series A Preferred Stock will receive cash payments of approximately $7.87 over the four-year term of the preferred stock, through the payment of 12.75% annual dividends in cash (equal to approximately $0.17 per share quarterly) and a $5.21 per share liquidation preference at maturity (assuming Revlon does not engage in one of certain specified change of control transactions during that period). If Revlon engages in one of certain specified change of control transactions within three years of consummation of the Exchange Offer, the holders of the Series A Preferred Stock will have the right to receive a special dividend, capped at an amount that would provide aggregate cash payments of up to $12.00 per share (including the liquidation preference and any dividends paid or payable in respect of the Series A Preferred Stock), as described in the section entitled “Description of Series A Preferred Stock — Dividend Rights.” Each share of Series A Preferred Stock will have the same voting rights as a share of Class A Common Stock, except with respect to certain mergers. A copy of the Certificate of Designation for the Series A Preferred Stock, which includes all of the terms of the Series A Preferred Stock, is included as Annex A to this Offer to Exchange. Please see the section entitled “Material Differences Between Class A Common Stock and Series A Preferred Stock,” for a more complete description of the differences between the Class A Common Stock and the Series A Preferred Stock.

 

Upon the consummation of the Exchange Offer, (1) MacAndrews & Forbes will contribute to Revlon $5.21 of the aggregate outstanding principal amount of the Senior Subordinated Term Loan Agreement (which we refer to as the “Senior Subordinated Term Loan”) between MacAndrews & Forbes and Revlon Consumer Products Corporation, Revlon’s wholly owned operating subsidiary (“RCPC”), for each share of Class A Common Stock tendered for exchange in the Exchange Offer, and not withdrawn, up to a maximum aggregate contribution of $105.43 million

of the outstanding principal amount of the Senior Subordinated Term Loan, (2) the maturity date of the portion of the Senior Subordinated Term Loan that will be contributed to Revlon (the “Contributed Loan”) will be extended from August 1, 2010 to the fourth anniversary of the consummation of the Exchange Offer, the interest rate on the Contributed Loan will be changed from 11% to 12.75% per annum, the maturity date of the portion of the Senior Subordinated Term Loan that will remain owed to MacAndrews & Forbes (the “Non-Contributed Loan”) will be extended from August 1, 2010 to the fifth anniversary of the consummation of the Exchange Offer, rather than the fourth anniversary of the consummation of the Exchange Offer, as under the original terms of the Exchange Offer, and the interest rate on the Non-Contributed Loan will be changed from 11% to 12% per annum, rather than from 11% to 12.75% per annum, as under the original terms of the Exchange Offer (we refer to this as the “Senior Subordinated Term Loan Amendment”), and, in consideration, (3) Revlon will issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer and (4) Revlon has entered into the Senior Subordinated Term Loan Amendment.

 

As of September 24, 2009, 48,443,072 shares of Class A Common Stock and 3,125,000 shares of our Class B Common Stock were issued and outstanding, and all calculations of percentage ownership in this Offer to Exchange are based on such numbers of outstanding shares. The Class A Common Stock is traded on the New York Stock Exchange (which we refer to as the “NYSE”) under the symbol “REV.” We do not intend to list the Series A Preferred Stock on any securities exchange. Fidelity (as hereinafter defined), the largest of Revlon’s unaffiliated stockholders through its beneficial ownership of approximately 15.9% of Revlon Class A Common Stock, has indicated to MacAndrews & Forbes that, although no investment decision to participate in the Exchange Offer has been made by Fidelity on behalf of itself or its funds and accounts and an investment decision would be subject to its review of SEC filings disclosing the Exchange Offer, Fidelity would view the Exchange Offer as an attractive potential investment opportunity, provided it meets the investment needs of Fidelity and its funds and accounts. MacAndrews & Forbes has advised that the terms of the Series A Preferred Stock are consistent with terms described to Fidelity, as further detailed in the section entitled “Special Factors — Background of the Transactions.”

 

You should consider carefully the Risk Factors beginning on page 65 of this Offer to Exchange and the Special Factors beginning on page 23 of this Offer to Exchange before you decide whether to participate in the Exchange Offer. Our Board of Directors has authorized us to make the Exchange Offer. Our Board of Directors has determined that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. The Board has also determined not to make any recommendation to unaffiliated stockholders as to whether or not to tender their shares for exchange in the Exchange Offer, and has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received. Neither our Board of Directors nor any other person is making any recommendation as to whether you should choose to exchange your Class A Common Stock for Series A Preferred Stock. You are receiving the enclosed package because we have revised certain terms of the offer, including the economic terms of the Series A Preferred Stock.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS OFFER TO EXCHANGE IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE EXCHANGE OFFER, PASSED UPON THE MERITS OR FAIRNESS OF THE EXCHANGE OFFER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

New York, New York

September 24, 2009

 

Table of Contents

 

We are relying on Section 3(a)(9) of the Securities Act of 1933, as amended, which we refer to herein as the “Securities Act,” to exempt the Exchange Offer from the registration requirements of the Securities Act. Section 3(a)(9) provides that the registration requirements of the Securities Act will not apply to “any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.” We have no contract, arrangement or understanding relating to, and will not, directly or indirectly, pay any commission or other remuneration to any broker, dealer, salesperson, agent or any other person for soliciting tenders in the Exchange Offer.

 

No dealer, salesman or other person has been authorized to give any information or to make any representations with respect to the matters described in this Offer to Exchange, other than those contained in, or incorporated by reference into, this Offer to Exchange. If given or made, such information or representations may not be relied upon as having been authorized by us.

 

This Offer to Exchange is submitted to holders for informational use solely in connection with their consideration of the Exchange Offer. Its use for any other purpose is not authorized. The Offer to Exchange may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents be disclosed to anyone other than the holder to whom it is submitted.

 

In making an investment decision, holders must rely on their own examination of us and the terms of the Exchange Offer, including the merits and risks involved. The information contained in this Offer to Exchange is correct in all material respects as of the date hereof. Neither the delivery of this Offer to Exchange nor the consummation of the Exchange Offer will create the implication that the information contained herein is correct at any time after the date hereof, however, if a material change occurs in the information contained in this Offer to Exchange, we will disseminate promptly disclosure of the change to you. Our business, financial condition, results of operations and prospects may change after that date. No representation is made to any holder regarding the legality of an investment in the Series A Preferred Stock under any applicable legal investment or similar laws or regulations. The contents of this Offer to Exchange are not to be construed as legal, financial or tax advice. Holders should consult their own attorneys, financial advisors or tax advisors as to legal, financial or tax advice with respect to the Exchange Offer.

 

Questions regarding the Exchange Offer, requests for assistance in tendering your Class A Common Stock or requests for additional copies of this Offer to Exchange circular or the Letter of Transmittal should be directed to D.F. King & Co., Inc., the information agent for the Exchange Offer, toll-free at (800) 949-2583. Holders of Class A Common Stock may also contact their brokers, dealers, commercial banks, trust companies or other nominees for assistance concerning the Exchange Offer.

 

SUMMARY TERM SHEET

About Revlon		Revlon conducts its business exclusively through its direct wholly-owned operating subsidiary, RCPC and its subsidiaries. Revlon, Inc. is a direct and indirect majority-owned subsidiary of MacAndrews & Forbes Holdings Inc., a corporation wholly-owned by Ronald O. Perelman.
		The Company’s vision is to provide glamour, excitement and innovation to consumers through high-quality products at affordable prices. The Company operates in a single segment and manufactures, markets and sells an extensive array of cosmetics, women’s hair color, beauty tools, fragrances, skincare, anti-perspirants/deodorants and other beauty care products. The Company is one of the world’s leading cosmetics companies in the mass retail channel (as hereinafter defined). 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.
		The Company’s products are sold worldwide and marketed under such brand names as Revlon, including the Revlon ColorStay, Revlon Super Lustrous and Revlon Age Defying franchises, as well as the Almay brand, including the Almay Intense i-Color and Almay Smart Shade franchises, in cosmetics; Revlon ColorSilk women’s hair color; Revlon in beauty tools; Charlie and Jean Naté fragrances; Ultima II and Gatineau in skincare; and Mitchum anti-perspirants/deodorants.
		The Company’s principal customers include large mass volume retailers, chain drug stores and food stores (collectively, the “mass retail channel”) in the U.S., as well as certain department stores and other specialty stores, such as perfumeries, outside the U.S. The Company also sells beauty products to U.S. military exchanges and commissaries and has a licensing business pursuant to which the Company licenses certain of its key brand names to third parties for the manufacture and sale of complementary beauty-related products and accessories in exchange for royalties.
		The Company was founded by Charles Revson, who revolutionized the cosmetics industry by introducing nail enamels matched to lipsticks in fashion colors over 75 years ago. Today, the Company has leading positions in a number of its principal product categories in the

		U.S. mass retail channel, including color cosmetics (face, lip, eye and nail categories), women’s hair color, beauty tools and anti-perspirants/deodorants. The Company also has leading positions in several product categories in certain foreign countries, including Australia, Canada and South Africa.
		Revlon is a Delaware corporation whose principal executive office is located at 237 Park Avenue, New York, New York 10017, and its phone number is 212-527-4000.
Purpose of the Exchange Offer		The purpose of the Exchange Offer is to allow our stockholders the opportunity to exchange their shares of Class A Common Stock, par value $0.01 per share, for newly-issued shares of our Series A Preferred Stock, par value $0.01 per share. The principal reason for the Exchange Offer is to extend the maturity date of the Senior Subordinated Term Loan from MacAndrews & Forbes to give the Company additional time to refinance the Senior Subordinated Term Loan. In addition, the Exchange Offer provides Revlon’s unaffiliated stockholders the opportunity to acquire a senior, dividend paying security that may have characteristics that are more aligned with their risk profile and investment strategy. For a detailed description of the purpose of the Exchange Offer, see “Special Factors — Purpose of and Reasons for the Exchange Offer” below. For a detailed description of differences between the Class A Common Stock and the Series A Preferred, see “Material Differences Between Class A Common Stock and Series A Preferred Stock” below.
Terms of the Exchange Offer		For each share of Class A Common Stock tendered, we are offering to exchange one share of Series A Preferred Stock.
		In addition, pursuant to the Contribution and Stockholder Agreement that MacAndrews & Forbes entered into with Revlon, as amended (which we refer to as the “Contribution and Stockholder Agreement”), MacAndrews & Forbes has entered into the Senior Subordinated Term Loan Amendment and will contribute $5.21 of the aggregate outstanding principal amount of the Senior Subordinated Term Loan between MacAndrews & Forbes and RCPC for each share of Class A Common Stock tendered for exchange in the Exchange Offer, and not withdrawn, up to a maximum aggregate contribution of $105.43 million of the outstanding principal amount of the Senior Subordinated Term Loan, and in consideration Revlon has agreed to issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer and has entered into the Senior Subordinated Term Loan Amendment.
		We expect that quarterly dividends on our Series A Preferred Stock will be funded by interest received by us from RCPC on the portion of the Senior Subordinated Term Loan Agreement that is contributed to us by MacAndrews & Forbes.
Position of Revlon as to the Fairness of the Exchange Offer		After careful consideration, our Board of Directors, with Messrs. Perelman, Schwartz, Kennedy and Ennis not participating in the vote, has determined that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well

		as the unaffiliated stockholders who do not tender their shares. The Board has also determined not to make any recommendation to unaffiliated stockholders as to whether or not to tender their shares for exchange in the Exchange Offer, and has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received. See “Special Factors — Position of Revlon as to the Fairness of the Exchange Offer.”
No Board Recommendation		Our Board of Directors, with Messrs. Perelman, Ennis, Kennedy and Schwartz not participating in the vote, has authorized us to make the Exchange Offer and determined that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. The Board has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received. After careful consideration, including a thorough review of the terms and conditions of the Exchange Offer with the legal advisors to our independent directors (Alan S. Bernikow, Paul J. Bohan, Meyer Feldberg, Ann D. Jordan, Debra L. Lee, Tamara Mellon, Kathi P. Seifert and, through June 16, 2009, Kenneth Wolfe, none of whom is affiliated with MacAndrews & Forbes, and whom we refer to in this Offer to Exchange as the “Independent Directors”), our Board of Directors, with Messrs. Perelman, Ennis, Kennedy and Schwartz not participating in the vote, determined to take no position and make no recommendation as to whether Revlon’s unaffiliated stockholders should tender their shares of Class A Common Stock in the Exchange Offer, in part because, as described in “Special Factors — Background of the Transactions,” the financial advisor to the Special Committee of our Board of Directors indicated that it would not be able to render an opinion that the consideration to be issued pursuant to the April 13 proposal — which consisted of shares of preferred stock having similar financial characteristics to the Series A Preferred Stock — was fair, from a financial point of view, to Revlon’s unaffiliated stockholders. The financial advisor to the Special Committee of our Board of Directors was not retained to advise and did not advise the Special Committee or our Board of Directors in connection with the Exchange Offer.
		All of our directors and executive officers who own shares of Class A Common Stock (other than Mr. Ronald O. Perelman), representing in the aggregate 298,297 shares of Class A Common Stock, have advised us that they intend to tender all such shares of Class A Common Stock in the Exchange Offer. The Company has also been advised that Mr. Ronald O. Perelman will not tender any shares of Class A Common Stock beneficially owned by him or MacAndrews & Forbes, as he

		and MacAndrews & Forbes are participating in the Exchange Offer by other means.
		See “Special Factors — Reasons for the Board’s Position as to the Exchange Offer; Factors Considered” and “Special Factors — Position of Revlon as to the Fairness of the Exchange Offer.”
Position of the MacAndrews & Forbes Participants as to the Fairness of the Exchange Offer		Each of the MacAndrews & Forbes Participants believes that the Exchange Offer is procedurally and substantively fair, including financially fair, to Revlon’s unaffiliated stockholders who tender their shares for exchange in the Exchange Offer and Revlon’s unaffiliated stockholders who do not tender their shares, based on a number of factors, including: that the Senior Subordinated Term Loan will be classified as a current maturity on our balance sheet at September 30, 2009 if the Senior Subordinated Term Loan Amendment is not effective; that the Exchange Offer addresses the impending maturity of the Senior Subordinated Term Loan, refinancing or repayment of which Revlon cannot assure due to ongoing uncertainty in the credit markets as a result of the economic downturn by extending the maturity of the Contributed Loan until the fourth anniversary of the consummation of the Exchange Offer and until the fifth anniversary of the consummation of the Exchange Offer on the Non-Contributed Loan and by reducing the aggregate outstanding principal amount of the Senior Subordinated Term Loan by $5.21 for each share of Class A Common Stock tendered for exchange in the Exchange Offer, and not withdrawn, up to a maximum reduction of $105.43 million of the aggregate outstanding principal amount of the Senior Subordinated Term Loan; that the terms of the Series A Preferred Stock provide significant value to stockholders who accept the offer through an instrument senior to the common stock, including through quarterly cash dividends, a liquidation preference and a special dividend that would be paid in connection with one of certain specified change of control transactions within three years; that the stockholders who do not accept the Exchange Offer will have the benefit post consummation of the Exchange Offer of protections negotiated by the Independent Directors and Plaintiffs’ Counsel (as defined below); and that Fidelity (as hereinafter defined), the largest of Revlon’s unaffiliated stockholders through its beneficial ownership of approximately 15.9% of Revlon Class A Common Stock, has indicated to MacAndrews & Forbes that, although no investment decision to participate in the Exchange Offer has been made by Fidelity on behalf of itself or its funds and accounts and an investment decision would be subject to its review of SEC filings disclosing the Exchange Offer, Fidelity would view the Exchange Offer as an attractive potential investment opportunity, provided it meets the investment needs of Fidelity and its funds and accounts. MacAndrews & Forbes has advised that the terms of the Series A Preferred Stock are consistent with terms described to Fidelity, as further detailed in the section entitled “Special Factors — Background of the Transactions.”
		See “Special Factors — Position of the MacAndrews & Forbes Participants as to the Fairness of the Exchange Offer.”

Interest of the MacAndrews & Forbes Participants with Respect to the Exchange Offer		The more shares of Class A Common Stock that are tendered into the Exchange Offer, the greater will be MacAndrews & Forbes’ interest in our common stock following the Exchange Offer because MacAndrews & Forbes is not exchanging its shares in the Exchange Offer, and Revlon will issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer.
		As of the date of this Offer to Exchange, MacAndrews & Forbes directly and indirectly beneficially owned approximately 58.2% of our Class A Common Stock and 100% of our Class B Common Stock, together representing approximately 74.6% of the combined voting power of all of our outstanding equity securities.
		See “Interests of Certain Persons in the Transactions — Interests of the MacAndrews & Forbes Participants in the Exchange Offer.”
Effect on Ownership Structure of Revlon		If all shares held by Revlon’s unaffiliated stockholders are tendered in the Exchange Offer, MacAndrews & Forbes will beneficially own 100% of our outstanding Class A Common Stock, will continue to beneficially own 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own approximately 79.8% of the combined voting power of all of our outstanding equity securities.
		If there are not at least 7,500,000 shares of Class A Common Stock tendered (we refer to this as the “Minimum Condition”) by Revlon’s unaffiliated stockholders, the Exchange Offer will not be consummated and MacAndrews & Forbes will continue to beneficially own approximately 58.2% of our outstanding Class A Common Stock and 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will continue to beneficially own approximately 74.6% of the combined voting power of all of our outstanding equity securities and the Senior Subordinated Term Loan Amendment will not be effective.
		If only a sufficient number of shares of Class A Common Stock to meet the Minimum Condition of 7,500,000 shares is tendered, but no other shares of Class A Common Stock held by Revlon’s unaffiliated stockholders are tendered in the Exchange Offer, MacAndrews & Forbes will beneficially own approximately 73.7% of our outstanding Class A Common Stock, 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own approximately 76.8% of the combined voting power of all of our outstanding equity securities.
		If a sufficient number of shares of Class A Common Stock are tendered in the Exchange Offer by Revlon’s unaffiliated stockholders such that MacAndrews & Forbes is eligible to consummate a short-form merger under Section 253 of the General Corporation Law of the State of Delaware (the “DGCL”) by reason of 90% ownership then (i) MacAndrews & Forbes or one of its subsidiaries will as soon as reasonably practicable seek to consummate, or cause to be

		consummated, a short-form merger in accordance with Section 253 of the DGCL pursuant to which the holders of Class A Common Stock (other than MacAndrews & Forbes or its affiliates) will receive Series A Preferred Stock or shares of preferred stock in the surviving corporation of such transaction with terms substantially identical to, or no less favorable than, the terms of the Series A Preferred Stock (with, for the avoidance of doubt, the same terms as though issued on the date of original issuance of the Series A Preferred Stock) and (ii) MacAndrews & Forbes will contribute to Revlon, effective upon the consummation of such short-form merger, $5.21 of the outstanding principal amount of the loan under the Senior Subordinated Term Loan, for each share of Class A Common Stock exchanged in such short-form merger (provided that MacAndrews & Forbes will not contribute more than $105.43 million of the aggregate outstanding principal amount of the Senior Subordinated Term Loan pursuant to the short-form merger and the Exchange Offer), in connection with the issuance by the Company to MacAndrews & Forbes or its designee, of one share of Class A Common Stock for each share of Class A Common Stock exchanged in such short-form merger. Upon consummation of such a short-form merger, MacAndrews & Forbes will beneficially own 100% of our Class A Common Stock, will continue to beneficially own 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own shares representing 79.8% of the combined voting power of all our outstanding equity securities. All shares of Series A Preferred Stock will remain outstanding.
		See “Special Factors — Certain Effects of the Exchange Offer — Effect on Ownership Structure of Revlon.”
Terms of the Series A Preferred Stock		The Series A Preferred Stock will have a liquidation preference of $5.21 per share, will be entitled to receive an annual dividend of 12.75% of the liquidation preference, payable quarterly in cash, and will be mandatorily redeemed after four years.
		Holders of Series A Preferred Stock will receive cash payments of approximately $7.87 over the four-year term of the preferred stock, through the payment of 12.75% annual dividends in cash (equal to approximately $0.17 per share quarterly) and a $5.21 per share liquidation preference at maturity (assuming Revlon does not engage in one of certain specified change of control transactions).
		If Revlon engages in one of certain specified change of control transactions (not including any transaction with MacAndrews & Forbes) within three years of consummation of the Exchange Offer, the holders of the Series A Preferred Stock will have the right to receive a special dividend if the per share equity value of Revlon in the change of control transaction is higher than the liquidation preference plus paid and accrued and unpaid dividends on the Series A Preferred Stock, capped at an amount that would provide aggregate cash payments of up to $12.00 per share (including the liquidation preference and any dividends paid or payable in respect of the Series A Preferred Stock), as described in more detail in the section entitled “Description of Series A Preferred Stock — Dividend Rights.”

