SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER 1-11178
REVLON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3662955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 527-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OR 12(g) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ---------------------------------------------------------------- --------------------------------------------------------------
CLASS A COMMON STOCK NEW YORK STOCK EXCHANGE, INC.
- ---------------------------------------------------------------- --------------------------------------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
AS OF FEBRUARY 2, 1998, 19,887,350 SHARES OF CLASS A COMMON STOCK AND
31,250,000 SHARES OF CLASS B COMMON STOCK WERE OUTSTANDING. 11,250,000 SHARES
OF CLASS A COMMON STOCK AND ALL OF THE SHARES OF CLASS B COMMON STOCK WERE HELD
BY REV HOLDINGS INC., AN INDIRECTLY WHOLLY OWNED SUBSIDIARY OF MAFCO HOLDINGS
INC. THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S CLASS A COMMON STOCK HELD
BY NON-AFFILIATES (USING NEW YORK STOCK EXCHANGE, INC. CLOSING PRICE AS OF
FEBRUARY 2, 1998) WAS APPROXIMATELY $378,424,000.
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
Revlon, Inc. (and together with its subsidiaries, the "Company")
operates in a single business segment with many different products, which
include an extensive array of glamorous, exciting and innovative cosmetics and
skin care, fragrance, personal care and professional products. REVLON is one of
the world's best known names in cosmetics and is a leading mass market
cosmetics brand. The Company's vision is to provide glamour, excitement and
innovation through quality products at affordable prices. To pursue this
vision, the Company's management team combines the creativity of a cosmetics
and fashion company with the marketing, sales and operating discipline of a
consumer packaged goods company. The Company believes that its global brand
name recognition, product quality and marketing experience have enabled it to
create one of the strongest consumer brand franchises in the world, with
products sold in approximately 175 countries and territories. The Company's
products are marketed under such well-known brand names as REVLON, COLORSTAY,
REVLON AGE DEFYING, ALMAY and ULTIMA II in cosmetics; MOON DROPS, ETERNA 27,
ALMAY TIME-OFF, ULTIMA II, JEANNE GATINEAU and NATURAL HONEY in skin care;
CHARLIE and FIRE & ICE, in fragrances; FLEX, OUTRAGEOUS, AQUAMARINE, MITCHUM,
COLORSTAY, COLORSILK, JEAN NATE, PLUSBELLE, BOZZANO and COLORAMA in personal
care products; and ROUX FANCI-FULL, REALISTIC, CREME OF NATURE, CREATIVE NAIL
and AMERICAN CREW in professional products. To further strengthen its consumer
brand franchises, the Company markets each core brand with a distinct and
uniform global image, including packaging and advertising, while retaining the
flexibility to tailor products to local and regional preferences.
The Company was founded by Charles Revson, who revolutionized the
cosmetics industry by introducing nail enamels matched to lipsticks in fashion
colors over 65 years ago. Today, the Company has leading market positions in
many of its principal product categories in the United States self-select
distribution channel. The Company's leading market positions for its REVLON
brand products include the number one positions in the United States
self-select distribution channel in lip makeup and nail enamel (which the
Company has occupied for the past 21 years) for 1997. The Company has the
number two position in face makeup in the United States self-select
distribution channel for 1997. Propelled by the success of its new product
launches and market share gains in its existing product lines, the Company
captured in 1996 and continued to hold in 1997 the number one position overall
in color cosmetics (consisting of lip, eye and face makeup and nail enamel) in
the United States self-select distribution channel, where its market share was
21.6% for 1997. The Company also has leading market positions in several
product categories in certain markets outside of the United States, including
in Argentina, Australia, Brazil, Canada, Mexico and South Africa.
In the United States, the self-select distribution channel, in which
consumers select their own purchases without the assistance of an in-store
demonstrator, includes independent drug stores and chain drug stores (such as
Walgreens, CVS, Eckerds and Rite Aid), mass volume retailers (such as Wal-Mart,
Target Stores and Kmart) and supermarkets and combination supermarket/drug
stores (such as Pathmark, Albertson's, Kroger's and Smith's). Internationally,
the self-select distribution channel includes retailers such as Boots in the
United Kingdom and Western Europe, Shoppers Drug Mart in Canada and Wal-Mart
worldwide. The foregoing retailers, among others, sell the Company's products.
The Company operates in a single business segment with many different
products, which include cosmetics and skin care, fragrance and personal care
products ("consumer products"), and hair and nail care products principally for
use in and resale by professional salons ("professional products"). The Company
presents its business geographically as its United States operation, which
comprises the Company's business in the United States, and its International
operation, which comprises its business outside of the United States.
On February 2, 1998, Revlon Escrow Corp. ("Revlon Escrow"), an
affiliate of Revlon Consumer Products Corporation (together with its
subsidiaries, "Products Corporation"), issued and sold in a private placement
$650 million aggregate principal amount of 8 5/8% Senior Subordinated Notes due
2008 (the "8 5/8% Notes") and $250 million aggregate principal amount of 8 1/8%
Senior Notes due 2006 (the "8 1/8% Notes" and, together with the 8 5/8% Notes,
the "Notes"), with the net proceeds deposited into escrow. The proceeds from
the sale of the Notes will be used to finance the redemption of Products
Corporation's $555 million aggregate principal amount of 10 1/2% Senior
Subordinated Notes due 2003 (the "Senior Subordinated Notes") and $260 million
aggregate principal
2
amount of 9 3/8% Senior Notes due 2001 (the "Senior Notes" and, together with
the Senior Subordinated Notes, the "Old Notes"). Products Corporation delivered
a redemption notice to the holders of the Senior Subordinated Notes for the
redemption of the Senior Subordinated Notes on March 4, 1998, at which time
Products Corporation assumed the obligations under the 8 5/8% Notes and the
related indenture (the "8 5/8% Notes Assumption"), and to the holders of the
Senior Notes for the redemption of the Senior Notes on April 1, 1998, at which
time Products Corporation will assume the obligations under the 8 1/8% Notes
and the related indenture (the "8 1/8% Notes Assumption" and, together with the
8 5/8% Notes Assumption, the "Assumption"). On or before March 19, 1998 either
Revlon Escrow or Products Corporation is required to file a registration
statement with the Securities and Exchange Commission (the "Commission") with
respect to an offer to exchange the Notes for registered notes with
substantially identical terms (the "Exchange Offer"). The Exchange Offer is
expected to occur on or before July 2, 1998.
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), a
wholly owned subsidiary of Products Corporation, and The Cosmetic Center, Inc.
("CCI") completed the merger of PFC with and into CCI (the "Cosmetic Center
Merger") with CCI (subsequent to the Cosmetic Center Merger, "Cosmetic Center")
surviving the Cosmetic Center Merger. In the Cosmetic Center Merger, Products
Corporation received in exchange for all of the capital stock of PFC newly
issued Class C Common Stock of Cosmetic Center constituting approximately 85.0%
of Cosmetic Center's outstanding common stock. Accordingly, the Cosmetic Center
Merger was accounted for as a reverse acquisition using the purchase method of
accounting, so that PFC is considered the acquiring entity for accounting
purposes even though Cosmetic Center is the surviving legal entity. The results
of the Company for 1997 include the results of operations of Cosmetic Center
from and after the effective date of the Cosmetic Center Merger.
In May 1997, Products Corporation entered into a credit agreement (the
"Credit Agreement") with a syndicate of lenders, whose individual members
change from time to time. The proceeds of loans made under the Credit Agreement
were used for the purpose of repaying the loans outstanding under the credit
agreement in effect at that time (the "1996 Credit Agreement") and to redeem
Products Corporation's 10 7/8% Sinking Fund Debentures due 2010 (the "Sinking
Fund Debentures") and were and will be used for general corporate purposes or,
in the case of the Acquisition Facility (as defined herein), the financing of
acquisitions. The Credit Agreement provides up to $750.0 million and is
comprised of five senior secured facilities: $200.0 million in two term loan
facilities (the "Term Loan Facilities"), a $300.0 million multi-currency
facility (the "Multi-Currency Facility"), a $200.0 million revolving
acquisition facility, which may be increased to $400.0 million under certain
circumstances with the consent of a majority of the lenders (the "Acquisition
Facility"), and a $50.0 million special standby letter of credit facility (the
"Special LC Facility").
On March 5, 1996, the Company completed an initial public equity
offering (the "Revlon IPO") in which it issued and sold 8,625,000 shares of its
Class A Common Stock for $24.00 per share. The proceeds, net of underwriters'
discount and related fees and expenses, of $187.8 million were contributed to
Products Corporation and used to repay borrowings outstanding under the credit
agreement in effect at that time (the "1995 Credit Agreement") and to pay fees
and expenses related to entering into the 1996 Credit Agreement.
On June 24, 1992, the Company succeeded to assets and liabilities of
the cosmetics and skin care, fragrance and personal care products business of
Revlon Holdings Inc. ("Holdings"). Holdings retained certain small brands that
historically had not been profitable (the "Retained Brands") and certain other
assets and liabilities. Unless the context otherwise requires, references to
the Company or Revlon relating to dates or periods prior to the formation of
the Company mean the cosmetics and skin care, fragrance and personal care
products business of Holdings to which the Company has succeeded. The Company's
business is conducted exclusively through its wholly owned subsidiary, Products
Corporation. Unless the context otherwise requires, all references in this Form
10-K to the Company or Revlon mean Revlon, Inc. and its subsidiaries.
All United States market share and market position data herein for the
Company's brands are based upon retail dollar sales, which are derived from
A.C. Nielsen data. A.C. Nielsen measures retail sales volume of products sold
in the United States self-select distribution channel. Such data represent A.C.
Nielsen's estimates based upon data gathered by A.C. Nielsen from market
samples. Such data are therefore subject to some degree of variance.
3
BUSINESS STRATEGY
The Company's business strategy, which implements its vision and is
intended to continue to improve operating performance, is to:
o Strengthen and broaden its core brands through globalization of marketing
and advertising, product development and manufacturing and through
increasing its emphasis on advertising and promotion.
o Lead the industry in the development and introduction of technologically
advanced innovative products that set new trends.
o Expand the Company's presence in all markets in which the Company competes
and enter new and emerging markets.
o Continue to reduce costs and improve operating efficiencies, customer
service and product quality by reducing overhead, rationalizing factory
operations, upgrading management information systems, globally sourcing
raw materials and components and carefully managing working capital.
o Continue to expand market share and product lines through possible
strategic acquisitions or joint ventures.
4
PRODUCTS
The Company manufactures and markets a variety of products worldwide.
The following table sets forth the Company's principal brands.
- ----------------------------------------------------------------------------------------------------------------------
BRAND COSMETICS SKIN CARE FRAGRANCES PERSONAL CARE PROFESSIONAL
PRODUCTS PRODUCTS
- ----------------------------------------------------------------------------------------------------------------------
Revlon Revlon, ColorStay, Moon Drops, Charlie, Charlie Red, Flex, Outrageous, Revlon
Revlon Age Defying, Revlon Results, Charlie White, Aquamarine, Professional, Roux
StreetWear, Super Eterna 27, Charlie Sunshine, Mitchum, Lady Fanci-full,
Lustrous, Moon Revlon Age Fire & Ice, Fire & Mitchum, Hi & Dri, Realistic, Creme of
Drops, Velvet Touch, Defying Ice Cool, Jontue, ColorStay, Nature, Sensor
Line & Shine, New Ciara, Body Kisses Colorsilk, Frost & Perm, Perfect Perm,
Complexion, Overtime Glow, Revlon Fermodyl, Perfect
Eyes, Touch & Glow, Shadings, Jean Touch, Salon
Top Speed, Lashful, Nate, Roux Perfection,
Lengthwise, Fanci-full, Revlonissimo,
Naturally Glamorous, Realistic, Creme Voila, Young Color,
Custom Eyes, of Nature, Herba Creative Nail,
Timeliner, Revlon Rich, Fabu-laxer Contours, American
Implements Crew, R PRO, True
Cystem
Almay Almay, Time-Off, Sensitive Care, Almay
Almay Clear Oil Control,
Complexion Makeup, Time-Off,
Amazing, One Coat Moisture
Balance,
Moisture Renew,
Almay Clear
Complexion Skin
Care
Ultima II Ultima II, Beautiful Ultima II, Vital
Nutrient, Radiance,
Wonderwear, The Interactives, CHR
Nakeds
Significant Colorama(b), Jeanne Floid(b), Versace(a), Plusbelle(b), Colomer(b),
Regional Juvena(b), Gatineau(b), Charlie Gold Bozzano(b), Intercosmo(b),
Brands Jeanne Gatineau(b) Natural Honey Juvena(b), Personal Bio Point,
Geniol(b), Natural Wonder,
Colorama(b), Llongueras(b)
Llongueras(b),
Bain de Soleil(b),
ZP-11
- ----------------------------------------------------------------------------------------------------------------------
(a) License held for distribution in certain countries outside the
United States.
(b) Trademark owned in certain markets outside the United States.
Cosmetics and Skin Care. The Company sells a broad range of cosmetics
and skin care products designed to fulfill specifically identified consumer
needs, principally priced in the upper range of the self-select distribution
channel, including lip makeup, nail color and nail care products, eye and face
makeup and skin care products such as lotions, cleansers, creams, toners and
moisturizers. Many of the Company's products incorporate patented,
patent-pending or proprietary technology.
5
The Company markets several different lines of REVLON lip makeup
(which includes lipstick, lip gloss and liner). The Company's breakthrough
COLORSTAY lipcolor, which uses patented transfer-resistant technology that
provides long wear, is produced in 40 shades. SUPER LUSTROUS lipstick is
produced in 60 shades. MOON DROPS, a moisturizing lipstick, is produced in 57
shades. LINE & SHINE, which was introduced in 1997, is a product that utilizes
an innovative product form, combining lipliner and lip gloss in one package,
and is produced in 8 shades.
The Company's nail color and nail care lines include enamels, cuticle
preparations and enamel removers. The Company's flagship REVLON nail enamel is
produced in 85 shades and uses a patented formula that provides consumers with
improved wear, application, shine and gloss in a toluene-free and
formaldehyde-free formula. TOP SPEED nail enamel, launched in 1997, is produced
in 52 shades and contains a patented speed drying polymer formula which sets in
90 seconds. STRONG WEAR, a patented strengthening nail enamel formula produced
in 27 shades, contains ingredients that provide protection against splitting,
chipping and breaking. Revlon has the number one position in nail enamel in the
United States self-select distribution channel. The Company also sells NAIL
BUILDERS, which includes nail strengtheners, hardeners and fortifiers.
The Company sells face makeup, including foundation, powder, blush and
concealers, under such REVLON brand names as REVLON AGE DEFYING, which is
targeted for women in the over 35 age bracket; COLORSTAY foundation, which uses
patent-pending transfer-resistant technology that provides long wear; and NEW
COMPLEXION, for consumers in the 25 to 49 age bracket.
The Company's eye makeup products include mascaras, eye shadows, brow
color and liners. COLORSTAY eyecolor, mascara and brow color, LASHFUL and
LENGTHWISE mascaras, SOFTSTROKE eyeliners and REVLON CUSTOM EYES and OVERTIME
SHADOW eye shadows are targeted for women in the 18 to 49 age bracket, and
REVLON AGE DEFYING eye color is targeted for women over 35.
The Company's ALMAY brand consists of a complete line of
hypo-allergenic, dermatologist-tested, fragrance-free cosmetics and skin care
products targeted for consumers who want "healthy looking skin." The Company
positions the ALMAY brand as the clean, natural-looking and healthy choice.
ALMAY products include lip makeup, nail color and nail care products, eye and
face makeup, skin care products, and sunscreen lotions and creams, including
TIME-OFF makeup and skin care and the ALMAY AMAZING collection, which includes
ALMAY AMAZING LASTING lip makeup, which includes the Company's proprietary
transfer-resistant technology developed for COLORSTAY, ALMAY AMAZING LASH
mascara, ALMAY AMAZING eye makeup, ALMAY AMAZING LASTING makeup, and ALMAY
CLEAR COMPLEXION SKIN CARE and MAKEUP and ALMAY EASY-TO-WEAR eyecolor and ALMAY
ONE COAT mascara. The Company targets ALMAY for value conscious consumers by
offering benefits comparable to higher priced products, such as Clinique, at
affordable prices. ALMAY is the leading brand in the hypo-allergenic market in
the United States self-select distribution channel.
The Company's STREETWEAR brand consists of a line of nail enamels,
mascaras, lip and eye liners and lip glosses which are targeted for the trend
conscious consumer. STREETWEAR was developed in response to the recent trend in
color and fashion coming from the street.
The Company sells implements, which include nail and eye grooming
tools such as clippers, scissors, files, tweezers and eye lash curlers. The
Company's implements are sold individually and in sets under the REVLON brand
name.
The Company also sells cosmetics in international markets under
regional brand names including COLORAMA in Brazil and JUVENA.
The Company's skin care products, including moisturizers, are sold
under brand names, including ETERNA 27, MOON DROPS, REVLON RESULTS, ALMAY
TIME-OFF REVITALIZER, CLEAR COMPLEXION and ULTIMA II VITAL RADIANCE, a skin
care collection introduced in 1997. In addition, the Company sells skin care
products in international markets under internationally recognized brand names
and under regional brands, including NATURAL HONEY.
6
The Company's premium priced cosmetics and skin care products are sold
under the ULTIMA II brand name, which is the Company's flagship premium priced
brand sold throughout the world, and the JEANNE GATINEAU brand name, which is
sold outside the United States. The ULTIMA II line includes the WONDERWEAR
collection, which includes a long-wearing foundation that uses patent-pending
technology, cheek and eyecolor products that use proprietary technology that
provides long wear, and WONDERWEAR LIPSEXXXY lipstick, which uses patented
transfer-resistant technology that provides long wear, the BEAUTIFUL NUTRIENT
collection, a complete line of nourishing makeup that provides advanced
nutrient protection against dryness and THE NAKEDS makeup, a trend-setting line
of makeup emphasizing neutral colors.
Fragrances. The Company sells a selection of moderately priced and
premium priced fragrances, including perfumes, eau de toilettes and colognes.
The Company's portfolio includes fragrances such as CHARLIE and FIRE & ICE and
line extensions such as CHARLIE RED, CHARLIE WHITE, CHARLIE SUNSHINE and FIRE &
ICE COOL. The Company's CHARLIE fragrance has been a market leader since the
mid-1970's and, the Company believes, one of the top selling fragrances
worldwide. In international markets, the Company distributes under license
certain brands, including VERSACE and VAN GILS.
Personal Care Products. The Company sells a broad line of personal
care consumer products which complements its core cosmetics lines and enables
the Company to meet the consumer's broader beauty care needs. In the
self-select distribution channel, the Company sells haircare, anti-perspirant
and other personal care products, including the FLEX, OUTRAGEOUS and AQUAMARINE
haircare lines throughout the world and the COLORAMA, PLUSBELLE, JUVENA,
LLONGUERAS and NATURAL HONEY brands outside the United States; the
breakthrough, patent-pending COLORSTAY and the COLORSILK, REVLON SHADINGS,
FROST & GLOW and ROUX FANCI-FULL hair coloring lines throughout most of the
world; and the MITCHUM, LADY MITCHUM and HI & DRI anti-perspirant brands
throughout the world. Certain hair care products, including ROUX FANCI-FULL
hair coloring and PERFECT TOUCH and SALON PERFECTION home permanents, were
originally developed for professional use. The Company also markets
hypo-allergenic personal care products, including sunscreens, moisturizers and
anti-perspirants, under the ALMAY brand.
Professional Products. The Company sells a comprehensive line of salon
products, including permanent wave preparations, hair relaxers, temporary and
permanent hair coloring products, shampoos, conditioners, styling products and
hair conditioners, to professional salons and beauty supply stores under the
REVLON brand as well as other brand names such as ROUX FANCI-FULL, REALISTIC,
REVLONISSIMO, CREME OF NATURE, FABU-LAXER, LOTTABODY, NATURAL WONDER, SENSOR
and INTERCOSMO. Most of the Company's salon products in the United States
currently are distributed in the non-exclusive distribution channels, in
contrast to those products that are distributed exclusively to professional
salons. Two recent acquisitions, Creative Nail Design, Inc. ("Creative Nail"),
acquired in November 1995, and American Crew, Inc., acquired in April 1996,
increase the Company's strength in the exclusive distribution channel. Through
Creative Nail, the Company sells nail enhancement systems and nail color and
treatment products and services for use by the professional salon industry
under the CREATIVE NAIL brand name. Through American Crew, Inc. the Company
sells men's shampoos, conditioners, gels, and other hair care products for use
by professional salons under the AMERICAN CREW brand name. The Company also
sells retail hair care products under the LLONGUERAS, PERSONAL BIO POINT,
GENIOL, FIXPRAY and LANOFIL brands outside the United States. The Company
markets in salons, beauty supply stores and the self-select distribution
channel several lines of hair relaxers, styling products, hair conditioners and
other hair care products under such names as FABU-LAXER and CREME OF NATURE
designed for the particular needs of ethnic consumers. The Company also
developed a new exclusive line of ethnic products, AROSCI, which was launched
in 1996. The Company also sells wigs and hair pieces to retail outlets and
certain professional salons under the REVLON brand and, pursuant to a license,
under the ADOLFO brand.
7
MARKETING
The Company's vision is to provide glamour, excitement and innovation
through quality products at affordable prices. The Company's marketing efforts
are designed to implement this vision. The Company has formed Global Marketing
Committees, consisting of managers from the Company's marketing, research and
development, operations, advertising and finance departments from the United
States and abroad, which develop strategies for the Company's current and new
brands and products. The Global Marketing Committees coordinate the Company's
globalization efforts while allowing sufficient flexibility to tailor products
to local and regional preferences.
Consumer Products. The Company markets extensive consumer product
lines at a range of retail prices primarily through the self-select
distribution channel and markets select premium lines through
demonstrator-assisted channels. Each line is distinctively positioned and is
marketed globally with consistently recognizable logos, packaging and
advertising designed to differentiate it from other brands. The Company's
existing consumer product lines are carefully segmented, and new product lines
are developed, to target specific consumer needs as measured by focus groups
and other market research techniques.
The Company uses print and television advertising and point-of-sale
merchandising, including displays and samples. The Company has shifted a
significant portion of its marketing to appeal to a broader audience and has
increased media advertising, particularly national television advertising.
Advertising and consumer-directed promotion expenditures increased by 11.8% in
1997 over 1996 levels and by 17.4% in 1996 over 1995 levels. The Company's
marketing emphasizes a uniform global image and product for its portfolio of
core brands, including REVLON, COLORSTAY, REVLON AGE DEFYING, ALMAY, ULTIMA II,
FLEX, CHARLIE, OUTRAGEOUS and MITCHUM. The Company coordinates advertising
campaigns with in-store promotional and other marketing activities. The Company
develops jointly with retailers carefully tailored advertising,
point-of-purchase and other focused marketing programs. In the self-select
distribution channel, the Company uses network and spot television advertising,
national cable advertising and print advertising in major general interest,
women's fashion and women's service magazines, as well as coupons, magazine
inserts and point-of-sale testers. In the demonstrator-assisted distribution
channel, the Company principally uses cooperative advertising programs with
retailers, supported by Company-paid or Company-subsidized demonstrators, and
coordinated in-store promotions and displays.
The Company also has developed unique marketing materials such as the
"Revlon Report," a glossy, color pamphlet distributed in magazines and on
merchandising units, available in 34 countries and 18 languages, which
highlights seasonal and other fashion and color trends, describes the Company's
products that address those trends and contains coupons, rebate offers and
other promotional material to encourage consumers to try the Company's
products. The Company has created on-the-road beauty sampling and information
vehicles that travel to major retailers throughout the United States, at which
Company trainers educate consumers on the latest product and shade offerings.
These vehicles create consumer and retail excitement about the Company's new
and existing products and encourage trial and purchase by consumers. Other
marketing materials designed to introduce the Company's newest products to
consumers and encourage trial and purchase include point-of-sale testers on the
Company's display units that provide information about, and permit consumers to
test, the Company's products, thereby achieving the benefits of an in-store
demonstrator without the corresponding cost; magazine inserts containing
samples of the Company's newest products; trial size products and "shade
samplers," which are collections of trial size products in different shades.
Additionally, the Company's website at http://www.revlon.com features current
product and promotional information and was recently recognized by a major
national business magazine as one of the top corporate sites on the World Wide
Web. Revlon was the only cosmetics company to receive this recognition.
Professional Products. Professional products are marketed through
educational seminars on their application and benefits and through advertising,
displays and samples to communicate to professionals and consumers the quality
and performance characteristics of such products. The Company's shift to
exclusive line distributors is intended to significantly reinforce the
Company's marketing and educational efforts with salon professionals. The
Company believes that its presence in the professional markets benefits its
consumer products business since the Company is able to anticipate consumer
trends in hair, nail and skin care, which often appear first in salons.
8
NEW PRODUCT DEVELOPMENT AND RESEARCH AND DEVELOPMENT
The Company believes that it is an industry leader in the development
of innovative and technologically-advanced consumer and professional products.
The Company's marketing and research and development groups identify consumer
needs and shifts in consumer preferences in order to develop new product
introductions, tailor line extensions and promotions and redesign or
reformulate existing products to satisfy such needs or preferences. The
Company's Advanced Concept Group consists of a select cross-functional group
that conducts research on a wide range of areas to develop new and innovative
technology. The Company independently develops substantially all of its new
products. The Company also has entered into joint research projects with major
universities and commercial laboratories to develop advanced technologies.
The Company believes that its Edison, New Jersey facility is one of
the most extensive cosmetics research and development facilities in the United
States. The researchers at the Edison facility are responsible for all of the
Company's new product research worldwide, performing research for new products,
ideas, concepts and packaging. The Company also has research facilities in
Brazil and California.
The research and development group at the Edison facility also
performs extensive safety and quality tests on the Company's products,
including toxicology, microbiology and package testing. Additionally, quality
control testing is performed at each manufacturing facility.
As of December 31, 1997, the Company employed approximately 200 people
in its research and development activities, including specialists in
pharmacology, toxicology, chemistry, microbiology, engineering, biology,
dermatology and quality control. In 1997, 1996 and 1995 the Company spent
approximately $29.7 million, $26.3 million and $22.3 million, respectively, on
research and development activities.
In certain instances, proprietary technology developed by the Company
for use in products and packaging is available for licensing to third parties
through the Company's Revlon Technologies division. In 1995, the Company
received the Innovation Award from the Coalition of NorthEast Governors
("CONEG") for its patented and patent-pending ENVIROGLUV glass decorating
technology (which resulted in significant cost reductions in decorating REVLON
AGE DEFYING and COLORSTAY makeup bottles and REVLON nail enamel bottles and
which is being offered for licensing to qualified glass decorators). The CONEG
challenge awards program is a nationwide competition to recognize companies
that make significant contributions to packaging and source reduction.
MANUFACTURING AND RELATED OPERATIONS AND RAW MATERIALS
The Company is continuing to rationalize its worldwide manufacturing
operations, which is intended to lower costs and improve customer service and
product quality. The globalization of the Company's core brands allows the
Company to centralize production of some product categories for sale throughout
the world within designated facilities and shift production of certain other
product categories to more cost effective manufacturing sites to reduce
production costs. Shifts of production may result in the closing of certain of
the Company's less significant manufacturing facilities, and the Company
continually reviews its needs in this regard. In addition, as part of its
continuing efforts to improve operating efficiencies, the Company attempts to
ensure that a significant portion of its capital expenditures is devoted to
improving operating efficiencies.
The Company manufactures REVLON brand color cosmetics, personal care
products and fragrances for sale in the United States, Japan and most of the
countries in Latin America and Southeast Asia at its Phoenix, Arizona facility
and its Canadian facility. The Company manufactures ULTIMA II cosmetics and
skin treatment products for sale in the United States and most of the countries
in Latin America and Southeast Asia, personal care products for sale in the
United States and ALMAY brand products for sale throughout the world at its
Oxford, North Carolina facility. Nail care products for sale through salons
worldwide are manufactured and distributed through the Vista, California
facility. Personal care implements for sale throughout the world are
manufactured at the Company's Irvington, New Jersey facility. The Company
manufactures salon and retail professional products and personal care consumer
products for sale in the United States and Canada at the Company's
Jacksonville, Florida facility. The Phoenix and Oxford facilities have been
ISO-9002 certified. An ISO-9002 certification is an internationally recognized
standard for manufacturing
9
facilities, which signifies that the manufacturing facility has achieved and
maintains certain performance and quality commitment standards.
The Company manufactures its entire line of consumer products (except
implements) for sale in most of Europe at its Maesteg, South Wales facility.
Local production of cosmetics and personal care products takes place at the
Company's facilities in Spain, Canada, Venezuela, Mexico, New Zealand, Brazil,
Italy, Argentina, France and South Africa. The manufacture of professional
products for sale by retailers outside the United States has been centralized
principally at the Company's facilities in Ireland, Spain, Italy and Mexico.
Production of color cosmetics for Japan and Mexico has been shifted primarily
to the United States while production of REVLON brand personal care products
for Argentina has been centralized in Brazil. The Maesteg and Irish facilities
have been certified by the British equivalent of ISO-9002.
The Company purchases raw materials and components throughout the
world. The Company continuously pursues reductions in cost of goods through the
global sourcing of raw materials and components from qualified vendors,
utilizing its large purchasing capacity to maximize cost savings. The global
sourcing of raw materials and components from accredited vendors also ensures
the quality of the raw materials and components. The Company believes that
alternate sources of raw materials and components exist and does not anticipate
any significant shortages of, or difficulty in obtaining, such materials.
The Company's improvements in manufacturing, sourcing and related
operations have contributed to improved customer service, including an
improvement in the percentage of timely order fulfillment from most of the
Company's principal manufacturing facilities and the timeliness and accuracy of
new product and promotion deliveries. To promote the Company's understanding
of, and responsiveness to the needs of its retail customers, the Company
assigns members of senior operations management to lead inter-departmental
teams that visit significant accounts, and has provided retail accounts with a
designated customer service representative.
The Company emphasizes safety and increased training of employees
resulting in an improved safety record. The Company anticipates that the
globalization of, and continued improvement in, the quality of its
manufacturing operations will result in lower manufacturing costs.
BUSINESS PROCESS ENHANCEMENTS
The Company's management information systems have been substantially
upgraded to provide comprehensive order processing, production and accounting
support for the Company's business. The Company's expenditures on improvements
to its management information systems were approximately $12 million for 1997,
and the Company anticipates a similar level of expenditure in 1998. Systems
improvements have been and the Company anticipates that they will continue to
be instrumental in contributing to the reduction of the time from order entry
to shipment, improved forecasting of demand and improved operating
efficiencies.
The Company has made an evaluation of steps necessary to address
issues related to required changes in computer systems for the Year 2000. While
the Company has determined that it currently has computer systems that require
modification to be Year 2000 compliant, many of the modifications are being
accomplished as part of the systems improvements referred to above. As to its
systems which are not impacted by the improvements referred to above, the
Company is identifying those which require modification or replacement to
address the Year 2000 issue. Management believes that there is no material risk
that the Company will fail to address the Year 2000 issues in a timely manner.
Additionally, the Company believes that the Year 2000 issue will not have a
material effect on its financial condition.
10
DISTRIBUTION
As a result of its improved customer service and consumer traffic
generated by its products and innovative marketing programs, the Company
believes that its relationships with self-select distribution cosmetic
retailers are the best in the cosmetics industry.
The Company's products are sold in approximately 175 countries and
territories. The Company's worldwide sales force had approximately 2,900 people
as of December 31, 1997, including a dedicated sales force for cosmetics, skin
care and fragrance products in the self-select distribution channel, for the
demonstrator-assisted distribution channel, for personal care products
distribution, for salon distribution, and for retail stores. In addition, the
Company utilizes sales representatives and independent distributors to serve
specialized markets and related distribution channels.
United States. The United States operation's net sales accounted for
approximately 60.8% of the Company's 1997 net sales, a majority of which were
made in the self-select distribution channel. The Company also sells a broad
range of consumer and retail professional products to United States Government
military exchanges and commissaries. The Company licenses its trademarks to
select manufacturers for products that the Company believes have the potential
to extend the Company's brand names and image. As of December 31, 1997, 19
licenses were in effect relating to 21 product categories to be marketed in the
self-select distribution channel. Pursuant to the licenses, the Company retains
strict control over product design and development, product quality,
advertising and use of its trademarks. These licensing arrangements offer
opportunities for the Company to generate revenues and cash flow through earned
royalties, royalty advances and, in some cases, up-front licensing fees.
Products designed for professional use or resale by beauty salons are sold
through wholesale beauty supply distributors and directly to professional
salons. Various hair care products, such as ethnic hair relaxers, scalp
conditioners, shampoos and hair coloring products and wigs and hairpieces are
sold directly and through wholesalers to chain drug stores and mass volume
retailers. Wigs and hairpieces are also sold through mail order direct
marketing, retail outlet malls, salons and certain department stores.
The Company also operates retail stores through Cosmetic Center. As of
December 31, 1997, Cosmetic Center's retail (or Cosmetic Center) division
operated 66 specialty retail stores in the middle Atlantic region and in
Chicago and its outlet (or Prestige Fragrance & Cosmetics) division operated
201 retail outlet stores throughout the United States. The stores in the
Cosmetic Center division offer a broad range of brand name prestige and mass
merchandised cosmetics products at value prices. The stores in the Prestige
Fragrance & Cosmetics division operate in factory outlet malls, rural areas and
other similar locations that are not disruptive to the Company's principal
distribution channels. In these stores, Cosmetic Center sells the Company's
first quality, first quality excess, returned and refurbished, and discontinued
consumer products and retail professional products, as well as similar products
of other cosmetics companies.
International. The International operation's net sales accounted for
approximately 39.2% of the Company's 1997 net sales. The International
operation's ten largest countries in terms of these sales, which include, among
others, Brazil, Spain, the United Kingdom, Australia, South Africa, Canada and
Japan, accounted for approximately 28% of the Company's net sales in 1997, with
Brazil accounting for approximately 5.5% of the Company's net sales. The
International operation is increasing distribution through the expanding
self-select distribution channels outside the United States, such as drug
stores/chemists, hypermarkets/mass volume retailers and variety stores, as
these channels gain importance. The International operation also distributes
through department stores and specialty stores such as perfumeries. The
International operation's professional products are sold directly to beauty
salons by the Company's direct sales force in Spain, France, Germany, Portugal,
Italy, Mexico and Ireland and through distributors in other countries. As of
December 31, 1997, the Company actively sold its products through wholly owned
subsidiaries established in 26 countries outside of the United States, through
joint ventures in India and Indonesia, and through a large number of
distributors and licensees elsewhere around the world. The Company continues to
pursue strategies to establish its presence in new emerging markets. Such new
and emerging markets include Eastern Europe; Russia; and China, where in 1996
the Company established a subsidiary with a local minority partner. In
addition, the Company is building a franchise through local distributorships in
northern and central Africa, where the Company intends to expand the
distribution of its products by capitalizing on its market strengths in South
Africa.
11
CUSTOMERS
The Company's principal customers include chain drug stores and large
mass volume retailers, including such well known retailers as Wal-Mart,
Walgreens, Kmart, Target, CVS, Drug Emporium, American Drug Stores, Eckerds,
and Rite Aid in the self-select distribution channel, J.C. Penney in the
demonstrator-assisted distribution channel, Sally's Beauty Company for
professional products, Boots in the United Kingdom and Western Europe and
Wal-Mart worldwide. The foregoing principal customers each accounted for 1% or
more of the Company's net sales in 1997 and are representative of the Company's
customers.
COMPETITION
The cosmetics and skin care, fragrance, personal care and professional
products business is characterized by vigorous competition throughout the
world. Brand recognition, together with product quality, performance and price
and the extent to which consumers are educated on product benefits, have a
marked influence on consumers' choices among competing products and brands.