		In the event that we fail to pay any required dividends on our Series A Preferred Stock, the amount of such unpaid dividends will be added to the amount payable to holders of our Series A Preferred Stock upon redemption. In addition, during any period when we have failed to pay a dividend and until all unpaid dividends have been paid in full we will be prohibited from paying dividends or distributions on any shares of stock that ranks junior to the Series A Preferred Stock (including our common stock), other than dividends or distributions payable in shares of stock that ranks junior to the Series A Preferred Stock.
		The Series A Preferred Stock will generally have the same voting rights as the Class A Common Stock, except that the holders of Series A Preferred Stock will not be entitled to vote on any merger, combination or similar transaction in which the holders of the Series A Preferred Stock either (i) retain their shares of Series A Preferred Stock or (ii) receive shares of preferred stock in the surviving corporation of such merger with terms identical to, or no less favorable in the aggregate to the holders of the Series A Preferred Stock than, the terms of the Series A Preferred Stock as long as, in any such case, the surviving or resulting company of any such merger, combination or similar transaction is not materially less creditworthy than the Company was immediately prior to the consummation of such transaction. See “Description of Series A Preferred Stock.”
		Under the DGCL, we are permitted to pay dividends only from our “surplus,” which is the excess of our total assets over the sum of our liabilities plus the aggregate par value of our outstanding capital stock, or if we have no surplus, out of our net profits for the year in which a dividend is declared and/or for the immediately preceding fiscal year. Additionally, we are permitted to redeem the Series A Preferred Stock only from our surplus. In the event that we fail to pay any required dividends on our Series A Preferred Stock, the amount of such unpaid dividends will be added to the amount payable to holders of our Series A Preferred Stock upon redemption.
Conditions to the Exchange Offer		The Exchange Offer is subject to the Minimum Condition that at least 7,500,000 shares of Class A Common Stock are tendered. The Exchange Offer is subject to other conditions as well. A more detailed discussion of the conditions to consummation of the Exchange Offer is contained in “Terms of the Exchange Offer — Conditions to the Exchange Offer.”
Expiration of the Exchange Offer; Withdrawal Rights		The Exchange Offer will expire at 11:59 p.m., New York City time, on October 7, 2009, or any subsequent date to which we extend it. We, in our sole discretion, may extend the Expiration Date for any reason. We will extend the duration of the Exchange Offer as required by applicable law. We will announce any extensions by press release or other permitted means by no later than 9:00 a.m., New York City time, on the business day after the previously scheduled Expiration Date. A stockholder may withdraw shares of Class A Common stock tendered pursuant to the Exchange Offer at any time prior to the Expiration Date and, if not yet accepted for exchange, at any time after October 5, 2009, which is forty business days from the commencement of the Exchange Offer.

Acceptance of Tendered Class A Common Stock and Exchange for Series A Preferred Stock		Upon the terms of the Exchange Offer and subject to the satisfaction or waiver of the conditions to the Exchange Offer specified herein under “Terms of the Exchange Offer — Conditions to the Exchange Offer,” we will:
		• accept for exchange all shares of Class A Common Stock validly tendered (or defectively tendered, if we have waived such defect) and not validly withdrawn; and
		• promptly issue one share of newly-issued Series A Preferred Stock in consideration for each share of Class A Common Stock accepted for exchange.
Financing		In connection with, and subject to consummation of, the Exchange Offer, MacAndrews & Forbes and RCPC will amend the Senior Subordinated Term Loan between MacAndrews & Forbes and RCPC to extend the maturity date of the Contributed Loan from August 1, 2010 to the fourth anniversary of the consummation of the Exchange Offer, change the annual interest rate on the Contributed Loan from 11% to 12.75%, extend the maturity date of the Non-Contributed Loan from August 1, 2010 to the fifth anniversary of the consummation of the Exchange Offer, rather than the fourth anniversary, as under the original terms of the Exchange Offer, and change the annual interest rate on the Non-Contributed Loan from 11% to 12%, rather than from 11% to 12.75%, as under the original terms of the Exchange Offer. Conditioned upon and effective upon the consummation of the Exchange Offer, MacAndrews & Forbes has entered into the Senior Subordinated Term Loan Amendment and will contribute to Revlon $5.21 of the aggregate outstanding principal amount of the Senior Subordinated Term Loan between MacAndrews & Forbes and RCPC for each share of Class A Common Stock tendered for exchange in the Exchange Offer, and not withdrawn, up to a maximum aggregate contribution of $105.43 million of outstanding principal amount of the Senior Subordinated Term Loan, and in consideration, Revlon will issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer and has entered into the Senior Subordinated Term Loan Amendment. This arrangement is discussed in detail in the section entitled “The Contribution and Stockholder Agreement.”
Material United States Federal Income Tax Considerations		In general, if you exchange your Class A Common Stock for Series A Preferred Stock, and we qualify as a “family-owned corporation,” you will not recognize gain or loss for United States federal income tax purposes. Our qualification as a family-owned corporation depends in part on the continued holding of stock representing at least 50% of the total combined voting power of our voting stock and at least 50% of all other classes of our stock, generally, directly or indirectly, by members of the same family during the period starting on the date of the consummation of the Exchange Offer and ending on the third anniversary of the consummation of the Exchange Offer (or, if a short-form merger described under “Special Factors — Certain Effects of the

		Exchange Offer — Effect on Ownership Structure of Revlon” is consummated, the third anniversary of the consummation of such short-form merger). No assurance can be given that this will be the case. If we fail to qualify as a family-owned corporation, the exchange likely would be treated, retroactively, as a taxable transaction. Depending on your particular circumstances, if no gain or loss is recognized upon the receipt of Series A Preferred Stock in exchange for your shares of Class A Common Stock pursuant to the Exchange Offer, a sale of the Series A Preferred Stock could result in ordinary income to you. The tax consequences you may experience as a result of participating in the Exchange Offer and owning shares of our preferred stock will depend on your individual situation. You should consult your tax advisor for a full understanding of these tax consequences. For more information regarding the tax consequences to you as a result of the Exchange Offer, see “Material United States Federal Income Tax Considerations.”
Appraisal Rights		Holders of Class A Common Stock are not entitled to appraisal rights in connection with the Exchange Offer. If a short-form merger is consummated in accordance with Section 253 of the DGCL consistent with the terms of the Contribution and Stockholder Agreement, appraisal rights pursuant to Section 262 of the DGCL will be available to unaffiliated stockholders who do not tender their shares of Class A Common Stock in the Exchange Offer. Revlon’s stockholders that perfect these rights by complying with the procedures set forth in Section 262 of the DGCL will have the fair value of their shares of Class A Common Stock (exclusive of any element of value arising from the accomplishment or expectation of the short-form merger) determined by the Delaware Court of Chancery and will be entitled to receive a cash payment equal to such fair value from Revlon. Any such judicial determination of the fair value of shares of Class A Common Stock could be based upon considerations other than, or in addition to, the value of the Series A Preferred Stock offered in the Exchange Offer and the market value of the shares of Class A Common Stock, including asset values and the investment value of the shares of Class A Common Stock. The value so determined could be more or less than the value of Series A Preferred Stock. You should be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in the Exchange Offer, is not an opinion as to fair value under Section 262 of the DGCL. If any stockholder of Revlon who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his or her right to appraisal, as provided in the DGCL, each of the shares of Class A Common Stock of such holder will be converted into the right to receive a share of Series A Preferred Stock. The foregoing summary of the rights of dissenting stockholders under the DGCL does not purport to be a complete statement of the procedures to be followed by Revlon’s stockholders desiring to exercise any available appraisal rights, and is qualified in its entirety by the full text of Section 262 of the DGCL, which is attached as Annex E hereto. For more information regarding appraisal rights, see “Appraisal Rights.”
Waiver, Amendment and Termination		We reserve the right, subject to applicable law, to waive any and all conditions to the Exchange Offer, extend or terminate the Exchange

		Offer or otherwise amend, modify or interpret the terms of the Exchange Offer.
Risk Factors		You should consider carefully in its entirety all of the information set forth in this Offer to Exchange, as well as the information incorporated by reference into this Offer to Exchange, and, in particular, you should evaluate the risks set forth in the sections entitled “Risk Factors” beginning on page 65 before deciding whether to participate in the Exchange Offer.
Market/Trading		Our common stock is traded on the NYSE under the symbol “REV.” The last reported sale price of our common stock on September 23, 2009 was $4.34 per share.
		We do not intend to list the Series A Preferred Stock on any securities exchange.
Brokerage Commissions		No brokerage commissions are payable by the holders of the Class A Common Stock to the exchange agent or us. If your Class A Common Stock is held through a broker or other nominee who tenders the Class A Common Stock on your behalf, your broker may charge you a commission for doing so. You should consult with your broker or nominee to determine whether any charges will apply.
Fees and Expenses		We estimate that the total fees and expenses of the Exchange Offer will be approximately $6.05 million.
Consequences of Not Tendering Class A Common Stock		If you do not tender your shares of Class A Common Stock in the Exchange Offer, you will continue to hold such shares (unless, following completion of the Exchange Offer a short-form merger is consummated in accordance with Section 253 of the DGCL consistent with the terms of the Contribution and Stockholder Agreement). Upon the consummation of the Exchange Offer, there will be fewer shares of our Class A Common Stock held by Revlon’s unaffiliated stockholders, and there will therefore likely be fewer transactions in Class A Common Stock. If the Class A Common Stock does not meet the NYSE’s continued listing requirements, it may be de-listed, and the Class A Common Stock may not satisfy the listing requirements of any other national securities exchange. During the four years following the consummation of the Exchange Offer, unless a short-form merger is consummated in accordance with the Contribution and Stockholder Agreement, we will use our reasonable best efforts to maintain the listing of our Class A Common Stock on the NYSE; if our Class A Common Stock is de-listed from the NYSE, we will use our reasonable best efforts to have our Class A Common Stock listed on another national securities exchange; and, in the event we are unable using our reasonable best efforts to cause the Class A Common Stock to be listed on another national securities exchange after it is de-listed from the NYSE, we will use our reasonable best efforts to cause a market to be made for the Class A Common Stock; provided, however, that such agreement will not prevent MacAndrews & Forbes or the Company from acquiring shares of Class A Common Stock or engaging in any other transaction permitted by the Contribution and Stockholder Agreement. A lack of an active trading market may have an adverse effect on the trading price of our Class A Common Stock. See “Special

		Factors — Certain Effects of the Exchange Offer — Effects on Listing, Registration and Status of Revlon Common Stock” and “The Contribution and Stockholder Agreement.”
Use of Proceeds		We will not receive any cash proceeds from the Exchange Offer. Class A Common Stock that is properly tendered and not withdrawn, and exchanged pursuant to the Exchange Offer, will be transferred into the Company’s treasury and subsequently transferred by us to MacAndrews & Forbes.
Exchange Agent		American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 (877) 777-0800
Further Information		If you have questions regarding the Exchange Offer, require assistance in tendering your Class A Common Stock or require additional copies of the Offer to Exchange or the Letter of Transmittal, please contact D.F. King & Co., Inc., the information agent for the Exchange Offer, toll-free at (800) 949-2583. Banks and brokerage firms please call collect at: (212) 269-5550. Holders of Class A Common Stock may also contact their brokers, dealers, commercial banks, trust companies or other nominees for assistance concerning the Exchange Offer.

 

The following questions and answers are for your convenience only, and briefly address some commonly asked questions about the Exchange Offer. You should still carefully read this entire Offer to Exchange, including the attached Annexes.

 

 

 

 

 

 

On September 23, 2009, Revlon’s Board of Directors, with Messrs. Perelman, Schwartz, Kennedy and Ennis not participating in the vote, determined to amend the terms of the Exchange Offer, which terms would include revisions to the terms of the Series A Preferred Stock, the Contribution and Stockholder Agreement and the Senior Subordinated Term Loan, discussed below and a Minimum Condition to require that at least 7,500,000 shares of Class A Common Stock not beneficially owned by MacAndrews & Forbes and its affiliates be tendered in the Exchange Offer. The Board of Directors determined that the revised Exchange Offer was fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares, taking into account the following reasons, as well as the reasons considered at the time of the Board’s prior determinations:

 

 

 

In reaching its determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares, Revlon’s Board of Directors had previously considered the fact that the Exchange Offer was conditioned upon the tender of a majority of the outstanding shares of Class A Common Stock not beneficially owned by MacAndrews & Forbes or its affiliates and the related fact that this condition was described as “non-waivable.” Notwithstanding the foregoing, Revlon’s Board of Directors has determined to reduce the Minimum Condition such that the Exchange Offer is no longer conditioned upon the tender of at least a majority of the shares of Class A Common Stock not beneficially owned by MacAndrews & Forbes and its affiliates.

 

Revlon’s Board of Directors no longer views these two factors as necessary to such determination in light of the additional factors supporting its fairness determination, as described above in this section.

 

Revlon and the MacAndrews & Forbes Participants

 

The purpose of the Exchange Offer is to allow our stockholders the opportunity to exchange their shares of our Class A Common Stock for newly-issued shares of our Series A Preferred Stock, which is a senior, dividend paying security that may have characteristics that are more aligned with their risk profile and investment strategy. The principal reason for the Exchange Offer is to extend the maturity date of the Senior Subordinated Term Loan from MacAndrews & Forbes to give the Company additional time to refinance the Senior Subordinated Term Loan. The Exchange Offer and the terms of the Series A Preferred Stock have been structured so as to (i) accomplish MacAndrews & Forbes’ proposal to extend the maturity of the Senior Subordinated Term Loan until four years from the issuance of the Series A Preferred Stock, in respect of the Contributed Loan, and until five years from the issuance of the Series A Preferred Stock, in respect of the Non-Contributed Loan and (ii) provide the holders of Class A Common Stock who tender in this Exchange Offer a security with a liquidation preference and dividend amount that mirror the principal amount and interest rate of the Senior Subordinated Term Loan being contributed to Revlon by MacAndrews & Forbes upon consummation of the Exchange Offer.

 

Extension of Maturity of Senior Subordinated Term Loan

 

Currently, the Senior Subordinated Term Loan matures on the earlier of (a) the date that Revlon issues equity with gross proceeds of at least $107 million, which proceeds would be contributed to RCPC and used to repay the $107 million remaining aggregate principal balance of the Senior Subordinated Term Loan, or (b) August 1, 2010. Additionally, the Senior Subordinated Term Loan is required to be reflected as a current liability on Revlon’s balance sheet if it is outstanding on September 30, 2009 unless its maturity is extended. As we approach the maturity date of

the Senior Subordinated Term Loan, in order to refinance or repay such loan the Company may be required to refinance RCPC’s indebtedness, seek to sell additional Revlon equity or debt securities or RCPC debt securities or seek additional capital contributions or loans from MacAndrews & Forbes or from the Company’s other affiliates or third parties. The Company may be unable to take any of these actions, because of a variety of commercial or market factors or constraints in RCPC’s debt instruments, including, without limitation, market conditions being unfavorable for an equity or debt issuance, additional capital contributions or loans not being available from affiliates and/or third parties, or that the transactions may not be permitted under the terms of the various debt instruments then in effect, such as due to restrictions on the incurrence of debt, incurrence of liens and/or related party transactions. Any such actions could be at a cost in excess of the current cost of RCPC’s indebtedness and not in the best interests of the Company and Revlon’s unaffiliated stockholders, especially in light of the ongoing uncertainty in the credit markets due to the economic downturn. Furthermore, the failure to repay the Senior Subordinated Term Loan at its maturity would trigger an event of default under the indenture governing the 91/2% Senior Notes and under RCPC’s credit agreements, which would otherwise be due in April 2011 and January 2012, respectively. Moreover, we have received no assurances from MacAndrews & Forbes that, absent the consummation of the Exchange Offer and, with it, the Senior Subordinated Term Loan Amendment, MacAndrews & Forbes would be willing to extend the maturity date of the Senior Subordinated Term Loan or would be willing to provide additional loans or make additional capital contributions to us, and the only proposals regarding extending the maturity of the Senior Subordinated Term Loan that have been received from MacAndrews & Forbes were the April 13 proposal and the May 26 alternative, each of which is described below in “— Background of the Transactions,” and this Exchange Offer.

 

Opportunity to Exchange Class A Common Stock for Series A Preferred Stock

 

As a result of the Exchange Offer, each unaffiliated Revlon stockholder will have the choice of retaining his, her or its shares of Class A Common Stock or exchanging such shares for Series A Preferred Stock. Please see the section entitled “Material Differences Between Class A Common Stock and Series A Preferred Stock” for a description of the differences between the Class A Common Stock and the Series A Preferred Stock.

 

Effect on Ownership Structure of Revlon

 

Although MacAndrews & Forbes has agreed that it will not tender its shares in the Exchange Offer because it is participating in the transaction by other means, in connection with, and subject to consummation of, the Exchange Offer, MacAndrews & Forbes and RCPC will amend the Senior Subordinated Term Loan between MacAndrews & Forbes and RCPC to extend the maturity date of the Contributed Loan from August 1, 2010 to the fourth anniversary of the consummation of the Exchange Offer, change the annual interest rate on the Contributed Loan from 11% to 12.75%, extend the maturity date of the Non-Contributed Loan from August 1, 2010 to the fifth anniversary of the consummation of the Exchange Offer, rather than the fourth anniversary, as under the original terms of the Exchange Offer, and change the annual interest rate on the Non-Contributed Loan from 11% to 12%, rather than from 11% to 12.75%, as under the original terms of the Exchange Offer. Conditioned upon and effective upon the consummation of the Exchange Offer, MacAndrews & Forbes has entered into the Senior Subordinated Term Loan Amendment and will contribute $5.21 of aggregate outstanding principal amount of the Senior Subordinated Term Loan between MacAndrews & Forbes and RCPC for each share of Class A Common Stock tendered for exchange in the Exchange Offer, and not withdrawn, up to a maximum aggregate contribution of $105.43 million of the outstanding principal of the Senior Subordinated Term Loan, and in consideration Revlon will issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer and has entered into the Senior Subordinated Term Loan Amendment. This arrangement is discussed in detail in the section entitled “The Contribution and Stockholder Agreement.”

 

Set forth below, for illustrative purposes only, are four scenarios that indicate the effect that the Exchange Offer could have on MacAndrews & Forbes’ relative percentage ownership of our outstanding shares and combined voting power. As of the date of this Offer to Exchange, MacAndrews & Forbes owned approximately 58.2% of our Class A Common Stock and 100% of our Class B Common Stock, together representing approximately 74.6% of the combined voting power of such shares as of such date and time.

SCENARIO A — All shares of Class A Common Stock held by Revlon’s unaffiliated stockholders are tendered in the Exchange Offer.  MacAndrews & Forbes will beneficially own 48,443,072 shares of our Class A Common Stock, representing 100% of our outstanding Class A Common Stock, will continue to beneficially own 3,125,000 shares of our Class B Common Stock, representing 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own shares representing approximately 79.8% of the combined voting power of all of our outstanding equity securities.

 

SCENARIO B — Insufficient number of shares of Class A Common Stock held by Revlon’s unaffiliated stockholders are tendered in the Exchange Offer to meet the Minimum Condition of 7,500,000 shares.  The Exchange Offer will not be consummated, and MacAndrews & Forbes will continue to beneficially own 28,207,735 shares of Class A Common Stock, representing approximately 58.2% of our outstanding Class A Common Stock and 3,125,000 shares of our Class B Common Stock, representing 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own shares representing approximately 74.6% of the combined voting power of our Class A Common Stock and Class B Common Stock and the Senior Subordinated Term Loan Amendment and the Contribution and Stockholder Agreement will not be effective.