Advertising, promotion, merchandising and packaging, and the timing of new
product introductions and line extensions, also have a significant impact on
buying decisions, and the structure and quality of the sales force affect
product reception, in-store position, permanent display space and inventory
levels in retail outlets. The Company competes in most of its product
categories against a number of companies, some of which have substantially
greater resources than the Company. In addition to products sold in the
self-select and demonstrator-assisted distribution channels, the Company's
products also compete with similar products sold door-to-door or through mail
order or telemarketing by representatives of direct sales companies. The
Company's principal competitors include L'Oreal S.A., The Procter & Gamble
Company, Helene Curtis Industries, Inc. and Joh A. Benckiser GmbH in the
self-select distribution channel; L'Oreal S.A., Unilever N.V., Estee Lauder,
Inc. and Joh A. Benckiser GmbH in the demonstrator-assisted distribution
channel; and L'Oreal S.A. and Matrix Essentials, Inc., which is owned by
Bristol-Myers Squibb Company, in professional products.
SEASONALITY
The Company's business is subject to certain seasonal fluctuations,
with net sales in the second half of the year generally benefiting from
increased retailer purchases in the United States for the back-to-school and
Christmas selling seasons.
PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY
The Company's major trademarks are registered in the United States and
in many other countries, and the Company considers trademark protection to be
very important to its business. Significant trademarks include REVLON,
COLORSTAY, REVLON AGE DEFYING, STREETWEAR, FLEX, PLUSBELLE, MITCHUM, ETERNA 27,
ULTIMA II, ALMAY, CHARLIE, JEAN NATE, REVLON RESULTS, COLORAMA, FIRE & ICE,
MOON DROPS, SUPER LUSTROUS and WONDERWEAR LIPSEXXXY for consumer products and
REVLON, ROUX FANCI-FULL, REALISTIC, FERMODYL, CREATIVE NAIL, AMERICAN CREW and
INTERCOSMO for professional products.
The Company utilizes certain proprietary or patented technologies in
the formulation or manufacture of a number of the Company's products, including
COLORSTAY lipcolor and cosmetics, COLORSTAY haircolor, FLEX & GO shampoo,
LENGTHWISE mascara, classic REVLON nail enamel, TOP SPEED nail enamel, REVLON
AGE DEFYING foundation and cosmetics, NEW COMPLEXION makeup, WONDERWEAR
foundation, WONDERWEAR LIPSEXXXY lipstick, ALMAY TIME-OFF skin care and makeup,
ALMAY AMAZING cosmetics, ALMAY ONE COAT eye makeup and cosmetics, ULTIMA II
VITAL RADIANCE skin care products, OUTRAGEOUS shampoo, FLEX hairspray and
various professional products, including FERMODYL shampoo and conditioners. The
Company also protects certain of its packaging and component concepts through
design patents. The Company considers its proprietary technology and patent
protection to be important to its business.
12
GOVERNMENT REGULATION
The Company is subject to regulation by the Federal Trade Commission
and the Food and Drug Administration (the "FDA") in the United States, as well
as various other federal, state, local and foreign regulatory authorities. The
Phoenix, Arizona and Oxford, North Carolina manufacturing facilities are
registered with the FDA as drug manufacturing establishments, permitting the
manufacture of cosmetics that contain over-the-counter drug ingredients such as
sunscreens. Compliance with federal, state, local and foreign laws and
regulations pertaining to discharge of materials into the environment, or
otherwise relating to the protection of the environment, has not had, and is
not anticipated to have, a material effect upon the capital expenditures,
earnings or competitive position of the Company. State and local regulations in
the United States that are designed to protect consumers or the environment
have an increasing influence on product claims, contents and packaging.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain geographic,
financial and other information of the Company is set forth in Note 18 of the
Notes to Consolidated Financial Statements of the Company.
EMPLOYEES
As of December 31, 1997, the Company employed the equivalent of
approximately 16,000 full-time persons. Approximately 2,100 of such employees
in the United States are covered by collective bargaining agreements. The
Company will be negotiating collective bargaining agreements or portions
thereof covering employees in eleven countries outside the United States during
1998 (namely, Australia, Brazil, England, France, Ireland, Israel, Italy,
Japan, Mexico, South Africa and Spain). Although there can be no assurance, the
Company expects that such agreements will be renewed in the ordinary course,
and further believes that its employee relations are satisfactory. Although the
Company has experienced minor work stoppages of limited duration in the past in
the ordinary course of business, such work stoppages have not had a material
effect on the Company's results of operations or financial condition.
13
ITEM 2. PROPERTIES
The following table sets forth as of December 31, 1997 the Company's
major manufacturing, research and warehouse/distribution facilities, all of
which are owned except where otherwise noted.
APPROXIMATE FLOOR SPACE
LOCATION USE SQ. FT.
- -------- --- -----------------------
United States:
Oxford, North
Carolina.................... Manufacturing, warehousing, distribution and office 1,012,000
Phoenix,
Arizona..................... Manufacturing, warehousing, distribution and office 706,000
(partially leased)
Jacksonville,
Florida..................... Manufacturing, warehousing, distribution, research and 526,000
office
Columbia,
Maryland.................... Warehousing, distribution and office (leased) 200,000
Edison, New
Jersey...................... Research and office (leased) 133,000
Irvington, New
Jersey...................... Manufacturing, warehouse and office 96,000
International:
Sao Paulo,
Brazil...................... Manufacturing, warehousing, distribution, office and 435,000
research
Maesteg, South
Wales....................... Manufacturing,.distribution and office 316,000
Mississauga,
Canada...................... Manufacturing, warehousing, distribution and office 245,000
Santa Maria,
Spain....................... Manufacturing and warehousing 173,000
Caracas,
Venezuela................... Manufacturing, distribution and office 145,000
Kempton Park, South
Africa...................... Warehousing, distribution and office (leased) 127,000
Canberra,
Australia................... Warehousing, distribution and office 125,000
Isando, South
Africa...................... Manufacturing, warehousing, distribution and office 94,000
Escobar,
Argentina................... Manufacturing, warehousing, distribution and office 75,000
Argenteuil,
France...................... Warehousing and distribution (leased) 73,000
Bologna,
Italy....................... Manufacturing, warehousing, distribution and office 60,000
Dublin,
Ireland..................... Manufacturing, warehousing, distribution and office 32,500
In addition to the facilities described above, additional facilities
are owned and leased in various areas throughout the world, including the lease
for the Company's executive offices in New York, New York (345,000 square feet,
of which approximately 57,000 square feet are currently sublet to affiliates of
the Company and approximately 27,000 square feet are sublet to an unaffiliated
third party). Management considers the Company's facilities to be
well-maintained and satisfactory for the Company's operations, and believes
that the Company's facilities provide sufficient capacity for its current and
expected production requirements. Products Corporation leases from Holdings on
arms' length terms its research and development facility located in Edison, New
Jersey.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings incident
to the ordinary course of its business. The Company believes that the outcome
of all pending legal proceedings in the aggregate is unlikely to have a
material adverse effect on the business or consolidated financial condition of
the Company.
14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), which is
indirectly wholly owned by Ronald O. Perelman, through REV Holdings Inc. ("REV
Holdings"), beneficially owns 11,250,000 shares of the Company's Class A Common
Stock (representing 56.6% of the outstanding shares of Class A Common Stock)
and all of the outstanding 31,250,000 shares of Class B Common Stock, which
together represent 83.1% of the outstanding shares of the Company's Common
Stock and have approximately 97.4% of the combined voting power of the
outstanding shares of the Company's Common Stock. The remaining 8,637,350
shares of Class A Common Stock outstanding at February 2, 1998 are owned by the
public. As of February 2, 1998, there were 529 holders of record of Class A
Common Stock. No dividends were declared or paid during 1997 or 1996. The terms
of the Credit Agreement, the Senior Subordinated Notes, the Senior Notes and
the 9 1/2% Senior Notes Due 1999 (the "1999 Notes") currently restrict, and,
after the Assumption, the terms of the Notes will restrict, the ability of
Products Corporation to pay dividends or make distributions to Revlon, Inc. See
the Consolidated Financial Statements of the Company and the Notes thereto.
The table below shows the Company's high and low quarterly stock
prices for the years ended December 31, 1997 and 1996.
1997 Quarterly Stock Prices (1)
---------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------ ------------- ------------ -------------
High............................ $ 42 3/8 $ 51 13/16 $ 54 1/8 49
Low............................. 29 5/8 33 1/4 45 3/8 33 1/8
1996 Quarterly Stock Prices (1)
---------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------ ------------- ------------ -------------
High............................ $ 28 1/4 $ 31 3/8 $ 31 1/8 $ 36 1/2
Low............................. 25 1/2 24 3/4 23 1/2 28 5/8
(1) Represents the closing price per share on the New York Stock
Exchange (NYSE), which is the market on which shares of the Company's Class A
Common Stock are listed. The Company's symbol is REV.
15
ITEM 6. SELECTED FINANCIAL DATA
The Consolidated Statements of Operations Data for each of the years
in the five-year period ended December 31, 1997 and the Balance Sheet Data as
of December 31, 1997, 1996, 1995, 1994 and 1993 are derived from the
Consolidated Financial Statements of the Company, which have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The Selected
Consolidated Financial Data should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes to the Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(dollars in millions, except share data)
Statements of Operations Data:
Net sales.............................................. $ 2,390.9 $ 2,169.5 $ 1,940.0 $ 1,736.7 $ 1,595.2
============ =========== =========== =========== ===========
Operating income....................................... $ 213.3(a)$ 200.6 $ 145.6 $ 107.4 $ 50.5
============ =========== =========== =========== ===========
Income (loss) before extraordinary
items and cumulative effect of
accounting changes............................. $ 58.5 $ 24.8 $ (41.2) $ (75.0) $ (130.2)
Extraordinary items - early extinguishments of debt.... (14.9) (6.6) - - (9.5)
Cumulative effect of accounting changes................ - - - (28.8)(b) $ (6.0)(c)
============ =========== =========== =========== ===========
Net income (loss)...................................... $ 43.6 $ 18.2 $ (41.2) $ (103.8) $ (145.7)
============ =========== =========== =========== ===========
Basic income (loss) per common share:
Income (loss) before extraordinary items.............. $ 1.14 $ 0.50 $ (0.97) $ (1.76) $ (3.07)
Extraordinary items................................... (0.29) (0.13) - - (0.22)
Cumulative effect of accounting changes............... - - - (0.68) (0.14)
============ =========== =========== =========== ===========
Net income (loss) per common share.................... $ 0.85 $ 0.37 $ (0.97) $ (2.44) $ (3.43)
============ =========== =========== =========== ===========
Diluted income (loss) per common share:
Income (loss) before extraordinary items.............. $ 1.14 $ 0.50 $ (0.97) $ (1.76) $ (3.07)
Extraordinary items................................... (0.29) (0.13) - - (0.22)
Cumulative effect of accounting changes............... - - - (0.68) (0.14)
============ =========== =========== =========== ===========
Net income (loss) per common share.................... $ 0.85 $ 0.37 $ (0.97) $ (2.44) $ (3.43)
============ =========== =========== =========== ===========
Weighted average common shares outstanding: (d)
Basic.......................................... 51,131,440 49,687,500 42,500,000 42,500,000 42,500,000
============ =========== =========== =========== ===========
Dilutive....................................... 51,544,318 49,818,792 42,500,000 42,500,000 42,500,000
============ =========== =========== =========== ===========
December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(dollars in millions)
Balance Sheet Data:
Total assets........................................... $ 1,834.6 $ 1,621.9 $ 1,536.0 $ 1,419.4 $ 1,551.1
Long-term debt, excluding current portion.............. 1,458.7 1,352.2 1,467.5 1,327.5 1,203.8
Total stockholders' deficiency......................... (458.5) (497.1) (702.3) (656.2) (554.2)
(a) In 1997, the Company incurred business consolidation costs and other, net,
of approximately $7.6 million in connection with the implementation of its
business strategy to rationalize factory and warehouse operations, including
primarily severance and other related costs in certain operations and the
consolidation of certain warehouse, distribution and headquarter operations
related to the Cosmetic Center Merger partially offset by a settlement of a
claim of $12.7 million and gains associated with the sale of certain facilities
related to the rationalizations.
(b) Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits." The Company recognized a charge of $28.8 million in
the first quarter of 1994 to reflect the cumulative effect of the accounting
change, net of income tax benefit.
(c) Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," for its retiree
benefit plan in the United States. Accordingly, the Company recognized a charge
of $6.0 million in the first quarter of 1993 to reflect the cumulative effect
of the accounting change.
(d) Represents the weighted average common shares outstanding for the period.
See Note 1 to the Consolidated Financial Statements.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN MILLIONS)
OVERVIEW
The Company operates in a single business segment with many different
products, which include an extensive array of glamorous, exciting and
innovative cosmetics and skin care, fragrance and personal care products, and
professional products, consisting of hair and nail care products principally
for use in and resale by professional salons. In addition, the Company also
operates retail and outlet stores and has a licensing group.
The Company presents its business geographically as its United States
operation, which comprises the Company's business in the United States, and its
International operation, which comprises its business outside of the United
States.
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales by operation
for each of the last three years:
Year Ended December 31,
-----------------------------------------------
Net sales: 1997 * 1996 * 1995 *
------------ ------------ ------------
United States ................................. $ 1,452.5 $ 1,259.7 $ 1,115.4
International ................................. 938.4 909.8 824.6
============ ============ ============
$ 2,390.9 $ 2,169.5 $ 1,940.0
============ ============ ============
The following sets forth certain statements of operations data as a
percentage of net sales for each of the last three years:
Year Ended December 31,
-----------------------------------------------
1997 ** 1996 ** 1995 **
------------ ------------ ------------
Cost of sales................................... 34.8% 33.5% 33.7%
Gross profit.................................... 65.2 66.5 66.3
Selling, general and administrative expenses.... 56.0 57.3 58.8
Business consolidation costs and other, net..... 0.3 - -
Operating income................................ 8.9 9.2 7.5
* The results of Cosmetic Center, after giving effect to certain intercompany
adjustments for 1997, 1996 and 1995, were as follows, respectively: Net sales
of $152.3, $77.4 and $72.7, cost of sales of $89.5, $37.6 and $38.0, S,G&A
expenses of $61.9, $38.4 and $36.5, and operating (loss) income of ($3.1), $1.4
and ($1.8). 1997 includes business consolidation costs of $4.0 in the operating
(loss).
** Excluding the results of Cosmetic Center, after giving effect to certain
intercompany adjustments for 1997, 1996 and 1995, the above percentages would
have been, respectively: cost of sales of 33.2%, 32.9% and 32.9%, gross profit
of 66.8%, 67.1% and 67.1%, S,G&A expenses of 57.0%, 57.6 % and 59.2%, business
consolidation costs and other, net, of 0.1%, 0% and 0% and operating income of
9.7%, 9.5% and 7.9%.
17
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
NET SALES
Net sales were $2,390.9 and $2,169.5 for 1997 and 1996, respectively,
an increase of $221.4, or 10.2% or 12.6% on a constant U.S. dollar basis,
primarily as a result of successful new product introductions worldwide,
increased demand in the United States, the impact of the Cosmetic Center
Merger, increased distribution internationally into the expanding self-select
distribution channel and the further development of new international markets.
United States. The United States operation's net sales increased to
$1,452.5 for 1997 from $1,259.7 for 1996, an increase of $192.8, or 15.3%. Net
sales improved for 1997, primarily as a result of continued consumer acceptance
of new product offerings, general improvement in consumer demand for the
Company's color cosmetics and the impact of the Cosmetic Center Merger. These
results were partially offset by a decline in the Company's fragrance business
caused by downward trends in the mass fragrance industry and the Company's
strategy to de-emphasize new fragrance products. Even though consumer
sell-through for the REVLON and ALMAY brands, as described below in more
detail, has increased significantly, the Company's sales to its customers have
been during 1997 and may continue to be impacted by retail inventory balancing
and reductions resulting from consolidation in the chain drugstore industry in
the U.S.
REVLON brand color cosmetics continued as the number one brand in
dollar market share in the self-select distribution channel with a share of
21.6% for 1997 versus 21.4% for 1996. Market share, which is subject to a
number of conditions, can vary from quarter to quarter as a result of such
things as timing of new product introductions and advertising and promotional
spending. New product introductions (including, in 1997, certain products
launched during 1996) generated incremental net sales in 1997, principally as a
result of launches of products in the COLORSTAY collection, including COLORSTAY
eye makeup and face products such as powder and blush, COLORSTAY haircolor,
launched in the third quarter of 1997, TOP SPEED nail enamel, launched in the
third quarter of 1997, and launches of REVLON AGE DEFYING line extensions, the
STREETWEAR collection, NEW COMPLEXION face makeup, LINE & SHINE lip makeup and
launches of products in the ALMAY AMAZING collection, including lip makeup, eye
makeup, face makeup and concealer, ALMAY ONE COAT, and ALMAY TIME-OFF
REVITALIZER.
International. The International operation's net sales increased to
$938.4 for 1997 from $909.8 for 1996, an increase of $28.6, or 3.1% on a
reported basis or 8.8% on a constant U.S. dollar basis. Net sales improved for
1997, principally as a result of increased distribution into the expanding
self-select distribution channel, successful new product introductions,
including the continued roll-out of the COLORSTAY cosmetics collection and the
further development of new international markets. This was partially offset by
the Company's decision to exit the unprofitable demonstrator-assisted channel
in Japan in the second half of 1996, unfavorable economic conditions in several
international markets, and, on a reported basis, the unfavorable effect on
sales of a stronger U.S. dollar against certain foreign currencies, primarily
the Spanish peseta, the Italian lira and several other European currencies, the
Australian dollar, the South African rand and the Japanese yen. New products
such as COLORSTAY haircolor and STREETWEAR were introduced in select
international markets in the second half of 1997. During 1997, the
International operation's sales were divided into the following geographic
areas: Europe, which is comprised of Europe, the Middle East and Africa (in
which net sales increased by 3.4% on a reported basis to $417.9 for 1997 as
compared to 1996 or an increase of 11.3% on a constant U.S. dollar basis); the
Western Hemisphere, which is comprised of Canada, Mexico, Central America,
South America and Puerto Rico (in which net sales increased by 11.1% on a
reported basis to $346.6 for 1997 as compared to 1996 or an increase of 14.5%
on a constant U.S. dollar basis); and the Far East (in which net sales
decreased by 10.3% on a reported basis to $173.9 for 1997 as compared to 1996
or a decrease of 5.5% on a constant U.S. dollar basis). Excluding in both
periods the effect of the Company's strategy of exiting the
demonstrator-assisted distribution channel in Japan, Far East net sales on a
constant U.S. dollar basis for 1997 would have been at approximately the same
level as those in 1996.
The Company's operations in Brazil are significant and, along with
operations in certain other countries, have been subject to, and may continue
to be subject to, significant political and economic uncertainties. In Brazil,
net sales, operating income and income before taxes were $130.9, $16.0 and
$7.7, respectively, for 1997 compared to $132.7, $25.1 and $20.0, respectively,
for 1996. Results of operations in Brazil for 1997 were adversely
18
impacted by competitive activity affecting the Company's toiletries business.
Cost of sales
As a percentage of net sales, cost of sales was 34.8% for 1997
compared to 33.5% for 1996. The increase in cost of sales as a percentage of
net sales is due primarily to the impact of the Cosmetic Center Merger.
Excluding the results of Cosmetic Center, as a percentage of net sales, cost of
sales would have been 33.2% for 1997 compared to 32.9% for 1996. Other factors
which increased cost of sales as a percentage of net sales included factors
which enhanced overall operating income, including increased sales of the
Company's higher cost, enhanced-performance, technology-based products and
increased export sales and other factors including the effect of weaker local
currencies on the cost of imported purchases and competitive pressures on the
Company's toiletries business in certain International markets. These factors
were partially offset by the benefits of improved overhead absorption against
higher production volumes and more efficient global production and purchasing.
S,G&A expenses
As a percentage of net sales, S,G&A expenses were 56.0% for 1997, an
improvement from 57.3% for 1996. S,G&A expenses other than advertising and
consumer-directed promotion expenses, as a percentage of net sales, improved to
39.3% for 1997 compared with 40.9% for 1996, primarily as a result of reduced
general and administrative expenses, improved productivity and lower
distribution costs in 1997 compared with those in 1996. In accordance with its
business strategy, the Company increased advertising and consumer-directed
promotion expenditures in 1997 compared with 1996 to support growth in existing
product lines, new product launches and increased distribution in the
self-select distribution channel in many of the Company's markets in the
International operation. Advertising and consumer-directed promotion expenses
increased by 11.8% to $397.4, or 16.6% of net sales, for 1997 from $355.5, or
16.4% of net sales, for 1996.
Business consolidation costs and other, net
Business consolidation costs and other, net, in 1997 include severance
and other costs in connection with the consolidation of certain warehouse,
distribution and headquarter operations related to the Cosmetic Center Merger,
severance, writedowns of certain assets to their estimated net realizable value
and other related costs to rationalize factory operations in certain operations
in accordance with the Company's business strategy, partially offset by related
gains from the sales of certain factory operations and an approximately $12.7
settlement of a claim in the second quarter of 1997. These business
consolidations are intended to lower the Company's operating costs and increase
efficiency in the future.
Operating income
As a result of the foregoing, operating income increased by $12.7, or
6.3%, to $213.3 for 1997 from $200.6 for 1996.
Other expenses/income
Interest expense was $136.2 for 1997 compared to $133.4 for 1996. The
slight increase in interest expense in 1997 is due to higher average
outstanding borrowings, partially offset by lower interest rates.
Gain on sale of subsidiary stock of $6.0 was recognized in the second
quarter of 1997 as a result of the Cosmetic Center Merger.
Foreign currency losses, net, were $6.4 for 1997 compared to $5.7 for
1996. The increase in foreign currency losses for 1997 as compared to 1996
resulted primarily from a non recurring gain recognized in 1996 in connection
with the Company's simplification of its international corporate structure and
from the strengthening of the U.S. dollar versus currencies in the Far East and
most European currencies, partially offset by the stabilization of the
Venezuelan bolivar and Mexican peso versus the devaluations which occurred
during 1996.
19
Provision for income taxes
The provision for income taxes was $9.4 and $25.5 for 1997 and 1996,
respectively. The decrease was primarily attributable to lower taxable income
in certain International operations, partially as a result of the
implementation of tax planning, including the utilization of net operating loss
carryforwards in certain International operations, and benefits from net
operating loss carryforwards domestically.
Extraordinary item
The extraordinary item in 1997 resulted from the write-off in the
second quarter of 1997 of deferred financing costs associated with the early
extinguishment of borrowings under the 1996 Credit Agreement prior to maturity
with proceeds from the Credit Agreement, and costs of approximately $6.3 in
connection with the redemption of Products Corporation's Sinking Fund
Debentures. The extraordinary item in 1996 resulted from the write-off in the
first quarter of 1996 of deferred financing costs associated with the early
extinguishment of borrowings under the 1995 Credit Agreement prior to maturity
with the net proceeds from the Revlon IPO and proceeds from the 1996 Credit
Agreement.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net sales
Net sales were $2,169.5 and $1,940.0 for 1996 and 1995, respectively,
an increase of $229.5, or 11.8%, primarily as a result of successful new
product introductions worldwide, increased demand in the United States,
acquisitions of certain exclusive line professional product businesses,
increased distribution internationally into the expanding self-select
distribution channel and the further development of new international markets.
United States. The United States operation's net sales increased to
$1,259.7 for 1996 from $1,115.4 for 1995, an increase of $144.3, or 12.9%. Net
sales improved for 1996 primarily as a result of continued consumer acceptance
of new product offerings, general improvement in consumer demand for the
Company's color cosmetics in the United States and acquisitions of certain
exclusive line professional product businesses, partially offset by overall
softness in the fragrance industry and lower sales of one of the Company's
prestige brands. The Company improved the dollar share of its REVLON brand
cosmetics in the color cosmetics business in the United States self-select
distribution channel to 21.4% for 1996 from 19.5% for 1995, moving into the
leading position in market share. Market share, which is subject to a number of
conditions, can vary from quarter to quarter as a result of such things as
timing of new product introductions and advertising and promotional spending.
New product introductions (including, in 1996, certain products launched during
1995) generated incremental net sales in 1996, principally as a result of
launches of products in the COLORSTAY collection, including COLORSTAY
foundation, lip makeup, eye makeup and COLORSTAY LASHCOLOR mascara, launches of
products in the ALMAY AMAZING collection, including lip makeup, eye makeup,
face makeup and concealer, and launches of Cherish fragrance and MITCHUM CLEAR
and ALMAY CLEAR COMPLEXION line extensions.
International. The International operation's net sales increased to
$909.8 for 1996 from $824.6 for 1995, an increase of $85.2, or 10.3% on a
reported basis or 12.6% on a constant U.S. dollar basis. Net sales improved
principally as a result of successful new product introductions, including the
continued roll-out of the COLORSTAY cosmetics collection and REVLON AGE DEFYING
makeup, increased distribution into the expanding self-select distribution
channel, the further development of new international markets, partially
offset, on a reported basis, by the unfavorable effect on sales of a stronger
U.S. dollar against certain foreign currencies, primarily the South African
rand, Japanese yen, and several European currencies. During 1996, the
International operation's sales were divided into the following geographic
areas: Europe, which is comprised of Europe, the Middle East and Africa (in
which net sales increased to $404.0 for 1996 from $374.6 for 1995, an increase
of $29.4, or 7.8%); the Western Hemisphere, which is comprised of Canada,
Mexico, Central America, South America and Puerto Rico (in which net sales
increased to $311.9 for 1996 from $275.4 for 1995, an increase of $36.5, or
13.3%); and the Far East (in which net sales increased to $193.9 for 1996 from
$174.6 for 1995, an increase of $19.3, or 11.1%).
The Company's operations in Brazil are significant and, along with
operations in certain other countries, have been subject to, and may continue
to be subject to, significant political and economic uncertainties. In Brazil,
net sales,
20
operating income and income before taxes were $132.7, $25.1 and $20.0,
respectively, for 1996 compared to $118.6, $22.8 and $19.8, respectively, for
1995. In Mexico, net sales for 1996 and 1995 were adversely affected by the
December 1994 devaluation of the Mexican peso and related economic weakness. In
Venezuela, net sales and income before taxes for 1996 and 1995 were adversely
affected by high inflation and in the 1996 period by a currency devaluation.
Cost of sales
As a percentage of net sales, cost of sales was 33.5% for 1996
compared to 33.7% for 1995, respectively. The improvement for 1996 resulted
from the benefits of improved overhead absorption against higher production
volumes and more efficient global production and purchasing. This improvement
was partially offset by changes in product mix involving an increase in sales
of the Company's higher cost technology-based products, an increase in export
sales, lower margin products (such as those products sold in Brazil), the
effect of weaker local currencies on the cost of imported purchases and
competitive pressures on the Company's toiletries business in certain
international markets in Europe and the Far East. The aforementioned increases
in sales that negatively impacted cost of sales were, however, more profitable
to the Company's overall operating results.
S,G&A expenses
As a percentage of net sales, S,G&A expenses were 57.3% for 1996, an
improvement from 58.8% for 1995. S,G&A expenses other than advertising and
consumer-directed promotion expenses, as a percentage of net sales, improved to
40.9% for 1996 compared with 43.2% for 1995 primarily as a result of reduced
general and administrative expenses, improved productivity and lower
distribution costs in 1996 compared with 1995, partially offset by additional
costs incurred in Japan in 1996 in connection with the Company's strategy of
exiting the demonstrator-assisted distribution channel. In accordance with its
business strategy, the Company increased advertising and consumer-directed
promotion expenditures in 1996 compared with 1995 to support growth in existing
product lines, new product launches and increased distribution in the
self-select distribution channel in many of the Company's markets in the
International operation. Advertising and consumer-directed promotion expenses
increased by 17.4% to $355.5, or 16.4% of net sales, for 1996 compared to
$302.9, or 15.6% of net sales, for 1995.
Operating income
As a result of the foregoing, operating income increased by $55.0, or
37.8%, to $200.6 for 1996 from $145.6 for 1995.
Other expenses/income
Interest expense was $133.4 for 1996 compared to $142.6 for 1995. The
reduction in interest expense is attributable to lower average outstanding
borrowings as a result of the paydown of debt under the 1996 Credit Agreement
and under the 1995 Credit Agreement with the use of proceeds from the Revlon
IPO in the 1996 period and lower interest rates under the 1996 Credit Agreement
than under the 1995 Credit Agreement.
Foreign currency losses, net, were $5.7 for 1996 compared to $10.9 for
1995. The reduction in the foreign currency loss in 1996 as compared to 1995
was due to lower foreign currency losses primarily in Mexico and Venezuela and
the Company's simplification of its international corporate structure, which
resulted in $2.1 of gains, previously deferred in the currency translation
account, partially offset by the strengthening of the U.S. dollar against the
Spanish peseta and the strengthening of the U.K. pound against several European
currencies.
Miscellaneous, net, was $6.3 for 1996 compared to $1.8 for 1995. The
increase relates primarily to the Company's continued investment in certain
emerging markets.
21
Extraordinary item
The extraordinary item resulted from the write-off recorded in the
first quarter of 1996 of deferred financing costs associated with the early
extinguishment of the 1995 Credit Agreement prior to its maturity with the net
proceeds from the Revlon IPO and borrowings under the 1996 Credit Agreement.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used for) operating activities was $6.9, ($9.6)
and ($52.1) for 1997, 1996 and 1995, respectively. The increase in net cash
provided by operating activities for 1997 compared with net cash used in 1996
resulted primarily from higher operating income and improved working capital
management, partially offset by increased spending on merchandise display units
in connection with the Company's continued expansion into the self-select
distribution channel. The decrease in net cash used for operating activities
for 1996 compared with 1995 resulted primarily from higher operating income,
lower restructuring payments ($13.3 for 1996 compared with $24.2 for 1995) and
improved management of inventory relative to business growth, partially offset
by higher trade receivable balances as a result of higher net sales and
increased spending on merchandise display units in connection with the
Company's continued expansion into the self-select distribution channel.
Net cash used for investing activities was $108.4, $65.1 and $72.5 for
1997, 1996 and 1995, respectively. Net cash used for investing activities for
1997, 1996 and 1995 included capital expenditures of $56.5, $58.0 and $54.3,
respectively, and $60.4, $7.1 and $21.2, respectively, used for acquisitions.
Net cash used for acquisitions in 1997 consisted primarily of cash paid to the
CCI shareholders in connection with the cash election pursuant to the Cosmetic
Center Merger and cash paid for the acquisition of a South American hair care
manufacturer and its distributor.
Net cash provided by financing activities was $109.3, $77.9 and $125.6
for 1997, 1996 and 1995, respectively. Net cash provided by financing
activities for 1997 included cash drawn under the 1996 Credit Agreement, the
Credit Agreement and Cosmetic Center's credit facility, partially offset by the
repayment of borrowings under the 1996 Credit Agreement, the payment of fees
and expenses related to entering into the Credit Agreement, the repayment of
borrowings under the Company's Japanese yen-denominated credit agreement (the
"Yen Credit Agreement"), the repayment of borrowings under CCI's former credit
agreement and the redemption of the Sinking Fund Debentures. Net cash provided
by financing activities for 1996 included the net proceeds from the Revlon IPO,
cash drawn under the 1995 Credit Agreement and under the 1996 Credit Agreement,
partially offset by the repayment of borrowings under the 1995 Credit
Agreement, the payment of fees and expenses related to the 1996 Credit
Agreement and the repayment of borrowings under the Yen Credit Agreement. Net
cash provided by financing activities for 1995 consisted primarily of
borrowings under the credit agreement of Products Corporation in effect prior
to the 1995 Credit Agreement and borrowings under the 1995 Credit Agreement,
partially offset by repayments of cash drawn under those credit agreements,
repayments under the Yen Credit Agreement and payment of debt issuance costs
under the 1995 Credit Agreement.
In May 1997, Products Corporation entered into the Credit Agreement
with a syndicate of lenders, whose individual members change from time to time.
The proceeds of loans made under the Credit Agreement were used for the purpose
of repaying the loans outstanding under the 1996 Credit Agreement and to redeem
the Sinking Fund Debentures and were and will be used for general corporate
purposes or, in the case of the Acquisition Facility, the financing of
acquisitions. See Note 10(a) to the Consolidated Financial Statements. At
December 31, 1997 Products Corporation had approximately $200.0 outstanding
under the Term Loan Facilities, $102.7 outstanding under the Multi-Currency
Facility, $41.9 outstanding under the Acquisition Facility and $34.8 of issued
but undrawn letters of credit under the Special LC Facility.
A subsidiary of Products Corporation is the borrower under the Yen
Credit Agreement, which had a principal balance of approximately Yen 4.3
billion as of December 31, 1997 (approximately $33.3 U.S. dollar equivalent as
of December 31, 1997). In accordance with the terms of the Yen Credit
Agreement, approximately Yen 539 million (approximately $5.2 U.S. dollar
equivalent) was paid in January 1996 and approximately Yen 539 million
(approximately $4.6 U.S. dollar equivalent) was paid in January 1997. In June
1997, Products Corporation amended and restated the Yen Credit Agreement to
extend the term to December 31, 2000 subject to earlier termination under
certain circumstances. In accordance with the terms of the Yen Credit
Agreement, as amended
22
and restated, approximately Yen 539 million (approximately $4.2 U.S. dollar
equivalent as of December 31, 1997) is due in each of March 1998, 1999 and 2000
and Yen 2.7 billion (approximately $20.7 U.S. dollar equivalent as of
December 31, 1997) is due on December 31, 2000.
Products Corporation made an optional sinking fund payment of $13.5
and redeemed all of the outstanding $85.0 principal amount Sinking Fund
Debentures during 1997 with the proceeds of borrowings under the Credit
Agreement. $9.0 aggregate principal amount of previously purchased Sinking Fund
Debentures were used for the mandatory sinking fund payment due July 15, 1997.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings at interest rates more
favorable to Products Corporation than interest rates under the Credit
Agreement. No such borrowings were outstanding as of December 31, 1997.
On February 2, 1998, Revlon Escrow issued and sold the Notes in a
private placement, with the net proceeds deposited into escrow. The proceeds
from the sale of the Notes will be used to finance the redemptions of the Old
Notes. Products Corporation delivered a redemption notice to the holders of the
Senior Subordinated Notes for the redemption of the Senior Subordinated Notes
on March 4, 1998, at which time Products Corporation consummated the 8 5/8%
Notes Assumption, and to the holders of the Senior Notes for the redemption of
the Senior Notes on April 1, 1998, at which time Products Corporation will
consummate the 8 1/8% Notes Assumption. On or before March 19, 1998 either
Revlon Escrow or Products Corporation is required to file a registration
statement with the Commission with respect to the Exchange Offer, which is
expected to occur on or before July 2, 1998. In connection with the early
redemptions of the Old Notes, the Company expects to record an extraordinary
loss of up to $52 in 1998. The indentures governing the 8 5/8% Notes (the "8
5/8% Notes Indenture") and the 8 1/8% Notes (the "8 1/8% Notes Indenture" and,
together with the 8 5/8% Notes Indenture, the "Notes Indentures") contain
covenants that, after the Assumption among other things, limit (i) the issuance
of additional debt and redeemable stock by Products Corporation, (ii) the
incurrence of liens, (iii) the issuance of debt and preferred stock by Products
Corporation's subsidiaries, (iv) the payment of dividends on capital stock of
Products Corporation, (v) the sale of assets and subsidiary stock, (vi)
transactions with affiliates, (vii) consolidations, mergers and transfers of
all or substantially all Products Corporation assets and (viii) in the case of
the 8 5/8% Notes Indenture, the issuance of additional subordinated debt that
is senior in right of payment to the 8 5/8% Notes. The Notes Indentures also
prohibit certain restrictions on distributions from Products Corporation and
subsidiaries of Products Corporation. All of these limitations and
prohibitions, however, are subject to a number of important qualifications.
The Company's principal sources of funds are expected to be cash flow
generated from operations and borrowings under the Credit Agreement and other
existing working capital lines. The Credit Agreement and the Senior Notes, the
1999 Notes and the Senior Subordinated Notes currently contain, and, following
the Assumption, the Notes will contain, certain provisions that by their terms
limit Products Corporation's and/or its subsidiaries' ability to, among other
things, incur additional debt. The Company's principal uses of funds are
expected to be the payment of operating expenses, working capital and capital
expenditure requirements and debt service payments.
The Company estimates that capital expenditures for 1998 will be
approximately $65, including upgrades to the Company's management information
systems. Pursuant to a tax sharing agreement (see "Certain Relationships and
Related Transactions-Tax Sharing Agreement"), Revlon, Inc. may be required to
make tax sharing payments to Mafco Holdings Inc. as if Revlon, Inc. were filing
separate income tax returns, except that no payments are required by Revlon,
Inc. if and to the extent that Products Corporation is prohibited under the
Credit Agreement from making tax sharing payments to Revlon, Inc. The Credit
Agreement prohibits Products Corporation from making any tax sharing payments
other than in respect of state and local income taxes. Revlon, Inc. currently
anticipates that, as a result of net operating tax losses and prohibitions
under the Credit Agreement, no cash federal tax payments or cash payments in
lieu of taxes pursuant to the tax sharing agreement will be required for 1998.
As of December 31, 1997, Products Corporation was party to a series of
interest rate swap agreements totaling a notional amount of $225.0 in which
Products Corporation agreed to pay on such notional amount a variable interest
rate equal to the six month LIBOR to its counterparties and the counterparties
agreed to pay on such notional amounts fixed interest rates averaging
approximately 6.03% per annum. Products Corporation entered
23
into these agreements in 1993 and 1994 (and in the first quarter of 1996
extended a portion equal to a notional amount of $125.0 through December 2001)
to convert the interest rate on $225.0 of fixed-rate indebtedness to a variable
rate. If Products Corporation had terminated these agreements, which Products
Corporation considered to be held for other than trading purposes, on December
31, 1997 and 1996, a loss of approximately $0.1 and $3.5, respectively, would
have been realized. Certain other swap agreements were terminated in 1993 for a
gain of $14.0 and were amortized over the original lives of the agreements
through 1997. The amortization of the 1993 realized gain in 1997, 1996, and
1995 was approximately $3.1, $3.2 and $3.2, respectively. Cash flow from the
agreements outstanding at December 31, 1997 was approximately break even for
1997. Products Corporation terminated these agreements in January 1998 and
realized a gain of approximately $1.6, which will be recognized upon repayment
of the hedged indebtedness.
Products Corporation enters into forward foreign exchange contracts
and option contracts from time to time to hedge certain cash flows denominated
in foreign currencies. At December 31, 1997 and 1996, Products Corporation had
forward foreign exchange contracts denominated in various currencies of
approximately $90.1 and $62.0, respectively, and option contracts of
approximately $94.9 outstanding at December 31, 1997. Such contracts are
entered into to hedge transactions predominantly occurring within twelve
months. If Products Corporation had terminated these contracts on December 31,
1997 and 1996, no material gain or loss would have been realized.
Based upon the Company's current level of operations and anticipated
growth in net sales and earnings as a result of its business strategy, the
Company expects that cash flows from operations and funds from currently
available credit facilities and refinancings of existing indebtedness will be
sufficient to enable the Company to meet its anticipated cash requirements for
the foreseeable future on a consolidated basis, including for debt service.
However, there can be no assurance that cash flow from operations and funds
from existing credit facilities and refinancing of existing indebtedness will
be sufficient to meet the Company's cash requirements on a consolidated basis.
If the Company is unable to satisfy such cash requirements, the Company could
be required to adopt one or more alternatives, such as reducing or delaying
capital expenditures, restructuring indebtedness, selling assets or operations,
seeking capital contributions or loans from affiliates of the Company or
issuing additional shares of capital stock of Revlon, Inc. Revlon, Inc., as a
holding company, will be dependent on the earnings and cash flow of, and
dividends and distributions from, Products Corporation to pay its expenses and
to pay any cash dividends or distributions on the Class A Common Stock that may
be authorized by the Board of Directors of Revlon, Inc. There can be no
assurance that any of such actions could be effected, that they would enable
the Company to continue to satisfy its capital requirements or that they would
be permitted under the terms of the Company's various debt instruments then in
effect. The terms of the Credit Agreement, the Senior Subordinated Notes, the
1999 Notes and the Senior Notes generally restrict and, after the Assumption,
the terms of the Notes generally will restrict, Products Corporation from
paying dividends or making distributions, except that Products Corporation is
permitted to pay dividends and make distributions to Revlon, Inc., among other
things, to enable Revlon, Inc. to pay expenses incidental to being a public
holding company, including, among other things, professional fees such as legal
and accounting, regulatory fees such as Commission filing fees and other
miscellaneous expenses related to being a public holding company and to pay
dividends or make distributions in certain circumstances to finance the
purchase by Revlon, Inc. of its Class A Common Stock in connection with the
delivery of such Class A Common Stock to grantees under the Revlon, Inc.
Amended and Restated 1996 Stock Plan, provided that the aggregate amount of
such dividends and distributions taken together with any purchases of Revlon,
Inc. common stock on the open market to satisfy matching obligations under the
excess savings plan may not exceed $6.0 per annum.
24
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K for the year ended December 31, 1997
as well as other public documents of the Company contain forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from those discussed in such forward-looking statements.
Such statements include, without limitation, the Company's expectations and
estimates as to introduction of new products and expansion into markets, future
financial performance, including growth in net sales and earnings, and the
effect on sales of inventory balancing and consolidation in the chain drugstore
industry in the U.S., cash flows from operations, improved results from
business consolidations, information system upgrades and globalization of the
Company's manufacturing operations, capital expenditures, the availability of
funds from currently available credit facilities and refinancings of
indebtedness, capital contributions or loans from affiliates, the sale of
assets or additional shares of Revlon, Inc., and the cost and timely
implementation of the Company's Year 2000 compliance modifications. Readers are
urged to consider that statements which use the terms "believes," "does not
believe," "no reason to believe," "expects," "plans," "intends," "estimates,"
"anticipated," "anticipates" and similar expressions, as they relate to the
Company or the Company's management, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions. In addition to factors that may be described in the Company's
Commission filings, including this filing, the following factors, among others,
could cause the Company's actual results to differ materially from those
expressed in any forward-looking statements made by the Company: (i)
difficulties or delays in developing and introducing new products or failure of
customers to accept new product offerings; (ii) changes in consumer
preferences, including reduced consumer demand for the Company's color
cosmetics and other current products; (iii) difficulties or delays in the
Company's continued expansion into the self-select distribution channel and
into certain markets and development of new markets; (iv) unanticipated costs
or difficulties or delays in completing projects associated with the Company's
strategy to improve operating efficiencies, including information system
upgrades, and to globalize its manufacturing operations; (v) the inability to
refinance indebtedness, secure capital contributions or loans from affiliates
or sell assets or additional shares of Revlon, Inc.; (vi) effects of and
changes in economic conditions, including inflation and monetary conditions,
and in trade, monetary, fiscal and tax policies in countries outside of the
U.S. in which the Company operates, including Brazil; (vii) actions by
competitors, including business combinations, technological breakthroughs, new
product offerings and marketing and promotional successes; (viii) combinations
among significant customers or the loss, insolvency or failure to pay its debts
by a significant customer or customers; (ix) difficulties or delays in
realizing improved results from business consolidations; (x) lower than
expected sales as a result of inventory balancing and consolidation in the
chain drugstore industry in the U.S.; and (xi) unanticipated costs or
difficulties or delays in implementing the Company's Year 2000 compliance
modifications. The Company assumes no responsibility to update forward-looking
information contained herein.
EFFECT OF NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued SFAS 130
"Reporting Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components in a full set of
general-purpose financial statements. The Company will adopt SFAS 130 in fiscal
1998.
25
INFLATION
In general, costs are affected by inflation and the effects of
inflation may be experienced by the Company in future periods. Management
believes, however, that such effects have not been material to the Company
during the past three years in the United States or foreign
non-hyperinflationary countries. The Company operates in certain countries
around the world, such as Brazil, Venezuela and Mexico, that have experienced
hyperinflation in the past three years. The Company's operations in Brazil were
accounted for as operating in a hyperinflationary economy until June 30, 1997.
Effective July 1, 1997 Brazil was considered a non-hyperinflationary economy.
The impact of accounting for Brazil as a non-hyperinflationary economy was not
material to the Company's operating results. Effective January 1997, Mexico was
considered a hyperinflationary economy for accounting purposes. In
hyperinflationary foreign countries, the Company attempts to mitigate the
effects of inflation by increasing prices in line with inflation, where
possible, and efficiently managing its working capital levels.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index on page F-1 of the Consolidated
Financial Statements of the Company and the Notes thereto contained herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
Directors and executive officers of the Company. Each Director holds office
until his successor is duly elected and qualified or until his resignation or
removal, if earlier.
NAME POSITION
- ---- --------
Ronald O. Perelman Chairman of the Executive Committee of the Board and Director
George Fellows President, Chief Executive Officer and Director
Jerry W. Levin Chairman of the Board and Director
William J. Fox Senior Executive Vice President and Director
Frank J. Gehrmann Executive Vice President and Chief Financial Officer
Wade H. Nichols III Executive Vice President and General Counsel
M. Katherine Dwyer Senior Vice President
Ronald H. Dunbar Senior Vice President, Human Resources
Donald G. Drapkin Director
Meyer Feldberg Director
Howard Gittis Director
Morton L. Janklow Director
Vernon E. Jordan Director
Henry A. Kissinger Director
Edward J. Landau Director
Linda G. Robinson Director
Terry Semel Director
Martha Stewart Director
The name, age, principal occupation for the last five years and
selected biographical information for each of the Directors and executive
officers of the Company are set forth below. Information is as of February 13,
1998.
Mr. Perelman (55) has been Chairman of the Executive Committee of the
Board of the Company and of Products Corporation since November 1995, and a
Director of the Company and of Products Corporation since their respective
formations in 1992. Mr. Perelman was Chairman of the Board of the Company and
of Products Corporation from their respective formations in 1992 until November
1995. Mr. Perelman has been Chairman of
27
the Board and Chief Executive Officer of Mafco Holdings Inc. ("Mafco Holdings")
and MacAndrews Holdings and various of its affiliates for more than the past
five years. Mr. Perelman also is Chairman of the Executive Committees of the
Boards of The Coleman Company, Inc. ("Coleman"), Consolidated Cigar Holdings
Inc. ("Cigar Holdings") and M&F Worldwide Corp. ("M&F Worldwide") and Chairman
of the Board of Meridian Sports Incorporated ("Meridian"). Mr. Perelman is a
Director of the following corporations which file reports pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"): California
Federal Bank, a Federal Savings Bank ("Cal Fed"), Cigar Holdings, CLN Holdings
Inc. ("CLN"), Coleman, Coleman Worldwide Corporation ("Coleman Worldwide"),
Consolidated Cigar Corporation ("Consolidated Cigar"), First Nationwide
Holdings Inc. ("FN Holdings"), First Nationwide (Parent) Holdings Inc. ("First
Nationwide Parent"), M&F Worldwide, Meridian, Products Corporation and REV
Holdings. (On December 27, 1996, Marvel Entertainment Group, Inc. ("Marvel"),
Marvel Holdings Inc. ("Marvel Holdings"), Marvel (Parent) Holdings Inc.
("Marvel Parent") and Marvel III Holdings Inc. ("Marvel III"), of which Mr.
Perelman was a Director on such date, and several subsidiaries of Marvel filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code.)
Mr. Fellows (55) has been President and Chief Executive Officer of the
Company and of Products Corporation since January 1997. He was President and
Chief Operating Officer of the Company and Products Corporation from November
1995 until January 1997 and has been a Director of the Company since November
1995 and a Director of Products Corporation since September 1994. Mr. Fellows
was Senior Executive Vice President of the Company and of Products Corporation
and President and Chief Operating Officer of the Company's Consumer Group from
February 1993 until November 1995. From 1989 through January 1993, he was a
senior executive officer of Mennen Corporation and then Colgate-Palmolive
Company, which acquired Mennen Corporation in 1992. From 1986 to 1989 he was
Senior Vice President of Holdings. Mr. Fellows is a Director of Cosmetic
Center, Products Corporation and VF Corporation, each of which files reports
pursuant to the Exchange Act.
Mr. Levin (53) has been Chairman of the Board of the Company and of
Products Corporation since November 1995 and a Director of the Company and of
Products Corporation since their respective formations in 1992. Mr. Levin was
Chief Executive Officer of the Company and of Products Corporation from their
respective formations in 1992 until January 1997 and President of the Company
and of Products Corporation from their respective formations in 1992 until
November 1995. Mr. Levin has been Executive Vice President of MacAndrews
Holdings since March 1989. Mr. Levin has been Chairman of the Board and Chief
Executive Officer of Coleman since February 1997 and has been Chairman of the
Board of Cosmetic Center since April 1997. For 15 years prior to joining
MacAndrews Holdings, he held various senior executive positions with The
Pillsbury Company. Mr. Levin is a Director of the following corporations which
file reports pursuant to the Exchange Act: Coleman, Coleman Worldwide, Cosmetic
Center, Ecolab, Inc., U.S. Bancorp, Inc., Meridian and Products Corporation.
Mr. Fox (41) was appointed President, Strategic and Corporate
Development, Revlon Worldwide, of the Company and of Products Corporation and
Chief Executive Officer, Revlon Technologies in January 1998. He has been
Senior Executive Vice President of the Company and of Products Corporation
since January 1997. Mr. Fox was Chief Financial Officer of the Company and of
Products Corporation from their respective formations in 1992 until January
1998 and was also Executive Vice President of the Company and of Products
Corporation from their respective formations in 1992 until January 1997. Mr.
Fox was elected as a Director of the Company in November 1995 and of Products
Corporation in September 1994. He has been Senior Vice President of MacAndrews
Holdings since August 1990. He was Vice President of MacAndrews Holdings from
February 1987 to August 1990 and was Treasurer of MacAndrews Holdings from
February 1987 to September 1992. Prior to February 1987, he was Vice President
and Assistant Treasurer of MacAndrews Holdings. Mr. Fox joined MacAndrews &
Forbes Group, Incorporated in 1983 as Assistant Controller, prior to which time
he was a certified public accountant at the international auditing firm of
Coopers & Lybrand. Mr. Fox is Vice Chairman of the Board and a Director of
Cosmetic Center, and a Director of The Hain Food Group, Inc. and Products
Corporation, each of which files reports pursuant to the Exchange Act.
Mr. Gehrmann (43) was elected as Executive Vice President and Chief
Financial Officer of the Company and of Products Corporation in January 1998.
From January 1997 until January 1998 he had been Vice President of the Company
and of Products Corporation. Prior to January 1997 he served in various
appointed senior executive positions for the Company and for Products
Corporation, including Executive Vice President and Chief Financial
28
Officer of Products Corporation's Operating Groups from August 1996 to January
1998, Executive Vice President and Chief Financial Officer of Products
Corporation's Worldwide Consumer Products business from January 1995 to August
1996, and Executive Vice President and Chief Financial Officer of Products
Corporation's Revlon North America unit from September 1993 to January 1994.
From 1983 through September 1993, Mr. Gehrmann held positions of increasing
responsibility in the financial organizations of Mennen Corporation and the
Colgate-Palmolive Company, which acquired Mennen Corporation in 1992. Prior to
1983, Mr. Gehrmann served as a certified public accountant at the international
accounting firm of Ernst & Young.
Mr. Nichols (55) has been Executive Vice President and General Counsel
of the Company and of Products Corporation since January 1998 and served as
Senior Vice President and General Counsel of the Company and Products
Corporation from their respective formations in 1992 until January 1998. Mr.
Nichols has been Vice President of MacAndrews Holdings since 1988. Mr. Nichols
is a Director of Cosmetic Center, which files reports pursuant to the Exchange
Act.
Ms. Dwyer (48) was appointed President of Products Corporation's
United States Consumer Products business in January 1998. Ms Dwyer was elected
Senior Vice President of the Company and of Products Corporation in December
1996. Prior to December 1996 she served in various appointed senior executive
positions for the Company and for Products Corporation, including President of
Products Corporation's United States Cosmetics unit from November 1995 to
December 1996 and Executive Vice President and General Manager of Products
Corporation's Mass Cosmetics unit from June 1993 to November 1995. From 1991 to
1993, Ms. Dwyer was Vice President, Marketing, of Clairol, a division of
Bristol-Myers Squibb Company. Prior to 1991, she served in various senior
positions for Victoria Creations, Avon Products Inc., Cosmair, Inc. and The
Gillette Company. Ms. Dwyer is a Director of WestPoint Stevens Inc. and, as of
February 24, 1998, Reebok International Ltd., each of which files reports
pursuant to the Exchange Act.
Mr. Dunbar (60) has been Senior Vice President, Human Resources of the
Company and of Products Corporation since their respective formations in 1992.
He was elected Senior Vice President, Human Resources of Holdings in July 1991.
Mr. Dunbar was Vice President and General Manager of Arnold Menn and
Associates, a New York City career management consulting and executive
outplacement firm, from 1989 to 1991 and Executive Vice President and Chief
Human Resources Officer of Ryder System, Inc., a highway transportation firm,
from 1978 to 1989. Prior to that, Mr. Dunbar served in senior executive human
resources positions at Xerox Corporation and Ford Motor Company.
Mr. Drapkin (49) has been a Director of the Company and of Products
Corporation since their respective formations in 1992. He has been Vice
Chairman of the Board of MacAndrews Holdings and various of its affiliates
since March 1987. Mr. Drapkin was a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom for more than five years prior to March 1987. Mr. Drapkin
is a Director of the following corporations which file reports pursuant to the
Exchange Act: Algos Pharmaceutical Corporation, BlackRock Asset Investors,
Cardio Technologies, Inc., Coleman, Coleman Worldwide, Cosmetic Center, Genta,
Inc., Playboy Enterprises, Inc., Products Corporation, VIMRx Pharmaceuticals
Inc. and Weider Nutrition International, Inc. (On December 27, 1996, Marvel,
Marvel Holdings, Marvel Parent and Marvel III, of which Mr. Drapkin was a
Director on such date, and several subsidiaries of Marvel filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.)
Professor Feldberg (55) has been a Director of the Company since
February 1997. Professor Feldberg has been the Dean of Columbia Business
School, New York City, for more than the past five years. Professor Feldberg is
a Director of the following corporations which file reports pursuant to the
Exchange Act: Federated Department Stores, Inc., PRIMEDIA Inc. and Paine Webber
Group, Inc. (28 directorships within such fund complex).
Mr. Gittis (63) has been a Director of the Company and of Products
Corporation since their respective formations in 1992. He has been Vice
Chairman of the Board of MacAndrews Holdings and various of its affiliates for
more than five years. Mr. Gittis is a Director of the following corporations
which file reports pursuant to the Exchange Act: Cal Fed, CLN, Cigar Holdings,
Consolidated Cigar, First Nationwide Parent, FN Holdings, Jones Apparel Group,
Inc., Loral Space & Communications Ltd., M&F Worldwide, Products Corporation,
REV Holdings and Rutherford-Moran Oil Corporation.
29
Mr. Janklow (67) has been a Director of the Company since July 1997.
He has been of counsel to Janklow, Newborn & Ashley and Senior Partner of
Janklow & Nesbit Associates, a New York City-based literary agency, since 1989
and Chairman of the Board and Chief Executive Officer of Morton L. Janklow
Associates, Inc., New York City since 1977. Mr. Janklow is also trustee of the
Managed Accounts Services Portfolio Trust/Pace.
Mr. Jordan (62) has been a Director of the Company since June 1996.
Mr. Jordan is a Senior Partner in the Washington, D.C. law firm of Akin, Gump,
Strauss, Hauer & Feld, LLP where he has practiced law since 1982. He is a
Director of the following corporations which file reports pursuant to the
Exchange Act: American Express Company, Bankers Trust Company, Bankers Trust
New York Company, Corning Incorporated, Dow Jones & Company, Inc., J.C. Penney
Company, Inc., Ryder System, Inc., Sara Lee Corporation, Union Carbide
Corporation and Xerox Corporation. He is also trustee of the Ford Foundation
and Howard University.
Dr. Kissinger (74) has been a Director of the Company since June 1996.
Dr. Kissinger has been Chairman of the Board and Chief Executive Officer of
Kissinger Associates, Inc., a New York City-based international consulting
firm, since 1982. Dr. Kissinger is an Advisor to the Board of Directors of
American Express Company, serves as Counselor to the Chase Manhattan Bank and
is a member of its International Advisory Committee. He is Chairman of the
International Advisory Board of American International Group, Inc. and is a
Director of Continental Grain Company, Freeport-McMoran Copper and Gold, Inc.,
Gulfstream Aerospace Corporation and Hollinger International Inc., all of which
file reports pursuant to the Exchange Act.
Mr. Landau (68) has been a Director of the Company since June 1996.
Mr. Landau has been a Senior Partner in the law firm of Wolf, Block, Schorr and
Solis-Cohen LLP (previously Lowenthal, Landau, Fischer & Bring, P.C.) for more
than the past five years. He has been a Director of Products Corporation since
June 1992. Mr. Landau is a Director of Offitbank Investment Fund, Inc. and
Products Corporation, each of which files reports pursuant to the Exchange Act.
Ms. Robinson (45) has been a Director of the Company since June 1996.
Ms. Robinson has been Chairman of the Board and Chief Executive Officer of
Robinson Lerer & Montgomery, LLC, a New York City strategic communications
consulting firm, since May 1996. For more than five years prior to May 1996 she
was Chairman of the Board and Chief Executive Officer of Robinson Lerer Sawyer
Miller Group, or its predecessors. Ms. Robinson is a Director of VIMRx
Pharmaceuticals Inc. and Group Practice Services Corporation, each of which
files reports pursuant to the Exchange Act, and is also a trustee of New York
University Medical Center.
Mr. Semel (54) has been a Director of the Company since June 1996. Mr.
Semel has been Chairman of the Board and Co-Chief Executive Officer of the
Warner Bros. Division of Time Warner Entertainment LP ("Warner Brothers"), Los
Angeles, since March 1994 and of Warner Music Group, Los Angeles, since
November 1995. For more than ten years prior to that he was President of Warner
Brothers or its predecessor, Warner Bros. Inc. Mr. Semel is a Director of Polo
Ralph Lauren Corporation, which files reports pursuant to the Exchange Act.
Ms. Stewart (56) has been a Director of the Company since June 1996.
Ms. Stewart is the Chairman of the Board of Martha Stewart Living Omnimedia,
LLC, New York City. She has been an author, founder of the magazine Martha
Stewart Living, creator of a syndicated television series, a syndicated
newspaper column and a catalog company, and a lifestyle consultant and lecturer
for more than the past five years.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Executive Committee, an Audit Committee
and a Compensation and Stock Plan Committee (the "Compensation Committee").
The Executive Committee consists of Messrs. Perelman, Gittis, Fellows
and Levin. The Executive Committee may exercise all of the powers and authority
of the Board, except as otherwise provided under the Delaware General
Corporation Law ("DGCL"). The Executive Committee also serves as the Company's
nominating committee for Board membership. The Audit Committee, consisting of
Mr. Landau, Professor Feldberg and Ms. Robinson, makes recommendations to the
Board of Directors regarding the engagement of the Company's
30
independent auditors, reviews the plan, scope and results of the audit, and
reviews with the auditors and management the Company's policies and procedures
with respect to internal accounting and financial controls, changes in
accounting policy and the scope of the non-audit services which may be
performed by the Company's independent auditors, among other things. The Audit
Committee also monitors policies to prohibit unethical, questionable or illegal
activities by the Company's employees. The Compensation Committee, consisting
of Messrs. Gittis, Drapkin, Janklow (since July 1997) and Semel, makes
recommendations to the Board of Directors regarding compensation and incentive
arrangements (including performance-based arrangements) for the Chief Executive
Officer, other executive officers, and officers and other key managerial
employees of the Company. The Compensation Committee also considers and
recommends awards of stock options to purchase shares of Class A Common Stock
pursuant to the Revlon, Inc. Amended and Restated 1996 Stock Plan (the "Stock
Plan") and administers the Stock Plan.
During 1997, the Board of Directors held four meetings, the Executive
Committee acted twice by unanimous written consent, the Audit Committee held
five meetings and the Compensation Committee held two meetings and acted five
times by unanimous written consent. During 1997, all Directors attended 75% or
more of the meetings of the Board of Directors and of the Committees of which
they were members.
COMPENSATION OF DIRECTORS
Directors who currently are not receiving compensation as officers or
employees of the Company or any of its affiliates are paid an annual retainer
fee of $25,000, payable in quarterly installments, and a fee of $1,000 for each
meeting of the Board of Directors or any committee thereof they attend.
31
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information for the years indicated
concerning the compensation awarded to, earned by or paid to the persons who
served as Chief Executive Officer of the Company during 1997 and the four most
highly paid executive officers, other than the Chief Executive Officer, who
served as executive officers of the Company as of December 31, 1997
(collectively, the "Named Executive Officers"), for services rendered in all
capacities to the Company and its subsidiaries during such periods.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION (A) LONG-TERM
COMPENSATION
------------------------------------- AWARDS
OTHER ------------------
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDER- COMPEN-
NAME AND SALARY BONUS SATION LYING SATION
PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS ($)
- ----------------------------------- ---------- -------------- ------------- ----------- ------------------ -------------
George Fellows 1997 1,250,000 1,250,000 22,191 170,000 30,917
President and Chief Executive 1996 1,025,000 870,000 15,242 120,000 4,500
Officer (b) 1995 841,667 531,700 68,559 0 4,500
- ----------------------------------- ---------- -------------- ------------- ----------- ------------------ -------------
Jerry W. Levin 1997 825,000 0 20,811 170,000 160,871
Chairman of the Board (c) 1996 1,500,000 1,500,000 93,801 170,000 307,213
1995 1,450,000 1,450,000 42,651 0 308,002
- ----------------------------------- ---------- -------------- ------------- ----------- ------------------ -------------
William J. Fox 1997 825,000 772,300 55,159 50,000 71,590
Senior Executive Vice President 1996 750,000 598,600 50,143 50,000 56,290
and Chief Financial Officer (d) 1995 660,000 455,000 54,731 0 56,290
- ----------------------------------- ---------- -------------- ------------- ----------- ------------------ -------------
M. Katherine Dwyer 1997 500,000 800,000 5,948 125,000 18,377
Senior Vice President (e) 1996 500,000 326,100 90,029 45,000 4,500
- ----------------------------------- ---------- -------------- ------------- ----------- ------------------ -------------
Carlos Colomer 1997 700,000 330,700 0 37,000 62,645
Executive Vice President (f) 1996 700,000 192,600 0 37,000 3,062
1995 600,000 135,200 0 0 0
- ----------------------------------- ---------- -------------- ------------- ----------- ------------------ -------------
(a) The amounts shown in Annual Compensation for 1997, 1996 and 1995
reflect salary, bonus and other annual compensation awarded to, earned
by or paid to the persons listed for services rendered to the Company
and its subsidiaries. The Company has a bonus plan (the "Executive
Bonus Plan") in which executives participate (including the Chief
Executive Officer and the other Named Executive Officers). The
Executive Bonus Plan provides for payment of cash compensation upon
the achievement of predetermined corporate and/or business unit and
individual performance goals during the calendar year established
pursuant to the Executive Bonus Plan or by the Compensation Committee.
(b) Mr. Fellows became Chief Executive Officer of the Company in January
1997. The amount shown for Mr. Fellows under Other Annual Compensation
for 1997 reflects payments in respect of gross ups for taxes on
imputed income arising out of personal use of a Company-provided
automobile and for taxes on imputed income arising out of premiums
paid or reimbursed by the Company in respect of life insurance.
32
The amount shown for Mr. Fellows under All Other Compensation for 1997
reflects $11,117 in respect of life insurance premiums, $4,800 in
respect of matching contributions under the Revlon Employees' Savings,
Profit Sharing and Investment Plan (the "401(k) Plan") and $15,000 in
respect of matching contributions under the Revlon Excess Savings Plan
for Key Employees (the "Excess Plan"). The amount shown for Mr.
Fellows under Other Annual Compensation for 1996 reflects payments in
respect of gross ups for taxes on imputed income arising out of
personal use of a Company-provided automobile and for taxes on imputed
income arising out of premiums paid or reimbursed by the Company in
respect of life insurance. The amount shown for Mr. Fellows under All
Other Compensation for 1996 reflects matching contributions under the
401(k) Plan. The amount shown for Mr. Fellows under Other Annual
Compensation for 1995 includes $43,251 in respect of membership fees
and related expenses for personal use of a health and country club and
$9,458 in respect of gross ups for taxes on imputed income arising out
of personal use of a Company-provided automobile. The amount shown for
Mr. Fellows under All Other Compensation for 1995 reflects matching
contributions under the 401(k) Plan.
(c) Mr. Levin was Chief Executive Officer of the Company during 1995, 1996
and January 1997 and Chairman of the Board during the remainder of
1997. The amount shown for Mr. Levin under Other Annual Compensation
for 1997 reflects payments in respect of gross ups for taxes on
imputed income arising out of personal use of a Company-provided
automobile. The amount shown for Mr. Levin under All Other
Compensation for 1997 reflects $150,971 in respect of split-dollar
life insurance premiums (under which the Company is entitled to
reimbursement of such premiums or the cash surrender value of such
insurance, whichever is less), $2,400 in respect of matching
contributions under the 401(k) Plan and $7,500 in respect of matching
contributions under the Excess Plan. The amount shown for Mr. Levin
under Other Annual Compensation for 1996 includes $26,400 in respect
of personal use of a Company-provided automobile, payments in respect
of gross ups for taxes on imputed income arising out of personal use
of such Company-provided automobile and payments for taxes on imputed
income arising out of premiums paid or reimbursed by the Company in
respect of life insurance. The amount shown for Mr. Levin under All
Other Compensation for 1996 reflects $302,713 in respect of life
insurance premiums and $4,500 in respect of matching contributions
under the 401(k) Plan. The amount shown for Mr. Levin under Other
Annual Compensation for 1995 reflects payments in respect of gross ups
for taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising
out of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Levin under All Other Compensation
for 1995 reflects $303,502 in respect of life insurance premiums and
$4,500 in respect of matching contributions under the 401(k) Plan.
(d) Mr. Fox became Senior Executive Vice President of the Company in
January 1997. Mr. Fox served as Chief Financial Officer of the Company
during 1995, 1996 and 1997. In January 1998 Mr. Fox was appointed
President, Strategic and Corporate Development, Revlon Worldwide, and
Mr. Gehrmann was elected Chief Financial Officer of the Company. The
amount shown for Mr. Fox under Bonus for 1997 includes an additional
payment of $125,000 based upon Mr. Fox's performance. The amount shown
for Mr. Fox under Other Annual Compensation for 1997 reflects payments
in respect of gross ups for taxes on imputed income arising out of
personal use of a Company-provided automobile and payments for taxes
on imputed income arising out of premiums paid or reimbursed by the
Company in respect of life insurance. The amount shown for Mr. Fox
under All Other Compensation for 1997 reflects $51,790 in respect of
life insurance premiums, $4,800 in respect of matching contributions
under the 401(k) Plan and $15,000 in respect of matching contributions
under the Excess Plan. The amount shown for Mr. Fox under Other Annual
Compensation for 1996 reflects payments in respect of gross ups for
taxes on imputed income arising out of personal use of a
Company-provided automobile and for taxes on imputed income arising
out of premiums paid or reimbursed by the Company in respect of life
insurance. The amount shown for Mr. Fox under All Other Compensation
for 1996 reflects $51,790 in respect of life insurance premiums and
$4,500 in respect of matching contributions under the 401(k) Plan. The
amount shown for Mr. Fox under Other Annual Compensation for 1995
reflects payments in respect of gross ups for taxes on imputed income
arising out of personal use of a Company-provided automobile and for
taxes on imputed income arising out of premiums paid or reimbursed by
the Company in respect of life insurance. The amount shown for Mr. Fox
under All Other Compensation for 1995 reflects $51,790 in respect of
life insurance premiums and $4,500 in respect of matching
contributions under the 401(k) Plan.
33
(e) Ms. Dwyer became an executive officer of the Company in December 1996.
The amount shown for Ms. Dwyer under Bonus for 1997 includes an
additional payment of $300,000 pursuant to her employment agreement.
The amount shown for Ms. Dwyer under Other Annual Compensation for
1997 reflects payments in respect of gross ups for taxes on imputed
income arising out of personal use of a Company-provided automobile
and payments for taxes on imputed income arising out of premiums paid
or reimbursed by the Company in respect of life insurance. The amount
shown for Ms. Dwyer under All Other Compensation for 1997 reflects
$4,800 in respect of matching contributions under the 401(k) Plan,
$10,857 in respect of matching contributions under the Excess Plan and
$2,720 in respect of life insurance premiums. The amount shown for Ms.
Dwyer under Other Annual Compensation for 1996 reflects $57,264 in
expense reimbursements and payments in respect of gross ups for taxes
on imputed income arising out of personal use of a Company-provided
automobile. The amount shown for Ms. Dwyer under All Other
Compensation for 1996 reflects matching contributions under the 401(k)
Plan.
(f) Mr. Colomer was an executive officer of the Company during 1995, 1996
and 1997. The amount shown for Mr. Colomer under Bonus for 1997
includes $148,815 which is being deferred at Mr. Colomer's election.
The amount shown for Mr. Colomer under All Other Compensation for 1997
reflects $59,583 in respect of an expatriate travel and hardship
allowance and $3,062 in respect of life insurance premiums. The amount
shown for Mr. Colomer under All Other Compensation for 1996 reflects
life insurance premiums.
34
OPTION GRANTS IN THE LAST FISCAL YEAR
During 1997, the following grants of stock options were made
pursuant to the Stock Plan to the executive officers named in the Summary
Compensation Table:
- ----------------------------------------------------------------------------------------------------- --------------------
GRANT DATE
VALUE
INDIVIDUAL GRANTS (A)
- ----------------------------------------------------------------------------------------------------- --------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS EXERCISE OR GRANT DATE PRESENT
OPTIONS GRANTED GRANTED BASE PRICE EXPIRATION VALUE
NAME (#) TO EMPLOYEES IN ($/SH) DATE $
FISCAL YEAR
- -------------------------- ------------------ ------------------- ---------------- ------------------ --------------------
George Fellows
President and Chief
Executive Officer (b) 170,000 11% $31.375 1/08/07 $2,703,255
- -------------------------- ------------------ ------------------- ---------------- ------------------ --------------------
Jerry W. Levin
Chairman of the Board (b) 170,000 11% $31.375 1/08/07 $2,703,255
- -------------------------- ------------------ ------------------- ---------------- ------------------ --------------------
William J. Fox
Senior Executive Vice
President and Chief
Financial Officer (b) 50,000 3% $31.375 1/08/07 $795,075
- -------------------------- ------------------ ------------------- ---------------- ------------------ --------------------
M. Katherine Dwyer
Senior Vice President (b) 125,000 8% $31.375 1/08/07 $1,987,688
- -------------------------- ------------------ ------------------- ---------------- ------------------ --------------------
Carlos Colomer
Executive Vice President 37,000 2% $31.375 1/08/07 $588,356
- -------------------------- ------------------ ------------------- ---------------- ------------------ --------------------
The grants made during 1997 under the Stock Plan to Messrs. Fellows,
Levin, Fox and Colomer and Ms. Dwyer were made on January 9, 1997 and consist
of non-qualified options having a term of 10 years. The options vest 25% each
year beginning on the first anniversary of the grant date and will become 100%
vested on the fourth anniversary of the grant date and have an exercise price
equal to the New York Stock Exchange ("NYSE") closing price per share of the
Class A Common Stock on the grant date, as indicated in the table above. During
1997, the Company also granted an option to purchase 300,000 shares of the
Company's Class A Common Stock pursuant to the Stock Plan to Mr. Perelman,
Chairman of the Executive Committee. The option will vest in full on the fifth
anniversary of the grant date and has an exercise price of $34.875, the NYSE
closing price per share of the Class A Common Stock on April 4, 1997, the date
of the grant.
(a) Present values were calculated using the Black-Scholes option pricing
model. The model as applied used the grant date of January 9, 1997.