 

SCENARIO C — Only a sufficient number of shares of Class A Common Stock to meet the Minimum Condition of 7,500,000 shares are tendered by Revlon’s unaffiliated stockholders, but no other shares of Class A Common Stock held by Revlon’s unaffiliated stockholders are tendered in the Exchange Offer.  MacAndrews & Forbes will beneficially own 35,707,735 shares of our Class A Common Stock, representing approximately 73.7% of our outstanding Class A Common Stock, will continue to beneficially own 3,125,000 shares of our Class B Common Stock, representing 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own shares representing approximately 76.8% of the combined voting power of all our outstanding equity securities.

 

SCENARIO D — A sufficient number of shares of Class A Common Stock are tendered in the Exchange Offer by Revlon’s unaffiliated stockholders such that MacAndrews & Forbes is eligible to consummate a short-form merger under Section 253 of the DGCL by reason of its 90% ownership.  Pursuant to the Contribution and Stockholder Agreement, (i) MacAndrews & Forbes or one of its subsidiaries will as soon as reasonably practicable seek to consummate, or cause to be consummated, a short-form merger in accordance with Section 253 of the DGCL pursuant to which the holders of Class A Common Stock (other than MacAndrews & Forbes or its affiliates) will receive Series A Preferred Stock or shares of preferred stock in the surviving corporation of such transaction with terms substantially identical to, or no less favorable than, the terms of the Series A Preferred Stock (with, for the avoidance of doubt, the same terms as though issued on the date of original issuance of the Series A Preferred Stock) and (ii) MacAndrews & Forbes will contribute to Revlon, in each case effective upon the consummation of such short-form merger, $5.21 of the outstanding principal amount of the loan under the Senior Subordinated Term Loan, for each share of Class A Common Stock exchanged in such short-form merger (provided that MacAndrews & Forbes will not contribute more than $105.43 million of the aggregate outstanding principal amount of the Senior Subordinated Term Loan pursuant to the short-form merger and the Exchange Offer), in connection with the issuance by the Company to MacAndrews & Forbes or its designee, of one share of Class A Common Stock for each share of Class A Common Stock exchanged in such short-form merger. Upon consummation of such a short-form merger, MacAndrews & Forbes will beneficially own 100% of our Class A Common Stock, will continue to beneficially own 100% of our outstanding Class B Common Stock, will own none of our Series A Preferred Stock and will beneficially own shares representing 79.8% of the combined voting power of all our outstanding equity securities. All shares of Series A Preferred Stock will remain outstanding.

 

 

Effects on Listing, Registration and Status of Revlon Common Stock

 

To the extent that stockholders tender Class A Common Stock into the Exchange Offer, the consummation of the Exchange Offer will reduce the daily trading volume and could adversely affect the liquidity and market value of the remaining shares of Class A Common Stock held by Revlon’s unaffiliated stockholders. The consummation of the Exchange Offer can also be expected to reduce the number of holders of Class A Common Stock. The reduction in the number of holders of Class A Common Stock could also decrease analyst coverage of Revlon. We cannot predict whether the reduction in the number of shares of Class A Common Stock that might otherwise trade publicly would have an adverse effect on the market price or marketability of the Class A Common Stock or whether it would cause future market prices to be greater or less than future market prices, if any, of the Series A Preferred Stock. Revlon’s Class A Common Stock is currently registered as a class of equity security under the Exchange Act. Registration of the Class A Common Stock under the Exchange Act may be terminated upon application by Revlon to the SEC if the Class A Common Stock is not listed on a national securities exchange and there are fewer than 300 record holders of the outstanding shares. We do not expect the Series A Preferred Stock to be traded on any securities exchange.

 

If the Exchange Offer is consummated, Revlon and MacAndrews & Forbes have agreed pursuant to the Contribution and Stockholder Agreement that, for the four-year period following consummation of the Exchange Offer, during any period in which Revlon is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, Revlon will still file or furnish, as appropriate, on a voluntary basis all periodic and other reports with the SEC that are required of a company that is subject to such reporting requirements.

 

Depending upon the number of shares of Class A Common Stock exchanged in the Exchange Offer, the Class A Common Stock may no longer meet the requirements for continued listing on the NYSE. The NYSE would consider disqualifying the Class A Common Stock for listing on the NYSE if, among other possible grounds, (1) the number of publicly held shares of Class A Common Stock falls below 600,000, (2) the total number of record and beneficial holders, taken together, of Class A Common Stock falls below 400, (3) the total number of record and beneficial holders, taken together falls below 1,200 and the average monthly trading volume of the Class A Common Stock falls below 100,000 shares (for the most recent 12 months), (4) the market value of publicly held shares of Class A Common Stock over a 30-consecutive trading day period falls below $15 million or (5) the average closing price of the Class A Common Stock is less than $1.00 over a consecutive 30-NYSE trading day period.

 

If the NYSE were to de-list our Class A Common Stock, it is possible that the Class A Common Stock would continue to trade on other securities exchanges or in the over-the-counter market and that price or other quotations for the Class A Common Stock would be reported by other sources.

 

During the four years following the consummation of the Exchange Offer, unless a short-form merger is consummated in accordance with the Contribution and Stockholder Agreement, we will use our reasonable best efforts to maintain the listing of our Class A Common Stock on the NYSE; if our Class A Common Stock is de-listed from the NYSE, we will use our reasonable best efforts to have our Class A Common Stock listed on another national securities exchange; and, in the event we are unable using our reasonable best efforts to cause the Class A Common Stock to be listed on another national securities exchange after it is de-listed from the NYSE, we will use

our reasonable best efforts to cause a market to be made for the Class A Common Stock; provided, however, that such agreement will not prevent MacAndrews & Forbes or the Company from acquiring shares of Class A Common Stock or engaging in any other transaction permitted by the Contribution and Stockholder Agreement.

 

The extent of the public market for such Class A Common Stock and the availability of such quotations would depend, however, upon such factors as the number of stockholders and the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. We cannot predict whether the reduction in the number of shares of Class A Common Stock that might otherwise trade publicly would have an adverse effect on the market price for or marketability of the Class A Common Stock or whether it would cause future market prices to be greater or less than the value of the Series A Preferred Stock.

 

We do not intend to list the Series A Preferred Stock on any securities exchange.

 

Revlon’s Class A Common Stock currently constitute “margin securities” under the regulations of the Board of Governors of the Federal Reserve System, which has the effect, among other things, of allowing brokers to extend credit on collateral of the Class A Common Stock. Following the consummation of the Exchange Offer, Revlon Class A Common Stock may no longer constitute “margin securities” for purposes of the margin regulations of such Board of Governors and, therefore, may no longer constitute eligible collateral for credit extended by brokers.

 

The Series A Preferred Stock will not constitute “margin securities” for purposes of the margin regulations of such Board of Governors of the Federal Reserve System and, therefore, will not constitute eligible collateral for credit extended by brokers.

 

Operations of Revlon Following the Exchange Offer

 

Except as described in this Offer to Exchange, Revlon has no, and MacAndrews & Forbes has informed us that it has no, current plans or proposals or negotiations which relate to or would result in an extraordinary corporate transaction, such as a change of control transaction, merger, reorganization, or liquidation; a purchase, sale or transfer of a material amount of assets; a material change in Revlon’s present dividend policy, or indebtedness or capitalization; a change in Revlon’s present Board of Directors or management; a material change in Revlon’s corporate structure or business; the acquisition by any person of additional securities of Revlon or the disposition of any securities by Revlon; or any change in Revlon’s charter or bylaws, other than the possible deregistration of the Class A Common Stock under the Exchange Act and the possible de-listing of the Class A Common Stock from the NYSE.

 

During the first quarter of 2009, RCPC used $16.5 million to repurchase an aggregate principal amount of $23.9 million of the 91/2% Senior Notes and paid an additional $1.2 million of accrued and unpaid interest and fees through the respective dates of the repurchases.

 

During the second quarter of 2009, RCPC used $6.3 million to repurchase an aggregate principal amount of $7.0 million of its 91/2% Senior Notes and paid an additional $0.2 million of accrued and unpaid interest and fees through the respective dates of the repurchases.

 

As a result of these repurchases, the Company recorded a net gain of $7.5 million during the first half of 2009, which is net of the write-off of the ratable portion of unamortized debt discount and deferred financing fees.

 

After these repurchases, the repurchased notes were cancelled and there remained outstanding $359.1 million aggregate principal amount of the 91/2% Senior Notes at June 30, 2009.

 

The Company may also, from time to time, seek to retire or purchase its outstanding debt in open market purchases, in privately negotiated transactions or otherwise. Such retirement or purchase of debt may be funded with operating cash flows of the business or other sources and will depend upon prevailing market conditions, liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.

 

We do not have a history of paying dividends on our Class A Common Stock. Revlon is a holding company with no business operations of its own and its only material asset is all of the outstanding capital stock of RCPC through which Revlon conducts its business operations. Accordingly, Revlon is dependent on the earnings and cash

flow of, and dividends and distributions from, RCPC to pay Revlon’s expenses incidental to being a public holding company and dividends, if any, on Revlon’s outstanding securities. The terms of RCPC’s bank credit agreements, its 91/2% Senior Notes indenture and the Senior Subordinated Term Loan currently restrict RCPC’s ability to pay dividends or make distributions to Revlon, except in limited circumstances, which restricts our ability to pay dividends on our Class A Common Stock. We expect that quarterly dividends on our Series A Preferred Stock will be funded by interest received by us from RCPC on the portion of the Senior Subordinated Term Loan that is contributed to us by MacAndrews & Forbes. See “Material Differences Between Class A Common Stock and Series A Preferred Stock” and “Senior Subordinated Term Loan Amendment.”

 

Effect on the MacAndrews & Forbes Participants’ Interest in Revlon’s Net Book Value and Net Income

 

Upon successful completion of the Exchange Offer, and assuming that all shares of Class A Common Stock held by Revlon’s unaffiliated stockholders are tendered in the Exchange Offer, the interest of each of the MacAndrews & Forbes Participants in Revlon’s (1) Net Book Value as of June 30, 2009 would have decreased by $5.4 million, or 0.8%, and (2) Net Income for the six months ended June 30, 2009 would have decreased by $1.4 million, or 17.8%.

 

In addition to the Exchange Offer and the related April 13 proposal and the May 26 alternative proposed by MacAndrews & Forbes, each of which is described in detail in “— Background of the Transactions,” Revlon also considered a rights offering, refinancing the Senior Subordinated Term Loan with new subordinated indebtedness, and maintaining the status quo.

 

Rights Offering

 

In September 2008, Revlon announced its intention to reduce its debt by $170 million. The debt reduction was to have been achieved in two steps. In the first step, Revlon was to use $63 million of the net proceeds from the sale of its Bozzano business in Brazil to repay $63 million of the then-$170 million principal amount of the Senior Subordinated Term Loan. Revlon completed the $63 million repayment of the Senior Subordinated Term Loan, after board approval (with the MacAndrews & Forbes directors abstaining from the vote), because of the nearing maturity date of such loan and because that debt was subject to the highest interest rate of Revlon’s debt.

 

In the second step Revlon intended to commence a $107 million equity rights offering that would have allowed stockholders to purchase additional shares of Revlon Class A Common Stock. Upon closing the rights offering, Revlon intended to use the net proceeds of such equity issuance to fully repay the remaining balance of the Senior Subordinated Term Loan. While Revlon has continued to monitor the equity markets closely to assess the timing of a potential rights offering, thus far we have not found conditions in the marketplace to be conducive to such an offering.

 

Subordinated Indebtedness

 

From time to time, the Company has explored the possibility of refinancing the Senior Subordinated Term Loan through subordinated indebtedness. The Company’s ability to refinance the Senior Subordinated Term Loan is restricted by the terms of its existing financing arrangements and must be refinanced with subordinated indebtedness or equity offerings. The possible terms and conditions available for any such refinancing through further subordinated indebtedness have not been viewed by the Company as favorable given the conditions in the credit markets for subordinated financing and our current credit ratings which, based on informal discussions with bankers, lead us to believe that any such refinancing could require amendments to or refinancing of other existing debt instruments, significantly higher rates for such subordinated indebtedness and/or potential equity dilution related to such refinanced subordinated indebtedness.

 

MacAndrews & Forbes Proposals

 

As explained below under “— Background of the Transactions,” the Special Committee of our Board of Directors evaluated two related proposals made by MacAndrews & Forbes that would have extinguished, in part,

and extended the terms of the Senior Subordinated Term Loan in each case in a merger transaction in which all shares of Class A Common Stock held by Revlon’s unaffiliated stockholders would have been converted into shares of preferred stock having similar financial characteristics to the Series A Preferred Stock. In evaluating those proposals, the Special Committee concluded that, because its financial advisor indicated that it would not be able to render an opinion that the consideration to be offered to Revlon’s unaffiliated stockholders in those proposed mergers was fair, from a financial point of view, to Revlon’s unaffiliated stockholders, the Special Committee was not able to recommend those proposals to our Board of Directors. The financial advisor to the Special Committee of our Board of Directors was not retained to advise and did not advise the Special Committee or our Board of Directors in connection with the Exchange Offer. The Special Committee did not evaluate the terms of or take a position with respect to the Exchange Offer. Our Board of Directors has determined that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. The Board has also determined not to make any recommendation to unaffiliated stockholders as to whether or not to tender their shares for exchange in the Exchange Offer, and has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received. See “— Position of Revlon as to the Fairness of the Exchange Offer.”

 

Maintaining the Status Quo

 

Our Board of Directors considered the alternative of taking no action.

 

As discussed above in “Special Factors — Purpose of and Reasons for the Exchange Offer — Extension of Maturity of Senior Subordinated Term Loan,” as we approach the maturity date of the Senior Subordinated Term Loan, in order to repay or refinance the Senior Subordinated Term Loan the Company may be required to refinance RCPC’s indebtedness, seek to sell additional Revlon equity or debt securities or RCPC debt securities or seek additional capital contributions or loans from MacAndrews & Forbes or from the Company’s other affiliates or third parties. The Company may be unable to take any of these actions, because of a variety of commercial or market factors or constraints in RCPC’s debt instruments, including, without limitation, market conditions being unfavorable for an equity or debt issuance, additional capital contributions or loans not being available from affiliates and/or third parties, or that the transactions may not be permitted under the terms of the various debt instruments then in effect, such as due to restrictions on the incurrence of debt, incurrence of liens and/or related party transactions. Any such actions could be at a cost in excess of the current cost of RCPC’s indebtedness and not in the best interests of the Company and Revlon’s unaffiliated stockholders, especially in light of the ongoing uncertainty in the credit markets due to the economic downturn. Furthermore, the failure to repay the Senior Subordinated Term Loan at its maturity would trigger an event of default under the indenture governing RCPC’s 91/2% Senior Notes and under RCPC’s credit agreements, which would otherwise be due in April 2011 and January 2012, respectively. In addition, we have received no assurances from MacAndrews & Forbes that, absent the consummation of the Exchange Offer and, with it, the Senior Subordinated Term Loan Amendment, MacAndrews & Forbes would be willing to extend the maturity date of the Senior Subordinated Term Loan or would be willing to provide additional loans or make additional capital contributions to us.

 

MacAndrews & Forbes has owned a controlling interest in Revlon since 1985.

 

In order to repay approximately $167 million of its 85/8% Senior Subordinated Notes due on February 1, 2008, in January 2008, RCPC entered into the then $170 million Senior Subordinated Term Loan, dated as of January 30, 2008, with MacAndrews & Forbes, pursuant to which MacAndrews & Forbes lent $170 million to RCPC with a maturity date of August 2009. In entering into Senior Subordinated Term Loan Agreement with MacAndrews & Forbes, the Board of Directors of Revlon considered the fact that the Senior Subordinated Term Loan from MacAndrews & Forbes was being provided on terms more favorable than those that were available to the Company from commercial lenders at both the time of entering into the loan and its extension.

In July 2008, the Company consummated the disposition of its non-core Bozzano business, a leading men’s hair care and shaving line of products, and certain other non-core brands, including Juvena and Aquamarine (which were sold by the Company only in the Brazilian market) and in September 2008, Revlon found it advisable to use a portion of the proceeds from the Bozzano Sale Transaction to repay its indebtedness with the nearest maturity and highest interest cost, which was the Senior Subordinated Term Loan from MacAndrews & Forbes. Therefore, RCPC used $63 million of the net proceeds from the Bozzano Sale Transaction to partially repay $63 million of the outstanding aggregate principal amount under the Senior Subordinated Term Loan. Following such partial repayment, there remained outstanding $107 million in aggregate principal amount outstanding under the Senior Subordinated Term Loan. In November 2008, the Senior Subordinated Term Loan was amended to extend the maturity date. Pursuant to this amendment, the Senior Subordinated Term Loan is currently scheduled to mature on the earlier of (a) the date that Revlon issues equity with gross proceeds of at least $107 million, which proceeds would be contributed to RCPC and used to repay the $107 million remaining aggregate principal balance under the Senior Subordinated Term Loan, or (b) August 1, 2010.

 

In the summer of 2008, Revlon was approached by a few companies regarding a potential acquisition of or other potential strategic transaction involving the Company. As a result, Revlon engaged in a process of exploring various strategic transactions. On August 5, 2008, the Company’s Board of Directors met to receive an update on developments regarding any such strategic transactions, including the fact that the Company’s discussions with most third parties regarding a strategic transaction had terminated and that the process had yielded one non-binding preliminary conditional indication of interest from a third party for a potential strategic transaction indicating a split-adjusted range of between $25.00 and $35.00 per share of the Company’s Common Stock. This preliminary indication was subject to numerous conditions, including due diligence conditions, receipt of Board of Directors approval and conditions that the third party raise the financing necessary to effect a transaction, and there were no assurances that any such financing could be obtained, especially in light of the extremely uncertain financing environment which evolved into a global financial crisis shortly thereafter. Further exploratory discussions with the third party did not result in any binding or executable proposal. The exploration process was terminated in August 2008 before the worldwide financial crisis froze the U.S. and global capital markets.

 

In March 2009, MacAndrews & Forbes began to consider alternative capital structures for Revlon in order to (1) address the repayment of the Senior Subordinated Term Loan which matures in August 2010, and (2) address the perception that the Revlon brand and business were being adversely affected by the Company’s low stock price, in a manner that would provide an attractive alternative for Revlon’s unaffiliated stockholders. MacAndrews & Forbes’ concern regarding the August 2010 maturity of the Senior Subordinated Term Loan was, in part, based on the fact that the Senior Subordinated Term Loan being classified as a current maturity on Revlon’s balance sheet at September 30, 2009, could have a negative impact on Revlon’s business. If the Company was required to classify and disclose the Senior Subordinated Term Loan as a current maturity on Revlon’s balance sheet at September 30, 2009, it could lead to concerns about Revlon’s ability to refinance or repay the Senior Subordinated Term Loan, which could create negative perceptions of the Company and could have a negative impact on its business, operations and/or employees. MacAndrews & Forbes’ concern regarding the August 2010 maturity of the Senior Subordinated Term Loan was also based on its belief that the continued illiquidity of the credit markets would likely make refinancing the Senior Subordinated Term Loan extremely expensive and potentially significantly dilutive to Revlon’s unaffiliated stockholders (assuming it could be refinanced at all). To assist with these efforts, MacAndrews & Forbes hired Gleacher Partners, LLC (which, as a result of its acquisition by Broadpoint Gleacher Securities Group, Inc. is referred to as “Broadpoint-Gleacher”) as its financial advisor, and Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”) as its legal counsel.

 

During March 2009 and April 2009, MacAndrews & Forbes had a few preliminary general discussions with Fidelity, the largest of Revlon’s unaffiliated stockholders (beneficially owning approximately 7,697,114 shares of Class A Common Stock as of December 31, 2009, representing approximately 15.9% of the currently outstanding Class A Common Stock), regarding potential alternative capital structures for Revlon to address the Company’s low stock price and the impending maturity of the Senior Subordinated Term Loan. Specifically, on March 10, 2009, Mr. Perelman and Mr. Barry F. Schwartz, MacAndrews & Forbes Executive Vice Chairman and Chief Administrative Officer, met with representatives of Fidelity to discuss such potential alternative capital structures. On April 6, 2009, Mr. Schwartz met with a representative of Fidelity to discuss the possibility of a transaction in which

MacAndrews & Forbes would contribute to the Company the majority of the principal amount of the Senior Subordinated Term Loan which the Company would then use as the basis to issue a new series of preferred stock, having seniority over the common stock, a fixed dividend and maturity and the ability to participate to a limited extent with the holders of Revlon common stock upon any sale of Revlon in the near term. Mr. Schwartz explained that as a result of this transaction, MacAndrews & Forbes and certain of its affiliates would beneficially own all of the Revlon common stock and all other holders of Revlon Class A Common Stock prior to such transaction would hold an equivalent number of shares of the newly-issued preferred stock. Mr. Schwartz explained that MacAndrews & Forbes was not looking for Fidelity’s agreement as to the terms of a transaction, but wished to know if Fidelity would be opposed to MacAndrews & Forbes making such a proposal to the Company’s Board of Directors. MacAndrews & Forbes has indicated to us that, at that meeting and in follow-up conversations, representatives of Fidelity expressed their appreciation of the merits of such a transaction.