The model also assumes (i) a risk-free rate of return of 6.41%, which
was the rate as of the grant date for the U.S. Treasury Zero Coupon
Bond issues with a remaining term similar to the expected term of the
options, (ii) stock price volatility of 39.34% based upon the
volatility of the Company's stock price, (iii) a constant dividend
rate of zero percent and (iv) that the options normally would be
exercised on the final day of their seventh year after grant. No
adjustments to the theoretical value were made to reflect the waiting
period, if any, prior to vesting of the stock options or the
transferability (or restrictions related thereto) of the stock
options.
35
(b) Mr. Fellows served as President during all of 1997 and became Chief
Executive Officer in January 1997. Mr. Levin served as Chairman of the
Board during all of 1997 and as Chief Executive Officer during January
1997. Mr. Fox was appointed President, Strategic and Corporate
Development, Revlon Worldwide in January 1998. Ms. Dwyer was appointed
President of Products Corporation's United States Consumer Products
business in January 1998.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following chart shows the number of stock options exercised during
1997 and the 1997 year-end value of the stock options held by the executive
officers named in the Summary Compensation Table:
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
SHARES VALUE YEAR-END (#) YEAR-END EXERCISABLE/
ACQUIRED ON REALIZED EXERCISABLE/ UNEXERCISABLE (a)
NAME EXERCISE (#) ($) UNEXERCISABLE ($)
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
George Fellows
President and
Chief Executive
Officer 0 0 0/290,000 0/2,026,875
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
Jerry W. Levin
Chairman of the
Board 0 0 0/340,000 0/2,592,500
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
William J. Fox
Senior Executive
Vice President and
Chief Financial
Officer 0 0 0/100,000 0/762,500
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
M. Katherine Dwyer
Senior Vice President 0 0 0/170,000 0/1,001,250
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
Carlos Colomer
Executive Vice
President 0 0 0/74,000 0/564,250
- ---------------------- --------------- ------------- ------------------------------------- --------------------------------
(a) Amounts shown represent the market value of the underlying shares of
Class A Common Stock at year-end calculated using the December 31,
1997 NYSE closing price per share of Class A Common Stock of $35 5/16
minus the exercise price of the stock option. The actual value, if
any, an executive may realize is dependent upon the amount by which
the market price of shares of Class A Common Stock exceeds the
exercise price per share when the stock options are exercised. The
actual value realized may be greater or less than the value shown in
the table.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Each of the Chief Executive Officer and the other Named Executive
Officers entered into an executive employment agreement with the Company's
wholly owned subsidiary, Products Corporation (except Mr. Colomer, who entered
into an executive employment agreement with a subsidiary of Products
Corporation), which became effective upon consummation of the Revlon IPO,
providing for their continued employment. Effective January 1, 1997, Mr.
Fellows' employment agreement was amended to provide that he will serve as the
President and Chief Executive Officer of the Company at a base salary of
$1,250,000 for 1997; $1,350,000 for 1998; $1,450,000 for 1999; $1,550,000 for
2000 and $1,700,000 for 2001 and thereafter, and that management recommend to
the Compensation Committee that he be granted options to purchase 170,000
shares of Class A Common Stock each year during the term of the agreement. At
any time after January 1, 2001, the Company may terminate the term of Mr.
Fellows' agreement by 12 months' prior notice of non-renewal. In connection
with his assumption of management responsibility for an affiliate, Mr. Levin
and the Company agreed to terminate his employment agreement as of June 30,
1997, with Mr. Levin continuing as Chairman of the Board of the Company (the
"Levin
36
Amendment"). Pursuant to the Levin Amendment, Mr. Levin received a base salary
of $825,000 for services provided to the Company in 1997. Effective January 1,
1998, Mr. Colomer's employment agreement was amended to provide that he will
serve as Chairman, Revlon Professional Worldwide Strategic Committee and
Chairman, Revlon Professional International at a base salary of not less than
$700,000 for 1998 and thereafter, and that management recommend to the
Compensation Committee that he be granted options to purchase 37,000 shares of
Class A Common Stock each year during the term of the agreement. Mr. Colomer's
agreement further provides that at any time on or after the second anniversary
of the effective date of his agreement, the Company may terminate the term by
12 months' prior notice of non-renewal. Mr. Fox's agreement provides for a base
salary of not less than $750,000 and that management recommend to the
Compensation Committee that Mr. Fox be granted options to purchase 50,000
shares of Class A Common Stock each year during the term of the agreement, and
further provides that at any time on or after the second anniversary of the
effective date of his agreement, the Company may terminate the term by 12
months' prior notice of non-renewal. Effective January 1, 1998, Mr. Fox was
appointed President, Strategic and Corporate Development, Revlon Worldwide, and
Chief Executive Officer, Revlon Technologies. Effective January 1, 1998, Ms.
Dwyer's employment agreement was amended to provide that she will serve as
President of Products Corporation's United States Consumer Products business at
a base salary of $875,000 per annum for 1998 to be increased as of January 1 of
each year by not less than $75,000, and that management recommend to the
Compensation Committee that she be granted options to purchase 75,000 shares of
Class A Common Stock each year during the term of the agreement. At any time on
or after the fourth anniversary of the effective date of her agreement, the
Company may terminate Ms. Dwyer's agreement by 12 months' prior notice of
non-renewal. All of the agreements currently in effect provide for
participation in the Executive Bonus Plan, continuation of life insurance and
executive medical insurance coverage in the event of permanent disability and
participation in other executive benefit plans on a basis equivalent to senior
executives of the Company generally. Pursuant to the Levin Amendment, Mr. Levin
is entitled to continued disability insurance and life insurance as well as
certain other benefits. The agreements with Messrs. Fellows and Colomer and Ms.
Dwyer provide for Company-paid supplemental term life insurance during
employment in the amount of three times base salary, while the terms of the
agreements with Mr. Levin and Mr. Fox provide that, in lieu of any
participation in Company-paid pre-retirement life insurance coverage, Products
Corporation will pay premiums and gross ups for taxes thereon in respect of, in
the case of Mr. Levin, whole life insurance policies on his life in the amount
of $14,100,000 under a split dollar arrangement pursuant to which Products
Corporation would be repaid the amount of premiums it paid up to the cash
surrender value of the policies from insurance proceeds payable under the
policies and, in the case of Mr. Fox, a whole life insurance policy on his life
in the amount of $5,000,000 under an arrangement providing for all insurance
proceeds to be paid to the designated beneficiary under such policy. The
agreements currently in effect provide that in the event of termination of the
term of the relevant executive employment agreement by Products Corporation
(otherwise than for "cause" as defined in the employment agreements or
disability) or by the executive for failure of the Compensation Committee to
adopt and implement the recommendations of management with respect to stock
option grants, the executive would be entitled to severance pursuant to and
subject to the terms of the Executive Severance Policy as in effect on
January 1, 1997 (see "--Executive Severance Policy") (or, at his or her
election, to continued base salary payments throughout the term in the case
of Mr. Fellows and Ms. Dwyer). In addition, the employment agreement with
Mr. Fellows provides that if he remains continuously employed by Products
Corporation or its affiliates until age 60, then upon any subsequent retirement
he will be entitled to a supplemental pension benefit in a sufficient amount so
that his annual pension benefit from all qualified and non-qualified pension
plans of Products Corporation and its affiliates (expressed as a straight life
annuity) equals $500,000. Upon any earlier retirement with Products
Corporation's consent or any earlier termination of employment by Products
Corporation otherwise than for "good reason" (as defined in the Executive
Severance Policy), Mr. Fellows will be entitled to a reduced annual payment in
an amount equal to the product of multiplying $28,540 by the number of
anniversaries, as of the date of retirement or termination, of Mr. Fellows'
fifty-third birthday (but in no event more than would have been payable to
Mr. Fellows under the foregoing provision had he retired at age 60). In each
case, Products Corporation reserves the right to treat Mr. Fellows as having
deferred payment of pension for purposes of computing such supplemental
payments.
As of December 31, 1997, 1996, and 1995, Mr. Colomer had a loan
outstanding from the Company's subsidiary in Spain in the amount of 25.0
million Spanish pesetas (approximately $165,050 U.S. dollar equivalent as of
December 31, 1997) dating from 1991 pursuant to a management retention program
grandfathered under a 1992 change in the Spanish tax law which currently covers
certain executives of such subsidiary, including Mr. Colomer. Pursuant to this
management retention program, outstanding loans do not bear interest but an
amount equal to the
37
one-year government bond interest rate in effect at the beginning of the year
is deducted from the executives' annual compensation, and loans must be repaid
in full upon termination of employment. The amount deducted from Mr. Colomer's
compensation was 1.4 million Spanish pesetas (approximately $9,210 U.S. dollar
equivalent as of December 31, 1997) for 1997; 2.15 million Spanish pesetas
(approximately $16,988 U.S. dollar equivalent as of December 31, 1996) for 1996
and 2.25 million Spanish pesetas (approximately $18,097 U.S. dollar equivalent
as of December 31, 1995) for 1995.
EXECUTIVE SEVERANCE POLICY
Products Corporation's Executive Severance Policy, as amended
effective January 1, 1996, provides that upon termination of employment of
eligible executive employees, including the Chief Executive Officer and the
other Named Executive Officers, other than voluntary resignation or termination
by Products Corporation for good reason, in consideration for the execution of
a release and confidentiality agreement and the Company's standard Employee
Agreement as to Confidentiality and Non-Competition (the "Non-Competition
Agreement"), the eligible executive will be entitled to receive, in lieu of
severance under any employment agreement then in effect or under Products
Corporation's basic severance plan, a number of months of severance pay in
semi-monthly installments based upon such executive's grade level and years of
service reduced by the amount of any compensation from subsequent employment,
unemployment compensation or statutory termination payments received by such
executive during the severance period, and, in certain circumstances, by the
actuarial value of enhanced pension benefits received by the executive, as well
as continued participation in medical and certain other benefit plans for the
severance period (or in lieu thereof, upon commencement of subsequent
employment, a lump sum payment equal to the then present value of 50% of the
amount of base salary then remaining payable through the balance of the
severance period). Pursuant to the Executive Severance Policy, upon meeting the
conditions set forth therein, Messrs. Fellows, Levin, Fox and Colomer and Ms.
Dwyer would be entitled to severance pay equal to two years of base salary at
the rate in effect on the date of employment termination plus continued
participation in the medical and dental plans for two years on the same terms
as active employees.
DEFINED BENEFIT PLANS
The following table shows the estimated annual retirement benefits
payable (as of December 31, 1997) at normal retirement age (65) to a person
retiring with the indicated average compensation and years of credited service,
on a straight life annuity basis, after Social Security offset, under the
Revlon Employees' Retirement Plan (the "Retirement Plan"), including amounts
attributable to the Pension Equalization Plan, each as described below:
HIGHEST CONSECUTIVE
FIVE-YEAR AVERAGE
COMPENSATION DURING ESTIMATED ANNUAL STRAIGHT LIFE ANNUITY BENEFITS AT RETIREMENT
WITH INDICATED YEARS OF CREDITED SERVICE (a)
FINAL 10 YEARS 15 20 25 30 35
- ---------------------------- -------- -------- -------- -------- --------
600,000 $151,974 $202,632 $253,290 $303,948 $303,948
700,000 177,974 237,299 296,623 355,948 355,948
800,000 203,974 271,965 339,957 407,948 407,948
900,000 229,974 306,632 383,290 459,948 459,948
1,000,000 255,974 341,299 426,623 500,000 500,000
1,100,000 281,974 375,965 469,957 500,000 500,000
1,200,000 307,974 410,632 500,000 500,000 500,000
1,300,000 333,974 445,299 500,000 500,000 500,000
1,400,000 359,974 479,965 500,000 500,000 500,000
1,500,000 385,974 500,000 500,000 500,000 500,000
2,000,000 500,000 500,000 500,000 500,000 500,000
2,500,000 500,000 500,000 500,000 500,000 500,000
38
(a) The normal form of benefit for the Retirement Plan and the Pension
Equalization Plan is a straight life annuity.
The Retirement Plan is intended to be a tax qualified defined benefit
plan. Retirement Plan benefits are a function of service and final average
compensation. The Retirement Plan is designed to provide an employee having 30
years of credited service with an annuity generally equal to 52% of final
average compensation, less 50% of estimated individual Social Security
benefits. Final average compensation is defined as average annual base salary
and bonus (but not any part of bonuses in excess of 50% of base salary) during
the five consecutive calendar years in which base salary and bonus (but not any
part of bonuses in excess of 50% of base salary) were highest out of the last
10 years prior to retirement or earlier termination. Except as otherwise
indicated, credited service only includes all periods of employment with the
Company or a subsidiary prior to retirement. The base salaries and bonuses of
each of the Chief Executive Officer and the other Named Executive Officers are
set forth in the Summary Compensation Table under columns entitled "Salary" and
"Bonus," respectively.
The Employee Retirement Income Security Act of 1974, as amended,
places certain maximum limitations upon the annual benefit payable under all
qualified plans of an employer to any one individual. In addition, the Omnibus
Budget Reconciliation Act of 1993 limits the annual amount of compensation that
can be considered in determining the level of benefits under qualified plans.
The Pension Equalization Plan, as amended effective January 1, 1996, is a
non-qualified benefit arrangement designed to provide for the payment by the
Company of the difference, if any, between the amount of such maximum
limitations and the annual benefit that would be payable under the Retirement
Plan but for such limitations, up to a combined maximum annual straight life
annuity benefit at age 65 under the Retirement Plan and the Pension
Equalization Plan of $500,000. Benefits provided under the Pension Equalization
Plan are conditioned on the participant's compliance with his or her
Non-Competition Agreement and, in any case, on the participant not competing
with Products Corporation for one year after termination of employment.
The number of years of credited service under the Retirement Plan and
the Pension Equalization Plan as of January 1, 1998 (rounded to full years) for
Mr. Fellows is nine years (which includes credit for prior service with
Holdings), for Mr. Fox is 14 years (which includes credit for service with
MacAndrews Holdings) and for Ms. Dwyer is four years, and as of June 30, 1997
for Mr. Levin is eight years (which includes credit for service with MacAndrews
Holdings). Pursuant to the Levin Amendment, Mr. Levin retains all benefits
under the Retirement Plan and the Pension Equalization Plan accrued by him as
of June 30, 1997. Mr. Colomer does not participate in the Retirement Plan or
the Pension Equalization Plan. Mr. Colomer participates in the Revlon Foreign
Service Employees Pension Plan (the "Foreign Pension Plan"). The Foreign
Pension Plan is a non-qualified defined benefit plan. The Foreign Pension Plan
is designed to provide an employee with 2% of final average salary for each
year of credited service, up to a maximum of 30 years, reduced by the sum of
all other Company-provided retirement benefits and social security or other
government-provided retirement benefits. Credited service includes all periods
of employment with the Company or a subsidiary prior to retirement. Final
average salary is defined as average annual base salary during the five
consecutive calendar years in which base salary was highest out of the last 10
years prior to retirement. The normal form of payment under the Foreign Pension
Plan is a life annuity. Mr. Colomer's credited service as of January 1, 1998
(rounded to full years) under the Foreign Pension Plan is 18 years (which
includes credit for service with Holdings).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee (made up of Messrs. Gittis, Drapkin,
Janklow (since July 1997) and Semel) determined compensation of executive
officers of the Company for 1997.
Products Corporation has used an airplane which is owned by a
corporation of which Messrs. Gittis and Drapkin are the sole stockholders. See
"Certain Relationships and Related Transactions - Other."
39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 9, 1998, the number of
shares of Common Stock beneficially owned, and the percent so owned, by (i)
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock, (ii) each director of the Company,
(iii) the Chief Executive Officer during 1997 and each of the other Named
Executive Officers during 1997 and (iv) all current directors and executive
officers of the Company as a group. The number of shares owned are those
beneficially owned, as determined under the rules of the Commission, and such
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares of
Common Stock as to which a person has sole or shared voting power or investment
power and any shares of Common Stock which the person has the right to acquire
within 60 days through the exercise of any option, warrant or right, through
conversion of any security or pursuant to the automatic termination of a power
of attorney or revocation of a trust, discretionary account or similar
arrangement.
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
Ronald O. Perelman 42,500,000 (Class A and Class B)1 83.1%
35 E. 62nd St.
New York, NY 10021
Carlos Colomer 9,250 (Class A)2 *
Donald Drapkin 12,000 (Class A)3 *
M. Katherine Dwyer 34,664 (Class A)4 *
Meyer Feldberg 0
George Fellows 50,972 (Class A)5 *
William J. Fox 22,968 (Class A)6 *
Howard Gittis 15,000 (Class A) *
Morton L. Janklow 0
Vernon E. Jordan 0
Henry A. Kissinger 0
Edward J. Landau 100 *
- --------------------------------
* Less than one percent.
1 Mr. Perelman through Mafco Holdings (which through REV Holdings)
beneficially owns 11,250,000 shares of Class A Common Stock
(representing 56.6% of the outstanding shares of Class A Common Stock)
and all of the outstanding 31,250,000 shares of Class B Common Stock,
which together represent 83.1% of the outstanding shares of Common
Stock and has approximately 97.4% of the combined voting power of the
outstanding shares of Common Stock. All of the shares of Common Stock
owned by REV Holdings are pledged by REV Holdings to secure
obligations, and shares of intermediate holding companies are or may
from time to time be pledged to secure obligations of Mafco Holdings
or its affiliates.
2 Reflects 9,250 shares which may be acquired under options which vested
on January 9, 1998.
3 All of such shares are held by trusts for Mr. Drapkin's children and
beneficial ownership is disclaimed.
4 Includes 414 shares acquired pursuant to the Company matching under
the 401(k) Plan and the Excess Plan, and 31,250 shares which may be
acquired under options which vested on January 9, 1998.
5 Includes 472 shares acquired pursuant to the Company matching under
the 401(k) Plan and the Excess Plan and 42,500 shares which may be
acquired under options which vested on January 9, 1998.
6 Includes 5,800 shares owned by Mr. Fox's wife and 4,200 shares owned
by his children as to which beneficial ownership is disclaimed, 4686
shares acquired pursuant to the Company matching under the 401(k) Plan
and the Excess Plan and 12,500 shares which may be acquired under
options which vested on January 9, 1998.
40
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
Jerry W. Levin 68,989 (Class A)7 *
Linda Gosden Robinson 0
Terry Semel 5,000 (Class A)8 *
Martha Stewart 0
Massachusetts Financial Services Company 1,146,480 (Class A)9 5.8%
All Directors and Executive Officers as a 11,508,941 (Class A)10 57.9%
Group (19 Persons)
31,250,000 (Class B) 100%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MacAndrews Holdings, a corporation wholly owned indirectly through
Mafco Holdings (Mafco Holdings, together with MacAndrews Holdings, "MacAndrews
& Forbes") beneficially owns shares of Common Stock having approximately 97.4%
of the combined voting power of the outstanding shares of Common Stock. As a
result, MacAndrews & Forbes is able to elect the entire Board of Directors of
the Company and control the vote on all matters submitted to a vote of the
Company's stockholders. MacAndrews & Forbes is wholly owned by Ronald O.
Perelman, who is Chairman of the Executive Committee of the Board and a
Director of the Company.
TRANSFER AGREEMENTS
In June 1992, Revlon, Inc. and Products Corporation entered into an
asset transfer agreement with Holdings and certain of its wholly owned
subsidiaries (the "Asset Transfer Agreement"), and Revlon, Inc. and Products
Corporation entered into a real property asset transfer agreement with Holdings
(the "Real Property Transfer Agreement" and, together with the Asset Transfer
Agreement, the "Transfer Agreements"), and pursuant to such agreements, on June
24, 1992 Holdings transferred assets to Products Corporation and Products
Corporation assumed all the liabilities of Holdings, other than certain
specifically excluded assets and liabilities (the liabilities excluded are
referred to as the "Excluded Liabilities"). Holdings retained the Retained
Brands. Holdings agreed to indemnify Revlon, Inc. and Products Corporation
against losses arising from the Excluded Liabilities, and Revlon, Inc. and
Products Corporation agreed to indemnify Holdings against losses arising from
the liabilities assumed by Products Corporation. The amount reimbursed by
Holdings to Products Corporation for the Excluded Liabilities for 1997 was $0.4
million.
- -----------------------------
* Less than one percent.
7 Includes 1,000 shares owned by Mr. Levin's daughter as to which
beneficial ownership is disclaimed, 489 shares acquired under the
401(k) Plan and the Excess Plan and 42,500 shares which may be
acquired under options which vested on January 9, 1998.
8 Includes 2,000 shares owned by Mr. Semel's children as to which
beneficial ownership is disclaimed.
9 Based upon a Schedule 13G filed by Massachussetts Financial Services
Company in February 1998, Massachussetts Financial Services Company
has sole voting power as to 1,137,280 shares and sole dispositive
power as to all 1,146,480 shares.
10 Includes 49,249 shares owned by executive officers not listed in the
table as to which beneficial ownership is disclaimed for 750 shares.
Included in this share number for such executive officers not listed
in the table are 7,250 shares which may be acquired under options
which vested on February 28, 1997, 15,750 shares which may be acquired
under options which vested on January 9, 1998, 7,250 shares which may
be acquired under options which vest on February 28, 1998, and 1,446
shares acquired under the 401(k) Plan and the Excess Plan.
41
OPERATING SERVICES AGREEMENT
In June 1992, Revlon, Inc., Products Corporation and Holdings entered
into an operating services agreement (as amended and restated, and as
subsequently amended, the "Operating Services Agreement") pursuant to which
Products Corporation manufactures, markets, distributes, warehouses and
administers, including the collection of accounts receivable, the Retained
Brands for Holdings. Pursuant to the Operating Services Agreement, Products
Corporation is reimbursed an amount equal to all of its and Revlon, Inc.'s
direct and indirect costs incurred in connection with furnishing such services,
net of the amounts collected by Products Corporation with respect to the
Retained Brands, payable quarterly. The net amount reimbursed by Holdings to
Products Corporation for such direct and indirect costs for 1997 was $1.4
million. Holdings also pays Products Corporation a fee equal to 5% of the net
sales of the Retained Brands, payable quarterly. The fees paid by Holdings to
Products Corporation pursuant to the Operating Services Agreement for services
with respect to the Retained Brands for 1997 was approximately $0.3 million.
REIMBURSEMENT AGREEMENTS
Revlon, Inc., Products Corporation and MacAndrews Holdings have
entered into reimbursement agreements (the "Reimbursement Agreements") pursuant
to which (i) MacAndrews Holdings is obligated to provide (directly or through
affiliates) certain professional and administrative services, including
employees, to Revlon, Inc. and its subsidiaries, including Products
Corporation, and purchase services from third party providers, such as
insurance and legal and accounting services, on behalf of Revlon, Inc. and its
subsidiaries, including Products Corporation, to the extent requested by
Products Corporation, and (ii) Products Corporation is obligated to provide
certain professional and administrative services, including employees, to
MacAndrews Holdings (and its affiliates) and purchase services from third party
providers, such as insurance and legal and accounting services, on behalf of
MacAndrews Holdings (and its affiliates) to the extent requested by MacAndrews
Holdings, provided that in each case the performance of such services does not
cause an unreasonable burden to MacAndrews Holdings or Products Corporation, as
the case may be. The Company reimburses MacAndrews Holdings for the allocable
costs of the services purchased for or provided to the Company and its
subsidiaries and for reasonable out-of-pocket expenses incurred in connection
with the provision of such services. MacAndrews Holdings (or such affiliates)
reimburses the Company for the allocable costs of the services purchased for or
provided to MacAndrews Holdings (or such affiliates) and for the reasonable
out-of-pocket expenses incurred in connection with the purchase or provision of
such services. In addition, in connection with certain insurance coverage
provided by MacAndrews Holdings, Products Corporation obtained letters of
credit (which aggregated approximately $27.7 million as of December 31, 1997)
to support certain self-funded risks of MacAndrews Holdings and its affiliates,
including the Company, associated with such insurance coverage. The costs of
such letters of credit are allocated among, and paid by, the affiliates of
MacAndrews Holdings, including the Company, which participate in the insurance
coverage to which the letters of credit relate. The Company expects that these
self-funded risks will be paid in the ordinary course and, therefore, it is
unlikely that such letters of credit will be drawn upon. MacAndrews Holdings
has agreed to indemnify Products Corporation to the extent amounts are drawn
under any of such letters of credit with respect to claims for which neither
Revlon, Inc. nor Products Corporation is responsible. The net amount reimbursed
by MacAndrews Holdings to the Company for the services provided under the
Reimbursement Agreements for 1997 was $4.0 million. Each of Revlon, Inc. and
Products Corporation, on the one hand, and MacAndrews Holdings, on the other,
has agreed to indemnify the other party for losses arising out of the provision
of services by it under the Reimbursement Agreements other than losses
resulting from its willful misconduct or gross negligence. The Reimbursement
Agreements may be terminated by either party on 90 days' notice. The Company
does not intend to request services under the Reimbursement Agreements unless
their costs would be at least as favorable to the Company as could be obtained
from unaffiliated third parties.
TAX SHARING AGREEMENT
Revlon, Inc., for federal income tax purposes, is included in the
affiliated group of which Mafco Holdings is the common parent, and Revlon,
Inc.'s federal taxable income and loss is included in such group's consolidated
tax return filed by Mafco Holdings. Revlon, Inc. also may be included in
certain state and local tax returns of Mafco Holdings or its subsidiaries. In
June 1992, Holdings, Revlon, Inc. and certain of its subsidiaries, and Mafco
Holdings entered into a tax sharing agreement (as subsequently amended, the
"Tax Sharing Agreement"), pursuant
42
to which Mafco Holdings has agreed to indemnify Revlon, Inc. against federal,
state or local income tax liabilities of the consolidated or combined group of
which Mafco Holdings (or a subsidiary of Mafco Holdings other than Revlon, Inc.
or its subsidiaries) is the common parent for taxable periods beginning on or
after January 1, 1992 during which Revlon, Inc. or a subsidiary of Revlon, Inc.
is a member of such group. Pursuant to the Tax Sharing Agreement, for all
taxable periods beginning on or after January 1, 1992, Revlon, Inc. will pay to
Holdings amounts equal to the taxes that Revlon, Inc. would otherwise have to
pay if it were to file separate federal, state or local income tax returns
(including any amounts determined to be due as a result of a redetermination
arising from an audit or otherwise of the consolidated or combined tax
liability relating to any such period which is attributable to Revlon, Inc.),
except that Revlon, Inc. will not be entitled to carry back any losses to
taxable periods ending prior to January 1, 1992. No payments are required by
Revlon, Inc. if and to the extent Products Corporation is prohibited under the
Credit Agreement from making tax sharing payments to Revlon, Inc. The Credit
Agreement prohibits Products Corporation from making such tax sharing payments
other than in respect of state and local income taxes. Since the payments to be
made by Revlon, Inc. under the Tax Sharing Agreement will be determined by the
amount of taxes that Revlon, Inc. would otherwise have to pay if it were to
file separate federal, state or local income tax returns, the Tax Sharing
Agreement will benefit Mafco Holdings to the extent Mafco Holdings can offset
the taxable income generated by Revlon, Inc. against losses and tax credits
generated by Mafco Holdings and its other subsidiaries. There were no cash
payments in respect of federal taxes made by Revlon, Inc. pursuant to the Tax
Sharing Agreement for 1997. The Company has a liability of $0.9 million to
Holdings in respect of federal taxes for 1997 under the Tax Sharing Agreement.
REGISTRATION RIGHTS AGREEMENT
Prior to the consummation of the Revlon IPO, Revlon, Inc. and Revlon
Worldwide Corporation (subsequently merged into REV Holdings), the then direct
parent of Revlon, Inc., entered into the Registration Rights Agreement pursuant
to which REV Holdings and certain transferees of Revlon, Inc.'s Common Stock
held by REV Holdings (the "Holders") have the right to require Revlon, Inc. to
register all or part of the Class A Common Stock owned by such Holders and the
Class A Common Stock issuable upon conversion of Revlon, Inc.'s Class B Common
Stock owned by such Holders under the Securities Act of 1933, as amended (a
"Demand Registration"); provided that Revlon, Inc. may postpone giving effect
to a Demand Registration up to a period of 30 days if Revlon, Inc. believes
such registration might have a material adverse effect on any plan or proposal
by Revlon, Inc. with respect to any financing, acquisition, recapitalization,
reorganization or other material transaction, or if Revlon, Inc. is in
possession of material non-public information that, if publicly disclosed,
could result in a material disruption of a major corporate development or
transaction then pending or in progress or in other material adverse
consequences to Revlon, Inc. In addition, the Holders have the right to
participate in registrations by Revlon, Inc. of its Class A Common Stock (a
"Piggyback Registration"). The Holders will pay all out-of-pocket expenses
incurred in connection with any Demand Registration. Revlon, Inc. will pay any
expenses incurred in connection with a Piggyback Registration, except for
underwriting discounts, commissions and expenses attributable to the shares of
Class A Common Stock sold by such Holders.
OTHER
Pursuant to a lease dated April 2, 1993 (the "Edison Lease"), Holdings
leases to Products Corporation the Edison research and development facility for
a term of up to 10 years with an annual rent of $1.4 million and certain shared
operating expenses payable by Products Corporation which, together with the
annual rent, are not to exceed $2.0 million per year. Pursuant to an assumption
agreement dated February 18, 1993, Holdings agreed to assume all costs and
expenses of the ownership and operation of the Edison facility as of January 1,
1993, other than (i) the operating expenses for which Products Corporation is
responsible under the Edison Lease and (ii) environmental claims and compliance
costs relating to matters which occurred prior to January 1, 1993 up to an
amount not to exceed $8.0 million (the amount of such claims and costs for
which Products Corporation is responsible, the "Environmental Limit"). In
addition, pursuant to such assumption agreement, Products Corporation agreed to
indemnify Holdings for environmental claims and compliance costs relating to
matters which occurred prior to January 1, 1993 up to an amount not to exceed
the Environmental Limit and Holdings agreed to indemnify Products Corporation
for environmental claims and compliance costs relating to matters which
occurred prior to January 1, 1993 in excess of the Environmental Limit and all
such claims and costs relating to matters occurring on or after January 1,
1993. Pursuant to an occupancy agreement, during 1997 Products Corporation
rented from Holdings a
43
portion of the administration building located at the Edison facility and space
for a retail store of Products Corporation. Products Corporation provides
certain administrative services, including accounting, for Holdings with
respect to the Edison facility pursuant to which Products Corporation pays on
behalf of Holdings costs associated with the Edison facility and is reimbursed
by Holdings for such costs, less the amount owed by Products Corporation to
Holdings pursuant to the Edison Lease and the occupancy agreement. The net
amount reimbursed by Holdings to Products Corporation for such costs with
respect to the Edison facility for 1997 was $0.7 million.
During 1997, a subsidiary of Products Corporation sold an inactive
subsidiary to an affiliate for approximately $1.0 million.
Effective July 1, 1997, Holdings contributed to Products Corporation
substantially all of the assets and liabilities of the Bill Blass business not
already owned by Products Corporation. The contributed assets approximated the
contributed liabilities and were accounted for at historical cost in a manner
similar to that of a pooling of interests and, accordingly, prior period
financial statements were restated as if the contribution took place prior to
the beginning of the earliest period presented.
In June 1997, Products Corporation borrowed from Holdings
approximately $0.5 million, representing certain amounts received by Holdings
from the sale of a brand and inventory relating thereto. Such amount is
evidenced by a noninterest bearing promissory note. Holdings agreed not to
demand payment under such note so long as any indebtedness remains outstanding
under Products Corporation's Credit Agreement.
On February 2, 1998, Revlon Escrow issued and sold the Notes in a
private placement, with the net proceeds deposited into escrow. The proceeds
from the sale of the Notes will be used to finance the redemptions of the Old
Notes. Products Corporation delivered a redemption notice to the holders of the
Senior Subordinated Notes for the redemption of the Senior Subordinated Notes
on March 4, 1998, at which time Products Corporation consummated the 8-5/8%
Notes Assumption, and to the holders of the Senior Notes for the redemption of
the Senior Notes on April 1, 1998, at which time Products Corporation will
consummate the 8-1/8% Notes Assumption. On or before March 19, 1998 either
Revlon Escrow or Products Corporation is required to file a registration
statement with the Commission with respect to the Exchange Offer, which is
expected to occur on or before July 2, 1998. In connection with these matters,
Products Corporation entered into a Purchase Agreement and a Registration
Agreement with Revlon Escrow and the initial purchasers of the Notes and
entered into an agreement with Revlon Escrow pursuant to which each of Products
Corporation and Revlon Escrow agree to take all actions required under the
Purchase Agreement, the Registration Agreement and the other documents
governing the sale of the Notes, the redemptions of the Old Notes and the
Assumption within the periods prescribed in order to effect such transactions
in accordance with their terms. A nationally recognized investment banking firm
rendered its written opinion that the Assumption, upon consummation of the
redemptions of the Old Notes, and the subsequent release from escrow to
Products Corporation of any remaining net proceeds from the sale of the Notes
are fair from a financial standpoint to Products Corporation under the
indenture governing the 1999 Notes.
During 1997, Products Corporation leased certain facilities to
MacAndrews & Forbes or its affiliates pursuant to occupancy agreements and
leases. These included space at Products Corporation's New York headquarters
and at Products Corporation's offices in London and Hong Kong. The rent paid by
MacAndrews & Forbes or its affiliates to Products Corporation for such leases
and agreements for 1997 was $3.8 million.
Products Corporation's Credit Agreement is supported by, among other
things, guarantees from Holdings and certain of its subsidiaries. The
obligations under such guarantees are secured by, among other things, (i) the
capital stock and certain assets of certain subsidiaries of Holdings and (ii) a
mortgage on Holdings' Edison, New Jersey facility.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings. No such borrowings were
outstanding as of December 31, 1997. The interest rates for such borrowings are
more favorable to Products Corporation than interest rates under the Credit
Agreement and, for borrowings occurring prior to the execution of the Credit
Agreement, the credit facility in effect at the time of such borrowing. The
amount of interest paid by Products Corporation for such borrowings for 1997
was $0.6 million.
44
During 1997, Products Corporation used an airplane owned by a
corporation of which Messrs. Gittis and Drapkin are the sole stockholders, for
which Products Corporation paid approximately $0.2 million.
During 1997, Products Corporation purchased products from an
affiliate, for which it paid approximately $0.9 million.
During 1997, Products Corporation provided licensing services to an
affiliate, for which Products Corporation has been paid approximately $0.7
million.
An affiliate of the Company assembles lipstick cases for Products
Corporation. Products Corporation paid approximately $0.9 million for such
services in 1997.
The law firm of which Mr. Jordan is a senior partner provided legal
services to Revlon, Inc. and its subsidiaries during 1997, and it is
anticipated that it will provide legal services to Revlon, Inc. and its
subsidiaries during 1998.
Revlon, Inc. believes that the terms of the foregoing transactions are
at least as favorable to Revlon, Inc. or Products Corporation, as applicable,
as those that could be obtained from unaffiliated third parties.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
(1) Consolidated Financial Statements and Independent Auditors'
Report included herein:
See Index on page F-1
(2) Financial Statement Schedule:
See Index on page F-1
All other schedules are omitted as they are inapplicable or the
required information is furnished in the Consolidated Financial
Statements of the Company or the Notes thereto.
(3) List of Exhibits:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Amended and Restated Certificate of Incorporation of Revlon,
Inc. dated March 4, 1996. (Incorporated by reference to
Exhibit 3.4 to the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996 of Revlon, Inc. (the
"Revlon 1996 First Quarter 10-Q")).
3.2 Amended and Restated By-Laws of Revlon, Inc. dated January
30, 1997 (Incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K for the year ended December 31,
1996 of Revlon, Inc. (the "Revlon 1996 10-K")).
4. INSTRUMENTS DEFINING THE RIGHT OF SECURITY HOLDERS, INCLUDING
INDENTURES.
4.1 Indenture, dated as of February 15, 1993, between Products
Corporation and The Bank of New York, as Trustee, relating to
Products Corporation's 10 1/2 % Series B Senior Subordinated
Notes Due 2003. (Incorporated by reference to Exhibit 4.31 to
the Registration Statement on Form S-1 of Products
Corporation filed with the Securities and Exchange Commission
on March 17, 1993, File No. 33-59650).