 

On April 13, 2009, MacAndrews & Forbes sent a proposal letter to the Independent Directors outlining the terms of a potential transaction which would result in MacAndrews & Forbes and certain of its affiliates owning 100% of the outstanding Class A Common Stock and Class B Common Stock, which we refer to as the “April 13 proposal.” The April 13 proposal was for a merger transaction in which each share of Class A Common Stock, other than shares beneficially owned by MacAndrews & Forbes and its affiliates, would be converted into one share of preferred stock. The terms of the preferred stock would include: (a) a liquidation preference of $3.74 per share of preferred stock (based on approximately 20.042 million shares of Class A Common Stock outstanding at that time), representing a premium of 40% to the $2.70 volume weighted 30-day average closing price for the Class A Common Stock at that time, (b) payment of quarterly cash dividends of 12.5% per year, (c) mandatory redemption four years from issuance at a price equal to the liquidation preference plus accrued but unpaid dividends, (d) a contingent payment designed to result in Revlon stockholders receiving a payment (described below) in exchange for their shares in Revlon if a sale of Revlon were consummated under certain circumstances during the two-year period following the transaction (which we refer to as the “contingent payment”), and (e) voting rights on a one-for-one basis with the Class A Common Stock of Revlon.

 

The contingent payment proposed in the April 13 proposal was structured so that the preferred stockholders would receive a proportional share of any amount over approximately $240 million of equity value generated in a sale of Revlon during the two years following the transaction, capped at an equity valuation for Revlon of approximately $617 million (which, at such valuation, would yield total payments, including payments payable upon the occurrence of one of certain specified change of control transactions, the liquidation preference and any dividends, to Revlon’s unaffiliated stockholders, of $12.00 per share). Alternatively, if a sale of Revlon were not consummated within that two-year period, holders would receive $1.00 in cash per share of preferred stock at the end of the two year period (which would, at the end of the four-year term, yield total payments, including payment of the liquidation preference and any dividends, to Revlon’s unaffiliated stockholders of $6.61 per share). In the April 13 proposal, MacAndrews & Forbes also indicated that it had no present intention of disposing of its equity stake in Revlon.

 

On April 17, 2009, the price per share of Class A Common Stock increased from $2.85 to $3.93, an increase of approximately 37.8%. As a result of this increase, Revlon determined that it would be advisable to disclose the April 13 proposal and MacAndrews & Forbes agreed with this determination. On April 20, 2009, Revlon issued a press release disclosing the receipt of the proposal.

 

On April 20, 2009, the Independent Directors met and determined that a Special Committee of our Board of Directors should be formed to evaluate and negotiate the April 13 proposal. The Independent Directors also discussed which Independent Directors would be on the Special Committee and the process for retaining legal and financial advisors to the Special Committee.

 

On April 28, 2009, the Revlon Board of Directors, at a regularly scheduled meeting, approved, on the timetable previously proposed, a management transition plan that had previously been presented to and deliberated on by the Board of Directors, including electing Mr. David L. Kennedy (then President and Chief Executive Officer of Revlon and RCPC) as Vice Chairman of Revlon and RCPC and Mr. Alan T. Ennis (then Chief Financial Officer of Revlon and RCPC) as Chief Executive Officer of Revlon and RCPC, in each case effective May 1, 2009.

After that meeting, the independent members of the Board of Directors of Revlon determined which Independent Directors would serve on the Special Committee of the Board that would evaluate the April 13 proposal. The Independent Directors also determined to engage Gibson, Dunn & Crutcher LLP, which we refer to as “Gibson,” as its legal advisor, after consideration of Gibson and several other major law firms.

 

On April 30, 2009, Revlon announced its earnings for the fiscal quarter ended March 31, 2009 and the price per share of Class A Common Stock increased from $3.54 to $4.74, an increase of approximately 33.9%.

 

On May 5, 2009, the Special Committee of the Board of Directors of Revlon held a meeting. At that meeting, Gibson reminded the members of the Special Committee of the scope of Special Committee’s role and their fiduciary duties as members of the Special Committee and the Special Committee’s function of protecting the interests of Revlon’s unaffiliated stockholders. The members of the Special Committee and Gibson discussed the independence of the members of the Special Committee and the responsibilities of the Special Committee with respect to making its recommendation to the Board of Directors concerning the April 13 proposal. After discussion and consideration of several potential financial advisors, the Special Committee determined to engage Barclays Capital Inc., which we refer to as “Barclays Capital,” as its financial advisor, for the purpose of providing financial advisory services to the Special Committee with respect to the April 13 proposal.

 

On May 6, 2009, at a special meeting of Revlon’s Board of Directors, the Board of Directors met to officially authorize the creation of a Special Committee to consider the April 13 proposal. At this meeting, Messrs. Ronald Perelman, Barry Schwartz and David Kennedy, the three members of the Revlon Board of Directors who are also directors or officers of MacAndrews & Forbes, recused themselves from discussion and consideration of the authorization of the Special Committee. Revlon’s Board of Directors then considered the independence of each of Messrs. Alan Bernikow, Paul Bohan, Meyer Feldberg and Kenneth Wolfe and Ms. Debra Lee in connection with evaluating each for service on the Special Committee and determined that none of Messrs. Bernikow, Bohan, Feldberg or Wolfe or Ms. Lee had, or was subject to, any interest that, in the opinion of Revlon’s Board of Directors, would interfere with the exercise by any of these persons of his or her independent judgment as a member of the Special Committee. Revlon’s Board of Directors unanimously (with Messrs. Perelman, Schwartz and Kennedy recusing themselves from the vote) adopted resolutions formally constituting the Special Committee and authorizing the Special Committee to exercise the power of the Revlon Board of Directors with respect to the evaluation of the April 13 proposal. The Special Committee’s mandate included, among other things, the authority to: (a) evaluate, consider, review and respond to the April 13 proposal, (b) negotiate the terms of the April 13 proposal, (c) determine whether the April 13 proposal was advisable, fair to, and in the best interests of Revlon and its stockholders (other than MacAndrews & Forbes and its affiliates), (d) provide any recommendation to the Revlon Board of Directors or its stockholders for their consideration of approving the terms of the April 13 proposal and (e) retain, in its sole discretion and at Revlon’s expense, legal counsel and a financial advisor. The mandate provided that the Special Committee was not required to take any particular action with respect to the April 13 proposal. The Special Committee’s mandate did not extend to seeking and evaluating alternatives to the April 13 proposal as MacAndrews & Forbes had stated to the Board that it had no present intention to dispose of its equity stake in Revlon.

 

On May 6, 2009, members of Revlon’s management, including Mr. Kennedy, Mr. Ennis, Mr. Chris Elshaw, Revlon’s Executive Vice President and Chief Operating Officer, Mr. Robert Kretzman, Revlon’s Executive Vice President, Chief Legal Officer and General Counsel, and Ms. Gina Mastantuono, Revlon’s Senior Vice President, Corporate Controller and Chief Accounting Officer, gave a presentation on the Company’s business to Barclays Capital, including the Company’s then latest available 2009 financial forecast and the Company’s preliminary plans to undergo an organizational restructuring, and subsequently delivered further requested information concerning the Company’s business to Barclays Capital.

 

On May 7, 2009, Barclays Capital and Gibson met with representatives of MacAndrews & Forbes, including Mr. Schwartz, Broadpoint-Gleacher and Wachtell Lipton at the request of the Special Committee to ask certain questions to confirm their understanding of the terms of the April 13 proposal. At the meeting, the representatives of MacAndrews & Forbes confirmed that the April 13 proposal was for a transaction in which, if the Special Committee approved the transaction, MacAndrews & Forbes and its affiliates, as the controlling stockholders of

Revlon, would act by written consent (as permitted by the governing documents of Revlon) to approve the transaction.

 

On May 8, 2009, Wachtell Lipton sent Gibson a draft Agreement and Plan of Merger, a draft Certificate of Designation of Series A Preferred Stock and a transaction structure chart in connection with the April 13 proposal. The draft Certificate of Designation indicated a liquidation preference for the new preferred stock of $3.71 per share (based on approximately 20.193 million shares of Class A Common Stock outstanding as of April 30, 2009 held by Revlon’s unaffiliated stockholders). The substantive terms of the draft Certificate of Designation were otherwise substantially similar to those outlined in the April 13 proposal.

 

On May 11, 2009, at a meeting of the Special Committee, the Special Committee discussed with Gibson and Barclays Capital the prior week’s meetings with Revlon and MacAndrews & Forbes. Barclays Capital and Gibson provided the Special Committee with a detailed review of the terms of the April 13 proposal, including a review of the legal and economic terms of the preferred stock proposed to be issued, the tax treatment to Revlon’s unaffiliated stockholders and the amendment to Revlon’s restated certificate of incorporation necessary to implement the April 13 proposal.

 

On May 12, 2009, management of Revlon, including Messrs. Ennis and Kretzman, spoke with Barclays Capital to discuss Revlon’s consideration of a possible worldwide organizational restructuring and the possible financial impacts of that restructuring.

 

On May 13, 2009, management of Revlon, including Messrs. Kennedy, Ennis, Elshaw and Kretzman, met with Barclays Capital to present the Company’s long-range financial projections, including the detailed assumptions underlying such long-range financial projections. Management noted that one of the major assumptions was RCPC refinancing all of its existing long-term debt, including its 2006 bank term loan and revolver facility, its 91/2% Senior Notes and the Senior Subordinated Term Loan, at existing terms and rates. Management indicated that, under current conditions, RCPC was highly unlikely to refinance its existing long-term debt at the same interest rates. On May 18, 2009, management of Revlon, including Messrs. Kennedy, Ennis, Elshaw and Kretzman and Mr. Steven Berns, Revlon’s Executive Vice President, Chief Financial Officer and Treasurer, and Ms. Mastantuono, met with Broadpoint-Gleacher to present the same long-range financial projections, including the detailed assumptions underlying such long-range financial projections.

 

On May 15, 2009, management of Revlon, including Mr. Kretzman and Ms. Mastantuono, spoke with Barclays Capital in two separate telephone conferences. One discussed due diligence questions regarding Revlon’s tax position and the other discussed further Revlon’s possible worldwide organizational restructuring (which was later announced in May 2009).

 

The Special Committee held a meeting on May 18, 2009, to further discuss the April 13 proposal. At that meeting, the Special Committee formally approved the terms of the Special Committee’s engagement of Barclays Capital as its financial advisor. Barclays Capital gave the Special Committee a presentation covering the financial aspects of the April 13 proposal. The presentation was followed by a general discussion among the members of the Special Committee, Barclays Capital and Gibson. See “Special Factors — Preliminary Draft Report of Special Committee’s Financial Advisor” for a summary of this presentation and additional information on Barclays Capital’s valuation analyses.

 

On May 22, 2009, the Special Committee held another meeting, at which Barclays Capital and Gibson discussed with the Special Committee the approach to negotiating with MacAndrews & Forbes in light of the financial analyses. The Special Committee instructed Barclays Capital to immediately convey to MacAndrews & Forbes the valuation issues raised by the April 13 proposal and the Special Committee’s strong preference for an all-cash transaction due to the greater certainty of value that an all-cash transaction would provide Revlon’s unaffiliated stockholders compared to the preferred stock proposed to be issued under the April 13 proposal.

 

Later that day, Barclays Capital and Gibson had a conference call with representatives of MacAndrews & Forbes, Broadpoint-Gleacher and Wachtell Lipton to discuss the Special Committee’s views with respect to the April 13 proposal. During this call, Barclays Capital communicated the Special Committee’s belief that the value of the April 13 proposal was below the then current market price of the Class A Common Stock, the Special Committee’s preference for an all-cash transaction and Barclays Capital’s belief that there were substantial

difficulties in valuing the preferred stock offered in the April 13 proposal, because, among other things, of the uncertainty as to the availability of surplus to lawfully pay dividends, the liquidation value or any contingent amounts and absence of a trading market and the potential for future dilution of the preferred stock.

 

On May 24, 2009, the Special Committee held another telephonic meeting, at which Barclays Capital and Gibson updated the Special Committee on the May 22 discussion with MacAndrews & Forbes and its advisors, including MacAndrews & Forbes request for a meeting with the Special Committee’s advisors. The Special Committee instructed Barclays Capital and Gibson to continue to negotiate with MacAndrews & Forbes and its advisors concerning the terms of the April 13 proposal to see if the value level of that proposal could be improved.

 

In light of these developments, on May 26, 2009, Barclays Capital and Gibson met with representatives of MacAndrews & Forbes, including Mr. Schwartz and MacAndrews & Forbes’ advisors to further discuss the April 13 proposal. At this meeting, Mr. Schwartz, on behalf of MacAndrews & Forbes, emphasized the importance of the structure as originally proposed, that MacAndrews & Forbes’ April 13 proposal was intended to address the impending maturity of RCPC’s Senior Subordinated Term Loan from MacAndrews & Forbes and why MacAndrews & Forbes was unwilling to make a cash offer. Mr. Schwartz advised that MacAndrews & Forbes was unwilling to make a cash offer because the April 13 proposal was structured to address the impending maturity of the Senior Subordinated Term Loan in a manner that would provide benefits to the participating holders of Revlon’s Class A Common Stock through the issuance of Series A Preferred Stock, and a cash offer would not have accomplished the objective of addressing the impending maturity of the Senior Subordinated Term Loan. In response to the Special Committee’s valuation concerns, MacAndrews & Forbes offered to increase the dividend rate on the new preferred stock from 12.5%, as originally proposed, to 12.75%, and to offer Revlon stockholders the alternative of taking $4.75 in liquidation preference instead of the $3.71 in liquidation preference, and without the component of the contingent payment or the $1.00 per share special dividend payable in the event that no change of control of Revlon were consummated within two years of the issuance of the new preferred stock (which we refer to as the “May 26 alternative”).

 

Following this meeting, on the same day, the Special Committee held a telephonic meeting in which Barclays Capital and Gibson updated the Special Committee on the discussions from earlier that day. Barclays Capital advised the Special Committee that it believed adding the May 26 alternative was essentially the same as the April 13 proposal but a minor improvement in terms of the dividend rate payable to holders of the preferred stock when compared to the original April 13 proposal. The Special Committee asked its advisors whether it would be advisable to propose a counter-offer, and the advisors advised that in light of the history of discussions making a counterproposal was not likely to be productive. In addition, Barclays Capital explained that waiting for public disclosure of a possible worldwide organizational restructuring being considered by Revlon would be advisable.

 

On May 28, 2009, Revlon issued a press release announcing the implementation of the worldwide organizational restructuring that had previously been discussed with the Board of Directors, including the members of the Special Committee, and commenting on the Company’s forecast for the second quarter of 2009 indicating that results for the quarter would be affected by a number of factors, including the fact that the rate of growth of the mass color cosmetics category had started to slow, that retailers were carefully examining and optimizing inventory levels and the unfavorable impact of foreign currency fluctuations and pension expense.

 

Also on May 28, 2009, the Special Committee held a telephonic meeting during which Barclays Capital summarized the views of its fairness committee with respect to the original MacAndrews & Forbes April 13 proposal and the May 26 alternative, based on the status of discussions at that time. Barclays Capital indicated that its internal fairness committee had determined that, if asked, Barclays Capital would not be able to render an opinion that the consideration to be offered to holders of Revlon’s Class A Common Stock (other than MacAndrews & Forbes and its affiliates) in the Merger was fair, from a financial point of view to such holders of Revlon Class A Common Stock. Barclays Capital was not retained to advise, and has not advised, the Special Committee of the Board of Directors or the Board of Directors in connection with the Exchange Offer.

 

Later that day, Gibson conveyed to Wachtell Lipton that the Special Committee would not be able to recommend the April 13 proposal or the May 26 alternative.

Following a discussion with MacAndrews & Forbes, Wachtell Lipton and Gibson on May 27, 2009 discussed an alternative transaction structure in which, instead of a merger, the Company would conduct a voluntary exchange offer offering consideration with financial terms similar to the alternatives that had been discussed, such that the Company’s Class A common stockholders (other than MacAndrews & Forbes and its affiliates) could individually determine whether to tender their shares into such offer in exchange for the new preferred stock (which transaction we hereafter refer to as the “exchange offer”). MacAndrews & Forbes also informed Fidelity of this proposal in order to determine whether Fidelity would be supportive of such an exchange offer with Series A Preferred Stock terms consistent with the terms described to Fidelity. Fidelity indicated that, although no investment decision to participate in the Exchange Offer had been made by Fidelity on behalf of itself or its funds and accounts and an investment decision would be subject to its review of SEC filings disclosing the Exchange Offer, Fidelity would view the Exchange Offer as an attractive potential investment opportunity, provided it meets the investment needs of Fidelity and its funds and accounts.

 

On June 1, 2009, the Special Committee held a meeting at which Gibson informed the Special Committee of MacAndrews & Forbes’ interest in pursuing the exchange offer. Gibson also explained that while such a transaction would be proposed for approval by the entire Board of Directors, and not specifically the Special Committee, MacAndrews & Forbes and the Company had each conveyed its desire that Gibson, acting as a representative of all of the Independent Directors of Revlon, continue to work together with Wachtell Lipton to assess the feasibility and negotiate the terms of the exchange offer. The Special Committee unanimously agreed that Gibson would continue to represent all of the Independent Directors in connection with the exchange offer, subject to confirmation from the other Independent Directors who were not members of the Special Committee. On June 4, 2009, the Special Committee met again with its advisors, at which time Gibson informed the Special Committee of MacAndrews & Forbes’ continued interest in pursuing the exchange offer.

 

On June 4, 2009, Barclays Capital met with Revlon management, including Messrs. Kennedy, Ennis, Elshaw, Berns and Kretzman, to discuss Revlon’s operating performance to date and the sources of the anticipated earnings shortfall in Revlon’s second quarter 2009 quarterly earnings versus the second quarter of 2008, and the factors contributing to such shortfall, as described above.

 

On June 8, 2009, the Special Committee, together with other Independent Directors, briefly met with Barclays Capital and Gibson to discuss the status of the April 13 proposal and the May 26 alternative. Gibson further discussed the possibility of an exchange offer with its members of the Special Committee.

 

On June 9, 2009, the Special Committee, together with other Independent Directors, met with its advisors. Gibson informed the Special Committee that MacAndrews & Forbes’ legal advisors at Wachtell Lipton confirmed that the Special Committee was not being asked to accept or act upon the original April 13 proposal by MacAndrews & Forbes or the May 26 alternative, and that the only transaction currently under discussion was a voluntary exchange offer that would be evaluated and negotiated by the Independent Directors, on behalf of the full Board of Directors, and not by the Special Committee. Because the Special Committee was no longer being asked to consider the April 13 proposal or the May 26 alternative and because the proposed exchange offer was an entirely separate offer and therefore outside of the scope of the authority granted to the Special Committee, the members of the Special Committee unanimously agreed that the work of the Special Committee was complete and that it was appropriate for the full Board of Directors (with Messrs. Perelman, Schwartz, Kennedy and Ennis not participating in any vote) to consider the exchange offer. Later that day, all of the Independent Directors met to discuss the terms of the proposed exchange offer. The Independent Directors confirmed that they would be represented by Gibson. Barclays Capital was not retained to advise and did not advise the Special Committee or the Revlon Board of Directors in connection with the Exchange Offer. The Independent Directors had the full authority to evaluate and negotiate the Exchange Offer on behalf of our Board of Directors, and in fact did so. The Independent Directors did not believe that a fairness opinion was necessary for their evaluation of the Exchange Offer because they did not make a specific determination as to the value of the consideration to be received by tendering stockholders. Furthermore, in light of Barclays Capital’s unwillingness to deliver a fairness opinion with respect to the April 13 proposal, together with the fact that the shares of preferred stock proposed to be issued in the exchange offer had substantially similar financial characteristics as those proposed to be issued under the April 13 proposal, the Independent Directors believed that they would not be able to obtain a fairness opinion with respect to the Exchange Offer, though the Independent Directors did not believe that such fairness opinion was necessary for

their evaluation of the Exchange Offer. Accordingly, the Independent Directors determined not to retain a financial advisor in connection with the Exchange Offer.