4.2 Indenture, dated as of April 1, 1993, between Products
Corporation and NationsBank of Georgia, National Association,
as Trustee, relating to the Products Corporation's 9 3/8 %
Senior Notes Due
45
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2001 and Products Corporation's 9 3/8 % Series B Senior Notes
Due 2001. (Incorporated by reference to Exhibit 4.28 to the
Amendment No. 1 to the Registration Statement on Form S-1 of
Products Corporation as filed with the Securities and
Exchange Commission on April 13, 1993, File No. 33-59650).
4.3 Indenture dated as of June 1, 1993, between Products
Corporation and NationsBank of Georgia, National Association,
as Trustee, relating to Products Corporation's 9 1/2 % Senior
Notes Due 1999. (Incorporated by reference to Exhibit 4.31 to
the Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1993 of Products Corporation).
4.4 Second Amended and Restated Credit Agreement dated as of
December 22, 1994, between Pacific Finance & Development
Corp. and the Long-Term Credit Bank of Japan, Ltd. (the "Yen
Credit Agreement") (Incorporated by reference to Exhibit 4.32
to the Annual Report on Form 10-K for the year ended December
31, 1994 of Products Corporation (the "Products Corporation
1994 10-K")).
4.5 First Amendment and Consent, dated as of March 10, 1997, with
respect to the Yen Credit Agreement. (Incorporated by
reference to Exhibit 4.8 to the Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997 of Revlon, Inc.
(the "Revlon 1997 First Quarter 10-Q")).
4.6 Third Amended and Restated Credit Agreement, dated as of June
30, 1997, between Pacific Finance and Development Corporation
and the Long-Term Credit Bank, Ltd. (Incorporated by
reference to Exhibit 4.11 to the Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1997 of Revlon,
Inc. (the "Revlon 1997 Second Quarter 10-Q")).
4.7 Amended and Restated Credit Agreement, dated as of May 30,
1997, among Products Corporation, The Chase Manhattan Bank,
Citibank N.A., Lehman Commerical Paper Inc., Chase Securities
Inc. and the lenders party thereto (the "Credit Agreement").
(Incorporated by reference to Exhibit 4.23 to Amendment No. 2
to the Form S-1 of Revlon Worldwide (Parent) Corporation,
filed with the Securities and Exchange Commission on June 26,
1997, File No. 333-23451).
*4.8 First Amendment, dated as of January 29, 1998, to the Credit
Agreement.
10. MATERIAL CONTRACTS.
10.1 Purchase and Sale Agreement and Amendment thereto by and
between Products Corporation and Holdings, each dated as of
February 18, 1993, relating to the Edison, New Jersey
facility. (Incorporated by reference to Exhibit 4.22 to the
Annual Report on Form 10-K for the year ended December 31,
1992 of Products Corporation (the "Products Corporation 1992
10-K").
10.2 Asset Transfer Agreement, dated as of June 24, 1992, among
Holdings, National Health Care Group, Inc., Charles of the
Ritz Group Ltd., Products Corporation and Revlon, Inc.
(Incorporated by reference to Exhibit 10.1 to the Amendment
No. 1 to the Revlon Form S-1 filed with the Securities and
Exchange Commission on June 29, 1992, File No. 33-47100 (the
"Revlon 1992 Amendment No. 1").
10.3 Real Property Asset Transfer Agreement, dated as of June 24,
1992, among Holdings, Revlon, Inc. and Products Corporation.
(Incorporated by reference to Exhibit 10.2 to the Revlon 1992
Amendment No. 1).
10.4 Assumption Agreement and Amendment thereto by and between
Products Corporation and Holdings, each dated as of
February 18, 1993, relating to the Edison, New Jersey
facility. (Incorporated by reference to Exhibit 4.23 to the
Products Corporation 1992 10-K).
10.5 Tax Sharing Agreement, dated as of June 24, 1992, among Mafco
Holdings, Revlon, Inc., Products Corporation and certain
subsidiaries of Products Corporation (the "Tax Sharing
Agreement"). (Incorporated by reference to Exhibit 10.5 to
the Revlon 1992 Amendment No. 1).
46
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.6 First Amendment, dated as of February 28, 1995, to the Tax
Sharing Agreement. (Incorporated by reference to Exhibit 10.5
to the Products Corporation 1994 10-K).
10.7 Second Amendment, dated as of January 1, 1997, to the Tax
Sharing Agreement. (Incorporated by reference to Exhibit 10.7
to the Revlon 1996 10-K).
*10.8 Agreement by The Cosmetic Center, Inc. to be bound by the Tax
Sharing Agreement, dated April 25, 1997.
10.9 Second Amended and Restated Operating Services Agreement by
and among Holdings, Revlon, Inc. and Products Corporation, as
of January 1, 1996 (the "Operating Services Agreement").
(Incorporated by reference to Exhibit 10.8 to the Revlon 1996
10-K).
*10.10 Amendment to the Operating Services Agreement, dated as of
July 1, 1997.
10.11 Employment Agreement dated as of January 1, 1996 between
Products Corporation and Jerry W. Levin (the "Levin
Employment Agreement") (Incorporated by reference to Exhibit
10.10 to the Annual Report on Form 10-K for the year ended
December 31, 1995 of Products Corporation (the "Products
Corporation 1995 10-K").
*10.12 Amendment, effective June 30, 1997, to the Levin Employment
Agreement.
10.13 Employment Agreement dated as of January 1, 1997 between
Products Corporation and George Fellows (Incorporated by
reference to Exhibit 10.10 to the Revlon 1997 First Quarter
10-Q).
10.14 Employment Agreement dated as of January 1, 1996 between
Products Corporation and William J. Fox (Incorporated by
reference to Exhibit 10.12 to the Products Corporation 1995
10-K).
10.15 Employment Agreement dated as of January 1, 1996 between
RIROS Corporation and Carlos Colomer Casellas (the "Colomer
Employment Agreement") (Incorporated by reference to Exhibit
10.13 to the Products Corporation 1995 10-K).
*10.16 Amendment, effective January 1, 1998, to the Colomer
Employment Agreement.
*10.17 Employment Agreement dated as of January 1, 1998 between
Products Corporation and M. Katherine Dwyer.
*10.18 Revlon Employees' Savings, Investment and Profit Sharing Plan
effective as of January 1, 1997.
10.19 Revlon Employees' Retirement Plan as amended and restated
December 19, 1994. (Incorporated by reference to Exhibit
10.15 to the Products Corporation 1994 10-K).
10.20 Amended and Restated Revlon Pension Equalization Plan,
effective January 1, 1996. (Incorporated by reference to
Exhibit 10.17 to the Amendment No.4 to the Revlon Form S-1
filed with the Securities and Exchange Commission on February
26, 1996, File No. 33-99558).
10.21 Executive Supplemental Medical Expense Plan Summary dated
July 1991. (Incorporated by reference to Exhibit 10.18 to the
Form S-1 of Revlon, Inc. filed with the Securities and
Exchange Commission on May 22, 1992, File No. 33-47100 (the
"Revlon 1992 Form S-1").
10.22 Description of Post Retirement Life Insurance Program for Key
Executives. (Incorporated by reference to Exhibit 10.19 to
the Revlon 1992 Form S-1).
10.23 Benefit Plans Assumption Agreement dated as of July 1, 1992,
by and among Holdings, Revlon, Inc. and Products Corporation.
(Incorporated by reference to Exhibit 10.25 to the Products
Corporation 1992 10-K).
10.24 Revlon Executive Bonus Plan effective January 1, 1997.
(Incorporated by reference to Exhibit 10.20 to the Revlon
1996 10-K).
47
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.25 Revlon Executive Deferred Compensation Plan, amended as of
October 15, 1993. (Incorporated by reference to Exhibit 10.25
to the Annual Report on Form 10-K for the year ended December
31, 1993 of Products Corporation (the "Products Corporation
1993 10-K").
10.26 Revlon Executive Severance Policy effective January 1, 1996.
(Incorporated by reference to Exhibit 10.23 to the Amendment
No. 3 to the Revlon 1995 Form S-1 filed with the Securities
and Exchange Commission on February 5, 1996).
10.27 Revlon, Inc. 1996 Stock Plan, amended and restated as of
December 17, 1996. (Incorporated by reference to Exhibit
10.23 to the Revlon 1996 10-K).
21. SUBSIDIARIES.
*21.1 Subsidiaries of the Registrant.
24. POWERS OF ATTORNEY.
*24.1 Power of Attorney of Ronald O. Perelman.
*24.2 Power of Attorney of Donald G. Drapkin.
*24.3 Power of Attorney of Jerry W. Levin.
*24.4 Power of Attorney of Howard Gittis.
*24.5 Power of Attorney of Vernon E. Jordan, Jr., Esq.
*24.6 Power of Attorney of Henry A. Kissinger.
*24.7 Power of Attorney of Edward J. Landau, Esq.
*24.8 Power of Attorney of Linda G. Robinson.
*24.9 Power of Attorney of Terry Semel.
*24.10 Power of Attorney of Martha Stewart.
*24.11 Power of Attorney of Meyer Feldberg.
*24.12 Power of Attorney of Morton Janklow.
*24.13 Power of Attorney of William J. Fox.
- --------------------
*Filed herewith.
(b) Reports on Form 8-K
Revlon, Inc. filed no reports on Form 8-K during the fiscal year ended
December 31, 1997.
48
REVLON, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page
Independent Auditors' Report..............................................................................F-2
AUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and 1996..........................................F-3
Consolidated Statements of Operations for each of the years in the three-year
period ended December 31, 1997.....................................................................F-4
Consolidated Statements of Stockholders' Deficiency for each of the years in
the three-year period ended December 31, 1997.....................................................F-5
Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31, 1997....................................................................F-6
Notes to Consolidated Financial Statements............................................................F-7
FINANCIAL STATEMENT SCHEDULE:
Schedule II--Valuation and Qualifying Accounts........................................................F-31
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Revlon, Inc.:
We have audited the accompanying consolidated balance sheets of Revlon, Inc.
and its subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for each of the years in the three-year period ended December 31, 1997. In
connection with our audits of the consolidated financial statements we have
also audited the financial statement schedule as listed on the index on page
F-1. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Revlon, Inc. and
its subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
New York, New York
January 23, 1998
F-2
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
DECEMBER 31, DECEMBER 31,
ASSETS 1997 1996
-------------- -------------
Current assets:
Cash and cash equivalents........................................... $ 42.8 $ 38.6
Trade receivables, less allowances of $25.9
and $24.9, respectively........................................ 493.9 426.8
Inventories......................................................... 349.3 281.1
Prepaid expenses and other.......................................... 97.5 74.5
-------------- -------------
Total current assets........................................... 983.5 821.0
Property, plant and equipment, net....................................... 378.2 381.1
Other assets............................................................. 143.7 139.2
Intangible assets, net................................................... 329.2 280.6
-------------- -------------
Total assets................................................... $ 1,834.6 $ 1,621.9
============== =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings - third parties............................... $ 42.7 $ 27.1
Current portion of long-term debt - third parties................... 5.5 8.8
Accounts payable.................................................... 195.5 161.9
Accrued expenses and other.......................................... 366.1 366.2
-------------- -------------
Total current liabilities...................................... 609.8 564.0
Long-term debt - third parties .......................................... 1,427.8 1,321.8
Long-term debt - affiliates.............................................. 30.9 30.4
Other long-term liabilities.............................................. 224.6 202.8
Stockholders' deficiency:
Preferred stock, par value $.01 per share; 20,000,000 shares authorized,
546 shares of Series A Preferred Stock
issued and outstanding......................................... 54.6 54.6
Class B Common Stock, par value $.01 per share; 200,000,000
shares authorized, 31,250,000 issued and outstanding........... 0.3 0.3
Class A Common Stock, par value $.01 per share; 350,000,000
shares authorized, 19,886,575 and 19,875,000 issued and
outstanding, respectively...................................... 0.2 0.2
Capital deficiency.................................................. (231.1) (231.6)
Accumulated deficit since June 24, 1992............................. (258.8) (302.4)
Adjustment for minimum pension liability............................ (4.5) (12.4)
Currency translation adjustment..................................... (19.2) (5.8)
-------------- -------------
Total stockholders' deficiency................................. (458.5) (497.1)
-------------- -------------
Total liabilities and stockholders' deficiency................. $ 1,834.6 $ 1,621.9
============== =============
See Notes to Consolidated Financial Statements.
F-3
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
Net sales.............................................. $ 2,390.9 $ 2,169.5 $ 1,940.0
Cost of sales.......................................... 832.1 726.5 653.0
--------------- --------------- --------------
Gross profit...................................... 1,558.8 1,443.0 1,287.0
Selling, general and administrative expenses........... 1,337.9 1,242.4 1,141.4
Business consolidation costs and other, net............ 7.6 - -
--------------- --------------- --------------
Operating income ................................. 213.3 200.6 145.6
--------------- --------------- --------------
Other expenses (income):
Interest expense.................................. 136.2 133.4 142.6
Interest and net investment income................ (3.0) (3.4) (4.9)
Gain on sale of subsidiary stock.................. (6.0) - -
Amortization of debt issuance costs............... 6.7 8.3 11.0
Foreign currency losses, net...................... 6.4 5.7 10.9
Miscellaneous, net................................ 5.1 6.3 1.8
--------------- --------------- --------------
Other expenses, net........................... 145.4 150.3 161.4
--------------- --------------- --------------
Income (loss) before income taxes...................... 67.9 50.3 (15.8)
Provision for income taxes............................. 9.4 25.5 25.4
--------------- --------------- --------------
Income (loss) before extraordinary items.............. 58.5 24.8 (41.2)
Extraordinary items - early extinguishment of debt..... (14.9) (6.6) -
--------------- --------------- --------------
Net income (loss)...................................... $ 43.6 $ 18.2 $ (41.2)
=============== =============== ==============
Basic income (loss) per common share:
Income (loss) before extraordinary items......... $ 1.14 $ 0.50 $ (0.97)
Extraordinary items.............................. (0.29) (0.13) -
--------------- --------------- --------------
Net income (loss) per common share............... $ 0.85 $ 0.37 $ (0.97)
=============== =============== ==============
Diluted income (loss) per common share:
Income (loss) before extraordinary items......... $ 1.14 $ 0.50 $ (0.97)
Extraordinary items.............................. (0.29) (0.13) -
--------------- --------------- --------------
Net income (loss) per common share............... $ 0.85 $ 0.37 $ (0.97)
=============== =============== ==============
Weighted average common shares outstanding:
Basic............................................ 51,131,440 49,687,500 42,500,000
=============== =============== ==============
Dilutive......................................... 51,544,318 49,818,792 42,500,000
=============== =============== ==============
See Notes to Consolidated Financial Statements.
F-4
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(DOLLARS IN MILLIONS)
Currency
Preferred Common Capital Accumulated Other Translation
Stock Stock Deficiency Deficit (a) Adjustments Adjustment
----------- ----------- ------------ ----------- ------------ ------------
Balance, January 1, 1995.............. $ 54.6 $ 0.4 $ (415.1) (279.4) $ (10.9) $ (5.8)
Net loss......................... (41.2)
Adjustment for minimum
pension liability............ (6.1)
Net capital contribution......... 0.4 (d)
Currency translation adjustment.. 0.8
----------- ----------- ------------ ----------- ------------ ------------
Balance, December 31, 1995............ 54.6 0.4 (414.7) (320.6) (17.0) (5.0)
Net income....................... 18.2
Net proceeds from
initial public offering...... 0.1 187.7
Adjustment for minimum
pension liability............ 4.6
Net capital distribution......... (0.5)(d)
Currency translation adjustment.. (0.8)(c)
Acquisition of business.......... (4.1)(b)
----------- ----------- ------------ ----------- ------------ ------------
Balance, December 31, 1996............ 54.6 0.5 (231.6) (302.4) (12.4) (5.8)
Net income....................... 43.6
Issuance of common stock......... 0.2
Adjustment for minimum
pension liability............ 7.9
Net capital contribution......... 0.3 (d)
Currency translation adjustment.. (13.4)
----------- ----------- ------------ ----------- ------------ ------------
Balance, December 31, 1997............ $ 54.6 $ 0.5 $ (231.1) $ (258.8) $ (4.5) $ (19.2)
=========== =========== ============ =========== ============ ============
- --------------------
(a) Represents net loss since June 24, 1992, the effective date of the
transfer agreements referred to in Note 15.
(b) Represents amounts paid to Revlon Holdings Inc. for the Tarlow Advertising
Division ("Tarlow") (See Note 15).
(c) Includes $2.1 of gains related to the Company's simplification of its
international corporate structure.
(d) Represents changes in capital from the acquisition of the Bill Blass
business (See Note 15).
See Notes to Consolidated Financial Statements.
F-5
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
Year Ended December 31,
---------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 1995
------------ ------------ ------------
Net income (loss)................................................... $ 43.6 $ 18.2 $ (41.2)
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization.................................. 103.8 90.9 88.4
Extraordinary item............................................. 14.9 6.6 -
Gain on sale of subsidiary stock.............................. (6.0) - -
Gain on sale of certain fixed assets, net...................... (4.4) - (2.2)
Change in assets and liabilities:
Increase in trade receivables............................. (70.3) (67.7) (44.1)
Increase in inventories.................................... (21.4) (5.3) (15.1)
Decrease (increase) in prepaid expenses and
other current assets............................ 2.3 (7.1) 4.5
Increase in accounts payable............................... 21.6 10.8 10.2
Decrease in accrued expenses and other
current liabilities............................. (4.2) (10.2) (12.2)
Other, net................................................. (73.0) (45.8) (40.4)
------------ ------------ ------------
Net cash provided by (used for) operating activities................ 6.9 (9.6) (52.1)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................ (56.5) (58.0) (54.3)
Acquisition of businesses, net of cash acquired..................... (60.4) (7.1) (21.2)
Proceeds from the sale of certain fixed assets...................... 8.5 - 3.0
------------ ------------ ------------
Net cash used for investing activities.............................. (108.4) (65.1) (72.5)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings - third parties ... 18.0 5.8 (122.9)
Proceeds from the issuance of long-term debt - third parties........ 802.3 266.4 493.7
Repayment of long-term debt - third parties......................... (707.5) (366.6) (236.3)
Net proceeds from issuance of common stock.......................... 0.2 187.8 -
Net contribution from (distribution to) parent...................... 0.3 (0.5) 0.4
Proceeds from the issuance of debt - affiliates..................... 120.7 115.0 157.4
Repayment of debt - affiliates...................................... (120.2) (115.0) (151.0)
Acquisition of business from affiliate.............................. - (4.1) -
Payment of debt issuance costs...................................... (4.5) (10.9) (15.7)
------------ ------------ ------------
Net cash provided by financing activities........................... 109.3 77.9 125.6
------------ ------------ ------------
Effect of exchange rate changes on cash and cash equivalents........ (3.6) (0.9) (0.1)
------------ ------------ ------------
Net increase in cash and cash equivalents...................... 4.2 2.3 0.9
Cash and cash equivalents at beginning of period............... 38.6 36.3 35.4
------------ ------------ ------------
Cash and cash equivalents at end of period..................... $ 42.8 $ 38.6 $ 36.3
============ ============ ============
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest .................................................. $ 142.2 $ 139.0 $ 148.2
Income taxes, net of refunds............................... 10.6 15.4 18.8
Supplemental schedule of noncash investing activities:
In connection with business acquisitions, liabilities
were assumed (including minority interest) as follows:
Fair value of assets acquired.............................. $ 132.7 $ 9.7 $ 27.3
Cash paid.................................................. (64.5) (7.2) (21.6)
------------ ------------ ------------
Liabilities assumed........................................ $ 68.2 $ 2.5 $ 5.7
============ ============ ============
See Notes to Consolidated Financial Statements.
F-6
REVLON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:
Revlon, Inc. (the "Company") is a holding company, formed in April
1992, that conducts its business exclusively through its direct subsidiary,
Revlon Consumer Products Corporation and its subsidiaries ("Products
Corporation"). The Company operates in a single business segment with many
different products, which include an extensive array of glamorous, exciting and
innovative cosmetic and skin care, fragrance and personal care products, and
professional products (products for use in and resale by professional salons).
In the United States and increasingly in international markets, the Company's
products are sold principally in the self-select distribution channel. The
Company also sells certain products in the demonstrator-assisted distribution
channel, sells consumer and professional products to United States military
exchanges and commissaries, operates retail outlet stores and has a licensing
group. Outside the United States, the Company also sells such consumer products
through department stores and specialty stores, such as perfumeries.
Products Corporation was formed in April 1992 and, on June 24, 1992,
succeeded to assets and liabilities of the cosmetic and skin care, fragrance
and personal care products business of its then parent company whose name was
changed from Revlon, Inc. to Revlon Holdings Inc. ("Holdings"). Certain
consumer products lines sold in demonstrator-assisted distribution channels
considered not integral to the Company's business and which historically had
not been profitable (the "Retained Brands") and certain other assets and
liabilities were retained by Holdings. Unless the context otherwise requires,
all references to the Company mean Revlon, Inc. and its subsidiaries. Through
December 31, 1997, the Company has essentially had no business operations of
its own and its only material asset has been all of the outstanding capital
stock of Products Corporation. As such its net income (loss) has historically
consisted predominantly of its equity in the net income (loss) of Products
Corporation and in 1997 and 1996 included approximately $1.2 and $0.8,
respectively, in expenses incidental to being a public holding company.
The Consolidated Financial Statements of the Company presented herein
relate to the business to which the Company succeeded and include the assets,
liabilities and results of operations of such business. Assets, liabilities,
revenues, other income, costs and expenses which were identifiable specifically
to the Company are included herein and those identifiable specifically to the
retained and divested businesses of Holdings have been excluded. Amounts which
were not identifiable specifically to either the Company or Holdings are
included herein to the extent applicable to the Company pursuant to a method of
allocation generally based on the respective proportion of the business of the
Company to the applicable total of the businesses of the Company and Holdings.
The operating results of the Retained Brands and divested businesses of
Holdings have not been reflected in the Consolidated Financial Statements of
the Company. Management of the Company believes that the basis of allocation
and presentation is reasonable.
Although the Retained Brands were not transferred to the Company when
the cosmetic and skin care, fragrance and personal care products business of
Holdings was transferred to Products Corporation, Products Corporation's bank
lenders required that all assets and liabilities relating to such Retained
Brands existing on the date of transfer (June 24, 1992), other than the brand
names themselves and certain other intangible assets, be transferred to
Products Corporation. Any assets and liabilities that had not been disposed of
or satisfied by December 31 of the applicable year have been reflected in the
Company's consolidated financial position as of such dates. However, any new
assets or liabilities generated by such Retained Brands since the transfer date
and any income or loss associated with inventory that has been transferred to
Products Corporation relating to such Retained Brands have been and will be for
the account of Holdings. In addition, certain assets and liabilities relating
to divested businesses were transferred to Products Corporation on the transfer
date and any remaining balances as of December 31 of the applicable year have
been reflected in the Company's Consolidated Balance Sheets as of such dates.
At December 31, 1997 and 1996, the amounts reflected in the Company's
Consolidated Balance Sheets aggregated a net liability of $23.3 and $23.6,
respectively, of which $4.9 and $5.2, respectively, are included in accrued
expenses and other and $18.4 as of both dates is included in other long-term
liabilities.
F-7
The Consolidated Financial Statements include the accounts of the
Company and its subsidiaries after elimination of all material intercompany
balances and transactions. Further, the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities, the
disclosure of liabilities and the reporting of revenues and expenses to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
The Company is an indirect majority owned subsidiary of MacAndrews &
Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned
indirectly through Mafco Holdings Inc. ("Mafco Holdings" and, together with
MacAndrews Holdings, "MacAndrews & Forbes") by Ronald O. Perelman.
CASH AND CASH EQUIVALENTS:
Cash equivalents (primarily investments in time deposits which have
original maturities of three months or less) are carried at cost, which
approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market value. Cost is
principally determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS:
Property, plant and equipment is recorded at cost and is depreciated
on a straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 20 to 40 years; buildings and improvements, 5 to 50
years; machinery and equipment, 3 to 17 years; and office furniture and
fixtures and capitalized software development costs, 2 to 12 years. Leasehold
improvements are amortized over their estimated useful lives or the terms of
the leases, whichever is shorter. Repairs and maintenance are charged to
operations as incurred, and expenditures for additions and improvements are
capitalized.
Included in other assets are permanent displays amounting to
approximately $107.7 and $81.8 (net of amortization) as of December 31, 1997
and 1996, respectively, which are amortized over 3 to 5 years.
INTANGIBLE ASSETS RELATED TO BUSINESSES ACQUIRED:
Intangible assets related to businesses acquired principally represent
goodwill, the majority of which is being amortized on a straight-line basis
over 40 years. The Company evaluates, when circumstances warrant, the
recoverability of its intangible assets on the basis of undiscounted cash flow
projections and through the use of various other measures, which include, among
other things, a review of its image, market share and business plans.
Accumulated amortization aggregated $104.4 and $94.2 at December 31, 1997 and
1996, respectively.
REVENUE RECOGNITION:
The Company recognizes net sales upon shipment of merchandise. Net
sales comprise gross revenues less expected returns, trade discounts and
customer allowances. Cost of sales is reduced for the estimated net realizable
value of expected returns.
INCOME TAXES:
Income taxes are calculated using the liability method in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes."
The Company is included in the affiliated group of which Mafco
Holdings is the common parent, and the Company's federal taxable income and
loss will be included in such group's consolidated tax return filed by Mafco
Holdings. The Company also may be included in certain state and local tax
returns of Mafco Holdings or its subsidiaries. For all periods presented,
federal, state and local income taxes are provided as if the Company filed its
F-8
own income tax returns. On June 24, 1992, Holdings, the Company and certain of
its subsidiaries and Mafco Holdings entered into a tax sharing agreement, which
is described in Notes 12 and 15.
PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
The Company sponsors pension and other retirement plans in various
forms covering substantially all employees who meet eligibility requirements.
For plans in the United States, the minimum amount required pursuant to the
Employee Retirement Income Security Act, as amended, is contributed annually.
Various subsidiaries outside the United States have retirement plans under
which funds are deposited with trustees or reserves are provided.
The Company accounts for benefits such as severance, disability and
health insurance provided to former employees prior to their retirement, if
estimable, on a terminal basis in accordance with the provisions of SFAS No. 5,
"Accounting for Contingencies," as amended by SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," which requires companies to accrue for
postemployment benefits when it is probable that a liability has been incurred
and the amount of such liability can be reasonably estimated, which the Company
has concluded is generally when an employee is terminated.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The
amounts charged against earnings in 1997, 1996 and 1995 were $29.7, $26.3 and
$22.3, respectively.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally translated
into United States dollars at the rates of exchange in effect at the balance
sheet date. Income and expense items are generally translated at the weighted
average exchange rates prevailing during each period presented. Gains and
losses resulting from foreign currency transactions are included in the results
of operations. Gains and losses resulting from translation of financial
statements of foreign subsidiaries and branches operating in
non-hyperinflationary economies are recorded as a component of stockholders'
deficiency. Foreign subsidiaries and branches operating in hyperinflationary
economies translate nonmonetary assets and liabilities at historical rates and
include translation adjustments in the results of operations.
Effective January 1997, the Company's operations in Mexico have been
accounted for as operating in a hyperinflationary economy. Effective July 1997,
the Company's operations in Brazil have been accounted for as is required for a
non-hyperinflationary economy. The impact of the changes in accounting for
Brazil and Mexico were not material to the Company's operating results in 1997.
SALE OF SUBSIDIARY STOCK:
The Company recognizes gains and losses on sales of subsidiary stock
in its Consolidated Statements of Operations.
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE AND CLASSES OF STOCK:
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share," which establishes new standards for computing
and presenting basic and diluted earnings per share. As required by SFAS No.
128, the Company adopted the provisions of the new standard with retroactive
effect beginning in 1997. Accordingly, all net income (loss) per common share
amounts for all prior periods have been restated to comply with SFAS No. 128.
The basic income (loss) per common share has been computed based upon
the weighted average of shares of common stock outstanding. Diluted income
(loss) per common share has been computed based upon the weighted average of
shares of common stock outstanding and shares that would have been outstanding
assuming the issuance of common stock for all dilutive potential common stock
outstanding. The Company's outstanding stock options represent the only
dilutive potential common stock outstanding. The amounts of income (loss) used
in the
F-9
calculations of diluted and basic income (loss) per common share were the same
for all years presented. The number of shares used in the calculation of
diluted income (loss) per common share increased by 412,878 shares and 131,292
shares, for 1997 and 1996, respectively, to give effect to outstanding stock
options in such years.
Basic and diluted income (loss) per common share calculations assume
that 42,500,000 shares of Common Stock (as defined below) had been outstanding
for all periods presented prior to the consummation of the Company's initial
public equity offering on March 5, 1996 (the "Revlon IPO"), in which each of
the outstanding shares of the Company's common stock in existence at that time
was converted into approximately .1215 of a share of its newly created Class A
Common Stock, par value $.01 per share (the "Class A Common Stock") (totaling
11,250,000 shares of Class A Common Stock), and approximately .3376 of a share
of its newly created Class B Common Stock, par value $.01 per share (totaling
31,250,000 shares of Class B Common Stock) (collectively with the Class A
Common Stock, the "Common Stock"), upon consummation of the Revlon IPO. In
connection with the Revlon IPO, the Company issued and sold 8,625,000 shares of
its Class A Common Stock. Such shares were included in the Company's basic
weighted average of shares outstanding as of December 31, 1997.
The Class A Common Stock and Class B Common Stock vote as a single
class on all matters, except as otherwise required by law, with each share of
Class A Common Stock entitling its holder to one vote and each share of the
Class B Common Stock entitling its holder to ten votes. All of the shares of
the Class B Common Stock are owned by REV Holdings Inc. ("REV Holdings"), an
indirect wholly owned subsidiary of Mafco Holdings. Mafco Holdings beneficially
owns shares of Common Stock having approximately 97.4% of the combined voting
power of the outstanding shares of Common Stock. The holders of the Company's
two classes of common stock are entitled to share equally in the earnings of
the Company from dividends, when and if declared by the Board.
The Company designated 1,000 shares of Preferred Stock as the Series A
Preferred Stock, of which 546 shares are outstanding and held by REV Holdings.
The holder of Series A Preferred Stock is not entitled to receive any
dividends. The Series A Preferred Stock is entitled to a liquidation preference
of $100,000 per share before any distribution is made to the holders of Common
Stock. The holder of the Series A Preferred Stock does not have any voting
rights, except as required by law. The Series A Preferred Stock may be redeemed
at any time by the Company, at its option, for $100,000 per share. However, the
terms of Products Corporation's various debt agreements currently restrict
Revlon, Inc.'s ability to effect such redemption by generally restricting the
amount of dividends or distributions Products Corporation can pay to Revlon,
Inc.
STOCK-BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages,
but does not require companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen to account
for stock-based compensation plans using the intrinsic value method prescribed
in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock (See Note 14).
DERIVATIVE FINANCIAL INSTRUMENTS:
Derivative financial instruments are utilized by the Company to reduce
interest rate and foreign exchange risks. The Company maintains a control
environment which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue derivative financial instruments
for trading purposes.
The differentials to be received or paid under interest rate contracts
designated as hedges are recognized in income over the life of the contracts as
adjustments to interest expense. Gains and losses on terminations of interest
rate contracts designated as hedges are deferred and amortized into interest
expense over the remaining life of the original contracts or until repayment of
the hedged indebtedness. Unrealized gains and losses on outstanding contracts
designated as hedges are not recognized.
F-10
Gains and losses on contracts designated to hedge identifiable foreign
currency commitments are deferred and accounted for as part of the related
foreign currency transaction. Gains and losses on all other foreign currency
contracts are included in income currently. Transaction gains and losses have
not been material.
2. EXTRAORDINARY ITEMS
The extraordinary item in 1997 resulted from the write-off in the
second quarter of 1997 of deferred financing costs associated with the early
extinguishment of borrowings under a prior credit agreement and costs of
approximately $6.3 in connection with the redemption of Products Corporation's
10 7/8% Sinking Fund Debentures due 2010 (the "Sinking Fund Debentures"). The
early extinguishment of borrowings under a prior credit agreement and the
redemption of the Sinking Fund Debentures were financed by the proceeds from a
new credit agreement which became effective in May 1997 (the "Credit
Agreement"). The extraordinary item in 1996 resulted from the write-off of
deferred financing costs associated with the early extinguishment of borrowings
with the net proceeds from the Revlon IPO and proceeds from a prior credit
agreement.
3. BUSINESS CONSOLIDATION COSTS AND OTHER, NET
Business consolidation costs and other, net in 1997 include severance
and other costs in connection with the consolidation of certain warehouse,
distribution and headquarter operations related to the Cosmetic Center Merger
(See Note 4); severance, writedowns of certain assets to their estimated net
realizable value and other related costs to rationalize factory and warehouse
operations in certain United States and International operations, partially
offset by related gains from the sales of certain factory operations of
approximately $4.3 and an approximately $12.7 settlement of a claim in the
second quarter of 1997. The business consolidation costs include $15.5 for the
termination of approximately 475 factory and administrative employees. By
December 31, 1997 the Company terminated approximately 260 employees, made cash
payments for such terminations of approximately $7.7, and made cash payments
for other business consolidation costs of approximately $5.4. As of December
31, 1997, the unpaid balance of the business consolidation accrual approximated
$11.5, which amount is included in accrued expenses and other.
4. ACQUISITIONS
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), a
wholly owned subsidiary of Products Corporation, and The Cosmetic Center, Inc.
("CCI") completed the merger of PFC with and into CCI (the "Cosmetic Center
Merger") with CCI (subsequent to the Cosmetic Center Merger, "Cosmetic Center")
surviving the Cosmetic Center Merger. In the Cosmetic Center Merger, Products
Corporation received in exchange for all of the capital stock of PFC newly
issued Class C Common Stock of Cosmetic Center constituting approximately 85.0%
of Cosmetic Center's outstanding common stock. Accordingly, the Cosmetic Center
Merger was accounted for as a reverse acquisition using the purchase method of
accounting, with PFC considered the acquiring entity for accounting purposes
even though Cosmetic Center is the surviving legal entity. The deemed purchase
consideration for the acquisition was approximately $27.9 and the goodwill
associated with the Cosmetic Center Merger was approximately $10.5. The Company
recognized a gain of $6.0 resulting from the sale of subsidiary stock pursuant
to the Cosmetic Center Merger. The results of the Company for the period ended
December 31, 1997 include the results of operations of Cosmetic Center since
the effective date of the Cosmetic Center Merger.
The following represents certain summary unaudited pro forma
information as if the Cosmetic Center Merger had occurred as of the beginning
of the respective periods presented. The summary unaudited pro forma
information below combines the actual results of the Company (including
Cosmetic Center after the Cosmetic Center Merger) and the results of CCI prior
to the Cosmetic Center Merger, excluding non-recurring business consolidation
costs directly attributable to the Cosmetic Center Merger of $4.0 in 1997, and
reflects increased amortization of goodwill, increased interest expense and
certain income tax adjustments related to the Cosmetic Center Merger that would
have been incurred had the Cosmetic Center Merger occurred at such dates. The
unaudited summary pro forma information is not necessarily indicative of the
results of operations of the Company had the Cosmetic Center Merger occurred at
such dates, nor is it necessarily indicative of future results.
F-11
Year Ended
December 31,
----------------------------------
1997 1996
----------------------------------
Net sales................................................................ $ 2,426.5 $ 2,303.3
Operating income......................................................... 215.2 194.3
Income before extraordinary items........................................ 59.4 15.5
Basic income before extraordinary items per common share................. 1.16 0.31
Diluted income before extraordinary items per common share............... 1.15 0.31
In 1997, the Company consummated other acquisitions for a combined
purchase price of $51.6, with resulting goodwill of $35.8. These acquisitions
were not significant to the Company's results of operations. Acquisitions
consummated in 1996 and 1995 were also not significant to the Company's results
of operations.
5. INVENTORIES
December 31,
--------------------------------
1997 1996
-------------- -------------
Raw materials and supplies.................................. $ 82.6 $ 76.6
Work-in-process............................................. 14.9 19.4
Finished goods.............................................. 251.8 185.1
-------------- -------------
$ 349.3 $ 281.1
============== =============
6. PREPAID EXPENSES AND OTHER
December 31,
--------------------------------
1997 1996
-------------- -------------
Prepaid expenses............................................ $ 40.9 $ 43.1
Other....................................................... 56.6 $ 31.4
-------------- -------------
$ 97.5 $ 74.5
============== =============
7. PROPERTY, PLANT AND EQUIPMENT, NET
December 31,
--------------------------------
1997 1996
-------------- -------------
Land and improvements.......................................... $ 32.5 $ 37.5
Buildings and improvements..................................... 193.2 207.6
Machinery and equipment........................................ 208.5 194.9
Office furniture and fixtures and software development costs... 85.5 59.4
Leasehold improvements......................................... 44.9 37.5
Construction-in-progress....................................... 30.6 43.7
-------------- -------------
595.2 580.6
Accumulated depreciation....................................... (217.0) (199.5)
-------------- -------------
$ 378.2 $ 381.1
============== =============
Depreciation expense for the years ended December 31, 1997, 1996 and
1995 was $42.1, $39.1 and $38.6, respectively.
F-12
8. ACCRUED EXPENSES AND OTHER
December 31,
--------------------------------
1997 1996
-------------- -------------
Advertising and promotional costs and accrual for sales returns...... $ 148.0 $ 137.4
Compensation and related benefits.................................... 76.6 95.5
Interest............................................................. 32.3 36.7
Taxes, other than federal income taxes............................... 32.1 35.0
Restructuring and business consolidation costs....................... 18.6 6.9
Net liabilities assumed from Holdings................................ 4.9 5.2
Other................................................................ 53.6 49.5
-------------- -------------
$ 366.1 $ 366.2
============== =============
9. SHORT-TERM BORROWINGS
Products Corporation maintained short-term bank lines of credit at
December 31, 1997 and 1996 aggregating approximately $82.3 and $72.7,
respectively, of which approximately $42.7 and $27.1 were outstanding at
December 31, 1997 and 1996, respectively. Interest rates on amounts borrowed
under such short-term lines at December 31, 1997 and 1996 varied from 2.5% to
12.0% and 2.2% to 12.1%, respectively. Compensating balances at December 31,
1997 and 1996 were approximately $6.2 and $7.4, respectively. Interest rates on
compensating balances at December 31, 1997 and 1996 varied from 0.4% to 8.1%
and 0.4% to 7.9%, respectively.
10. LONG-TERM DEBT
December 31,
--------------------------------
1997 1996
-------------- -------------
Working capital lines (a).......................................... $ 344.6 $ 187.2
Bank mortgage loan agreement due 2000 (b).......................... 33.3 41.7
9 1/2% Senior Notes due 1999 (c)................................... 200.0 200.0
9 3/8 % Senior Notes due 2001 (d).................................. 260.0 260.0
10 1/2% Senior Subordinated Notes due 2003 (e)..................... 555.0 555.0
10 7/8 % Sinking Fund Debentures due 2010 (f)...................... - 79.6
Advances from Holdings (g)......................................... 30.9 30.4
Other mortgages and notes payable (8.6%-13.0%)
due through 2001............................................... 1.4 7.1
Cosmetic Center facility (h)....................................... 39.0 -
-------------- -------------
1,464.2 1,361.0
Less current portion............................................... (5.5) (8.8)
-------------- -------------
$ 1,458.7 $ 1,352.2
============== =============
(a) In May 1997, Products Corporation entered into the Credit
Agreement with a syndicate of lenders, whose individual members change from
time to time. The proceeds of loans made under the Credit Agreement were used
to repay the loans outstanding under the 1996 Credit Agreement and to redeem
the Sinking Fund Debentures.
The Credit Agreement provides up to $750.0 and is comprised of five
senior secured facilities: $200.0 in two term loan facilities (the "Term Loan
Facilities"), a $300.0 multi-currency facility (the "Multi-Currency Facility"),
a $200.0 revolving acquisition facility, which may be increased to $400.0 under
certain circumstances with the consent of a majority of the lenders (the
"Acquisition Facility"), and a $50.0 special standby letter of credit facility
(the "Special LC Facility" and together with the Term Loan Facilities, the
Multi-Currency Facility and the Acquisition Facility, the "Credit Facilities").
The Multi-Currency Facility is available (i) to Products Corporation in
revolving credit loans denominated in U.S. dollars (the "Revolving Credit
Loans"), (ii) to Products Corporation in standby and commercial letters of
credit denominated in U.S. dollars (the "Operating Letters of Credit") and
(iii) to Products Corporation and certain of its international subsidiaries
designated from time to time in revolving credit
F-13
loans and bankers' acceptances denominated in U.S. dollars and other currencies
(the "Local Loans"). At December 31, 1997 Products Corporation had
approximately $200.0 outstanding under the Term Loan Facilities, $102.7
outstanding under the Multi-Currency Facility, $41.9 outstanding under the
Acquisition Facility and $34.8 of issued but undrawn letters of credit under
the Special LC Facility.
The Credit Facilities (other than loans in foreign currencies) bear
interest as of December 31, 1997 at a rate equal to, at Products Corporation's
option, either (A) the Alternate Base Rate plus 1/4 of 1% (or 1.25% for Local
Loans); or (B) the Eurodollar Rate plus 1.25%. Loans in foreign currencies bear
interest as of December 31, 1997 at a rate equal to the Eurocurrency Rate or,
in the case of Local Loans, the local lender rate, in each case plus 1.25%. The
applicable margin is reduced (or increased, but not above 3/4 of 1% for
Alternate Base Rate Loans not constituting Local Loans and 1.75% for other
loans) in the event Products Corporation attains (or fails to attain) certain
leverage ratios. Products Corporation pays the lender a commitment fee as of
December 31, 1997 of 3/8 of 1% of the unused portion of the Credit Facilities,
subject to reduction (or increase, but not above 1/2 of 1%) based on attaining
(or failing to attain) certain leverage ratios. Under the Multi-Currency
Facility, the Company pays the lenders an administrative fee of 1/4% per annum
on the aggregate principal amount of specified Local Loans. Products
Corporation also paid certain facility and other fees to the lenders and agents
upon closing of the Credit Agreement. Prior to its termination date, the
commitments under the Credit Facilities will be reduced by: (i) the net
proceeds in excess of $10.0 each year received during such year from sales of
assets by Holdings (or certain of its subsidiaries), Products Corporation or
any of its subsidiaries (and $25.0 with respect to certain specified
dispositions), subject to certain limited exceptions, (ii) certain proceeds
from the sales of collateral security granted to the lenders, (iii) the net
proceeds from the issuance by Products Corporation or any of its subsidiaries
of certain additional debt, (iv) 50% of the excess cash flow of Products
Corporation and its subsidiaries (unless certain leverage ratios are attained)
and (v) certain scheduled reductions in the case of the Term Loan Facilities,
which will commence on May 31, 1998 in the aggregate amount of $1.0 annually
over the remaining life of the Credit Agreement, and in the case of the
Acquisition Facility, which will commence on December 31, 1999 in the amount of
$25.0 and in the amounts of $60.0 during 2000, $90.0 during 2001 and $25.0
during 2002 (which reductions will be proportionately increased if the
Acquisition Facility is increased). The Credit Agreement will terminate on May
30, 2002. The weighted average interest rates on the Term Loan Facilities, the
Multi-Currency Facility and the Acquisition Facility were 7.1%, 5.4% and 5.7%
per annum, respectively, as of December 31, 1997.
The Credit Facilities, subject to certain exceptions and limitations,
are supported by guarantees from Holdings and certain of its subsidiaries,
Revlon, Inc., Products Corporation and the domestic subsidiaries of Products
Corporation. The obligations of Products Corporation under the Credit
Facilities and the obligations under the aforementioned guarantees are secured,
subject to certain limitations, by (i) mortgages on Holdings' Edison, New
Jersey and Products Corporation's Phoenix, Arizona facilities; (ii) the capital
stock of Products Corporation and its domestic subsidiaries, 66% of the capital
stock of its first tier foreign subsidiaries and the capital stock of certain
subsidiaries of Holdings; (iii) domestic intellectual property and certain
other domestic intangibles of (x) Products Corporation and its domestic
subsidiaries (other than Cosmetic Center) and (y) certain subsidiaries of
Holdings; (iv) domestic inventory and accounts receivable of (x) Products
Corporation and its domestic subsidiaries (other than Cosmetic Center) and (y)
certain subsidiaries of Holdings; and (v) the assets of certain foreign
subsidiary borrowers under the Multi-Currency Facility (to support their
borrowings only). The Credit Agreement provides that the liens on the stock and
personal property referred to above may be shared from time to time with
specified types of other obligations incurred or guaranteed by Products
Corporation, such as interest rate hedging obligations, working capital lines
and a subsidiary of Products Corporation's Yen-denominated credit agreement
(the "Yen Credit Agreement").
The Credit Agreement contains various material restrictive covenants
prohibiting Products Corporation from (i) incurring additional indebtedness or
guarantees, with certain exceptions, (ii) making dividend, tax sharing and
other payments or loans to Revlon, Inc. or other affiliates, with certain
exceptions, including among others, permitting Products Corporation to pay
dividends and make distributions to Revlon, Inc., among other things, to enable
Revlon, Inc. to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Securities and Exchange Commission ("Commission")
filing fees and other miscellaneous expenses related to being a public holding
company, and to pay dividends or make distributions in certain circumstances to
finance the purchase by Revlon, Inc. of its common stock in connection with the
delivery of such common stock to grantees under any stock option plan, provided
that the aggregate amount of such dividends and distributions taken together
with any purchases of Revlon, Inc.
F-14
common stock on the market to satisfy matching obligations under an excess
savings plan may not exceed $6.0 per annum, (iii) creating liens or other
encumbrances on their assets or revenues, granting negative pledges or selling
or transferring any of their assets except in the ordinary course of business,
all subject to certain limited exceptions, (iv) with certain exceptions,
engaging in merger or acquisition transactions, (v) prepaying indebtedness,
subject to certain limited exceptions, (vi) making investments, subject to
certain limited exceptions, and (vii) entering into transactions with
affiliates of Products Corporation other than upon terms no less favorable to
Products Corporation or its subsidiaries than it would obtain in an arms'
length transaction. In addition to the foregoing, the Credit Agreement contains
financial covenants requiring Products Corporation to maintain minimum interest
coverage and covenants which limit the leverage ratio of Products Corporation
and the amount of capital expenditures.
In January 1996, Products Corporation entered into a credit agreement
(the "1996 Credit Agreement"), which became effective upon consummation of the
Revlon IPO on March 5, 1996. The 1996 Credit Agreement included, among other
things, (i) a term to December 31, 2000 (subject to earlier termination in
certain circumstances), and (ii) credit facilities of $600.0 comprised of four
senior secured facilities: a $130.0 term loan facility, a $220.0 multi-currency
facility, a $200.0 revolving acquisition facility and a $50.0 standby letter of
credit facility. The weighted average interest rates on the term loan facility
and multi-currency facility were 8.1% and 7.0% per annum, respectively, as of
December 31, 1996.
(b) The Pacific Finance & Development Corp., a subsidiary of the
Company, is the borrower under a yen denominated credit agreement (the "Yen
Credit Agreement"), which had a principal balance of approximately Yen 4.3
billion as of December 31, 1997 (approximately $33.3 U.S. dollar equivalent as
of December 31, 1997). In accordance with the terms of the Yen Credit
Agreement, approximately Yen 539 million (approximately $5.2 U.S. dollar
equivalent) was paid in January 1996 and approximately Yen 539 million
(approximately $4.6 U.S. dollar equivalent) was paid in January 1997. In June
1997, Products Corporation amended and restated the Yen Credit Agreement to
extend the term to December 31, 2000 subject to earlier termination under
certain circumstances. In accordance with the terms of the Yen Credit
Agreement, as amended and restated, approximately Yen 539 million
(approximately $4.2 U.S. dollar equivalent as of December 31, 1997) is due in
each of March 1998, 1999 and 2000 and Yen 2.7 billion (approximately $20.7
U.S. dollar equivalent as of December 31, 1997) is due on December 31, 2000.
The applicable interest rate at December 31, 1997 under the Yen Credit
Agreement was the Euro-Yen rate plus 1.25% which approximated 1.9%. The
interest rate at December 31, 1996, was the Euro-Yen rate plus 2.5%, which
approximated 3.1%.
(c) The Senior Notes due 1999 (the "1999 Senior Notes") are senior
unsecured obligations of Products Corporation and rank pari passu in right of
payment to all existing and future Senior Debt (as defined in the indenture
relating to the 1999 Senior Notes (the "1999 Senior Note Indenture")). The 1999
Senior Notes bear interest at 9 1/2% per annum. Interest is payable on June 1
and December 1.
The 1999 Senior Notes may not be redeemed prior to maturity. Upon a
Change of Control (as defined in the 1999 Senior Note Indenture) and subject to
certain conditions, each holder of 1999 Senior Notes will have the right to
require Products Corporation to repurchase all or a portion of such holder's
1999 Senior Notes at 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase. In addition, under certain
circumstances in the event of an Asset Disposition (as defined in the 1999
Senior Note Indenture), Products Corporation will be obligated to make offers
to purchase the 1999 Senior Notes.
The 1999 Senior Note Indenture contains various restrictive covenants
that, among other things, limit (i) the issuance of additional debt and
redeemable stock by Products Corporation, (ii) the issuance of debt and
preferred stock by Products Corporation's subsidiaries, (iii) the incurrence of
liens on the assets of Products Corporation and its subsidiaries which do not
equally and ratably secure the 1999 Senior Notes, (iv) the payment of dividends
on and redemption of capital stock of Products Corporation and its subsidiaries
and the redemption of certain subordinated obligations of Products Corporation,
except that the 1999 Senior Note Indenture permits Products Corporation to pay
dividends and make distributions to Revlon, Inc., among other things, to enable
Revlon, Inc. to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Commission filing fees and other miscellaneous expenses
related to being a public holding company, and to pay dividends or make
distributions up to $5.0 per annum (subject to allowable increases) in certain
circumstances to finance the purchase by Revlon, Inc. of its Class A Common
Stock in connection with the delivery of such Class A Common Stock to grantees
under any stock option plan, (v) the sale of assets and subsidiary stock, (vi)
F-15
transactions with affiliates and (vii) consolidations, mergers and transfers of
all or substantially all of Products Corporation's assets. The 1999 Senior Note
Indenture also prohibits certain restrictions on distributions from
subsidiaries. All of these limitations and prohibitions, however, are subject
to a number of important qualifications.
(d) The 9 3/8% Senior Notes due 2001 (the "Senior Notes") are senior
unsecured obligations of Products Corporation and rank pari passu in right of
payment to all existing and future Senior Debt (as defined in the indenture
relating to the Senior Notes (the "Senior Note Indenture")). The Senior Notes
bear interest at 9 3/8% per annum. Interest is payable on April 1 and October
1.
The Senior Notes may be redeemed at the option of Products Corporation
in whole or in part at any time on or after April 1, 1998 at the redemption
prices set forth in the Senior Note Indenture, plus accrued and unpaid
interest, if any, to the date of redemption. Upon a Change of Control (as
defined in the Senior Note Indenture), Products Corporation will have the
option to redeem the Senior Notes in whole or in part at a redemption price
equal to the principal amount thereof plus the Applicable Premium (as defined
in the Senior Note Indenture), plus accrued and unpaid interest, if any, to the
date of redemption, and, subject to certain conditions, each holder of Senior
Notes will have the right to require Products Corporation to repurchase all or
a portion of such holder's Senior Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
In addition, under certain circumstances in the event of an Asset Disposition
(as defined in the Senior Note Indenture), Products Corporation will be
obligated to make offers to purchase the Senior Notes.
The Senior Note Indenture contains various restrictive covenants that,
among other things, limit (i) the issuance of additional indebtedness and
redeemable stock by Products Corporation, (ii) the issuance of indebtedness and
preferred stock by Products Corporation's subsidiaries, (iii) the incurrence of
liens on the assets of Products Corporation and its subsidiaries which do not
equally and ratably secure the Senior Notes, (iv) the payment of dividends on
capital stock of Products Corporation and its subsidiaries and the redemption
of capital stock and certain subordinated obligations of Products Corporation,
except that the Senior Note Indenture permits Products Corporation to pay
dividends and make distributions to Revlon, Inc., among other things, to enable
Revlon, Inc. to pay expenses incidental to being a public holding company,
including, among other things, professional fees such as legal and accounting,
regulatory fees such as Commission filing fees and other miscellaneous expenses
related to being a public holding company, and to pay dividends or make
distributions up to $5.0 per annum (subject to allowable increases) in certain
circumstances to finance the purchase by Revlon, Inc. of its Class A Common
Stock in connection with the delivery of such Class A Common Stock to grantees
under any stock option plan, (v) the sale of assets and subsidiary stock, (vi)
transactions with affiliates and (vii) consolidations, mergers and transfers of
all or substantially all of Products Corporation's assets. The Senior Note
Indenture also prohibits certain restrictions on distributions from
subsidiaries of Products Corporation. All of these limitations and
prohibitions, however, are subject to a number of important qualifications (See
Note 19).
(e) The Senior Subordinated Notes due 2003 (the "Senior Subordinated
Notes") are unsecured obligations of Products Corporation and are subordinated
in right of payment to all existing and future Senior Debt (as defined in the
indenture relating to the Senior Subordinated Notes (the "Senior Subordinated
Note Indenture")). The Senior Subordinated Notes bear interest at 10 1/2% per
annum. Interest is payable on February 15 and August 15.
The Senior Subordinated Notes may be redeemed at the option of
Products Corporation in whole or in part at any time on or after February 15,
1998 at the redemption prices set forth in the Senior Subordinated Note
Indenture, plus accrued and unpaid interest, if any, to the date of redemption.
Upon a Change of Control (as defined in the Senior Subordinated Note
Indenture), Products Corporation will have the option to redeem the Senior
Subordinated Notes in whole or in part at a redemption price equal to the
principal amount thereof plus the Applicable Premium (as defined in the Senior
Subordinated Note Indenture), plus accrued and unpaid interest, if any, to the
date of redemption, and, subject to certain conditions, each holder of Senior
Subordinated Notes will have the right to require Products Corporation to
repurchase all or a portion of such holder's Senior Subordinated Notes at 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of repurchase. In addition, under certain circumstances in the event
of an Asset Disposition (as defined in the Senior Subordinated Note Indenture),
Products Corporation will be obligated to make offers to purchase the Senior
Subordinated Notes.
F-16
The Senior Subordinated Note Indenture contains various restrictive
covenants that, among other things, limit (i) the issuance of additional
indebtedness and redeemable stock by Products Corporation, (ii) the issuance of
indebtedness and preferred stock by Products Corporation's subsidiaries, (iii)
the incurrence of liens on the assets of Products Corporation and its
subsidiaries to secure debt other than Senior Debt (as defined in the Senior
Subordinated Note Indenture) or debt of a subsidiary, unless the Senior
Subordinated Notes are equally and ratably secured, (iv) the payment of
dividends on capital stock of Products Corporation and its subsidiaries and the
redemption of capital stock and certain subordinated obligations of Products
Corporation, except that the Senior Subordinated Note Indenture permits
Products Corporation to pay dividends and make distributions to Revlon, Inc.,
among other things, to enable Revlon, Inc. to pay expenses incidental to being
a public holding company, including, among other things, professional fees such
as legal and accounting, regulatory fees such as Commission filing fees and
other miscellaneous expenses related to being a public holding company, and to
pay dividends or make distributions up to $5.0 per annum (subject to allowable
increases) in certain circumstances to finance the purchase by Revlon, Inc. of
its Class A Common Stock in connection with the delivery of such Class A Common
Stock to grantees under any stock option plan, (v) the sale of assets and
subsidiary stock, (vi) transactions with affiliates and (vii) consolidations,
mergers and transfers of all or substantially all of Products Corporation's
assets. The Senior Subordinated Note Indenture also prohibits certain
restrictions on distributions from subsidiaries of Products Corporation. All of
these limitations and prohibitions, however, are subject to a number of
important qualifications (See Note 19).
(f) Products Corporation redeemed all the outstanding $85.0 principal
amount of Sinking Fund Debentures during 1997 with the proceeds of borrowings
under the Credit Agreement.
(g) During 1992, Holdings made an advance of $25.0 to Products
Corporation. This advance was evidenced by a noninterest-bearing demand note
payable by Products Corporation, the payment of which was subordinated to the
obligations of Products Corporation under the credit agreement in effect at
that time. Holdings agreed not to demand payment under the note so long as any
indebtedness remained outstanding under the credit agreement in effect at that
time. In February 1995, the $13.3 in notes due to Products Corporation under
the Financing Reimbursement Agreement, referred to in Note 15, was offset
against the $25.0 note and Holdings agreed not to demand payment under the
resulting $11.7 note so long as certain indebtedness remains outstanding. In
October 1993, Products Corporation borrowed from Holdings approximately $23.2
(as adjusted and subject to further adjustment for certain expenses)
representing amounts received by Holdings from an escrow account relating to
divestiture by Holdings of certain of its predecessor businesses. In July 1995,
Products Corporation borrowed from Holdings approximately $0.8, representing
certain amounts received by Holdings relating to an arbitration arising out of
the sale by Holdings of certain of its businesses. In 1995, Products
Corporation borrowed from Holdings approximately $5.6, representing certain
amounts received by Holdings from the sale by Holdings of certain of its
businesses. In June 1996, $10.9 in notes due to Products Corporation under the
Financing Reimbursement Agreement from Holdings was offset against the $11.7
demand note (referred to above) payable by Products Corporation to Holdings. In
June 1997, Products Corporation borrowed from Holdings approximately $0.5,
representing certain amounts received by Holdings from the sale of a brand and
the inventory relating thereto. At December 31, 1997 the balance of $30.9 is
evidenced by noninterest-bearing promissory notes payable to Holdings that are
subordinated to Products Corporation's obligations under the Credit Agreement.
(h) In connection with the Cosmetic Center Merger, on April 25, 1997
Cosmetic Center entered into a loan and security agreement (the "Cosmetic
Center Facility"). Cosmetic Center paid the then outstanding balance of $14.0
on CCI's former credit agreement with borrowings under the Cosmetic Center
Facility. On April 28, 1997, Cosmetic Center used approximately $21.2 of
borrowings under the Cosmetic Center Facility to fund the cash election
associated with the Cosmetic Center Merger. The Cosmetic Center Facility, which
expires on April 30, 1999, provides up to $70.0 of revolving credit tied to a
borrowing base of 65% of Cosmetic Center's eligible inventory, as defined in
the Cosmetic Center Facility. Borrowings under the Cosmetic Center Facility are
collateralized by Cosmetic Center's accounts receivable and inventory and
proceeds therefrom. Under the Cosmetic Center Facility, Cosmetic Center may
borrow at the London Inter-Bank Offered Rate ("LIBOR") plus 2.25% or at the
lending bank's prime rate plus 0.5%. Cosmetic Center also pays a commitment fee
equal to one-quarter of one percent per annum. Interest is payable on a monthly
basis except for interest on LIBOR rate loans with a maturity of less than
three months, which is payable at the end of the LIBOR rate loan period and
interest on LIBOR rate loans with a maturity of more than three months, which
is payable every three months. If Cosmetic Center terminates the Cosmetic
Center Facility, Cosmetic Center is obligated to pay a prepayment penalty of
$0.7 if the
F-17
termination occurs before the first anniversary date of the Cosmetic Center
Facility and $0.2 if the termination occurs after the first anniversary date.
The Cosmetic Center Facility contains various restrictive covenants and
requires Cosmetic Center to maintain a minimum tangible net worth and an
interest coverage ratio. At December 31, 1997, approximately $39.0 was
outstanding under the Cosmetic Center Facility with an interest rate of 8.1%.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings at interest rates more
favorable to Products Corporation than the rate under the Credit Agreement. No
such borrowings were outstanding at December 31, 1997 or 1996.
The aggregate amounts of long-term debt maturities and sinking fund
requirements (at December 31, 1997), in the years 1998 through 2002 are $5.5,
$244.4, $26.2, $278.5 and $354.6, respectively, and $555.0 thereafter.
11. FINANCIAL INSTRUMENTS
As of December 31, 1997, Products Corporation was party to a series of
interest rate swap agreements totaling a notional amount of $225.0 in which
Products Corporation agreed to pay on such notional amount a variable interest
rate equal to the six month LIBOR to its counterparties and the counterparties
agreed to pay on such notional amounts fixed interest rates averaging
approximately 6.03% per annum. Products Corporation entered into these
agreements in 1993 and 1994 (and in the first quarter of 1996 extended a
portion equal to a notional amount of $125.0 through December 2001) to convert
the interest rate on $225.0 of fixed-rate indebtedness to a variable rate. If
Products Corporation had terminated these agreements, which Products
Corporation considered to be held for other than trading purposes, on December
31, 1997 and 1996, a loss of approximately $0.1 and $3.5, respectively would
have been realized. Certain other swap agreements were terminated in 1993 for a
gain of $14.0 that was amortized over the original lives of the agreements
through 1997. The amortization of the 1993 realized gain in 1997, 1996 and 1995
was approximately $3.1, $3.2 and $3.2, respectively. Cash flow from the
agreements outstanding at December 31, 1997 was approximately break even for
1997. In anticipation of repayment of the hedged indebtedness, Products
Corporation terminated these agreements in January 1998 and realized a gain of
approximately $1.6, which will be recognized upon repayment of the hedged
indebtedness.
Products Corporation enters into forward foreign exchange contracts
and option contracts from time to time to hedge certain cash flows denominated
in foreign currencies. At December 31, 1997 and 1996, Products Corporation had
forward foreign exchange contracts denominated in various currencies of
approximately $90.1 and $62.0, respectively, and option contracts of
approximately $94.9 outstanding at December 31, 1997. Such contracts are
entered into to hedge transactions predominantly occurring within twelve
months. If Products Corporation had terminated these contracts on December 31,
1997 and 1996, no material gain or loss would have been realized.
The fair value of the Company's long-term debt is estimated based on
the quoted market prices for the same issues or on the current rates offered to
the Company for debt of the same remaining maturities. The estimated fair value
of long-term debt at December 31, 1997 and 1996 was approximately $39.0 and
$37.3 more than the carrying value of $1,464.2 and $1,361.0, respectively.
Because considerable judgment is required in interpreting market data to
develop estimates of fair value, the estimates are not necessarily indicative
of the amounts that could be realized or would be paid in a current market
exchange. The effect of using different market assumptions or estimation
methodologies may be material to the estimated fair value amounts.
Products Corporation also maintains standby and trade letters of
credit with certain banks for various corporate purposes under which Products
Corporation is obligated, of which approximately $40.6 and $40.9 (including
amounts available under credit agreements in effect at that time) were
maintained at December 31, 1997 and 1996, respectively. Included in these
amounts are $27.7 and $26.4, respectively, in standby letters of credit which
support Products Corporation's self-insurance programs (See Note 15). The
estimated liability under such programs is accrued by Products Corporation.
The carrying amounts of cash and cash equivalents, trade receivables,
accounts payable and short-term borrowings approximate their fair values.
F-18
12. INCOME TAXES
In June 1992, Holdings, Revlon, Inc. and certain of its subsidiaries,
and Mafco Holdings entered into a tax sharing agreement (as subsequently
amended, the "Tax Sharing Agreement"), pursuant to which Mafco Holdings has
agreed to indemnify Revlon, Inc. against federal, state or local income tax
liabilities of the consolidated or combined group of which Mafco Holdings (or a
subsidiary of Mafco Holdings other than Revlon, Inc. or its subsidiaries) is
the common parent for taxable periods beginning on or after January 1, 1992
during which Revlon, Inc. or a subsidiary of Revlon, Inc. is a member of such
group. Pursuant to the Tax Sharing Agreement, for all taxable periods beginning
on or after January 1, 1992, Revlon, Inc. will pay to Holdings amounts equal to
the taxes that Revlon, Inc. would otherwise have to pay if it were to file
separate federal, state or local income tax returns (including any amounts
determined to be due as a result of a redetermination arising from an audit or
otherwise of the consolidated or combined tax liability relating to any such
period which is attributable to Revlon, Inc.), except that Revlon, Inc. will
not be entitled to carry back any losses to taxable periods ending prior to
January 1, 1992. No payments are required by Revlon, Inc. if and to the extent
that Products Corporation is prohibited under the Credit Agreement from making
tax sharing payments to Revlon, Inc. The Credit Agreement prohibits Products
Corporation from making any tax sharing payments other than in respect of state
and local income taxes. Since the payments to be made by Revlon, Inc. under the
Tax Sharing Agreement will be determined by the amount of taxes that Revlon,
Inc. would otherwise have to pay if it were to file separate federal, state or
local income tax returns, the Tax Sharing Agreement will benefit Mafco Holdings
to the extent Mafco Holdings can offset the taxable income generated by Revlon,
Inc. against losses and tax credits generated by Mafco Holdings and its other
subsidiaries. As a result of net operating tax losses and prohibitions under
the Credit Agreement there were no federal tax payments or payments in lieu of
taxes pursuant to the Tax Sharing Agreement for 1997, 1996 or 1995. The Company
has a liability of $0.9 to Holdings in respect of federal taxes for 1997 under
the Tax Sharing Agreement.
Pursuant to the asset transfer agreement referred to in Note 15,
Products Corporation assumed all tax liabilities of Holdings other than (i)
certain income tax liabilities arising prior to January 1, 1992 to the extent
such liabilities exceeded reserves on Holdings' books as of January 1, 1992 or
were not of the nature reserved for and (ii) other tax liabilities to the
extent such liabilities are related to the business and assets retained by
Holdings.
The Company's income (loss) before income taxes and the applicable
provision (benefit) for income taxes are as follows:
Year Ended December 31,
-----------------------------------------------
Income (loss) before income taxes: 1997 1996 1995
------------ ------------ ------------
Domestic................................................. $ 83.4 $ 9.8 $ (39.4)
Foreign.................................................. (15.5) 40.5 23.6
------------ ------------ ------------
$ 67.9 $ 50.3 $ (15.8)
============ ============ ============
Provision (benefit) for income taxes:
Federal.................................................. $ 0.9 $ - $ -
State and local.......................................... 1.2 1.2 3.4
Foreign.................................................. 7.3 24.3 22.0
------------ ------------ ------------
$ 9.4 $ 25.5 $ 25.4
============ ============ ============
Current.................................................. $ 30.1 $ 22.7 $ 37.1
Deferred................................................. 10.4 6.6 3.0
Benefits of operating loss carryforwards................. (32.2) (4.7) (15.4)
Carryforward utilization applied to goodwill............. 1.1 1.0 0.8
Effect of enacted change of tax rates.................... - (0.1) (0.1)
------------ ------------ ------------
$ 9.4 $ 25.5 $ 25.4
============ ============ ============
F-19
The effective tax rate on income (loss) before income taxes is
reconciled to the applicable statutory federal income tax rate as follows:
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------------ ------------ ------------
Statutory federal income tax rate.............................. 35.0 % 35.0 % (35.0) %
State and local taxes, net of federal income tax benefit....... 1.2 1.6 14.0
Foreign and U.S. tax effects attributable to
operations outside the U.S................................ 13.3 35.9 87.0
Nondeductible amortization expense............................. 4.5 5.8 15.7
U.S. loss without benefit...................................... - - 79.1
Change in domestic valuation allowance......................... (40.3) (28.8) -
Nontaxable gain on sale of subsidiary stock.................... (3.1) - -
Other.......................................................... 3.2 1.2 -
------------ ------------ ------------
Effective rate................................................. 13.8 % 50.7 % 160.8 %
============ ============ ============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1997 and 1996 are presented below:
December 31,
-----------------------------
Deferred tax assets: 1997 1996
------------ ------------
Accounts receivable, principally due to doubtful accounts................ $ 3.3 $ 3.9
Inventories.............................................................. 11.7 12.5
Net operating loss carryforwards......................................... 223.0 269.5
Restructuring and related reserves....................................... 9.4 10.2
Employee benefits........................................................ 29.0 31.7
State and local taxes.................................................... 13.1 12.8
Self-insurance........................................................... 3.8 3.6
Advertising, sales discounts and returns and coupon redemptions ......... 26.0 23.6
Other.................................................................... 26.2 23.9
------------ ------------
Total gross deferred tax assets..................................... 345.5 391.7
Less valuation allowance............................................ (299.7) (347.3)
------------ ------------
Net deferred tax assets............................................. 45.8 44.4
Deferred tax liabilities:
Plant, equipment and other assets........................................ (49.7) (43.0)
Inventories.............................................................. (0.2) (0.2)
Other.................................................................... (4.5) (7.2)
------------ ------------
Total gross deferred tax liabilities................................ (54.4) (50.4)
------------ ------------
Net deferred tax liability.......................................... $ (8.6) $ (6.0)
============ ============
The valuation allowance for deferred tax assets at January 1, 1997 was
$347.3. The valuation allowance decreased by $47.6 and $9.9 during the years
ended December 31, 1997 and 1996, respectively, and increased by $19.2 during
the year ended December 31, 1995.
During 1997, 1996 and 1995, certain of the Company's foreign
subsidiaries used operating loss carryforwards to credit the current provision
for income taxes by $4.0, $4.7 and $15.4, respectively. Certain other foreign
operations generated losses during the years 1997, 1996 and 1995 for which the
potential tax benefit was reduced by a valuation allowance. During 1997, the
Company used domestic operating loss carryforwards to credit the current
provision for income taxes by $16.2 and the deferred provision for income taxes
by $12.0. At December 31, 1997, the Company had tax loss carryforwards of
approximately $581.3 which expire in future years as follows: 1998-$21.1;
1999-$25.3; 2000-$9.3; 2001-$15.9; and beyond-$388.8; unlimited-$120.9. The
Company will receive a benefit only to the extent it has taxable income during
the carryforward periods in the applicable jurisdictions.
F-20
Appropriate United States and foreign income taxes have been accrued
on foreign earnings that have been or are expected to be remitted in the near
future. Unremitted earnings of foreign subsidiaries which have been, or are
currently intended to be, permanently reinvested in the future growth of the
business aggregated approximately $18.7 at December 31, 1997, excluding those
amounts which, if remitted in the near future, would not result in significant
additional taxes under tax statutes currently in effect.
13. POSTRETIREMENT BENEFITS
PENSIONS:
The Company uses a September 30 date for measurement of plan
obligations and assets.
The following tables reconcile the funded status of the Company's
significant pension plans with the respective amounts recognized in the
Consolidated Balance Sheets at the dates indicated:
December 31, 1997
-----------------------------------------------
Overfunded Underfunded
Actuarial present value of benefit obligation: Plans Plans Total
------------ ------------ ------------
Accumulated benefit obligation as of September 30,
1997, includes vested benefits of $304.5. .......... $ (269.3) $ (45.2) $ (314.5)
============ ============ ============
Projected benefit obligation as of September 30,
1997 for service rendered .......................... $ (309.3) $ (55.5) $ (364.8)
Fair value of plan assets as of September 30, 1997............ 305.0 1.9 306.9
------------ ------------ ------------
Plan assets less than projected benefit
obligation............................................... (4.3) (53.6) (57.9)
Amounts contributed to plans during fourth
quarter 1997............................................. 0.3 0.6 0.9
Unrecognized net (assets) obligation.......................... (1.3) 0.2 (1.1)
Unrecognized prior service cost............................... 6.5 3.2 9.7
Unrecognized net loss......................................... 0.2 12.7 12.9
Adjustment to recognize additional minimum liability.......... - (6.5) (6.5)
------------ ------------ ------------
Prepaid (accrued) pension cost...................... $ 1.4 $ (43.4) $ (42.0)
============ ============ ============
December 31, 1996
-----------------------------------------------
Overfunded Underfunded
Actuarial present value of benefit obligation: Plans Plans Total
------------ ------------ ------------
Accumulated benefit obligation as of September 30,
1996, includes vested benefits of $286.9............ $ (163.7) $ (131.4) $ (295.1)
============ ============ ============
Projected benefit obligation as of September 30,
1996 for service rendered .......................... $ (198.1) $ (141.4) $ (339.5)
Fair value of plan assets as of September 30, 1996............ 173.3 81.6 254.9
------------ ------------ ------------
Plan assets less than projected benefit
obligation............................................... (24.8) (59.8) (84.6)
Amounts contributed to plans during fourth
quarter 1996............................................. 0.2 0.5 0.7
Unrecognized net (assets) obligation.......................... (1.5) 0.2 (1.3)
Unrecognized prior service cost............................... 5.2 3.9 9.1
Unrecognized net loss......................................... 20.2 20.5 40.7
Adjustment to recognize additional minimum liability.......... - (15.3) (15.3)
------------ ------------ ------------
Accrued pension cost.......................................... $ (0.7) $ (50.0) $ (50.7)
============ ============ ============
F-21
The weighted average discount rate assumed was 7.75% for 1997 and 1996
for domestic plans. For foreign plans, the weighted average discount rate was
7.1% and 7.9% for 1997 and 1996, respectively. The rate of future compensation
increases was 5.3% for 1997 and 1996 for domestic plans and was a weighted
average of 5.3% and 5.1% for 1997 and 1996, respectively, for foreign plans.