 

On June 10, 2009, the Company’s Board of Directors held a meeting with representatives of MacAndrews & Forbes, including Messrs. Perelman, Schwartz and Kennedy, and MacAndrews & Forbes’ advisors, as well as Gibson and the Company’s legal advisors, Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to as “Skadden Arps.” The Board of Directors heard from the Chairman of the Board, Mr. Perelman, the reasons that MacAndrews & Forbes proposed the initial transaction, including that the MacAndrews & Forbes proposal provided a solution to (1) the repayment of the Senior Subordinated Term Loan from MacAndrews & Forbes to RCPC which was coming due in August 2010 and (2) the Revlon brand and business being adversely affected by the Company’s low stock price, while providing significant value to Revlon’s unaffiliated stockholders. The Board of Directors also heard the views of Messrs. Kennedy and Ennis, Revlon’s Vice-Chairman and Chief Executive Officer, respectively, who voiced their view that the extension of the Senior Subordinated Term Loan would improve Revlon’s capital structure during a time of ongoing uncertainty in the credit markets due to the current economic downturn, providing a substantial benefit to Revlon. Individual Independent Directors expressed their willingness to move forward with consideration of an exchange offer in light of the benefit to the Company’s capital structure.

 

Between June 10, 2009 and July 22, 2009, Revlon and MacAndrews & Forbes and their respective legal advisors and Gibson, on behalf of the Independent Directors, negotiated drafts of the documents required in connection with the Exchange Offer. Through the course of such negotiations, the parties also determined that in the Exchange Offer Revlon’s unaffiliated stockholders would have the opportunity to exchange shares of Class A Common Stock for a newly-issued series of preferred stock, which would be substantially the same as the security proposed in the April 13 proposal, but would have a dividend of 12.75%.

 

On June 17, 2009, Gibson, on behalf of the Independent Directors, and Wachtell Lipton had a telephone conversation to discuss and negotiate the terms of the Exchange Offer and protective provisions for the benefit of those stockholders of the Company, if any, who would choose not to participate in the Exchange Offer. On June 23, 2009, Gibson, Skadden Arps and Wachtell Lipton further discussed the terms of the Exchange Offer and such protective provisions. The protective provisions that were agreed to among the parties, as refined based on discussions with counsel for the Independent Directors and separate discussions with Plaintiffs’ Counsel (as defined below) in connection with the Delaware actions described in “Stockholder and Derivative Litigation” which occurred in July 2009 and early August 2009, have been included as covenants of Revlon and MacAndrews & Forbes in the Contribution and Stockholder Agreement.

 

On June 30, 2009, Gibson, on behalf the Independent Directors, met with MacAndrews & Forbes and Wachtell Lipton to discuss and negotiate the remaining terms of the Exchange Offer, including certain protections to the holders of Class A Common Stock who did not elect to participate in the Exchange Offer, other governance protections for the holders of Class A Common Stock and Series A Preferred Stock, and disclosures in the draft Offer to Exchange being prepared in contemplation of the Exchange Offer. Skadden Arps was present at this meeting as a representative of Revlon.

 

On July 22, 2009, the Independent Directors met with Gibson. Gibson and the Independent Directors reviewed and discussed the terms of each of the transaction documents, including the Certificate of Designations of the Preferred Stock, the Senior Subordinated Term Loan Amendment, the Contribution and Stockholder Agreement, this Offer to Exchange and amendments to Revlon’s amended and restated certificate of incorporation necessary to permit the Exchange Offer. The Independent Directors also discussed at length the merits of the Exchange Offer and the protections that had been negotiated for the benefit of stockholders of the Company who would choose not to participate.

 

On July 29, 2009, the Independent Directors met again to discuss the terms of the exchange offer, having considered and reviewed the terms of the transaction, the advisability of conducting the Exchange Offer in light of the benefits to Revlon’s capital structure and impending maturities, and the Exchange Offer documentation and disclosures. The Board of Directors authorized Revlon to conduct the Exchange Offer, subject to finalization of documentation relating to the Exchange Offer.

From time to time commencing in late July 2009, counsel for Revlon, the Independent Directors and MacAndrews & Forbes had discussions with counsel for parties in the Delaware actions described in “Stockholder and Derivative Litigation” (whom we refer to as “Plaintiffs’ Counsel”) regarding certain potential changes in the proposed transaction in the context of settling the litigation described in that section. Certain changes to the structure of the transaction were agreed during daily discussions during the week of August 3, 2009 at the request of Plaintiffs’ Counsel, including that the holders of the Series A Preferred Stock would have the right to receive a special dividend of $1.50 per share out of funds lawfully available therefor, instead of $1.00 per share, that the Series A Preferred Stock would be convertible into a new Series B Preferred Stock, and that the cap on the change of control payment payable to holders of Series B Preferred Stock would be $12.50 per share instead of $12.00 per share (including the liquidation preference and any dividends paid or payable in respect of the Series B Preferred Stock) and that the Exchange Offer would provide that if MacAndrews & Forbes is eligible upon the consummation of the Exchange Offer to effect a short-form merger in accordance with Section 253 of the DGCL, then MacAndrews & Forbes or one of its subsidiaries will as soon as reasonably practicable seek to consummate, or cause to be consummated, a short-form merger in accordance with Section 253 of the DGCL pursuant to which the holders of Class A Common Stock (other than MacAndrews & Forbes or its affiliates) will receive Series A Preferred Stock or shares of preferred stock in the surviving corporation of such transaction with terms substantially identical to, or no less favorable than, the terms of the Series A Preferred Stock (with, for the avoidance of doubt, the same terms as though issued on the date of original issuance of the Series A Preferred Stock). On August 10, 2009, the Independent Directors met with Gibson to discuss the terms of the Exchange Offer as previously proposed, taking into account the changes requested by Plaintiffs’ Counsel, and Gibson and the Independent Directors reviewed and discussed the merits of the proposal. After such discussions, none of the Independent Directors raised any objections to proceeding with the Exchange Offer as previously approved, and as revised to reflect the discussions with the Plaintiffs’ Counsel.

 

On September 11, 2009, the Expiration Date was extended to 5:00 p.m. on September 17, 2009, and on September 18, 2009, the Expiration Date was extended to 5:00 p.m. on September 24, 2009.

 

During the week of September 14, 2009, the Plaintiffs’ Counsel and counsel for each of Revlon, the Independent Directors and MacAndrews & Forbes discussed certain proposed revisions to the Exchange Offer, including an amendment to the Minimum Condition which would provide that the Exchange Offer be conditioned on at least 7,500,000 shares of Class A Common Stock being tendered by Revlon’s unaffiliated stockholders.

 

On September 21, 2009, the Board of Directors met to discuss certain revisions to the Exchange Offer proposed by MacAndrews & Forbes, including, among other things, an amendment to the Minimum Condition which would provide that the Exchange Offer be conditioned on at least 7,500,000 shares of Class A Common Stock being tendered by Revlon’s unaffiliated stockholders. The Board of Directors preliminarily approved these amended terms of the Exchange Offer.

 

Discussions with MacAndrews & Forbes continued, and on September 22, 2009, MacAndrews & Forbes proposed amended terms for the Exchange Offer, including a Minimum Condition that at least 7,500,000 shares of Class A Common Stock be tendered by Revlon’s unaffiliated stockholders and revised terms of the Series A Preferred Stock that would (i) increase the liquidation preference of the Series A Preferred Stock from $3.71 per share to $5.21 per share, (ii) no longer provide for the special cash dividend of $1.50 per share after two years if Revlon had not engaged in one of certain specified change of control transactions during that period, and (iii) extend from two years to three years after consummation of the Exchange Offer the right of holders of Series A Preferred Stock to receive a special dividend, capped at an amount that would provide aggregate cash payments of up to $12.00 per share (as opposed to $12.00 per share in respect of the first and second years after consummation of the Exchange Offer and, upon conversion into the Series B Preferred Stock, $12.50 per share in respect of the third year after consummation of the Exchange Offer), upon certain specified change of control transactions and instead of the one-time opportunity such holders otherwise had to extend such participation right from two years to three years in exchange for giving up the right to receive the $1.50 per share special cash dividend.

 

On September 22, 2009, MacAndrews & Forbes also informed Fidelity of this proposal in order to determine whether Fidelity would be supportive of such an exchange offer with Series A Preferred Stock terms consistent with the terms described to Fidelity. Fidelity indicated that, although no investment decision to participate in the

Exchange Offer had been made by Fidelity on behalf of itself or its funds and accounts and an investment decision would be subject to its review of SEC filings disclosing the Exchange Offer, Fidelity would view the Exchange Offer as an attractive potential investment opportunity, provided it meets the investment needs of Fidelity and its funds and accounts.

 

On September 23, 2009, after further discussions with MacAndrews & Forbes, the Plaintiffs’ Counsel, and counsel for Revlon, MacAndrews & Forbes and the Independent Directors, MacAndrews & Forbes proposed to Revlon that, in addition to the terms proposed on September 22, the maturity date of the Non-Contributed Loan be extended from August 1, 2010 to the fifth anniversary of the consummation of the Exchange Offer and the interest rate on the Non-Contributed Loan be changed from 11% to 12% per annum. As previously proposed, the maturity date of the entire Senior Subordinated Term Loan would have been extended from August 1, 2010 to the fourth anniversary of the consummation of the Exchange Offer and the interest rate on the entire Senior Subordinated Term Loan would have been changed from 11% to 12.75% per annum. These revisions were agreed to by MacAndrews & Forbes conditioned upon the approval of counsel for the Independent Directors and Plaintiffs’ Counsel.

 

On September 23, 2009, the Board of Directors met and authorized the amended terms for the Exchange Offer, as proposed by MacAndrews & Forbes on September 22, 2009 and September 23, 2009.

 

On September 23, 2009, the parties to the Delaware actions agreed to Amendment No. 1 to the Memorandum of Understanding previously executed on August 10, 2009. Among other things, this Amendment No. 1 reflected the revised terms of the Exchange Offer and the fact that MacAndrews & Forbes explicitly conditioned the modifications to the terms of the Exchange Offer and the provision of any additional benefits to be provided in connection with the Settlement of the Delaware actions on the agreement of both Delaware lead counsel and the Independent Directors.

 

The financial terms of the Series A Preferred Stock offered pursuant to this Exchange Offer have improved from the April 13 proposal in that (a) the liquidation preference has increased to $5.21 per share from $3.71 per share, (b) a 12.75% annual dividend will be paid out of funds legally available therefor as opposed to the 12.5% dividend, (c) it includes certain anti-dilution provisions that had not been included in the April 13 proposal and (d) if Revlon engages in a change of control transaction within three years of consummation of the Exchange Offer, the holders of the Series A Preferred Stock will have the right to receive a special dividend, capped at an amount that would provide aggregate cash payments of up to $12.00 per share, as opposed to up to $12.00 per share in respect of the first and second years after consummation of the Exchange Offer and, upon conversion into the Series B Preferred Stock, $12.50 per share in respect of the third year after consummation of the Exchange Offer (in each case, including the liquidation preference and any dividends paid or payable in respect of the Series A Preferred Stock), as described in the section entitled “Description of Series A Preferred Stock — Dividend Rights.” However, the Series A Preferred Stock offered pursuant to this Exchange Offer does not provide the opportunity to receive a one-time $1.50 per share special cash dividend.

 

Our Board of Directors, with Messrs. Perelman, Ennis, Kennedy and Schwartz not participating in the vote, has authorized us to make the Exchange Offer and determined that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. The Board has also determined not to make any recommendation to unaffiliated stockholders as to whether or not to tender their shares for exchange in the Exchange Offer, and has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received. The transaction was approved by all of the Independent Directors, who constitute a majority of the directors who are not employees of Revlon or MacAndrews & Forbes. The Board of Directors consists of eleven directors, four of whom, Messrs. Perelman, Kennedy and Schwartz (due solely to their being affiliated with MacAndrews & Forbes) and Mr. Ennis (due to his being Revlon’s President and Chief Executive Officer), have interests in the Exchange Offer different from the interests of Revlon’s unaffiliated stockholders generally, as described below. On July 29, 2009, our Board of Directors approved the Exchange Offer and the Senior Subordinated Term Loan Amendment, in

each case on the terms then proposed, subject to finalization of documentation relating to the Exchange Offer. Messrs. Perelman, Kennedy and Schwartz chose not to participate in the vote regarding the Exchange Offer due to their affiliation with MacAndrews & Forbes, which has interests in the Exchange Offer and the Senior Subordinated Term Loan Amendment that are different from those of Revlon’s unaffiliated stockholders generally. See Annex D for the name, business address, citizenship, present principal occupation and employment history for the past five years of each of the members of the Board of Directors and the executive officers of Revlon. See “Interests of Certain Persons in the Transactions — Interests of the MacAndrews & Forbes Participants —  in the Exchange Offer” for additional information on MacAndrews & Forbes’ interests in the Exchange Offer. In addition, Mr. Ennis chose not to participate in the discussion of, consideration of, and vote regarding the Exchange Offer because he is not an “independent” director within the meaning of the NYSE’s listing standards and our Board of Directors’ Guidelines for Assessing Director Independence. On September 23, 2009, our Board of Directors approved the amended terms of the Exchange Offer.

 

After careful consideration, including, without limitation, a thorough review of the terms and conditions of the Exchange Offer with the Independent Directors’ legal advisors, our Board of Directors, with Messrs. Perelman, Ennis, Kennedy and Schwartz not participating in the vote, determined to take no position and make no recommendation as to whether Revlon’s unaffiliated stockholders should tender their shares of Class A Common Stock in the Exchange Offer. In reaching the determination to authorize the Exchange Offer, our Board of Directors primarily considered the facts that the Series A Preferred Stock has very different characteristics than the Class A Common Stock (including, among other things, a 12.75% annual dividend rate and seniority in liquidation) that may appeal to Revlon’s unaffiliated stockholders; that Fidelity has indicated to MacAndrews & Forbes that, although no investment decision to participate in the Exchange Offer had been made by Fidelity on behalf of itself or its funds and accounts and an investment decision would be subject to its review of SEC filings disclosing the Exchange Offer, Fidelity would view the Exchange Offer as an attractive potential investment opportunity, provided it meets the investment needs of Fidelity and its funds and accounts, and MacAndrews & Forbes has advised that the terms of the Series A Preferred Stock are consistent with terms described to Fidelity, as further detailed in the section entitled “Special Factors — Background of the Transactions” ; and that the Exchange Offer is voluntary and that Revlon’s unaffiliated stockholders who do not tender their shares of Class A Common Stock will have the protections described in the section entitled “The Contribution and Stockholder Agreement.”

 

In reaching the determination to take no position and make no recommendation to Revlon’s unaffiliated stockholders as to whether they should tender their shares of Class A Common Stock in the Exchange Offer, our Board of Directors primarily considered the fact that, as described above under the section entitled “— Background of the Transactions,” although the Exchange Offer is a different transaction, the Special Committee evaluating a merger transaction in which Revlon’s unaffiliated stockholders would have received in exchange for their shares of Class A Common a series of preferred stock having similar financial characteristics as the Series A Preferred Stock was informed by its financial advisor that it would not be able to render an opinion that the consideration to be offered to Revlon’s unaffiliated stockholders in such transaction was fair, from a financial point of view, to Revlon’s unaffiliated stockholders. In addition, our Board of Directors also noted that investors have different risk tolerances and varying time horizons and these decisions are personal to each investor. Accordingly, our Board of Directors has determined that the decision of any unaffiliated Revlon stockholder regarding whether or not to exchange his, her or its shares of Class A Common Stock is a personal investment decision based on that stockholder’s particular circumstances and must be made according to that stockholder’s evaluation of its own best interests after consideration of all of the information in this Offer to Exchange, including, without limitation, the information incorporated into this Offer to Exchange by reference. The Board of Directors also urges each stockholder to consult with its own financial and tax advisors regarding the Exchange Offer.

 

MacAndrews & Forbes and Revlon have agreed pursuant to the Contribution and Stockholder Agreement that during the four years following the consummation of the Exchange Offer to maintain a majority of Independent Directors on our Board of Directors in accordance with the NYSE listed company manual following the consummation of the Exchange Offer.

 

All of our directors and executive officers who own shares of Class A Common Stock (other than Mr. Ronald O. Perelman), representing in the aggregate 298,297 shares of Class A Common Stock, have advised us that they intend to tender all such shares of Class A Common Stock in the Exchange Offer. The Company has also been

advised that Mr. Ronald O. Perelman will not tender any shares of Class A Common Stock beneficially owned by him or MacAndrews & Forbes, as he and MacAndrews & Forbes are participating in the Exchange Offer by other means.

 

An unaffiliated representative was not retained to act solely on behalf of Revlon’s unaffiliated stockholders for purposes of negotiating the terms of the Exchange Offer or preparing a report concerning the fairness of the Exchange Offer.

 

In reaching its determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares, our Board of Directors had previously considered the fact that the Exchange Offer was conditioned upon the tender of a majority of the outstanding shares of Class A Common Stock not beneficially owned by MacAndrews & Forbes or its affiliates and the related fact that this condition was described as “non-waivable.” Our Board of Directors no longer views these two factors as necessary to such determination in light of the additional factors supporting its fairness determination, as described above in the section titled “Special Factors — Reasons for the Revisions to the Exchange Offer.”

 

After careful consideration, on September 23, 2009 our Board of Directors, with Messrs. Perelman, Schwartz, Kennedy and Ennis not participating in the vote, has determined that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. The Board has also determined not to make any recommendation to unaffiliated stockholders as to whether or not to tender their shares for exchange in the Exchange Offer, and has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received.

 

When the Board reached its determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares, it took into account the following terms of the Series A Preferred Stock which relate to financial fairness:

 

 

The Board has not made any specific determination as to the value of the consideration to be received by tendering stockholders, and, accordingly, the value of the consideration was not a factor in the Board’s reaching its determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. In that regard, the Board did not believe that it was legally required to consider the value of the consideration to be received by tendering stockholders in order to make such determination. Notwithstanding Barclays Capital’s unwillingness to deliver a fairness opinion with respect to the April 13 proposal in which it was proposed that Revlon would issue preferred stock with similar financial characteristics to the Series A Preferred Stock, the Board determined to offer Revlon

stockholders a choice to consider the Exchange Offer transaction, which offered terms that could be found attractive, and may be beneficial, to individual Revlon stockholders as well as to Revlon, for the following reasons:

 

 

The Board also considered the following substantive and procedural factors when it reached its determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares:

 

 

 

 

 

Our Board of Directors also considered a variety of risks and other potentially negative factors concerning the Exchange Offer. The material risks and potentially negative factors considered by our Board of Directors were as follows:

 

 

 

As indicated above, our Board of Directors has not made any specific determination as to the value of the consideration to be received by tendering stockholders. Accordingly, you must make your own decision as to whether to tender Class A Common Stock in the Exchange Offer in light of your own particular circumstances, taking into account your determination as to the value of the consideration to be received. For the reasons expressed above, the Board did not consider the current stock prices of the Class A Common Stock, the Company’s net book value, the going concern value of Revlon, the liquidation value of Revlon or the prices paid for Class A Common Stock by the MacAndrews & Forbes Participants in the previous two years. Our Board of Directors did not retain Barclays Capital or any other unaffiliated representative (as that term is used in Rule 13e-3 of the Exchange Act) to act solely on behalf of Revlon’s unaffiliated stockholders for purposes of preparing a report concerning the fairness of the Exchange Offer. We are not aware of any firm offers made by a third party to acquire the Company during the past two years. Furthermore, we have been advised that MacAndrews & Forbes has no current intention of selling the Class A Common Stock and Class B Common Stock owned by it. Accordingly, third-party offers were not considered by the Board of Directors in reaching its conclusion as to fairness. The Exchange Offer is not structured so that approval of at least a majority of unaffiliated security holders is required.