The expected long-term rate of return on assets was 9.0% for 1997 and 1996 for
domestic plans and a weighted average of 10.1% for 1997 and 10.4% for 1996 for
foreign plans.
Plan assets consist primarily of common stock, mutual funds and fixed
income securities, which are stated at fair market value and cash equivalents
which are stated at cost, which approximates fair market value.
In accordance with the provisions of SFAS No. 87, "Employers'
Accounting for Pensions," the Company recorded an additional liability to the
extent that, for certain U.S. plans, the unfunded accumulated benefit
obligation exceeded recorded liabilities. At December 31, 1997, the additional
liability was recognized by recording an intangible asset to the extent of
unrecognized prior service costs of $1.0, a due from affiliates of $1.0 and a
charge to stockholders' deficiency of $4.5. At December 31, 1996, the
additional liability was recognized by recording an intangible asset to the
extent of unrecognized prior service costs of $1.8, a due from affiliates of
$1.1, and a charge to stockholders' deficiency of $12.4.
Net periodic pension cost for the pension plans consisted of the
following components:
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------------ ------------ ------------
Service cost-benefits earned during the period.............. $ 11.7 $ 10.6 $ 8.2
Interest cost on projected benefit obligation............... 26.0 24.3 21.7
Actual return on plan assets................................ (55.8) (30.4) (27.3)
Net amortization and deferrals.............................. 35.6 15.1 13.4
------------ ------------ ------------
17.5 19.6 16.0
Portion allocated to Holdings............................... (0.3) (0.3) (0.3)
------------ ------------ ------------
Net periodic pension cost of the Company.................... $ 17.2 $ 19.3 $ 15.7
============ ============ ============
A substantial portion of the Company's employees in the United States
are covered by defined benefit retirement plans. To the extent that aggregate
pension costs could be identified as relating to the Company or to Holdings,
such costs have been so apportioned. The components of the net periodic pension
cost applicable solely to the Company are not presented as it is not practical
to segregate such information between Holdings and the Company. In 1997 and
1996, there was a settlement loss of $0.2 and $0.3, respectively, and a
curtailment loss of $0.1 and $1.0, respectively, resulting from workforce
reductions.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company also has sponsored an unfunded retiree benefit plan, which
provides death benefits payable to beneficiaries of certain key employees and
former employees. Participation in this plan is limited to participants
enrolled as of December 31, 1993. The Company also administers a medical
insurance plan on behalf of Holdings, the cost of which has been apportioned to
Holdings. Net periodic postretirement benefit cost for each of the years ended
December 31, 1997, 1996 and 1995 was $0.7 which consists primarily of interest
on the accumulated postretirement benefit obligation. The Company's date of
measurement of Plan obligations is September 30. At December 31, 1997 and 1996,
the portion of accumulated benefit obligation attributable to retirees was $7.3
and $6.9, respectively, and to other fully eligible participants, $1.4 and
$1.3, respectively. The amount of unrecognized gain at December 31, 1997 and
1996 was $1.9 and $1.2, respectively. At December 31, 1997 and 1996, the
accrued postretirement benefit obligation recorded on the Company's
Consolidated Balance Sheets was $10.6 and $9.4, respectively. Of these amounts,
$1.9 and $2.0 was attributable to Holdings and was recorded as a receivable
from affiliates at December 31, 1997 and 1996, respectively. The weighted
average discount rate used in determining the accumulated postretirement
benefit obligation at September 30, 1997 and 1996 was 7.75%.
F-22
14. STOCK COMPENSATION PLAN
At December 31, 1997 and 1996, Revlon, Inc. had a stock-based
compensation plan (the "Plan"), which is described below. Revlon, Inc. applies
APB Opinion No. 25 and related Interpretations in accounting for the Plan.
Under APB Opinion No. 25, because the exercise price of Revlon, Inc.'s employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation cost has been recognized. Had compensation cost for
Revlon, Inc.'s Plan been determined consistent with SFAS No. 123, Revlon,
Inc.'s net income and net income per diluted share for 1997 of $43.6 and $0.85,
respectively, ($18.2 and $0.37, respectively, in 1996) would have been reduced
to the pro forma amounts of $31.3 and $0.61 for 1997, respectively, ($15.0 and
$0.30, respectively, in 1996). The fair value of each option grant is estimated
on the date of the grant using the Black-Scholes option-pricing model assuming
no dividend yield, expected volatility of approximately 39% in 1997 and 31% in
1996; weighted average risk-free interest rate of 6.54% in 1997 and 5.99% in
1996; and a seven year expected average life for the Plan's options issued in
1997 and 1996. The effects of applying SFAS No. 123 in this pro forma
disclosure are not necessarily indicative of future amounts.
Under the Plan, Revlon, Inc. may grant options to its employees for up
to an aggregate of 5.0 million shares of Class A Common Stock. Non-qualified
options granted under the Plan have a term of 10 years during which the holder
can purchase shares of Class A Common Stock at an exercise price which must be
not less than the market price on the date of the grant. Options granted in
1996 to certain executive officers will not vest as to any portion until the
third anniversary of the grant date and will thereupon become 100% vested,
except that upon termination of employment by Revlon, Inc. other than for
"cause," death or "disability" under the applicable employment agreement, such
options will vest with respect to 25% of the shares subject thereto (if the
termination is between the first and second anniversaries of the grant) and 50%
of the shares subject thereto (if the termination is between the second and
third anniversaries of the grant). Primarily all other option grants, including
options granted to certain executive officers in 1997 will vest 25% each year
beginning on the first anniversary of the date of grant and will become 100%
vested on the fourth anniversary of the date of grant. During 1997, the Company
granted to Mr. Perelman, Chairman of the Executive Committee, an option to
purchase 300,000 shares of Class A Common Stock, which will vest in full on the
fifth anniversary of the grant date. At December 31, 1997 there were 98,450
options exercisable under the Plan. At December 31, 1996 there were no options
exercisable under the Plan.
A summary of the status of the Plan as of December 31, 1997 and 1996
and changes during the years then ended is presented below:
Shares Weighted Average
(000) Exercise Price
------------- -------------
Outstanding at 2/28/96............................. - -
Granted............................................ 1,010.2 $24.37
Exercised.......................................... - -
Forfeited.......................................... (119.1) 24.00
-------------
Outstanding at 12/31/96............................ 891.1 24.37
Granted............................................ 1,485.5 32.64
Exercised.......................................... (12.1) 24.00
Forfeited.......................................... (85.1) 29.33
-------------
Outstanding at 12/31/97............................ 2,279.4 29.57
=============
The weighted average fair value of each option granted during 1997 and
1996 approximated $16.42 and $11.00, respectively.
F-23
The following table summarizes information about the Plan's options
outstanding at December 31, 1997:
Year Ended December 31, 1997
- ---------------------------------------------------------------------------
Weighted
Range Number Average Weighted
of Outstanding Years Average
Exercise Prices (000) Remaining Exercise Price
- ----------------- -------------- ------------- -------------
$24.00 to $29.88 817.9 8.17 $ 24.05
31.38 to 33.88 1,067.8 9.02 31.40
34.88 to 50.75 393.7 9.38 36.10
--------------
24.00 to 50.75 2,279.4 8.78 29.57
==============
15. RELATED PARTY TRANSACTIONS
TRANSFER AGREEMENTS
In June 1992, Revlon, Inc. and Products Corporation entered into an
asset transfer agreement with Holdings and certain of its wholly owned
subsidiaries (the "Asset Transfer Agreement"), and Revlon, Inc. and Products
Corporation entered into a real property asset transfer agreement with Holdings
(the "Real Property Transfer Agreement" and, together with the Asset Transfer
Agreement, the "Transfer Agreements"), and pursuant to such agreements, on June
24, 1992 Holdings transferred assets to Products Corporation and Products
Corporation assumed all the liabilities of Holdings, other than certain
specifically excluded assets and liabilities (the liabilities excluded are
referred to as the "Excluded Liabilities"). Holdings retained the Retained
Brands. Holdings agreed to indemnify Revlon, Inc. and Products Corporation
against losses arising from the Excluded Liabilities, and Revlon, Inc. and
Products Corporation agreed to indemnify Holdings against losses arising from
the liabilities assumed by Products Corporation. The amounts reimbursed by
Holdings to Products Corporation for the Excluded Liabilities for 1997, 1996
and 1995 were $0.4, $1.4 and $4.0, respectively.
OPERATING SERVICES AGREEMENT
In June 1992, Revlon, Inc., Products Corporation and Holdings entered
into an operating services agreement (as amended and restated, and as
subsequently amended, the "Operating Services Agreement") pursuant to which
Products Corporation manufactures, markets, distributes, warehouses and
administers, including the collection of accounts receivable, the Retained
Brands for Holdings. Pursuant to the Operating Services Agreement, Products
Corporation is reimbursed an amount equal to all of its and Revlon, Inc.'s
direct and indirect costs incurred in connection with furnishing such services,
net of the amounts collected by Products Corporation with respect to the
Retained Brands, payable quarterly. The net amounts reimbursed by Holdings to
Products Corporation for such direct and indirect costs for 1997, 1996 and 1995
were $1.4, $5.1 and $8.6, respectively. Holdings also pays Products Corporation
a fee equal to 5% of the net sales of the Retained Brands, payable quarterly.
The fees paid by Holdings to Products Corporation pursuant to the Operating
Services Agreement for services with respect to the Retained Brands for 1997,
1996 and 1995 were approximately $0.3, $0.6 and $1.7, respectively.
REIMBURSEMENT AGREEMENTS
Revlon, Inc., Products Corporation and MacAndrews Holdings have
entered into reimbursement agreements (the "Reimbursement Agreements") pursuant
to which (i) MacAndrews Holdings is obligated to provide (directly or through
affiliates) certain professional and administrative services, including
employees, to Revlon, Inc. and its subsidiaries, including Products
Corporation, and purchase services from third party providers, such as
insurance and legal and accounting services, on behalf of Revlon, Inc. and its
subsidiaries, including Products Corporation, to the extent requested by
Products Corporation, and (ii) Products Corporation is obligated to provide
certain professional and administrative services, including employees, to
MacAndrews Holdings (and its affiliates) and purchase services from third party
providers, such as insurance and legal and accounting services, on behalf of
MacAndrews Holdings (and its affiliates) to the extent requested by MacAndrews
Holdings, provided that in each case the performance of such
F-24
services does not cause an unreasonable burden to MacAndrews Holdings or
Products Corporation, as the case may be. The Company reimburses MacAndrews
Holdings for the allocable costs of the services purchased for or provided to
the Company and its subsidiaries and for reasonable out-of-pocket expenses
incurred in connection with the provision of such services. MacAndrews Holdings
(or such affiliates) reimburses the Company for the allocable costs of the
services purchased for or provided to MacAndrews Holdings (or such affiliates)
and for the reasonable out-of-pocket expenses incurred in connection with the
purchase or provision of such services. In addition, in connection with certain
insurance coverage provided by MacAndrews Holdings, Products Corporation
obtained letters of credit under the Special LC Facility (which aggregated
approximately $27.7 as of December 31, 1997) to support certain self-funded
risks of MacAndrews Holdings and its affiliates, including the Company,
associated with such insurance coverage. The costs of such letters of credit
are allocated among, and paid by, the affiliates of MacAndrews Holdings,
including the Company, which participate in the insurance coverage to which the
letters of credit relate. The Company expects that these self-funded risks will
be paid in the ordinary course and, therefore, it is unlikely that such letters
of credit will be drawn upon. MacAndrews Holdings has agreed to indemnify
Products Corporation to the extent amounts are drawn under any of such letters
of credit with respect to claims for which neither Revlon, Inc. nor Products
Corporation is responsible. The net amounts reimbursed by MacAndrews Holdings
to the Company for the services provided under the Reimbursement Agreements for
1997, 1996 and 1995 were $4.0, $2.2 and $3.0, respectively. Each of Revlon,
Inc. and Products Corporation, on the one hand, and MacAndrews Holdings, on the
other, has agreed to indemnify the other party for losses arising out of the
provision of services by it under the Reimbursement Agreements other than
losses resulting from its willful misconduct or gross negligence. The
Reimbursement Agreements may be terminated by either party on 90 days' notice.
The Company does not intend to request services under the Reimbursement
Agreements unless their costs would be at least as favorable to the Company as
could be obtained from unaffiliated third parties.
TAX SHARING AGREEMENT
Holdings, Revlon, Inc., Products Corporation and certain of its
subsidiaries and Mafco Holdings are parties to the Tax Sharing Agreement, which
is described in Note 12. Since payments to be made under the Tax Sharing
Agreement will be determined by the amount of taxes that Revlon, Inc. would
otherwise have to pay if it were to file separate federal, state or local
income tax returns, the Tax Sharing Agreement will benefit Mafco Holdings to
the extent Mafco Holdings can offset the taxable income generated by Revlon,
Inc. against losses and tax credits generated by Mafco Holdings and its other
subsidiaries.
F-25
FINANCING REIMBURSEMENT AGREEMENT
Holdings and Products Corporation entered into a financing
reimbursement agreement (the "Financing Reimbursement Agreement") in 1992,
which expired on June 30, 1996, pursuant to which Holdings agreed to reimburse
Products Corporation for Holdings' allocable portion of (i) the debt issuance
cost and advisory fees related to the capital restructuring of Holdings, and
(ii) interest expense attributable to the higher cost of funds paid by Products
Corporation under the credit agreement in effect at that time as a result of
additional borrowings for the benefit of Holdings in connection with the
assumption of certain liabilities by Products Corporation under the Asset
Transfer Agreement and the repurchase of certain subordinated notes from
affiliates. The amount of interest to be reimbursed by Holdings for 1994 was
approximately $0.8 and was evidenced by noninterest-bearing promissory notes
originally due and payable on June 30, 1995. In February 1995, the $13.3 in
notes then payable by Holdings to Products Corporation under the Financing
Reimbursement Agreement was offset against a $25.0 note payable by Products
Corporation to Holdings and Holdings agreed not to demand payment under the
resulting $11.7 note payable by Products Corporation so long as any
indebtedness remained outstanding under the credit agreement then in effect. In
February 1995, the Financing Reimbursement Agreement was amended and extended
to provide that Holdings would reimburse Products Corporation for a portion of
the debt issuance costs and advisory fees related to the credit agreement then
in effect (which portion was approximately $4.7 and was evidenced by a
noninterest-bearing promissory note payable on June 30, 1996) and 1 1/2 % per
annum of the average balance outstanding under the credit agreement then in
effect and the average balance outstanding under working capital borrowings
from affiliates through June 30, 1996 and such amounts were evidenced by a
noninterest-bearing promissory note payable on June 30, 1996. The amount of
interest to be reimbursed by Holdings for 1995 was approximately $4.2. As of
December 31, 1995, the aggregate amount of notes payable by Holdings under the
Financing Reimbursement Agreement was $8.9. In June 1996, $10.9 in notes due to
Products Corporation, which included $2.0 of interest reimbursement from
Holdings in 1996, under the Financing Reimbursement Agreement was offset
against an $11.7 demand note payable by Products Corporation to Holdings.
REGISTRATION RIGHTS AGREEMENT
Prior to the consummation of the Revlon IPO, Revlon, Inc. and Revlon
Worldwide Corporation (subsequently merged into REV Holdings), the then direct
parent of Revlon, Inc., entered into the Registration Rights Agreement pursuant
to which REV Holdings and certain transferees of Revlon, Inc.'s Common Stock
held by REV Holdings (the "Holders") have the right to require Revlon, Inc. to
register all or part of the Class A Common Stock owned by such Holders and the
Class A Common Stock issuable upon conversion of Revlon, Inc.'s Class B Common
Stock owned by such Holders under the Securities Act (a "Demand Registration");
provided that Revlon, Inc. may postpone giving effect to a Demand Registration
up to a period of 30 days if Revlon, Inc. believes such registration might have
a material adverse effect on any plan or proposal by Revlon, Inc. with respect
to any financing, acquisition, recapitalization, reorganization or other
material transaction, or if Revlon, Inc. is in possession of material
non-public information that, if publicly disclosed, could result in a material
disruption of a major corporate development or transaction then pending or in
progress or in other material adverse consequences to Revlon, Inc. In addition,
the Holders have the right to participate in registrations by Revlon, Inc. of
its Class A Common Stock (a "Piggyback Registration"). The Holders will pay all
out-of-pocket expenses incurred in connection with any Demand Registration.
Revlon, Inc. will pay any expenses incurred in connection with a Piggyback
Registration, except for underwriting discounts, commissions and expenses
attributable to the shares of Class A Common Stock sold by such Holders.
OTHER
Pursuant to a lease dated April 2, 1993 (the "Edison Lease"), Holdings
leases to Products Corporation the Edison research and development facility for
a term of up to 10 years with an annual rent, of $1.4 and certain shared
operating expenses payable by Products Corporation which, together with the
annual rent are not to exceed $2.0 per year. Pursuant to an assumption
agreement dated February 18, 1993, Holdings agreed to assume all costs and
expenses of the ownership and operation of the Edison facility as of January 1,
1993, other than (i) the operating expenses for which Products Corporation is
responsible under the Edison Lease and (ii) environmental claims and compliance
costs relating to matters which occurred prior to January 1, 1993 up to an
amount not to exceed $8.0 (the amount of such claims and costs for which
Products Corporation is responsible, the "Environmental Limit"). In addition,
pursuant to such assumption agreement, Products Corporation agreed to indemnify
Holdings for environmental claims and compliance costs relating to matters
which occurred prior to January 1, 1993 up to an amount not to exceed the
F-26
Environmental Limit and Holdings agreed to indemnify Products Corporation for
environmental claims and compliance costs relating to matters which occurred
prior to January 1, 1993 in excess of the Environmental Limit and all such
claims and costs relating to matters occurring on or after January 1, 1993.
Pursuant to an occupancy agreement, during 1997, 1996 and 1995 Products
Corporation rented from Holdings a portion of the administration building
located at the Edison facility and space for a retail store of Products
Corporation. Products Corporation provides certain administrative services,
including accounting, for Holdings with respect to the Edison facility pursuant
to which Products Corporation pays on behalf of Holdings costs associated with
the Edison facility and is reimbursed by Holdings for such costs, less the
amount owed by Products Corporation to Holdings pursuant to the Edison Lease
and the occupancy agreement. The net amount reimbursed by Holdings to Products
Corporation for such costs with respect to the Edison facility for 1997, 1996
and 1995 was $0.7, $1.1 and $1.2, respectively.
During 1997, a subsidiary of Products Corporation sold an inactive
subsidiary to an affiliate for approximately $1.0.
Effective July 1, 1997, Holdings contributed to Products Corporation
substantially all of the assets and liabilities of the Bill Blass business not
already owned by Products Corporation. The contributed assets approximated the
contributed liabilities and were accounted for at historical cost in a manner
similar to that of a pooling of interests and, accordingly, prior period
financial statements were restated as if the contribution took place prior to
the beginning of the earliest period presented.
In the fourth quarter of 1996, a subsidiary of Products Corporation
purchased an inactive subsidiary from an affiliate for net cash consideration
of approximately $3.0 in a series of transactions in which the Company expects
to realize foreign tax benefits in future years.
Effective January 1, 1996, Products Corporation acquired from Holdings
substantially all of the assets of Tarlow in consideration for the assumption
of substantially all of the liabilities and obligations of Tarlow. Net
liabilities assumed were approximately $3.4. The assets acquired and
liabilities assumed were accounted for at historical cost in a manner similar
to that of a pooling of interests and, accordingly, prior period financial
statements have been restated as if the acquisition took place at the beginning
of the earliest period. Products Corporation paid $4.1 to Holdings which was
accounted for as an increase in capital deficiency. A nationally recognized
investment banking firm rendered its written opinion that the terms of the
purchase are fair from a financial standpoint to Products Corporation.
Products Corporation leases certain facilities to MacAndrews & Forbes
or its affiliates pursuant to occupancy agreements and leases. These included
space at Products Corporation's New York headquarters and at Products
Corporation's offices in London during 1997, 1996 and 1995; in Tokyo during
1996 and 1995 and in Hong Kong during 1997. The rent paid by MacAndrews &
Forbes or its affiliates to Products Corporation for 1997, 1996 and 1995 was
$3.8, $4.6 and $5.3, respectively.
In July 1995, Products Corporation borrowed from Holdings
approximately $0.8, representing certain amounts received by Holdings relating
to an arbitration arising out of the sale by Holdings of certain of its
businesses. In 1995, Products Corporation borrowed from Holdings approximately
$5.6, representing certain amounts received by Holdings from the sale by
Holdings of certain of its businesses. In June 1997, Products Corporation
borrowed from Holdings approximately $0.5, representing certain amounts
received by Holdings from the sale of a brand and inventory relating thereto.
Such amounts are evidenced by noninterest-bearing promissory notes. Holdings
agreed not to demand payment under such notes so long as any indebtedness
remains outstanding under the Credit Agreement.
The Credit Agreement is supported by, among other things, guarantees
from Holdings and certain of its subsidiaries. The obligations under such
guarantees are secured by, among other things, (i) the capital stock and
certain assets of certain subsidiaries of Holdings and (ii) a mortgage on
Holdings' Edison, New Jersey facility.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings. No such borrowings were
outstanding as of December 31, 1997, 1996 or 1995. The interest rates for such
borrowings are more favorable to Products Corporation than interest rates under
the Credit Agreement and, for borrowings occurring prior to the execution of
the Credit Agreement, the credit facility in effect at the time of such
F-27
borrowing. The amount of interest paid by Products Corporation for such
borrowings for 1997, 1996 and 1995 was $0.6, $0.5 and $1.2, respectively.
In November 1993, Products Corporation assigned to Holdings a lease
for warehouse space in New Jersey (the "N.J. Warehouse") between Products
Corporation and a trust established for the benefit of certain family members
of the Chairman of the Executive Committee. The N.J. Warehouse had become
vacant as a result of divestitures and restructuring of Products Corporation.
The lease has annual lease payments of approximately $2.3 and terminates on
June 30, 2005. In consideration for Holdings assuming all liabilities and
obligations under the lease, Products Corporation paid Holdings $7.5 (for which
a liability was previously recorded) in three installments of $2.5 each in
January 1994, January 1995 and January 1996. A nationally recognized investment
banking firm rendered its written opinion that the terms of the lease transfer
were fair from a financial standpoint to Products Corporation. During 1996 and
1995, Products Corporation paid certain costs associated with the N.J.
Warehouse on behalf of Holdings and was reimbursed by Holdings for such
amounts. The amounts reimbursed by Holdings to the Company for such costs were
$0.2 and $0.2 for 1996 and 1995, respectively.
During 1997, 1996 and 1995, Products Corporation used an airplane
owned by a corporation of which Messrs. Gittis, Drapkin and, during 1995 and
1996, Levin were the sole stockholders, for which Products Corporation paid
approximately $0.2, $0.2 and $0.4 for 1997, 1996 and 1995, respectively.
During 1997, Products Corporation purchased products from an
affiliate, for which it paid approximately $0.9.
During 1997, Products Corporation provided licensing services to an
affiliate, for which Products Corporation has been paid approximately $0.7.
An affiliate of the Company assembles lipstick cases for Products
Corporation. Products Corporation paid approximately $0.9, $1.0 and $1.0 for
such services for 1997, 1996 and 1995, respectively.
In January 1995, the Company agreed to license certain of its
trademarks to a former affiliate of MacAndrews & Forbes. The amount paid to the
Company pursuant to such license for 1995 was less than $0.1. The affiliate
purchased $1.1 of wigs from the Company during 1995. The Company terminated the
license with the affiliate during 1995.
16. COMMITMENTS AND CONTINGENCIES
The Company currently leases manufacturing, executive, including
research and development, and sales facilities and various types of equipment
under operating lease agreements. Rental expense was $57.3, $51.7 and $49.3 for
the years ended December 31, 1997, 1996 and 1995, respectively. Minimum rental
commitments under all noncancelable leases, including those pertaining to idled
facilities and the Edison research and development facility, with remaining
lease terms in excess of one year from December 31, 1997 aggregated $201.1;
such commitments for each of the five years subsequent to December 31, 1997 are
$43.2, $39.8, $34.6, $29.3 and $26.7, respectively. Such amounts exclude the
minimum rentals to be received in the future under noncancelable subleases of
$4.2.
The Company and its subsidiaries are defendants in litigation and
proceedings involving various matters. In the opinion of the Company's
management, based upon advice of its counsel handling such litigation and
proceedings, adverse outcomes, if any, will not result in a material effect on
the Company's consolidated financial condition or results of operations.
F-28
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations:
Year Ended December 31, 1997
--------------------------------------------------------------
1st 2nd 3rd 4th
Quarter (b) Quarter (b) Quarter Quarter
------------ ------------- ------------ -------------
Net sales........................................ $ 492.9 $ 572.4 $ 623.5 $ 702.1
Gross profit..................................... 326.6 370.5 406.4 455.3
(Loss) income before extraordinary item.......... (25.4) 9.4 33.1 41.4
Net (loss) income ............................... (25.4) (5.5)(a) 33.1 41.4
Basic (loss) income per common share:
(Loss) income before extraordinary item .. $ (0.50) $ 0.18 $ 0.65 $ 0.81
Extraordinary item........................ - (0.29) - -
------------ ------------- ------------ -------------
Net (loss) income per common share........ $ (0.50) $ (0.11) $ 0.65 $ 0.81
============ ============= ============ =============
Diluted (loss) income per common share:
(Loss) income before extraordinary item... $ (0.50) $ 0.18 $ 0.64 $ 0.80
Extraordinary item........................ - (0.29) - -
------------ ------------- ------------ -------------
Net (loss) income per common share........ $ (0.50) $ (0.11) $ 0.64 $ 0.80
============ ============= ============ =============
Year Ended December 31, 1996 (b)
--------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------ ------------- ------------ -------------
Net sales........................................ $ 464.8 $ 518.3 $ 571.7 $ 614.7
Gross profit..................................... 311.7 347.5 378.4 405.4
(Loss) income before extraordinary item.......... (29.0) 1.5 21.0 31.3
Net (loss) income ............................... (35.6)(c) 1.5 21.0 31.3
Basic (loss) income per common share:
(Loss) income before extraordinary item .. $ (0.64) $ 0.03 $ 0.41 $ 0.61
Extraordinary item........................ (0.14) - - -
------------ ------------- ------------ -------------
Net (loss) income per common share........ $ (0.78) $ 0.03 $ 0.41 $ 0.61
============ ============= ============ =============
Diluted (loss) income per common share:
(Loss) income before extraordinary item... $ (0.64) $ 0.03 $ 0.41 $ 0.61
Extraordinary item........................ (0.14) - - -
------------ ------------- ------------ -------------
Net (loss) income per common share........ $ (0.78) $ 0.03 $ 0.41 $ 0.61
============ ============= ============ =============
(a) Includes the extraordinary charges of $14.9 resulting from the
write-off in the second quarter of 1997 of deferred financing costs associated
with the early extinguishment of borrowings and the redemption of Products
Corporation's Sinking Fund Debentures.
(b) Effective July 1, 1997, Holdings contributed to Products
Corporation substantially all of the assets and liabilities of the Bill Blass
business not already owned by Products Corporation. The contributed assets
approximated the contributed liabilities and were accounted for at historical
cost in a manner similar to that of a pooling of interests
F-29
and, accordingly, prior period financial statements were restated as if the
contribution took place prior to the beginning of the earliest period
presented.
(c) Includes an extraordinary charge of $6.6 resulting from the
write-off of deferred financing costs associated with the early extinguishment
of borrowings.
18. GEOGRAPHIC SEGMENTS
The Company manages its business on the basis of one reportable
segment. See Note 1 for a brief description of the Company's business. As of
December 31, 1997, the Company had operations established in 26 countries
outside of the United States and its products are sold throughout the world.
The Company is exposed to the risk of changes in social, political and economic
conditions inherent in foreign operations and the Company's results of
operations and the value of its foreign assets are affected by fluctuations in
foreign currency exchange rates. The Company's operations in Brazil have
accounted for approximately 5.5%, 6.1% and 6.1% of the Company's net sales for
1997, 1996 and 1995, respectively. Net sales by geographic area are presented
by attributing revenues from external customers on the basis of where the
products are sold. During 1996, one customer and its affiliates accounted for
approximately 10.1% of the Company's consolidated net sales. This data is
presented in accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which the Company has retroactively
adopted for all periods presented.
GEOGRAPHIC AREAS Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
NET SALES:
United States........................................... $ 1,452.5 $ 1,259.7 $ 1,115.4
International........................................... 938.4 909.8 824.6
--------------- --------------- --------------
$ 2,390.9 $ 2,169.5 $ 1,940.0
=============== =============== ==============
As of December 31,
-----------------------------------
Long-lived assets: 1997 1996
--------------- ---------------
United States........................................... $ 570.6 $ 555.0
International........................................... 280.5 245.9
--------------- ---------------
$ 851.1 $ 800.9
=============== ===============
Year Ended December 31,
--------------------------------------------------------
CLASSES OF SIMILAR PRODUCTS: 1997 1996 1995
--------------- --------------- --------------
Net sales:
Cosmetics, skin care and fragrances..................... $ 1,408.3 $ 1,262.0 $ 1,080.5
Personal care and professional.......................... 982.6 907.5 859.5
--------------- --------------- --------------
$ 2,390.9 $ 2,169.5 $ 1,940.0
=============== =============== ==============
19. SUBSEQUENT EVENT (UNAUDITED)
On February 2, 1998, an affiliate of the Company, Revlon Escrow Corp.,
issued notes in the aggregate amount of $900.0 (the "Notes"). The net proceeds
of $880 (net of discounts, fees and expenses) were deposited with an escrow
agent and substantially all of such proceeds will be used to fund the
redemptions by Products Corporation of its Senior Subordinated Notes and the
Senior Notes, including prepayment premiums for early redemptions. Products
Corporation will assume the obligations of Revlon Escrow Corp. under the Notes
upon consummation of such redemptions. In connection with the early redemptions
of the Senior Notes and Senior Subordinated Notes, the Company expects to
record an extraordinary loss of up to $52 in 1998.
F-30
SCHEDULE II
REVLON, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)
Balance at Charged to Balance
beginning cost and Other at end
of year expenses deductions of year
------------- ------------ ------------- -----------
YEAR ENDED DECEMBER 31, 1997:
Applied against asset accounts:
Allowance for doubtful accounts............................. $ 12.9 $ 3.6 $ (4.5)(1) $ 12.0
Allowance for volume and early payment
discounts................................................ $ 12.0 $ 46.8 $ (44.9)(2) $ 13.9
YEAR ENDED DECEMBER 31, 1996:
Applied against asset accounts:
Allowance for doubtful accounts............................. $ 13.6 $ 7.1 $ (7.8)(1) $ 12.9
Allowance for volume and early payment
discounts................................................ $ 10.1 $ 43.8 $ (41.9)(2) $ 12.0
YEAR ENDED DECEMBER 31, 1995:
Applied against asset accounts:
Allowance for doubtful accounts............................. $ 11.1 $ 5.5 $ (3.0)(1) $ 13.6
Allowance for volume and early payment
discounts................................................ $ 10.6 $ 33.3 $ (33.8)(2) $ 10.1
- ----------------------
Notes:
(1) Doubtful accounts written off, less recoveries, reclassifications and
foreign currency translation adjustments.
(2) Discounts taken, reclassifications and foreign currency translation
adjustments.
F-31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Revlon, Inc.
(Registrant)
By: /s/ George Fellows By: /s/ Frank J. Gehrmann By: /s/ Lawrence E. Kreider
--------------------------- ---------------------------------------- ----------------------------------------
George Fellows Frank J. Gehrmann Lawrence E. Kreider
President, Executive Vice Senior Vice President,
Chief Executive Officer President and Controller and
and Director Chief Financial Officer Chief Accounting Officer
Dated: March 4, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant on
March 4, 1998 and in the capacities indicated.
Signature Title
* Chairman of the Executive Committee of the Board and
- ---------------------------------- Director
(Ronald O. Perelman)
* Chairman of the Board and Director
- -----------------------------------
(Jerry W. Levin)
/s/ George Fellows President, Chief Executive Officer and Director
- -----------------------------------
(George Fellows)
* Senior Executive Vice President and Director
- -----------------------------------
(William J. Fox)
* Director
- -----------------------------------
(Donald G. Drapkin)
* Director
- -----------------------------------
(Howard Gittis)
* Director
- -----------------------------------
(Edward J. Landau)
* Director
- -----------------------------------
(Vernon E. Jordan)
* Director
- -----------------------------------
(Henry A. Kissinger)
* Director
- -----------------------------------
(Meyer Feldberg)
* Director
- -----------------------------------
(Linda G. Robinson)
* Director
- -----------------------------------
(Terry Semel)
* Director
- -----------------------------------
(Martha Stewart)
* Director
- -----------------------------------
(Morton L. Janklow)
* Robert K. Kretzman, by signing his name hereto, does hereby sign this report
on behalf of the directors of the registrant after whose typed names asterisks
appear, pursuant to powers of attorney duly executed by such directors and
filed with the Securities and Exchange Commission.
By: /s/ Robert K. Kretzman
Robert K. Kretzman
Attorney-in-fact
Exhibit 4.8
FIRST AMENDMENT
FIRST AMENDMENT, dated as of January 29, 1998 (this
"Amendment"), to the Credit Agreement, dated as of May 30, 1997 (the "Credit
Agreement"), among Revlon Consumer Products Corporation (the "Company"), the
Borrowing Subsidiaries from time to time parties thereto, the financial
institutions from time to time parties thereto (the "Lenders"), the Co-Agents
named therein, Citibank, N.A., as Documentation Agent, Lehman Commercial Paper
Inc., as Syndication Agent, and The Chase Manhattan Bank, as Administrative
Agent.
W I T N E S S E T H :
WHEREAS, the Company has requested that the Lenders and the
Agents amend certain provisions of the Credit Agreement;
WHEREAS, the Lenders and the Agents are willing to amend such
provisions upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the Company, the Lenders and the Agents
hereby agree as follows:
1. Definitions. (a) General. All terms defined in the
Credit Agreement shall have such defined meanings when used herein unless
otherwise defined herein.
(b) Amendment of Definitions. The definition of the term
"Net Proceeds Event" is hereby amended by deleting therefrom the following: "or
(Y)" and substituting in lieu thereof the following: ", (Y) the sales (or cash
received) described in subsections 14.6(i), (j) and (k) and (Z)".