 

The foregoing discussion summarizes the material factors considered by our Board of Directors in its consideration of the Exchange Offer. After considering these factors, the Board of Directors concluded that the positive factors relating to the Exchange Offer and related transactions outweighed the potential negative factors to the Company and Revlon’s unaffiliated stockholders. In view of the wide variety of factors considered by the Board of Directors, and the complexity of these matters, the Board of Directors did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual Independent Directors may have assigned different weights to various factors. The Board of Directors approved the Exchange Offer and related transactions based upon the totality of the information presented to and considered by its members. The Board of Directors’ view as to the fairness of the Exchange Offer to Revlon’s unaffiliated stockholders should not be

construed as a recommendation to any stockholder as to whether that stockholder should tender in the Exchange Offer.

 

The rules of the SEC require each of the MacAndrews & Forbes Participants to express its or his belief as to the fairness of the Exchange Offer to Revlon’s unaffiliated stockholders.

 

Each of the MacAndrews & Forbes Participants believes that the Exchange Offer is procedurally and substantively fair, including financially fair, to Revlon’s unaffiliated stockholders who tender their shares for exchange in the Exchange Offer and Revlon’s unaffiliated stockholders who do not tender their shares. The MacAndrews & Forbes Participants base their beliefs on the following factors, each of which, in their judgment, supports their view as to the fairness of the Exchange Offer:

 

 

 

 

In addition, each of the MacAndrews & Forbes Participants believes that the Exchange Offer is procedurally fair to Revlon’s unaffiliated stockholders, based on the following factors:

 

 

 

Each of the MacAndrews & Forbes Participants also considered the following factors, each of which it considered a negative in its considerations concerning the fairness of the terms of the Exchange Offer:

 

 

Each of the MacAndrews & Forbes Participants believes that the revisions to the Exchange Offer made on September 24, 2009 are procedurally and substantively fair, including financially fair, to Revlon’s unaffiliated stockholders who tender their shares for exchange in the Exchange Offer and Revlon’s unaffiliated stockholders who do not tender their shares. The MacAndrews & Forbes Participants base their beliefs on the following factors, each of which, in their judgment, supports their view as to the fairness of the Exchange Offer:

 

 

 

In reaching its determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares, the MacAndrews & Forbes Participants had previously considered the fact that the Exchange Offer was conditioned upon the tender of a majority of the outstanding shares of Class A Common Stock not beneficially owned by MacAndrews & Forbes or its affiliates and the related fact that this condition was described as “non-waivable.”

 

The MacAndrews & Forbes Participants no longer view these two factors as necessary to such determination in light of the additional factors supporting its fairness determination, as described above in the two prior paragraphs.

 

The Exchange Offer is no longer conditioned upon the tender of at least a majority of the shares of Class A Common Stock not beneficially owned by MacAndrews & Forbes and its affiliates, and the MacAndrews & Forbes Participants no longer view the factors set forth above as necessary to their determination that the Exchange Offer is fair to Revlon and Revlon’s unaffiliated stockholders who tender their shares for exchange, as well as the unaffiliated stockholders who do not tender their shares. The MacAndrews & Forbes Participants did not consider as a negative factor in their fairness determinations that security holders participating in the Exchange Offer will participate on a limited basis in any future earnings or growth of the Company because the holders of the Series A Preferred Stock will receive substantial value in the form of quarterly cash dividends and the ability to receive additional upside value up to total payments of $12.00 per share (including the liquidation preference and any dividends paid or payable in respect of the Series A Preferred Stock) in the event that Revlon does engage in one of certain specified change of control transactions within three years of the consummation of the Exchange Offer. Another reason the MacAndrews & Forbes Participants did not consider this as a negative factor in their fairness determinations was that the Exchange Offer provides Revlon’s unaffiliated stockholders the opportunity to acquire a senior, dividend paying security that may have characteristics that are more aligned with their risk profile and investment strategy. The terms of the Series A Preferred Stock by themselves thus offer both downside protection (through the payment of regular dividends and the liquidation preference) and the opportunity for upside in the event Revlon engages in one of certain specified change of control transactions, reflecting the benefits of possible future earnings growth or revenue growth. The MacAndrews & Forbes Participants did not consider as a negative factor the fact that shareholders who elect to exchange their shares of Class A Common Stock for shares of Series A Preferred Stock would have limited participation in future earnings or revenue growth of Revlon as such a trade-off is inherent in any disposition of common shares and the holders of the Series A Preferred Stock would have a degree of downside protection not available to holders of common stock. Moreover, there is no guarantee that holders of Class A Common Stock would realize any value from such future growth or that any value so realized would exceed $12.00 per share. The MacAndrews & Forbes Participants were aware of the fact (as disclosed in the section titled “Risk Factors — Risks Related to the Exchange Offer — We may be restricted by the terms of our indebtedness and the applicable provisions of the General Corporation Law of the State of Delaware from paying dividends on and/or redeeming the Series A Preferred Stock ‘”) that dividends on the Series A Preferred Stock may only be paid out of surplus or net profits of the Company, but the MacAndrews & Forbes Participants nevertheless believed that the terms of the Series A Preferred Stock were fair in light of the fact that the Series A Preferred Stock is senior to the Class A Common Stock.

In reaching their conclusions as to fairness, the MacAndrews & Forbes Participants did not consider the views of the Special Committee’s financial advisor in considering the April 13 proposal and the May 26 alternative because the MacAndrews & Forbes Participants consider that factor irrelevant to the current structure of a voluntary exchange transaction. The MacAndrews & Forbes Participants believe that the Special Committee’s financial advisor, in considering the April 13 proposal and the May 26 alternative and advising the Special Committee through the review process of such proposal, did not provide adequate weight to the impending maturity of the Senior Subordinated Term Loan and the likely negative impacts any alternative refinancing of such debt would have on the Company and its stockholders.

 

In reaching their conclusions as to fairness, the MacAndrews & Forbes Participants did not consider the liquidation value or net book value of Revlon. The liquidation value was not considered, and neither of the MacAndrews & Forbes Participants performed a liquidation analysis, because Revlon is a viable going concern and neither the Board of Directors of Revlon nor the MacAndrews & Forbes Participants has any current intention of liquidating the Company. In addition, the liquidation of Revlon’s assets was not considered to be a viable course of action based on the MacAndrews & Forbes Participants’ desire for Revlon to continue to conduct its business as a subsidiary of MacAndrews & Forbes and remain an integral component of MacAndrews & Forbes’ overall long-term strategy. Therefore, the MacAndrews & Forbes Participants believe that Revlon’s liquidation value is irrelevant to a determination as to whether the Exchange Offer is fair to Revlon’s unaffiliated stockholders. Further, the MacAndrews & Forbes Participants did not consider net book value, which is an accounting concept, as a factor because they believe that net book value (which is a large negative number in this case, equal to negative $20.85 per share as of June 30, 2009, and therefore not an indication of the Company’s value or the value of its equity) is not a material indicator of the value of Revlon as a going concern but rather is indicative of historical costs. Revlon’s net book value per share as of June 30, 2009, calculated by dividing stockholders’ deficiency by the number of shares of common stock outstanding, was negative $20.85 per share.

 

While the MacAndrews & Forbes Participants considered historical market prices of the Class A Common Stock and the prices they have paid for Class A Common Stock in the previous two years, and noted that in both cases they reflected prices above recent trading prices, the MacAndrews & Forbes Participants concluded that these factors were not important in determining present value. In the MacAndrews & Forbes Participants’ judgment, the prices they or anyone else paid in the past are not necessarily indicative of the value of the Class A Common Stock as of the date of this Offer to Exchange. The MacAndrews & Forbes Participants considered the current market prices of the Class A Common Stock, but concluded that this factor was not important to their determinations of the fairness of the Exchange Offer because of the entirely voluntary nature of the Exchange Offer and because of the protections afforded to Revlon’s unaffiliated stockholders who choose not to tender their shares of Class A Common Stock in the Exchange Offer, as described in the section titled “The Contribution and Stockholder Agreement.”

 

The MacAndrews & Forbes Participants determined the amount of consideration to be paid in the Exchange Offer and did not rely on any report, opinion or appraisal from an outside party in reaching its conclusion as to fairness.

 

No MacAndrews & Forbes Participant is aware of any firm offers made by third parties to acquire Revlon during the past two years.

 

In any event, MacAndrews & Forbes has no current intention of selling the common stock beneficially owned by it, and therefore did not consider the possibility that any such offers might be made in reaching its conclusion as to the fairness of the Exchange Offer.

 

To the MacAndrews & Forbes Participants’ knowledge, a majority of the directors of Revlon who are not employees of Revlon have not retained an “unaffiliated representative” (as that term is defined under Rule 13e-3 of the Exchange Act) to act solely on behalf of stockholders who are unaffiliated with MacAndrews & Forbes for purposes of preparing a report concerning the fairness of the Exchange Offer. The Exchange Offer is not structured so that approval of at least a majority of unaffiliated security holders is required.

 

The MacAndrews & Forbes Participants’ consideration of the factors described above were taken into account in their assessments of the fairness of the Series A Preferred Stock to be received pursuant to the Exchange Offer in relation to the going concern value of Revlon on a stand-alone basis. The MacAndrews & Forbes Participants did

not explicitly calculate a stand-alone going concern value of Revlon because the MacAndrews & Forbes Participants believe that going concern value is not an appropriate method of determining the value of the shares of Class A Common Stock for the purpose of the Exchange Offer. A valuation that contemplates the sale of a company as a going concern incorporates into that valuation a premium for the control of that company. In light of the fact that MacAndrews & Forbes already has, and will continue to have, control of Revlon, the MacAndrews & Forbes Participants do not believe that it would be appropriate for the shares of Class A Common Stock of the stockholders who are unaffiliated with MacAndrews & Forbes to be valued on a basis that includes a control premium.

 

The foregoing discussion summarizes the material information and factors the MacAndrews & Forbes Participants considered, including factors that support as well as weigh against the Exchange Offer and is not intended to be exhaustive. In view of the variety of factors and the amount of information considered, the MacAndrews & Forbes Participants did not find it practicable to, and did not, make specific assessments of, quantify, or otherwise assign relative weights to these factors in reaching their conclusions. The MacAndrews & Forbes Participants’ views as to the financial and procedural fairness of the Exchange Offer to Revlon’s stockholders should not be construed as a recommendation to any stockholder as to whether that stockholder should tender in the Exchange Offer or seek to remain as a holder of Class A Common Stock of Revlon.

 

MacAndrews & Forbes and certain of its affiliates delivered to Revlon an executed written consent of stockholders approving each of the following (the “Written Consent”): (1) the issuance of up to 20,235,337 shares of Class A Common Stock to MacAndrews & Forbes (the “Proposed Issuance”), (2) the approval of an amendment to our restated certificate of incorporation (our “certificate of incorporation”) to increase the number of authorized shares of our preferred stock from 20 million to 50 million (the “Preferred Charter Amendment”) and (3) an amendment to our certificate of incorporation to clarify that the provision requiring that holders of our Class A Common Stock, and holders of our Class B Common Stock, receive the same consideration in certain business combinations will only apply in connection with transactions involving third parties (the “Transaction Charter Amendment” and, together with the Preferred Charter Amendment, the “Charter Amendments” ; the approval of the Charter Amendments and the Proposed Issuance is collectively referred to as the “Proposals”).

 

As the Proposals have been duly authorized and approved by the written consent of the holders of at least a majority of our issued and outstanding voting securities, we will not seek any consent, authorization or proxy from Revlon’s unaffiliated Stockholders. Section 228 of the DGCL provides that the written consent of the holders of outstanding shares of voting capital stock, having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, may be substituted for a meeting. Approval by at least a majority of the outstanding voting power of our shares of common stock present and voting on the matter at a meeting would be required to approve the Proposals, which approval has been duly secured by written consent executed and delivered to us by MacAndrews & Forbes, as noted above.

 

The Proposed Issuance and the Preferred Charter Amendment will only occur if the Exchange Offer is consummated, in which case they will occur substantially simultaneously with the consummation of the Transactions. The Transaction Charter Amendment will occur as soon as practicable after the effectiveness of the Written Consent.

 

Role of Barclays Capital

 

The Special Committee engaged Barclays Capital to act as its financial advisor in connection with its evaluation of the April 13 proposal pursuant to which (i) each outstanding share of Revlon’s Class A Common Stock (other than shares held by MacAndrews & Forbes and its affiliates) would be converted through a merger (the “Merger”) into one share of a new series of preferred stock of Revlon (the “Preferred Stock”), (ii) MacAndrews & Forbes would contribute to Revlon $75 million of the Senior Subordinated Term Loan, and (iii) MacAndrews & Forbes would agree to amend the terms of Senior Subordinated Term Loan to extend its maturity to 2013 and increase its interest rate from 11% to 12.5%.

Barclays Capital was retained by the Special Committee to render assistance in connection with its consideration of the April 13 proposal. Barclays Capital was not retained to advise, and did not advise, the Special Committee or the Revlon Board of Directors in connection with the Exchange Offer. The work of Barclays Capital was limited to assisting the Special Committee in connection with its consideration of the April 13 proposal.

 

On May 18, 2009, at a meeting with the Special Committee held to consider the April 13 proposal, Barclays Capital delivered discussion materials, dated May 18, 2009, containing a draft summary of its financial analyses of the April 13 proposal to the Special Committee (the “Barclays Capital Presentation”) and reviewed the Barclays Capital Presentation with the Special Committee. The full text of the Barclays Capital Presentation is filed as Exhibit (c)(1) to the Schedule TO/Schedule 13E-3 of Revlon. Stockholders are encouraged to review the Barclays Capital Presentation carefully in its entirety and to be aware of the assumptions made, procedures followed, factors considered and limitations upon the review undertaken as described below. The following is a summary of the financial analyses that Barclays Capital performed in connection with its role as financial advisor to the Special Committee. This summary is qualified in its entirety by reference to the full text of the Barclays Capital Presentation.

 

On May 28, 2009, Barclays Capital, in response to a request of the Special Committee, informed the Special Committee that Barclays Capital’s Fairness Opinion Committee had determined that, if asked, it would not be able to render an opinion that the consideration to be offered to the stockholders of Revlon (other than MacAndrews & Forbes and its affiliates) in the April 13 Proposal was fair, from a financial point of view, to the stockholders of Revlon (other than MacAndrews & Forbes and its affiliates). See “Special Factors — Background of the Transactions.” In determining that it would not be able to render an opinion that the consideration to be offered to the stockholders of Revlon (other than MacAndrews & Forbes and its affiliates) in the April 13 proposal was fair, from a financial point of view, to the stockholders of Revlon (other than MacAndrews & Forbes and its affiliates), Barclays Capital did not attribute any particular weight to any single analysis or factor considered by it, as described below, but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the April 13 proposal. Accordingly, Barclays Capital believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its review of the April 13 proposal.

 

The financial analyses summarized in the Barclays Capital Presentation were prepared solely for the use of the Special Committee in its evaluation of the April 13 proposal. Neither the Barclays Capital Presentation nor this summary constitutes a recommendation to any stockholder of Revlon as to whether such stockholder should tender shares of Class A Common Stock with respect to the Exchange Offer or any other matter. Barclays Capital was not requested to address, and the financial advice Barclays Capital rendered to the Special Committee does not in any manner address, Revlon’s underlying business decision to proceed with, and Revlon’s Board of Directors’ decision to approve, the Exchange Offer. In addition, the financial advice Barclays Capital rendered to the Special Committee does not in any manner address the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the Merger or the proposed Exchange Offer, or any class of such persons, relative to the consideration to be received by the stockholders of Revlon in the Merger or the proposed Exchange Offer. Except as described herein, no limitations were imposed by Revlon’s Special Committee upon Barclays Capital with respect to the investigations made or procedures followed by it in rendering its financial advice with respect to the April 13 proposal and the May 26 alternative.

 

In rendering its financial advice to the Special Committee, Barclays Capital, among other things:

 

 

 

In evaluating the April 13 proposal, Barclays Capital also took into consideration the following factors, among others:

 

 

 

In rendering its financial advice to the Special Committee, Barclays Capital assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays Capital without any independent verification of such information. Barclays Capital also relied upon the assurances of Revlon’s management that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Revlon, upon the advice of Revlon, Barclays Capital assumed that such projections were reasonably prepared in accordance with the assumptions stated therein and on a basis reflecting the best currently available estimates and judgments of the management of Revlon as to Revlon’s future financial performance. In rendering its financial advice to the Special Committee, Barclays Capital assumed no responsibility for, and expressed no view as to, any such projections or estimates or the assumptions on which they were based. In rendering its financial advice, Barclays Capital did not conduct a physical inspection of the properties and facilities of Revlon and did not make or obtain any evaluations or appraisals of the assets or liabilities of Revlon. In addition, Barclays Capital was not authorized by the Special Committee to solicit, and did not solicit, any indications of interest from any third party with respect to the purchase of all or a part of Revlon’s business. The Barclays Capital Presentation was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, May 15, 2009, the last trading date prior to the delivery of the Barclays Capital Presentation. Barclays Capital assumed no responsibility for updating or revising its financial analysis based on events or circumstances that may have occurred after May 15, 2009. The Barclays Capital Presentation was prepared in connection with the Special Committee’s consideration of the April 13 proposal and not in connection with the Exchange Offer.

 

In connection with rendering its financial advice to the Special Committee, Barclays Capital performed certain financial, comparative and other analyses as summarized below. In rendering its financial advice, Barclays Capital did not ascribe a specific range of values to the shares of Class A Common Stock or the Preferred Stock but rather made its determination as to the adequacy, from a financial point of view, to the stockholders of Revlon (other than MacAndrews & Forbes and its affiliates) of the consideration to be offered to such stockholders in the Merger on the basis of various financial and comparative analyses. The preparation of the financial analyses presented to the Special Committee in the Barclays Capital Presentation is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, the Barclays Capital Presentation is not readily susceptible to summary description.

 

In rendering its financial advice, Barclays Capital did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the April 13 proposal. Accordingly, Barclays Capital believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its financial advice.

 

The following is a summary of the material financial analyses used by Barclays Capital in preparing the Barclays Capital Presentation. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Barclays Capital, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. In performing its analyses, Barclays Capital made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Revlon or any other parties to the proposed transaction. None of Revlon, Barclays Capital or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold.

Historical Share Price Analysis

 

To illustrate the trend in the historical trading prices of Class A Common Stock, Barclays Capital considered historical data with regard to the trading prices of Class A Common Stock for the period from January 3, 2005 to May 15, 2009 and compared the trading prices of Class A Common Stock for the period from May 15, 2006 to May 15, 2009 with the relative stock price performances during the same periods of the S&P 500 Index, the Consumer Staples SPDR Index, and a composite index comprised of the companies listed under the caption “—  Selected Comparable Company Analysis” below. Trading prices of Class A Common Stock were adjusted for Revlon’s 1-for-10 reverse stock split that occurred on September 15, 2008.

 

Barclays Capital noted that during the period from May 15, 2006 to May 15, 2009, the closing price of Class A Common Stock traded from a low of $2.30 on March 30, 2009 to a high of $31.10 on May 18, 2006. Barclays Capital further noted that the closing price of Class A Common Stock was $3.93 on April 17, 2009 (the last trading day prior to public disclosure of the April 13 proposal), and was $4.87 on May 15, 2009 (the last trading day prior to the delivery of the Barclays Capital Presentation).

 

Selected Comparable Company Analysis

 

In order to assess how the public market values shares of publicly traded companies with similar operating characteristics, Barclays Capital reviewed and compared specific financial and operating data relating to Revlon with selected companies that Barclays Capital, based on its experience in the cosmetics and personal care industries, deemed comparable to Revlon. The selected comparable companies were:

 

 

Barclays Capital calculated and compared various financial multiples and ratios of Revlon and the selected comparable companies. As part of its selected comparable company analysis, Barclays Capital calculated and analyzed each company’s enterprise value to its projected revenue and earnings before interest, taxes, depreciation and amortization, or EBITDA. The enterprise value of each selected comparable company was obtained by adding its short- and long-term debt to the sum of the market value of its fully-diluted common equity, the value of any preferred stock (at liquidation value) and the book value of any minority interest, and subtracting its cash and cash equivalents. For the selected comparable companies, these calculations were performed and were based on publicly available financial data (including projections available through First Call/I/B/E/S International, Inc., selected equity research analyst reports, and balance sheet data based on the companies’ most recent public filing prior to May 15, 2009, the last trading date prior to the delivery of the Barclays Capital Presentation) and closing prices as of May 15, 2009. Revlon’s enterprise value was calculated by adding Revlon’s short- and long-term debt and the book value of Revlon’s underfunded pension obligations to the market value of its fully-diluted common equity, and subtracting its cash and cash equivalents. For purposes of the comparable company analysis, Revlon’s revenue and EBITDA were based on the Base Case and the Adjusted Base Case financial projections. Revlon’s EBITDA was further adjusted such that, based on Barclays Capital’s judgment, Revlon’s operating data would be more comparable to that of the selected comparable companies, including (i) a reduction to EBITDA by expensing Revlon’s permanent display expense, (ii) a reduction to EBITDA by not adding back Revlon’s stock-based compensation expense, and (iii) an addition to EBITDA by adding back Revlon’s pension expense, net of service

costs. Barclays Capital also calculated a “Pro Forma EBITDA” for Revlon which, although not used in the selected comparable company analysis, was used in other sections of the Barclays Capital Presentation for comparative purposes. Barclays Capital calculated Revlon’s Pro Forma EBITDA by making the same adjustments to EBITDA as described above in this paragraph but did not add back Revlon’s pension expense. Furthermore, when calculating Revlon’s enterprise value to Pro Forma EBITDA, Barclays Capital calculated Revlon’s enterprise value in the same manner as described above in this paragraph, but did not add to Revlon’s enterprise value the book value of Revlon’s underfunded pension obligations.

 

The following are summary results of the selected comparable company analysis:

 

 

Note:  Physicians Formula Holdings, Inc. excluded from Low, Mean, Median and High calculations.

 

Barclays Capital noted that comparable multiples for Revlon based on the $4.87 closing price of Class A Common Stock on May 15, 2009 were 7.7x and 7.0x 2009E and 2010E EBITDA, respectively, for the Base Case, and 7.2x and 6.2x 2009E and 2010E EBITDA, respectively, for the Adjusted Base Case.

 

Barclays Capital then derived from these analyses and calculations the range of multiples deemed most meaningful for this analysis (which were 7.5x to 8.5x 2009E EBITDA and 6.5x to 7.5x 2010E EBITDA) and applied these multiples to the corresponding data for Revlon based on the Base Case financial projections. Barclays Capital also performed a separate comparable company analysis based on the Adjusted Base Case financial projections. The comparable company analysis indicated a range of implied equity values for Revlon of $2.40 to $8.40 per share for the Base Case, and $6.40 to $11.70 per share for the Adjusted Base Case.

 

Barclays Capital selected the comparable companies listed above because their businesses and operating profiles are reasonably similar to that of Revlon. However, because of the inherent differences between the business, operations and prospects of Revlon and those of the selected comparable companies, Barclays Capital believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays Capital also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Revlon and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Revlon and the companies included in the comparable company analysis.

 

Discounted Cash Flow Analysis

 

Barclays Capital performed a discounted cash flow analysis in order to estimate the present value of Class A Common Stock. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

 

To calculate the estimated enterprise value of Revlon using the discounted cash flow method, Barclays Capital added (i) Revlon’s projected after-tax unlevered free cash flows from July 1, 2009 through December 31, 2013 based on management projections to (ii) the estimated “terminal value” of Revlon as of December 31, 2013, and discounted such amount to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking Revlon’s tax-affected earnings before interest and tax expense, or EBIT, and

(w) subtracting capital expenditures and permanent display expenditures, (x) adding depreciation and amortization expense and stock-based compensation expense, (y) adjusting for changes in working capital, and, for the Adjusted Base Case, (z) subtracting estimated severance-related cash payments related to the implementation of the organizational restructuring.

 

The residual value of Revlon at the end of the forecast period, or “terminal value,” was estimated by applying a range of perpetuity growth rates of 1.75% to 2.25% to Revlon’s 2013 after-tax unlevered free cash flows. The range of after-tax discount rates of 11.0% to 13.0% was selected based on an analysis of the weighted average cost of capital of Revlon and the comparable companies described above under the caption “— Selected Comparable Company Analysis.” Barclays Capital then calculated a range of implied prices per share of Revlon by subtracting Revlon’s estimated net debt as of March 31, 2009 (including the book value of Revlon’s underfunded pension liabilities as of December 31, 2008) from Revlon’s estimated enterprise value using the discounted cash flow method and dividing such amount by the fully diluted number of shares of Class A Common Stock and Class B Common Stock. Barclays Capital performed a discounted cash flow analysis based on the Base Case financial projections, as well as a separate discounted cash flow analysis based on the Adjusted Base Case financial projections. For each of the Base Case and the Adjusted Base Case discounted cash flow analyses, Barclays Capital also separately analyzed the estimated present value on a per share basis of Revlon’s U.S. net-operating loss carryforwards (“NOLs”) based on information provided to Barclays Capital by Revlon management.

 

This analysis yielded a range of values for the Base Case from $1.10 to $8.70 per share plus a per share value of NOLs of $1.70 to $1.80. For the Adjusted Base Case, the analysis yielded a range of values from $4.70 to $13.20 per share plus a per share value of NOLs of $2.10 to $2.30.

 

Transaction Premium Analysis

 

In assessing the April 13 proposal, Barclays Capital reviewed the premium paid in similar transactions since 2000 where a majority stockholder of a company acquired all or a portion of the target company’s remaining outstanding shares. Barclays Capital noted that no transaction was directly comparable because all transactions involved cash, publicly listed common stock or a combination of cash and stock as consideration in the transaction; no transaction involved the use of preferred stock as consideration to be offered in exchange for publicly listed common stock. For the reasons above, the transaction premium analysis was not one of the primary methodologies used in the Barclays Capital Presentation.

 

For each transaction, Barclays Capital calculated the premium per share paid by the acquirer by comparing the announced transaction value per share to the target company’s historical average share price during the following periods: (i) one trading day prior to announcement of the transaction, (ii) seven calendar days prior to announcement, (iii) 30 calendar days prior to announcement, and (iv) 90 calendar days prior to announcement.

 

The reasons for, and the circumstances surrounding, each of the transactions analyzed in the transaction premium analysis were diverse and there are inherent differences in the business, operations, financial conditions and prospects of Revlon and the companies included in the analysis. Accordingly, Barclays Capital believed that a purely quantitative transaction premium analysis would not be particularly meaningful in the context of considering the April 13 proposal and therefore made qualitative judgments when selecting the set of transactions to include in the analysis. Based upon these judgments, Barclays Capital applied (i) a 20% premium to the closing price of Class A Common Stock on April 17, 2009, the last trading day prior to the public announcement of the April 13 proposal, implying a per share price of $4.70, and (ii) a 30% premium to the closing price of Class A Common Stock on May 15, 2009, the last trading day prior to the delivery of the Barclays Capital Presentation, implying a per share price of $6.30.

 

Selected Precedent Transaction Analysis

 

Barclays Capital reviewed and compared the purchase prices and financial multiples paid in selected beauty, cosmetics and personal care transactions that Barclays Capital deemed relevant. Barclays Capital chose such transactions based on, among other things, the similarity of the applicable target companies in the transactions to Revlon with respect to the size, mix, margins and other characteristics of their respective businesses.

The reasons for, and the circumstances surrounding, each of the selected precedent transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of Revlon and the companies included in the selected precedent transaction analysis. Accordingly, Barclays Capital believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the April 13 proposal and therefore made qualitative judgments when selecting the set of transactions included in precedent transaction analysis.

 

The precedent transaction analysis performed by Barclays Capital was not one of the primary methodologies used in the Barclays Capital Presentation given that the April 13 proposal does not contemplate a change of control of Revlon. Barclays Capital nevertheless deemed the analysis relevant due to the potential impact that accepting the April 13 proposal could have on a Revlon stockholder’s ability to participate in a future sale of Revlon.

 

The selected precedent transaction analysis yielded a range of purchase multiples of 14.0x to 15.0x last twelve months EBITDA, and 1.75x to 2.75x last twelve months net sales.

 

Analysis of the Preferred Stock

 

Barclays Capital performed a preferred stock valuation analysis on the Preferred Stock that MacAndrews & Forbes proposed be exchanged for shares of Class A Common Stock held by unaffiliated Revlon stockholders pursuant to the April 13 proposal. Barclays Capital’s analysis assumed, based on the terms specified in the April 13 proposal, the following for the Preferred Stock:

 

 

 

The preferred stock valuation analysis calculates the present value per share of the Preferred Stock, assuming a 20% discount rate, at a range of probabilities that a sale of Revlon, at a range of stock prices, occurs within two years of the date on which the Preferred Stock is issued. The discount rate was based upon an expectation that an investor would require a return that was consistent with similar securities. In selecting a discount rate, Barclays Capital used Revlon’s Senior Secured Notes (the “Notes”) which were yielding 18% as reference security over which investors

would require a premium given the Preferred Stock would be junior to the Notes. The following table summarizes the results of these calculations:

 

 

 

Note:  Assumes 20% discount rate.

 

Barclays Capital also performed a separate preferred stock analysis calculating the present value of the option, as described in the April 13 proposal, to participate to a limited extent with holders of Class A Common Stock in the event that Revlon is sold within two years of the issuance of the Preferred Stock (the “Participation Right”). The present value of the Participation Right was calculated based on the Black-Scholes option pricing model, the methodology that Barclays Capital believed an investor would use in pricing the Participation Right. The present value of the Participation Right was based on Revlon’s closing price on May 15, 2009, the last trading date prior to the delivery of the Barclays Capital Presentation, and, separately, based on Revlon’s closing price on April 9, 2009, the closing price used by MacAndrews & Forbes in the April 13 proposal. The following table summarizes the results of these calculations:

 

 

Barclays Capital further noted that several factors may adversely affect the public market value of the Preferred Stock, including:

 

 

General

 

Barclays Capital is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The Special Committee selected Barclays Capital because of its familiarity with Revlon and its

qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as Barclays Capital’s substantial experience in advising special committees.

 

Barclays Capital acted as financial advisor to the Special Committee in connection with evaluating the April 13 proposal. As compensation for its services in connection with its evaluating the April 13 proposal, Revlon paid Barclays Capital a fee of $1,350,000, which included reimbursement of Barclays Capital for its reasonable out-of-pocket expenses incurred in connection with evaluating the April 13 proposal and agreed to indemnify Barclays Capital for certain liabilities that may arise out of its engagement by the Special Committee and the rendering of Barclays Capital’s financial advice. Barclays Capital has not performed any investment banking and financial services for Revlon and MacAndrews & Forbes in the past two years. Barclays Capital may perform various investment banking and financial services for Revlon in the future, and is likely to receive customary fees for such services.

 

Barclays Capital is a full service securities firm engaged in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of its business, Barclays Capital and affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of Revlon and MacAndrews & Forbes for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.

 

Role of Broadpoint-Gleacher

 

In connection with the Exchange Offer, Broadpoint-Gleacher, MacAndrews & Forbes’ financial advisor, prepared materials that were made available to MacAndrews & Forbes and Revlon (the “Broadpoint-Gleacher Presentation”), in which Broadpoint-Gleacher outlined its view of the economic benefits of a transaction similar to the Exchange Offer to Revlon’s unaffiliated stockholders. The presentation was prepared by Broadpoint-Gleacher and provided to the Independent Directors for their information in connection with the Exchange Offer and is not intended and does not constitute a recommendation to any stockholder of Revlon as to whether such stockholder should tender shares of Class A Common Stock with respect to the Exchange Offer or any other matter. Broadpoint-Gleacher was not asked to and did not consider the fairness, from a financial point of view, of the Exchange Offer. In addition, the terms of the Exchange Offer changed following the delivery of the Broadpoint-Gleacher Presentation and the Broadpoint-Gleacher Presentation does not reflect all of the terms of the Exchange Offer. The full text of the Broadpoint-Gleacher Presentation is filed as Exhibit (c)(2) to the Schedule TO/Schedule 13E-3 of Revlon.

 

In arriving at its conclusions, Broadpoint-Gleacher did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Broadpoint-Gleacher believes that its analyses must be considered as a whole and that selecting portions of its analyses or portions of the factors considered by it, without considering all analyses and factors, would create an incomplete view of the processes underlying such analyses and its opinion. In its analyses, Broadpoint-Gleacher made numerous assumptions with respect to the Company, industry performance, general business, economic, market and financial conditions and other matters. Because such estimates are inherently subject to substantial uncertainty, none of MacAndrews & Forbes, the Company, Broadpoint-Gleacher or any other person assumes responsibility for their accuracy.

 

In conducting its analyses and arriving at its opinion, Broadpoint-Gleacher: (i) reviewed certain publicly available financial statements and other information of the Company; (ii) reviewed certain internal financial statements and other financial and operating data concerning the Company prepared by Company management; (iii) analyzed certain financial forecasts prepared by Company management; (iv) discussed the past and current operations and financial condition and the prospects of the Company with Company management; (v) reviewed the reported prices and trading activity for the Class A Common Stock; (vi) compared the financial performance of the Company and the prices and trading activity of the Class A Common Stock with that of certain other publicly traded companies and their securities that Broadpoint-Gleacher considered comparable to the Company in certain

respects; and (vii) reviewed such other information, performed such other analyses and considered such other factors as Broadpoint-Gleacher deemed appropriate.

 

Summary of the Broadpoint-Gleacher Presentation

 

Broadpoint-Gleacher’s presentation was premised on a two-phased transaction structure with similar financial terms to the Exchange Offer, prior to its amendment on September 24, 2009. In the first step of this structure, MacAndrews & Forbes would amend the terms of the Senior Subordinated Term Loan such that the maturity date would be extended to 2013 in exchange for an increase in the coupon rate from 11% to 12.75%, payable in cash on a quarterly basis. In the second step, Revlon’s participating minority stockholders (the “Participating Stockholders”) would surrender their existing equity interests in Revlon in exchange for new preferred stock (the “New Preferred Stock”) pursuant to which Participating Stockholders would receive a security with a $3.71 per share liquidation preference and other terms similar to those of the restructured Senior Subordinated Term Loan. The New Preferred Stock would also include the right to receive a special dividend in the event of certain specified change of control transactions during the two years following the consummation of the proposed voluntary exchange offer that would have provided Participating Stockholders with the right to participate in such a transaction by means of a special dividend in the event the equity value paid in such transaction exceeded a minimum threshold, up to a total maximum consideration of $12.00 per share, including the liquidation preference and aggregate preferred dividends paid or accrued. If no specified change of control transaction were to occur within the two-year period, Participating Stockholders would have received an additional $1.00 per share payment. Finally, for each share of Class A Common Stock tendered in the proposed voluntary exchange offer, MacAndrews & Forbes would have contributed $3.71 in principal amount of the Senior Subordinated Term Loan to Revlon in exchange for Revlon issuing one share of Class A Common Stock to MacAndrews & Forbes.

 

Broadpoint-Gleacher noted its views on the affirmative benefits to Participating Stockholders of the proposed voluntary exchange offer. First, Broadpoint-Gleacher stated that Participating Stockholders would maintain their voting rights in Revlon while receiving substantial downside protection through a liquidation preference of $3.71 per share. Second, Broadpoint-Gleacher stated that Participating Stockholders would receive the benefit of quarterly preferred dividends at a rate of 12.75% per annum (or approximately $0.47 per share per annum). Broadpoint-Gleacher also noted that these cash dividends would serve to increase the total consideration received by Participating Stockholders by approximately 51% in a potentially tax advantageous manner. Third, Broadpoint-Gleacher noted that Participating Stockholders would have the continued ability to participate in the equity upside if Revlon engaged in one of certain specified change of control transactions within two years of consummation of the proposed voluntary exchange offer, capped at $12 per share, including the liquidation preference and aggregate preferred dividends. In addition, if Revlon did not engage in such a change of control transaction within two years of consummation of the proposed voluntary exchange offer, then Participating Stockholders would have received a $1.00 special dividend. Fourth, Broadpoint-Gleacher noted the benefits associated with the elimination of the August 2010 refinancing contingency relating to the Senior Subordinated Term Loan.

 

Broadpoint-Gleacher performed an analysis of illustrative value considerations in the event a change of control occurred during the two years following the consummation of the proposed voluntary exchange offer. The following table summarizes the proceeds that would have been received by Participating Stockholders in the proposed voluntary exchange offer based on a range of per share change of control prices:

 

Value to Participating Stockholders

 

 

Proceeds to Participating Stockholders at a Range of Exit Values ($)

 

 

 

 

Broadpoint-Gleacher also outlined its views of the refinancing considerations facing Revlon and RCPC with respect to the Senior Subordinated Term Loan. Broadpoint-Gleacher noted that as of March 31, 2009, RCPC had approximately $1.3 billion of funded indebtedness maturing within the next three years, including its bank term loan agreement, which matures in January 2012, its 91/2% Senior Notes, which mature in April 2011, and the Senior Subordinated Term Loan; the Senior Subordinated Term Loan matures on the earlier of (i) the date that Revlon issues equity with gross proceeds of at least $107 million, or (ii) August 1, 2010; and that the Senior Subordinated Term Loan would become a current liability at the end of the Revlon’s third fiscal quarter on September 30, 2009 unless its maturity is extended.

 

Broadpoint-Gleacher also stated its belief that the upcoming maturity of the Senior Subordinated Term Loan poses significant risk to Revlon equity holders for the following reasons:

 

 

Broadpoint-Gleacher identified three specific alternatives for the refinancing of the Senior Subordinated Term Loan.

 

First, Broadpoint-Gleacher considered the refinancing of the Senior Subordinated Term Loan through the proposed voluntary exchange offer. Broadpoint-Gleacher performed a dilution analysis based on the successful completion of the proposed voluntary exchange offer, and found that it could result in a 2% to 20% economic dilution of non-participating stockholders, depending on participation rates, in the event of a change of control

transaction within two years of consummation of such offer and depending on the valuation of a change of control transaction. The following are summary results of the dilution analysis for the proposed voluntary exchange offer:

 

Economic Dilution to Non-Participating Stockholders

 

 

 

 

Second, Broadpoint-Gleacher considered the refinancing of the Senior Subordinated Term Loan on market terms. Broadpoint-Gleacher stated its belief that it would be extremely difficult for Revlon to refinance the Senior Subordinated Term Loan in the then-current credit market environment. Broadpoint-Gleacher based this position on the belief that a financing commitment would be unlikely on a fully underwritten basis and that any attempt to secure financing would be pursued on a “best efforts” basis. Broadpoint-Gleacher further stated that third parties would likely require a yield to maturity in excess of that of RCPC’s 91/2% Senior Notes, implying a yield higher than 15.4% based on the then current trading values of RCPC’s 91/2% Senior Notes. In addition, Broadpoint-Gleacher noted that third parties may also require warrant coverage to induce them to participate in the contemplated refinancing, resulting in further dilution to Revlon stockholders. Broadpoint-Gleacher also expressed its view that the terms of any refinancing of the Senior Subordinated Term Loan, if it could be refinanced at all, could affect the refinancing of Revlon’s and RCPC’s other debt. Finally, Broadpoint-Gleacher estimated that the dilution associated with a substantial increase in interest rates and the required warrant coverage would be significant to existing Revlon stockholders.

 

Third, Broadpoint-Gleacher considered the refinancing of the Senior Subordinated Term Loan through an equity issuance or rights offering. Broadpoint-Gleacher performed a dilution analysis for an equity issuance or

rights offering, and found that such a transaction could result in up to 35% economic dilution to Revlon’s unaffiliated stockholders depending on participation rates and the price of the equity issuance or rights offering. Broadpoint-Gleacher’s analysis contemplated a scenario in which Revlon issued equity with gross proceeds of at least $107 million to repay the Senior Subordinated Term Loan at maturity, and assumed that if fewer than 100% of Revlon’s unaffiliated stockholders participated in the equity issuance or rights offering on a pro rata basis, then MacAndrews & Forbes would be issued shares representing the shortfall. The following are summary results of the dilution analysis for a proposed rights offering:

 

Accretion / Dilution to Public Stockholders

 

 

 

 

 

Miscellaneous

 

Broadpoint-Gleacher is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. MacAndrews & Forbes selected Broadpoint-Gleacher because of its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally. MacAndrews & Forbes has paid Broadpoint-Gleacher a fee of $500,000 in connection with its retention as MacAndrews & Forbes’ financial advisor. Broadpoint-Gleacher has not performed any investment banking and financial services for Revlon in the past two years, and, although it has not received any compensation in respect of such services, it has performed other investment banking or financial services for MacAndrews & Forbes in the past two years. Broadpoint-Gleacher may perform various investment banking and financial services for MacAndrews & Forbes in the future, and is likely to receive customary fees for such services.

 

In addition to the other information in this Offer to Exchange, investors should consider carefully the following risk factors when evaluating the Exchange Offer:

 

In the event the Exchange Offer is not consummated, Revlon will need to find alternative methods to refinance or repay the Senior Subordinated Term Loan, which may be prohibitively expensive.

 

One of the reasons for conducting the Exchange Offer is to reduce the principal amount of the Senior Subordinated Term Loan and to extend the maturity date of the principal amount that remains after the Exchange Offer from August 1, 2010 to the fourth anniversary of the consummation of the Exchange Offer. The principal reduction of up to $105.43 million of the Senior Subordinated Term Loan will occur through the contribution by MacAndrews & Forbes in connection with the consummation of the Exchange Offer. Revlon cannot provide assurances that we would otherwise be able to repay or refinance such loan amount with subordinated debt when it comes due August 1, 2010, especially in light of uncertainty in the credit markets due to the economic downturn. Furthermore, the failure to repay the Senior Subordinated Term Loan at its maturity would trigger an event of default under the indenture governing RCPC’s 91/2% Senior Notes due April 1, 2011 (the “91/2% Senior Notes”) and under RCPC’s credit agreements.

 

There can been no assurance that any trading market for the Series A Preferred Stock will develop or be maintained.

 

There can be no assurance that any market for the Series A Preferred Stock will develop or, if one does develop, that it will be maintained. If an active market for the Series A Preferred Stock fails to develop or be sustained, the trading price of the Series A Preferred Stock could be materially adversely affected. We do not intend to apply for listing of the Series A Preferred Stock on any securities exchange. The liquidity of the trading market in the Series A Preferred Stock, and the market price quoted for the Series A Preferred Stock, may be materially adversely affected by:

 

 

We may be restricted by the terms of our indebtedness and the applicable provisions of the General Corporation Law of the State of Delaware from paying dividends on and/or redeeming the Series A Preferred Stock.

 

Under the DGCL, we are permitted to pay dividends only from our “surplus,” which is the excess of our total assets over the sum of our liabilities plus the aggregate par value of our outstanding capital stock, or if we have no surplus, out of our net profits for the year in which a dividend is declared and/or for the immediately preceding fiscal year. We cannot assure you that we will have any surplus or net profits so that we will be able to pay dividends on the Series A Preferred Stock. Additionally, we are permitted to redeem the Series A Preferred Stock only from our surplus. We cannot assure you that we will have any surplus at such time as we may be required to redeem the Series A Preferred Stock. In the event that we fail to pay any required dividends on our Series A Preferred Stock, the amount of such unpaid dividends will be added to the amount payable to holders of our Series A Preferred Stock upon redemption.

Revlon’s unaffiliated stockholders who exchange their shares of Class A Common Stock will only participate on a limited basis in any future earnings or growth of our business or the proceeds from one of certain specified change of control transactions.

 

While holders of Series A Preferred Stock will be entitled to quarterly dividends at an annual rate of 12.75% over the four-year life of the Series A Preferred Stock, such holders will not benefit from increases, if any, in the value of Revlon, including, without limitation, any increases due to a general economic recovery, unless there is a change of control of Revlon during the three-year period following the consummation of the Exchange Offer. If such an event occurs, participation by holders of Series A Preferred Stock will be limited to the receipt of payments up to an aggregate of $12.00 per share (including, without limitation, the liquidation preference, dividends and payments upon certain specified change of control transactions).

 

The Series A Preferred Stock will be senior to our common stock, but it will be subordinate to our indebtedness in our capital structure.

 

While the Series A Preferred Stock will be senior to the common stock of Revlon, it will be subordinate to all present and future indebtedness of Revlon with respect to assets available to satisfy claims against Revlon, including, without limitation, in the event of any liquidation, dissolution or winding up of Revlon. As a result, holders of our Series A Preferred Stock will not be entitled to receive any payment or other distribution of assets upon liquidation or dissolution until after Revlon’s obligations to its debt holders have been satisfied. However, pursuant to the Senior Subordinated Term Loan Amendment, no portion of the principal amount of the Senior Subordinated Term Loan may be repaid prior to its maturity unless and until all shares of Series A Preferred Stock have been or are being concurrently redeemed and all payments due thereon are paid in full or are concurrently being paid in full.

 

Holders of the Series A Preferred Stock are subject to future economic dilution in the event that we issue equity to third-parties who are not affiliated with MacAndrews & Forbes or to MacAndrews & Forbes on arms’ length terms.

 

We are not prohibited from issuing equity to third parties or from issuing equity to MacAndrews & Forbes or its affiliates on arms’ length terms. In the event of any such issuance, holders of Series A Preferred Stock will be economically diluted, and their participation in increases, if any, in the value of Revlon, will be proportionally diluted.

 

It is uncertain whether the exchange of Class A Common Stock for Series A Preferred will be treated as a taxable transaction for United States federal income tax purposes.

 

We may qualify as a “family-owned corporation” for purposes of the United States federal income tax rules relating to tax-free recapitalizations and, if we do, you will not recognize gain or loss for United States federal income tax purposes on the exchange of Class A Common Stock for Series A Preferred Stock pursuant to the Exchange Offer. Our qualification as a family-owned corporation depends in part on the continued holding of stock representing at least 50% of the total combined voting power of our voting stock and at least 50% of all other classes of our stock, generally, directly or indirectly by members of the same family, during the period starting on the date of the consummation of the Exchange Offer and ending on the third anniversary of the consummation of the Exchange Offer (or, if a short-form merger described under “Special Factors — Certain Effects of the Exchange Offer — Effect on Ownership Structure of Revlon” is consummated, the third anniversary of the consummation of such short-form merger). No assurance can be given that this will be the case. If we fail to qualify as a family-owned corporation, the exchange likely would be treated, retroactively, as a taxable transaction. See “Material United States Federal Income Tax Considerations” below for a discussion of the tax consequences of exchanging Class A Common Stock for Series A Preferred Stock, including, without limitation, the failure of the exchange to qualify as a tax-free transaction.

Risks Related to Retaining Class A Common Stock

 

The successful completion of the Exchange Offer will result in a diminished public float for our Class A Common Stock, which could adversely affect the liquidity and market value of our Class A Common Stock and create uncertainty as to whether our Class A Common Stock would remain eligible for listing on the NYSE or any other national securities exchange.

 

Upon the consummation of the Exchange Offer, there will be fewer shares of our Class A Common Stock held by Revlon’s unaffiliated stockholders, and there will therefore likely be fewer transactions in Class A Common Stock. If the Class A Common Stock does not meet the NYSE’s continued listing requirements, it may be de-listed, and the Class A Common Stock may not satisfy the listing requirements of any other national securities exchange. During the four years following the consummation of the Exchange Offer, unless a short-form merger is consummated in accordance with the Contribution and Stockholder Agreement, we will use our reasonable best efforts to maintain the listing of our Class A Common Stock on the NYSE; if our Class A Common Stock is de-listed from the NYSE, we will use our reasonable best efforts to have our Class A Common Stock listed on another national securities exchange; and, in the event we are unable using our reasonable best efforts to cause the Class A Common Stock to be listed on another national securities exchange after it is de-listed from the NYSE, we will use our reasonable best efforts to cause a market to be made for the Class A Common Stock; provided, however, that such agreement will not prevent MacAndrews & Forbes or the Company from acquiring shares of Class A Common Stock or engaging in any other transaction permitted by the Contribution and Stockholder Agreement. A lack of an active trading market may have an adverse effect on the trading price of our Class A Common Stock. See “Special Factors — Certain Effects of the Exchange Offer — Effects on Listing, Registration and Status of Revlon Common Stock.”

 

The Exchange Offer may adversely affect our earnings per share and consequently the value of our Class A Common Stock.

 

On a pro forma basis, the dividends on the Series A Preferred Stock will result in lower income attributable to Class A Common Stock and consequently lower earnings per share of Class A Common Stock. Net income from continuing operations per share for the six months ended June 30, 2009 was $0.24 per diluted share. Assuming 20,235,337 shares of Class A Common Stock are validly tendered in the Exchange Offer, pro forma net income from continuing operations for the same period would decrease by $2.3 million, or $0.04 per diluted share. Earnings per share from continuing operations for the fiscal year ended December 31, 2008 were $0.26 per diluted share. Assuming 20,235,337 shares of Class A Common Stock are validly tendered in the Exchange Offer, pro forma earnings from continuing operations for the same period would decrease by $3.8 million, or $0.07 per diluted share. See the section of this Offer to Exchange titled “Selected Historical and Unaudited Pro Forma Consolidated Financial Data.” The decrease in earnings per share of Class A Common Stock after the Exchange Offer may have a material adverse effect on the value of our Class A Common Stock and result in lower stock prices or reduced liquidity in the trading market for our shares of Class A Common Stock in the future.

 

For a discussion of risks associated with our business, please see the discussion of risks related to our business under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008.

 

Revlon stockholders should be aware that certain executive officers and directors of Revlon have interests in the Exchange Offer that may be different from the interests of Revlon stockholders generally. Our Board of Directors was aware of these interests and considered them, among other matters, in approving the Exchange Offer. Currently, of the eleven directors of Revlon, three are also serve as directors and/or officers of MacAndrews & Forbes: Ronald O. Perelman, David L. Kennedy and Barry F. Schwartz. These three individuals and Alan Ennis recused themselves from the vote on the Exchange Offer at meetings of Revlon’s Board of Directors. See “Special Factors — Background of the Transactions.”

 

Interests of Revlon Executive Officers

 

Effects of Exchange Offer on Existing Employment and Benefits Arrangements

 

The transactions contemplated by the Exchange Offer will not result in accelerated vesting or payment of benefits under existing Revlon employment agreements or benefit plans, including our equity-based incentive plans. Our executive officers will not have any rights under the Exchange Offer other than those afforded to other holders of Revlon Class A Common Stock. Our executive officers will have the same rights as other participants in our 401(k) plan with respect to any shares of Class A Common Stock held by our 401(k) plan for their accounts.

 

Our executive officers are not eligible to tender those shares of Class A Common Stock that have not vested and remain subject to restricted stock awards granted under the Third Amended and Restated Revlon, Inc. Stock Plan (as amended and restated), but they are eligible to tender any shares of Class A Common Stock that have previously vested or which by their terms become vested during the offering period. As of the date hereof, our executive officers are eligible to tender the following number of shares of Class A Common Stock in the Exchange Offer: Mr. David L. Kennedy, 147,001 shares; Mr. Alan T. Ennis, 23,647 shares; Mr. Chris Elshaw, 11,618 shares; and Mr. Robert Kretzman, 49,209 shares.

 

Interests of Revlon Directors

 

Certain members of our Board of Directors have the following interests in the Exchange Offer.

 

Interests of Directors Affiliated with MacAndrews & Forbes

 

Certain members of our Board of Directors, namely Messrs. Perelman, Kennedy and Schwartz, have, by virtue of their affiliation with MacAndrews & Forbes, interests in the Exchange Offer that are different from the interests of Revlon stockholders generally. The Interests of the MacAndrews & Forbes Participants in the Exchange Offer are described in the section entitled “Interests of Certain Persons in the Exchange Offer — Interests of the MacAndrews & Forbes Participants in the Exchange Offer.”

 

Compensation of Members of Special Committee

 

The Special Committee was a committee of our Board of Directors that was formed to review, evaluate and make recommendations to the Board of Directors, on behalf of the stockholders of Revlon (other than MacAndrews & Forbes), with respect to the April 13 proposal. As the Special Committee was not required to consider the Exchange Offer, the Special Committee disbanded on June 9, 2009. The Special Committee consisted of five members of our Board of Directors who were not employed by, or otherwise affiliated with, Revlon or MacAndrews & Forbes. The members of the Special Committee were Ms. Debra Lee and Messrs. Alan Bernikow, Paul Bohan, Meyer Feldberg and Kenneth Wolfe, each of whom had been determined by the Company’s full Board to qualify as an “independent” director within the meaning of the listing standards of the NYSE and the Board’s Guidelines for Assessing Director Independence (as most recently reflected in the Board’s determination at its meeting on February 24, 2009).

 

For their service as members of the Special Committee, each of Ms. Lee and Messrs. Bernikow, Bohan, Feldberg and Wolfe received a $50,000 cash retainer and per meeting attendance fees of $2,000 per meeting, in

addition to their regular cash retainers and meeting fees as members of the Board of Directors (which are described in our annual proxy statement filed with the SEC on April 21, 2009).

 

Indemnification of Directors and Officers

 

Under Section 145 of the DGCL, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including, without limitation, attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding (i) if such person acted in good faith and in a manner that such person reasonably believed to be in or not opposed to the best interests of the corporation and (ii) with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe such conduct was unlawful. In actions brought by or in the right of the corporation, a corporation may indemnify such person against expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner that such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which that person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought will determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or other such court will deem proper. To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defending any such action, suit or proceeding referred to above or any claim, issue or matter therein, he or she is entitled to indemnification for expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by such person in connection therewith. A corporation may pay expenses (including, without limitation, attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it will ultimately be determined that such person is not entitled to be indemnified by the corporation. Such expenses (including, without limitation, attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate. The indemnification and advancement of expenses provided for or granted pursuant to Section 145 is not exclusive of any other rights of indemnification or advancement of expenses to which those seeking indemnification or advancement of expenses may be entitled, and a corporation may purchase and maintain insurance against liabilities asserted against any former or current director, officer, employee or agent of the corporation, or a person who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, whether or not the power to indemnify is provided by the statute.

 

Article X of Revlon’s bylaws provides for indemnification of the officers and directors of Revlon to the fullest extent permitted by applicable law.

 

Section 8 of Article X of Revlon’s bylaws allows Revlon 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. The indemnification and advancement of expenses will, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs, executors and administrators of such a person.

 

Section 11 of Article X of Revlon’s bylaws provides that except for proceedings to enforce rights to indemnification, Revlon will not be obligated to indemnify any director or officer of the registrant in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the board of directors of the registrant.

Pursuant to Section 102(b)(7) of the DGCL, Article Fifth(4) of Revlon’s certificate of incorporation provides that no director of the registrant will be personally liable to the registrant or any of its stockholders for monetary damages for breach of such director’s fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the registrant or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. Pursuant to Article Fifth(4) of Revlon’s certificate of incorporation, any repeal or modification of Article Fifth(4) by the stockholders of Revlon will not adversely affect any right or protection of a director of the registrant existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

 

In connection with, and subject to consummation of, the Exchange Offer, (1) MacAndrews & Forbes and RCPC will amend the Senior Subordinated Term Loan to extend the maturity date of the Contributed Loan from August 1, 2010 to the fourth anniversary of the consummation of the Exchange Offer, change the interest rate on the Contributed Loan from 11% to 12.75% per annum, extend the maturity date of the Non-Contributed Loan from August 1, 2010 to the fifth anniversary of the consummation of the Exchange Offer and change the interest rate on the Non-Contributed Loan from 11% to 12% per annum, (2) MacAndrews & Forbes will contribute $5.21 of the aggregate outstanding principal amount of the Subordinated Term Loan for each share of Class A Common Stock tendered for exchange in the Exchange Offer, and not withdrawn, up to a maximum aggregate contribution of $105.43 million of the outstanding principal amount of the Subordinated Term Loan, and, in consideration, (3) Revlon will issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer and (4) Revlon has entered into the Senior Subordinated Term Loan Amendment. This arrangement is discussed in detail in the section entitled “The Contribution and Stockholder Agreement.”

 

MacAndrews & Forbes, as holder of Revlon common stock and as lender under the Senior Subordinated Term Loan has various interests in certain arrangements and transactions to be entered into in connection with, and subject to consummation of, the Exchange Offer different from your interests as a stockholder. These interests, which are described below, were considered by the Board of Directors in their respective decisions to approve the Exchange Offer.

 

As of the date of the Exchange Offer, MacAndrews & Forbes owned approximately 58.2% of our Class A Common Stock and 100% of our Class B Common Stock, and approximately 74.6% of the combined voting power of such shares as of such date and time. As a result, MacAndrews & Forbes is able to elect the entire Revlon board of directors and to control the vote on all matters submitted to a vote of our stockholders. MacAndrews & Forbes Holdings Inc. is wholly-owned by Ronald O. Perelman, Chairman of the Revlon Board of Directors.

 

The more shares of Class A Common Stock that are tendered into the Exchange Offer, the greater will be MacAndrews & Forbes’ interest in our Common Stock following the Exchange Offer because MacAndrews & Forbes is not exchanging its shares of Common Stock in the Exchange Offer and because Revlon will issue to MacAndrews & Forbes one share of Class A Common Stock for each share of Class A Common Stock tendered for exchange, and not withdrawn, in the Exchange Offer. If all of our outstanding shares of Class A Common Stock other than those owned by MacAndrews & Forbes and its affiliates are tendered into the Exchange Offer, then MacAndrews & Forbes and its affiliates would own 100% of our Common Stock following the Exchange Offer. For illustrative examples of four scenarios that indicate the effect that the Exchange Offer could have on MacAndrews & Forbes’ relative percentage ownership of the number of our outstanding shares and combined voting power, see “Special Factors — Certain Effects of the Exchange Offer — Effect on Ownership Structure of Revlon.” In addition, if the Exchange Offer is not consummated, MacAndrews & Forbes will continue to be owed $107 million, which amount will be due on August 1, 2010, under the Senior Subordinated Term Loan.

 

The selected historical financial and other data for the year ended December 31, 2008 have been derived from our audited consolidated financial statements. The selected historical financial and other data for the six months ended June 30, 2009 have been derived from our unaudited consolidated financial statements. Results for the six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the entire 2009 fiscal year.

 

The Pro Forma Data give pro forma effect as described below to the following transactions (collectively referred to as the “Debt Reduction Transactions”):

 

 

The Pro Forma Statement of Operations Data for the year ended December 31, 2008 shows the incremental pro forma effect of the 2008 Debt Reduction Transaction, as well as the pro forma effects of the 2009 Repurchase

Transactions and the 2009 Exchange Transaction, in each case, as if such transactions had been consummated on January 1, 2008.

 

The Pro Forma Statement of Operations Data for the six months ended June 30, 2009 shows the incremental pro forma effect of the 2009 Repurchase Transactions as well as the pro forma effect of the 2009 Exchange Transaction, in each case, as if such transactions had been consummated on January 1, 2008.

 

The Pro Forma Balance Sheet Data as of June 30, 2009 gives pro forma effect to the net impact of the 2009 Exchange Transactions as if such transaction had occurred on June 30, 2009.

 

The adjustments reflected in the unaudited pro forma condensed financial statements are based upon available information and certain estimates and assumptions. Actual results may differ from the pro forma adjustments and from the estimates and assumptions used. The Company’s management believes that the estimates and assumptions used provide a reasonable basis for presenting the effects of the 2009 Exchange Transaction. The Company’s management also believes that the pro forma adjustments give appropriate effect to these estimates and assumptions and are applied in conformity with U.S. generally accepted accounting principles.

 

The pro forma adjustments made in connection with the development of the pro forma information are preliminary and have been made solely for the purpose of developing such pro forma information necessary to comply with disclosure requirements and are not necessarily indicative of our results of continuing operations or our financial position that actually would have occurred had such transactions been consummated on the aforementioned dates. The pro forma financial data is not intended to indicate the results that may be expected for any future period.

The financial data should be read in conjunction with our consolidated financial statements and the notes to those financial statements included in the documents incorporated by reference in this prospectus supplement and the accompanying prospectus.