(c) Addition of Definitions. The following defined terms
shall be added to Section 1.1 of the Credit Agreement in appropriate
alphabetical order:
"'Barclays Receivables Facility' means, the Invoice
Discounting Facility, dated as of January 29, 1998 between
RIC and Barclays Bank PLC, as amended, supplemented or
otherwise modified from time to time;
'German Distribution Option' shall have the meaning
assigned to such term in subsection 14.6(j);
'German Distribution Shares' shall have the meaning
assigned to such term in subsection 14.6(j);
'German Distribution Subsidiary' means Fondolo
Vermogensverwaltungs GmbH, a company organized under the laws
of Germany;
2
'RIC' shall mean Revlon International Corporation,
a Delaware corporation;"
2. Amendment to Subsection 13.11. (a) Subsection 13.11(b) of
the Credit Agreement is hereby amended by inserting immediately after the word
"Company" in the eighth line thereof the following: "(other than the German
Distribution Subsidiary, so long as the sale contemplated by subsection 14.6(j)
shall have occurred within 30 days of the acquisition by RIC of ownership of
the German Distribution Subsidiary)".
(b) Subsection 13.11(c) of the Credit Agreement is hereby
amended by inserting immediately after the word "Company" the first time it
appears in the eighth line thereof the following: "(other than the German
Distribution Subsidiary, so long as the sale contemplated by subsection 14.6(j)
shall have occurred within 30 days of the acquisition by RIC of ownership of
the German Distribution Subsidiary)".
3. Amendment to Subsection 13.13(b). Subsection 13.13(b) of
the Credit Agreement is hereby amended by inserting immediately after the words
"Security Documents" in the last line thereof but prior to the period the
following: "; provided that RIC shall not be required to grant to the
Administrative Agent a security interest in (i) the German Distribution Option
and (ii) the German Distribution Shares for a period of up to six months
following the day on which RIC shall exercise the German Distribution Option".
4. Amendment to Subsection 14.6. Subsection 14.6 of the
Credit Agreement is hereby amended by (a) deleting the word "and" at the end of
clause (g) thereof, (b) deleting the period at the end of clause (h) and
substituting in lieu thereof the following: "; and" and (c) adding at the end
thereof the following new clauses (i) through (k):
"(i) sales from time to time by RIC to Barclays Bank
PLC of all or any portion of its accounts receivable pursuant
to the Barclays Receivables Facility; provided that (i) the
aggregate principal amount of the Barclays Receivables
Facility shall not exceed (pound)7,500,000 and (ii) there
shall be no recourse to RIC (other than (x) to its accounts
receivable in connection with such sales, (y) in connection
with the payment of interest by RIC thereunder or (z) as a
result of a failure by RIC to deliver a written confirmation
of the goods subject to such receivables or a material
misstatement by RIC in any such confirmation) or to any other
Person;
(j) the sale by RIC to European Cosmetic Group
S.a.r.l. or its Affiliate Marbert AG of all of the capital
stock of the German Distribution Subsidiary for consideration
of (i) DM 50,000 (representing the amount of the initial
capitalization of the German Distribution Subsidiary by RIC)
and (ii) a five-year option (the "German Distribution
Option") to (A) purchase up to 435,000 shares of common stock
of Marbert AG (par value DM 5.00) (the "German Distribution
Shares") at a purchase price of DM 45 per share or (B)
receive cash in an amount equal to the difference between the
exercise price of the German Distribution Option and the fair
market value of the German
3
Distribution Shares at the time of exercise of the German
Distribution Option; and
(k) the sale by RIC at fair market value of the
German Distribution Shares."
5. Amendment to Subsection 14.8. Subsection 14.8 of the
Credit Agreement is hereby amended by (a) deleting the word "and" at the end of
clause (g) thereof, (b) deleting the period at the end of clause (h) and
substituting in lieu thereof the following: "; and" and (c) adding at the end
thereof the following new clause (i):
"(i) RIC may acquire and hold (x) the German
Distribution Option in connection with the sale contemplated
by subsection 14.6(j) and (y) the German Distribution Shares
in connection with the exercise of the German Distribution
Option in accordance with its terms."
6. Amendment to Subsection 17.2(b). Subsection 17.2(b) of the
Credit Agreement is hereby amended by (a) deleting the word "or" the first time
it appears in the ninth line and substituting in lieu thereof a comma and (b)
adding at the end thereof but prior to the period the following: "or (vi) so
long as no Default or Event of Default shall have occurred and is continuing,
the sale by RIC at fair market value of the German Distribution Shares (to the
extent the Administrative Agent shall at the time of such sale have a security
interest therein)".
7. Conditions to Effectiveness. This Amendment shall become
effective on and as of the date that the Administrative Agent shall have
received (i) counterparts of this Amendment duly executed by the Company and
the Required Lenders, and duly acknowledged and consented to by each Guarantor,
Grantor and Pledgor and (ii) copies of the Barclays Receivables Facility in
form and substance satisfactory to the Administrative Agent.
8. Representations and Warranties. The Company, as of the
date hereof and after giving effect to the amendment contained herein, hereby
confirms, reaffirms and restates the representations and warranties made by it
in Section 11 of the Credit Agreement and otherwise in the Credit Documents to
which it is a party; provided that each reference to the Credit Agreement
therein shall be deemed to be a reference to the Credit Agreement after giving
effect to this Amendment.
9. Reference to and Effect on the Credit Documents; Limited
Effect. On and after the date hereof and the satisfaction of the conditions
contained in Section 7 of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Credit
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby. The execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender or the Agents under any of
the Credit Documents, nor constitute a
4
waiver of any provisions of any of the Credit Documents. Except as expressly
amended herein, all of the provisions and covenants of the Credit Agreement and
the other Credit Documents are and shall continue to remain in full force and
effect in accordance with the terms thereof and are hereby in all respects
ratified and confirmed.
10. Counterparts. This Amendment may be executed by one or
more of the parties hereto in any number of separate counterparts (which may
include counterparts delivered by facsimile transmission) and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Any executed counterpart delivered by facsimile transmission shall
be effective as for all purposes hereof.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
5
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
REVLON CONSUMER PRODUCTS
CORPORATION
By: /s/ Steven Berns
------------------------------------------
Name: Steven Berns
Title: Vice President & Treasurer
DEUTSCHE REVLON GMBH & CO. KG
REVLON INTERNATIONAL CORPORATION
(UK Branch)
REVLON MANUFACTURING LIMITED
(Australia Branch)
REVLON MANUFACTURING (UK)
LIMITED
EUROPEENNE DE PRODUITS DE
BEAUTE
REVLON NEDERLAND B.V.
REVLON K.K.
REVLON CANADA, INC., as Local Subsidiaries
By: /s/ Steven Berns
------------------------------------------
Name: Steven Berns
Title: Vice President & Treasurer
REVLON SA
REVLON-REALISTIC PROFESSIONAL
PRODUCTS LTD.
REVLON PROFESSIONAL LIMITED
REVLON (HONG KONG) LIMITED
EUROPEAN BEAUTY PRODUCTS S.P.A., as
Local Subsidiaries
By: /s/ Robert K. Kretzman
------------------------------------------
Name: Robert K. Kretzman
Title: Authorized Signatory
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By: /s/ Neil R. Boylan
------------------------------------------
Name: Neil R. Boylan
Title: Vice President
6
CHASE SECURITIES INC., as Arranger
By: /s/ Douglas V. Traver
-----------------------------------------
Name: Douglas V. Traver
Title: Managing Director
CITIBANK, N.A., as Documentation Agent and as
a Lender
By: /s/ James Buchanan
-----------------------------------------
Name: James Buchanan
Title: Attorney-in-Fact
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and as a Lender
By: /s/ Michele Swanson
-----------------------------------------
Name: Michele Swanson
Title: Authorized Signatory
ABN AMRO BANK N.V., as a Local Fronting
Lender in the Federal Republic of Germany
By: /s/ Frances O. Logan
-----------------------------------------
Name: Frances O. Logan
Title: Group Vice President
By: /s/ William S. Bennett
-----------------------------------------
Name: William S. Bennett
Title: Vice President
BANKBOSTON, N.A., as a Local Fronting
Lender in the United Kingdom
By: /s/ Richard D. Hill, Jr.
-----------------------------------------
Name: Richard D. Hill, Jr.
Title: Director
7
NATEXIS BANQUE BFCE, formerly BANQUE
FRANCAISE DU COMMERCE EXTERIEUR, as
a Local Fronting Lender in France
By: /s/ G. Kevin Dooley
-----------------------------------------
Name: G. Kevin Dooley
Title: Vice President
By: /s/ Evan S. Kraus
-----------------------------------------
Name: Evan S. Kraus
Title: Associate
THE SANWA BANK LTD., as a Local Fronting
Lender in Japan
By: /s/ Dominic J. Sorresso
-----------------------------------------
Name: Dominic J. Sorresso
Title: Vice President
BANK OF AMERICA CANADA, as a Local
Fronting Lender in Canada
By: /s/ Richard J. Hall
-----------------------------------------
Name: Richard J. Hall
Title: Vice President
CITIBANK LIMITED, as a Local Fronting
Lender in Australia
By: /s/ Tony O'Neill
-----------------------------------------
Name: Tony O'Neill
Title: Vice President
8
CITIBANK, N.A., as a Local Fronting Lender in
Hong Kong
By: /s/ James Buchanan
----------------------------------
Name: James Buchanan
Title: Attorney-in-Fact
CITIBANK, N.A., as a Local Fronting Lender in
the Netherlands
By: /s/ James Buchanan
----------------------------------
Name: James Buchanan
Title: Attorney-in-Fact
CITIBANK, N.A., as a Local Fronting Lender in
Italy
By: /s/ James Buchanan
----------------------------------
Name: James Buchanan
Title: Attorney-in-Fact
ALLIED IRISH BANK, as a Local Fronting
Lender in Ireland
By: /s/ W J Strickland & Tracey Duffy
------------------------------------
Name: W J Strickland
Title: Senior Vice President
Name: Tracey Duffy
Title: Assistant Vice President
CITIBANK, N.A., as a Local Fronting
Lender in Spain
By: /s/ James Buchanan
----------------------------------
Name: James Buchanan
Title: Attorney-in-Fact
9
ABN AMRO BANK N.V.
New York Branch
By: /s/ Frances O. Logan
----------------------------------
Name: Frances O. Logan
Title: Group Vice President
By: /s/ William S. Bennett
----------------------------------
Name: William S. Bennett
Title: Vice President
ALLIED IRISH BANK PLC
Cayman Islands Branch
By: /s/ W J Stickland
----------------------------------
Name: W J Strickland
Title: Senior Vice President
By: /s/ Tracey Duffy
----------------------------------
Name: Tracey Duffy
Title: Assistant Vice President
BANKBOSTON, N.A., as a Co-Agent
By: /s/ Richard D. Hill, Jr.
----------------------------------
Name: Richard D. Hill, Jr.
Title: Director
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent
By: /s/ R.L. Wennekamp
----------------------------------
Name: R.L. Wennekamp
Title: Senior Vice President
10
THE BANK OF NEW YORK
By: /s/ Georgia M. Pan-Kita
----------------------------------
Name: Georgia M. Pan-Kita
Title: Vice President
NATEXIS BANQUE BFCE, formerly BANQUE
FRANCAISE DU COMMERCE EXTERIEUR, as
a Co-Agent
By: /s/ G. Kevin Dooley
----------------------------------
Name: G. Kevin Dooley
Title: Vice President
By: /s/ Evan S. Kraus
----------------------------------
Name: Evan S. Kraus
Title: Associate
BANQUE PARIBAS
By: /s/ John J. McCormick, Jr.
----------------------------------
Name: John J. McCormick, Jr.
Title: Vice President
By: /s/ Mary T. Finnegan
----------------------------------
Name: Mary T. Finnegan
Title: Director
BARCLAYS BANK PLC
By: /s/ Terance Bullock
----------------------------------
Name: Terance Bullock
Title: Associate Director
11
CREDIT AGRICOLE INDOSUEZ
By: /s/ Richard Manix
----------------------------------
Name: Richard Manix
Title: First Vice President
By: /s/ Cheryl A. Solomato
----------------------------------
Name: Cheryl A. Solomato
Title: Vice President
CREDIT LYONNAIS, New York Branch
By: /s/ W. Michael George
----------------------------------
Name: W. Michael George
Title: Vice President
CREDIT SUISSE FIRST BOSTON, as a Co-
Agent
By: /s/ Joel Glodowski
----------------------------------
Name: Joel Glodowski
Title: Managing Director
By: /s/ Chris T. Hogan
----------------------------------
Name: Chris T. Hogan
Title: Vice President
DEEPROCK & COMPANY
By EATON VANCE MANAGEMENT, as
Investment Manager
By: /s/ Scott H. Page
----------------------------------
Name: Scott H. Page
Title: Vice President
12
FIRST BANK NATIONAL ASSOCIATION, as a
Co-Agent
By: /s/ Elliot Jaffee
----------------------------------
Name: Elliot Jaffee
Title: Vice President
THE FUJI BANK, LIMITED, New York Branch,
as a Co-Agent
By: /s/ Teiji Teramoto
----------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Co-Agent
By: /s/ Janet K. Williams
----------------------------------
Name: Janet K. Williams
Title: Duly Authorized Signatory
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., Los Angeles Agency
By: /s/ Noboru Akahane
----------------------------------
Name: Noboru Akahane
Title: Deputy General Manager
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Anne McCarthy
----------------------------------
Name: Anne McCarthy
Title: Authorized Signatory
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Toshihiro Hayashi
----------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
13
NATIONSBANK, N.A.
By: /s/ Diana Hamner Inman
----------------------------------
Name: Diana Hamner Inman
Title: Vice President
THE OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (A UNIT OF THE CHASE
MANHATTAN BANK)
By: /s/ Richard W. Stewart
----------------------------------
Name: Richard W. Stewart
Title: Managing Director
THE SANWA BANK, LIMITED
NEW YORK BRANCH
By: /s/ Dominic J. Sorresso
----------------------------------
Name: Dominic J. Sorresso
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ John C. Kissinger
----------------------------------
Name: John C. Kissinger
Title: Joint General Manager
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
ROYAL BANK OF CANADA
By: /s/ Michael Korine
----------------------------------
Name: Michael Korine
Title: Senior Manager
14
SENIOR DEBT PORTFOLIO
By: /s/ Scott H. Page
----------------------------------
Name: Scott H. Page
Title: Vice President
AERIES FINANCE LTD.
By: /s/ Andrew Ian Wignall
----------------------------------
Name: Andrew Ian Wignall
Title: Director
STRATA FUNDING LTD.
By: /s/ John J. Cullinane
----------------------------------
Name: John J. Cullinane
Title: Director
MEDICAL LIABILITY MUTUAL INSURANCE
COMPANY
By: /s/ Christopher E. Jansen
----------------------------------
Name: Christopher E. Jansen
Title: Managing Director
CERES FINANCE LTD.
By: /s/ John H. Cullinane
----------------------------------
Name: John H. Cullinane
Title: Director
ACKNOWLEDGEMENT AND CONSENT
Dated as of January 29, 1998
Each of the undersigned (in its capacity as a Guarantor, Grantor
and/or Pledgor, as the case may be, under the Security Documents to which it is
a party) does hereby (a) consent, acknowledge and agree to the transactions
described in the foregoing First Amendment and (b) after giving effect to such
First Amendment, (i) confirms, reaffirms and restates the representations and
warranties made by it in each Credit Document to which it is a party, (ii)
ratifies and confirms each Security Document to which it is a party and (iii)
confirms and agrees that each such Security Document is, and shall continue to
be, in full force and effect, with the Collateral described therein securing,
and continuing to secure, the payment of all obligations of the undersigned
referred to therein; provided that each reference to the Credit Agreement
therein and in each of the other Credit Documents shall be deemed to be a
reference to the Credit Agreement after giving effect to such First Amendment.
ALEXANDRA DE MARKOFF, LTD.
ALMAY, INC.
AMERICAN CREW, INC.
APPLIED SCIENCE & TECHNOLOGIES INC.
CARRINGTON PARFUMS LTD.
CHARLES OF THE RITZ GROUP LTD.
CHARLES REVSON INC.
COSMETIQUES HOLDINGS, INC.
CREATIVE NAIL DESIGN, INC.
FERMODYL PROFESSIONALS INC.
GENERAL WIG MANUFACTURERS, INC.
NEW ESSENTIALS LIMITED
NORELL PERFUMES, INC.
NORTH AMERICA REVSALE INC.
OXFORD PROPERTIES CO.
PACIFIC FINANCE & DEVELOPMENT CORP.
PPI TWO CORPORATION
PPI FOUR CORPORATION
PRESTIGE FRAGRANCES, LTD.
REALISTIC/ROUX PROFESSIONAL PRODUCTS
INC.
REVLON, INC.
REVLON COMMISSARY SALES, INC.
REVLON CONSUMER CORP.
REVLON CONSUMER PRODUCTS
CORPORATION
REVLON GOVERNMENT SALES, INC.
REVLON HOLDINGS INC.
REVLON INTERNATIONAL CORPORATION
REVLON PROFESSIONAL, INC.
REVLON PROFESSIONAL PRODUCTS INC.
REVLON RECEIVABLES SUBSIDIARY, INC.
RIROS CORPORATION
RIT INC.
ROUX LABORATORIES, INC.
VISAGE BEAUTE COSMETICS, INC.
By: /s/ Steven Berns
----------------------------------
Title: Vice President & Treasurer
The Cosmetic Center, Inc. ("Cosmetic"), a majority owned subsidiary of
Revlon Consumer Products Corporation ("RCPC") and an indirect majority owned
subsidiary of Revlon, Inc. (Public Co.) as a result of the merger of Prestige
Fragrance & Cosmetics, Inc. with and into Cosmetic, hereby agrees to be bound
by all of the terms of the Tax Sharing Agreement dated as of June 24, 1992 (as
amended on February 28, 1995 and January 1, 1997) by and among Mafco Holdings,
Inc., Revlon Holdings Inc., Public Co., RCPC and the Subsidiaries of Public Co.
that are signatories thereto.
Dated: April 25, 1997
THE COSMETIC CENTER, INC.
By: /s/ Stanley B. Dessen
------------------------------
Name: Stanley B. Dessen
Title: Vice President
AMENDMENT TO SECOND AMENDED
AND RESTATED OPERATING SERVICES AGREEMENT
AMENDMENT TO SECOND AMENDED AND RESTATED OPERATING SERVICES AGREEMENT
dated as of July 1, 1997 (this "Amendment"), by and among Revlon Holdings Inc.,
a Delaware corporation ("Holdings"), Revlon, Inc., a Delaware corporation
("Public Co."), and Revlon Consumer Products Corporation, a Delaware
corporation and a wholly owned subsidiary of Public Co. ("Operating Co.").
W I T N E S S E T H :
WHEREAS, Holdings, Public Co. and Operating Co. are parties to that
certain Amended and Restated Operating Services Agreement dated as of June 24,
1992, as amended as of January 1, 1993, amended and restated as of September 1,
1993, amended as of January 1, 1994 and amended and restated as of January 1,
1996 (as amended, the "Operating Services Agreement"); and
WHEREAS, the parties hereto desire to amend the Operating Services
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
A G R E E M E N T:
1. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Operating Services Agreement.
2. The defined term "Retained Brands" shall be amended to exclude the
Bill Blass brand from the brands included in such definition.
3. Except as expressly amended hereby, the terms of the Operating
Services Agreement shall be unchanged and shall remain in full force and
effect.
4. This Amendment shall be governed by the law of the State of New
York applicable to agreements executed and to be wholly performed in New York
among residents of New York.
5. This Amendment may be executed by one or more of the parties to
this Amendment on any number of separate counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
REVLON HOLDINGS INC.
By: /s/ Glenn P. Dickes
-------------------------------
Glenn P. Dickes
Vice President
REVLON, INC.
By: /s/ Robert K. Kretzman
-------------------------------
Robert K. Kretzman
Vice President
REVLON CONSUMER PRODUCTS
CORPORATION
By: /s/ Robert K. Kretzman
-------------------------------
Robert K. Kretzman
Vice President
REVLON CONSUMER PRODUCTS CORPORATION
625 MADISON AVENUE
NEW YORK, NY 10022
February 24, 1998
Jerry W. Levin
15 East 70th Street
New York, New York 10021
Dear Mr. Levin:
Reference is made to the employment agreement between you and
Revlon Consumer Products Corporation(the "Company") dated as of January 1, 1996
(the "Agreement"). Pursuant to the Agreement, you were employed as Chief
Executive Officer of the Company. The Company and you have agreed that, except
as otherwise provided herein, the Term of the Agreement and your employment by
the Company shall be terminated as of June 30, 1997. Notwithstanding such
termination, it is agreed that you shall continue to serve as Chairman of the
Board of the Company and of Revlon, Inc. and that the stock options previously
granted to you shall remain outstanding in accordance with the terms of such
grants. You have agreed to the foregoing upon the terms hereinafter set forth.
1. Termination of Agreement. Except as otherwise provided
herein, the Term of the Agreement shall terminate effective June 30, 1997, and
upon such termination you hereby waive and release all rights and claims under
the Agreement and with respect to your employment or the termination of your
employment thereunder, including without limitation under Sections 3 and 4
(except Section 3.3 (which shall remain in effect with respect to options
previously granted and options which are to be granted to you under the
Agreement in 1999, such 1999 grant to be of 42,500 options, and Sections
3.6(ii), 3.6(iii), 4.5 and 8 which shall remain in effect during your continued
employment with any affiliate of the Company). In respect of your employment
during 1997, the Company shall have paid to you on or before December 31, 1997
an aggregate base salary of $825,000. In respect of your services to the
Company during 1998 as Chairman of the Board, the Company shall pay to you
$825,000. Notwithstanding any other provision of this agreement, you do not
hereby release or waive any
Jerry W. Levin
As of February 24, 1998
Page 3
benefits under the tax-qualified and supplemental retirement plans of the
Company and its affiliates accrued as of June 30, 1997 or under the Section 401
savings plan of the Company and its affiliates accrued as of the end of such
date.
2. Inventions; Confidential Information; Competitors. Without
limiting the generality of paragraph 1, the provisions of Sections 5 through 7
and 9 through 11 of the Agreement shall remain in full force and effect,
including without limitation your agreement to comply with subsection 5.2.
3. Miscellaneous. This agreement shall be binding upon and
inure to the benefit of the parties hereto, their respective legal
representatives and any successor of the Company, which successor shall be
deemed substituted for the Company under the terms of this agreement. As used
in this agreement, the term "successor" shall include any person, firm,
corporation or other entity which at any time, whether by merger, purchase or
otherwise, acquires all or substantially all of the capital stock, assets or
business of the Company. The waiver by the Company or you of a breach of any
provision of this agreement by you or the Company shall not operate or be
construed as a waiver of any subsequent or other breach. Any notice required or
permitted to be given shall be sufficient if in writing and if sent by
registered or certified mail to you at your then residence or to the Company at
its then principal place of business. This instrument contains the entire
agreement of the parties with respect to the subject matter hereof and may not
be changed except in a written modification signed by both parties. This
agreement shall be governed by and construed in accordance with
Jerry W. Levin
As of February 24, 1998
Page 4
the laws of the State of New York as applied to contracts between residents
thereof executed and performed wholly within the State of New York.
If this letter accurately sets forth our agreement, please so
indicate by returning a copy of this letter signed in the place set forth
below.
Sincerely,
REVLON CONSUMER PRODUCTS
CORPORATION
By:/s/ WADE H. NICHOLS III
-----------------------------
Wade H. Nichols III
Executive Vice President
and General Counsel
ACCEPTED AND AGREED:
/s/JERRY W. LEVIN
----------------------
Jerry W. Levin
Exhibit 10.16
625 Madison Avenue
New York, NY 10022
Phone: (212) 527-5610
Fax: (212) 527-5681
Wade H. Nichols III
Senior Vice President and
General Counsel
February 3, 1998
Mr. Carlos Colomer Casellas
Paseo de los Tilos, 26 bis
08034 Barcelona
SPAIN
Dear Carlos:
Reference is made to the Employment Agreement dated as of January 1,
1996 between you and RIROS Corporation as supplemented by letter dated February
23, 1996 (collectively, the "Agreement"), and terms defined therein are used
herein with the meanings therein ascribed to them. In consideration of the
mutual covenants set forth herein and other good and valuable consideration,
receipt whereof is hereby acknowledged, you and the Company agree as follows:
1. Section 1.1 of the Agreement is hereby amended, effective
January 1, 1998, to read in its entirety as follows:
"1.1 Employment, Duties. The Company hereby employs the
Executive for the Term (as defined in Section 2.1), to render
exclusive and full-time services to the Company as head of its
worldwide professional beauty products strategic committee (which the
Executive acknowledges will require frequent involvement in senior
management activities at the Company's world headquarters in New York
City) and chief executive officer of the Company's professional beauty
products business outside of the United States or in such other
executive positions of at least an equivalent level consistent with
the Executive's business experience and background as may be assigned
to the Executive by the Chief Executive Officer of the Company
(provided that the Executive shall be permitted to deal with the
administration and management of the Executive's and his family's
personal property), and to perform such other duties consistent with
such position (including service as a director or officer of any
affiliate of the Company, if elected) as may be assigned to the
Executive by the Chief Executive Officer of the Company. The
Executive's title shall be Chairman, Revlon Professional Worldwide
Strategic Committee and Chairman, Revlon Professional International or
such other titles of at least equivalent level consistent with the
Executive's duties from time to time as may be assigned to the
Executive by the Chief Executive Officer of the Company."
Mr. Carlos Colomer Casellas
January 27, 1998
Page 2
2. Except as amended hereby the Agreement shall not be deemed to have
been amended, modified or affected hereby in any respect, and the Agreement as
so amended hereby shall remain in full force and effect in accordance with all
of its terms.
If this letter correctly reflects your agreement with the Company,
please so indicate by signing and returning a copy hereof.
Very truly yours,
RIROS CORPORATION
By: /s/ Wade H. Nichols III
------------------------
Vice President
AGREED AND ACCEPTED:
/s/ Carlos Colomer Casellas
- ------------------------------
Carlos Colomer Casellas
Employment Agreement
EMPLOYMENT AGREEMENT, dated as of January 1, 1998, between REVLON
CONSUMER PRODUCTS CORPORATION, a Delaware corporation (the "Company"), and M.
KATHERINE DWYER (the "Executive").
The Company wishes to continue the employment of the Executive, and the
Executive wishes to accept such continued employment, on the terms and
conditions set forth in this Agreement.
Accordingly, the Company and the Executive hereby agree as follows:
Employment, Duties and Acceptance.
1.1 Employment, Duties. The Company hereby employs the Executive for
the Term (as defined in Section 2.1), to render exclusive and full-time
services to the Company as head of the Company's United States consumer
products business or in such other executive position of at least an equivalent
level consistent with the Executive's business experience and background as may
be assigned to the Executive by the Chief Executive Officer of the Company, and
to perform such other duties consistent with such position (including service
as a director or officer of any affiliate of the Company, if elected) as may be
assigned to the Executive by the Chief Executive Officer of the Company. The
Executive's title shall be President, Revlon Consumer Products U.S.A. or such
other title of at least equivalent level consistent with the Executive's duties
from time to time as may be assigned to the Executive by the President of the
Company.
1.2 Acceptance. The Executive hereby accepts such employment and
agrees to render the services described above. During the Term, the Executive
agrees to serve the Company faithfully and to the best of the Executive's
ability, to devote the Executive's entire business time, energy and skill to
such employment, and to use the Executive's best efforts, skill and ability to
promote the Company's interests.
1.3 Location. The duties to be performed by the Executive hereunder
shall be performed primarily at the office of the Company in the New York City
metropolitan area, subject to reasonable travel requirements consistent with
the nature of the Executive's duties from time to time on behalf of the
Company.
2. Term of Employment; Certain Post-Term Benefits.
2.1 The Term. The term of the Executive's employment under this
Agreement (the "Term") shall commence as of the date hereof (the "Effective
Date") and shall end on such date as is provided pursuant to Section 2.2.
2.2 End of Term Provisions. At any time on or after the fourth
anniversary of the Effective Date the Company shall have the right to give
written notice of non-renewal of the Term. In the vent the Company gives such
notice of non-renewal, the Term automatically shall be extended so that it
needs twelve months after the last day of the month in which the Company gives
such notice. If the Company shall not theretofore have given such notice, from
and after the fifth anniversary of the Effective Date unless and until the
Company gives written notice of non-renewal as provided in this Section 2.2,
the Term automatically shall be extended day-by-day; upon the giving of such
notice by the Company, the Term automatically shall be extended so that it ends
twelve months after the last day of the month in which the Company gives such
notice. Non-extension of the Term shall not be deemed to be a breach of this
Agreement by the Company for purposes of Section 4.4, provided, however, that
during any period that the Executive's employment shall continue following
termination of the Term, the Executive shall be eligible for severance on terms
no less favorable than those of the Revlon Executive Severance Plan as in
effect on the date of this Agreement, other than the provision in Paragraph
IIIC(ii) establishing a limit of six months of payments, which shall not apply
to the Executive, upon the executive's compliance with the terms thereof.
2.3 Special Curtailment. The Term shall end earlier than the date
provided in Section 2.2, if sooner terminated pursuant to Section 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be rendered pursuant
to this Agreement, the Company agrees to pay the Executive during the Term a
base salary, payable semi-monthly in arrears, at the annual rate of not less
than $875,000 during the period from the Effective Date through December 31,
1998, said base salary to be increased as of January 1 of each calendar year
during the Term, commencing January 1, 1999, by not less than $75,000 (the
"Base Salary"). All payments of Base Salary or other compensation hereunder
shall be less such deductions or withholdings as are required by applicable law
and regulations. In the event that the Company, in its sole discretion, from
time to time determines to increase the Base Salary in an amount greater than
above provided, such increased amount shall, from and after the effective date
of the increase, constitute "Base Salary" for purposes of all subsequent
increases pursuant to this Section 3.1.
3.2 Bonus. In addition to the amounts to be paid to the Executive
pursuant to Section 3.1, during the Term:
(i) The Executive shall receive a maximum annual performance
incentive bonus with respect to each year commencing with calendar year 1997 of
100% of the Executive's Base Salary at the rate in effect during the calendar
year in which bonus is earned (with a target bonus equal to 100% of such Base
Salary), based upon the degree of
2
achievement of objectives set annually not later than February 28 of such year
in accordance with the Revlon Executive Bonus Plan or by the Compensation
Committee of the Board of Directors of the Company, as the case may be. In the
event that the Executive's employment shall terminate otherwise than as of a
calendar year end, the Executive's bonus with respect to the calendar year in
which employment terminates shall be prorated for the actual number of days of
employment during such year, and such bonus, if any, shall be payable on the
date that executive bonuses are paid generally, whether or not the Executive
remains employed on such date.
(ii) The Executive shall receive within 10 days after commencement of
the Term a lump sum bonus in the amount of $300,000.
(iii) The Executive shall receive, at the time executive bonuses are
paid generally with respect to calendar year 1997, a lump sum bonus equal to
60% of the bonus, if any, payable with respect to calendar year 1997 pursuant
to section 3.1(i) above.
3.3 Stock Options. The Executive shall be recommended to the
Compensation Committee or other committee of the Board administering the 1996
Revlon Stock Plan or any plan that may replace it, as from time to time in
effect, to receive an option not later than February 28 of each year of the
Term, commencing in 1998, each such option to cover a minimum of 75,000 shares
of Revlon common stock, to have a term of 10 years, to have an option exercise
price equal to the market price of the Revlon common stock on the date of
grant, and otherwise to be on terms (other than number of shares covered)
substantially the same as other senior executives of the Company generally.
3.4 Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or paid by the
Executive during the Term in the performance of the Executive's services under
this Agreement, subject to and in accordance with the Company's applicable
expense reimbursement and related policies and procedures as in effect from
time to time. Arrangements heretofore in effect with respect to wardrobe
allowances were terminated on the Effective Date.
3.5 Vacation. During each year of the Term, the Executive shall be
entitled to a vacation period or periods of four weeks taken in accordance with
the vacation policy of the Company as in effect from time to time.
3.6 Fringe Benefits.
(i) During the Term, the Executive shall be entitled to participate
in those qualified and non-qualified defined benefit, defined contribution,
group insurance, medical, dental, disability and other benefit plans of the
Company as from time to time in effect made available to senior executives of
the Company generally, shall be entitled to
3
the use of a Company-provided automobile in accordance with the Company's
executive automobile policy and guidelines as from time to time in effect, and
shall be entitled to the use of an assigned Company-provided chauffeured
automobile as required for business purposes.
(ii) During the Term, the Company agrees to make available to the
Executive additional term life insurance coverage with a face amount of three
times the Executive's Base Salary from time to time, subject to the insurer's
satisfaction with the results of any required medical examination, to which the
Executive hereby agrees to submit, and shall reimburse the Executive for the
premium expense related thereto and gross the Executive up for the tax payable
with respect to such reimbursement. Such coverage shall be provided pursuant to
the Company's optional supplemental term insurance program, if available, or if
not, the Executive may select a plan of the Executive's choice and may
designate the beneficiary of such plan.
(iii) During the Term the Company shall maintain an individual
policy of disability insurance, naming the Executive as the insured and the
Executive or a designee as the beneficiary, with a benefit equal to (A) fifty
percent of the sum of the Executive's Base Salary in effect on the date of
disability plus the Executive's most recent annual bonus pursuant to Section
3.2 less (B) the long-term disability benefit payable under the Company's group
disability program as in effect from time to time (irrespective of whether the
Executive has elected to participate in such long-term disability program).
4. Termination.
4.1 Death. If the Executive shall die during the Term, the Term
shall terminate and no further amounts or benefits shall be payable hereunder
except pursuant to life insurance provided under Section 3.6.
4.2 Disability. If during the Term the Executive shall become
physically or mentally disabled, whether totally or partially, such that the
Executive is unable to perform the Executive's services hereunder for (i) a
period of six consecutive months or (ii) shorter periods aggregating six months
during any twelve month period, the Company may at any time after the last day
of the six consecutive months of disability or the day on which the shorter
periods of disability shall have equaled an aggregate of six months, by written
notice to the Executive (but before the Executive has returned to active
service following such disability), terminate the Term and no further amounts
or benefits shall be payable hereunder, except that the Executive shall be
entitled to receive until the first to occur of (x) the Executive ceasing to be
disabled or (y) the Executive's attaining the age of 65, continued coverage for
the Executive under the Company paid group life insurance plan (including
supplemental coverage under Section 3.6) and for the Executive and her spouse
and children, if any, under the Company's group medical (including executive
4
medical) plan, to the extent permitted by such plans and to the extent such
benefits continue to be provided to the Company's senior executives generally.
4.3 Cause. In the event of gross neglect by the Executive of the
Executive's duties hereunder, conviction of the Executive of any felony,
conviction of the Executive of any lesser crime or offense involving the
property of the Company or any of its subsidiaries or affiliates, willful
misconduct by the Executive in connection with the performance of the
Executive's duties hereunder or other material breach by the Executive of this
Agreement, or any other conduct on the part of the Executive which would make
the Executive's continued employment by the Company materially prejudicial to
the best interests of the Company, the Company may at any time by written
notice to the Executive terminate the Term and, upon such termination, the
Executive shall be entitled to receive no further amounts or benefits
hereunder, except as required by law.
4.4 Company Breach; Other Termination. In the event of the breach of
any material provision of this Agreement by the Company or the failure of the
Compensation Committee (or other appropriate Committee of the Company's Board
of Directors) to fully implement the Company's recommendation pursuant to
Section 3.3, the Executive shall be entitled to terminate the Term upon 60
days' prior written notice to the Company. In addition, the Company shall be
entitled to terminate the Term at any time and without prior notice otherwise
than pursuant to the provisions of Section 2.2, 4.2 or 4.3. Upon such
termination by the Executive, or in the event the Company so terminates the
Term otherwise than pursuant to the provisions of Section 2.2, 4.2 or 4.3, the
Company's sole obligation shall be (at the Executive's election by written
notice within 10 days after such termination) either (i) to make payments in
the amounts prescribed by Section 3.1 (less amounts required by law to be
withheld) and to continue the Executive's participation in the group life
insurance and in the basic and executive medical plans of the Company, in each
case through the date on which the Term would have expired pursuant to Section
2.2 if the Company had given notice of non-renewal on the date of termination
of employment, provided that any compensation earned by the Executive from
other employment or a consultancy during such period shall reduce the payments
provided for herein, and provided further that the Executive shall cease to be
covered by medical and/or dental plans of the Company at such time as the
Executive becomes covered by like plans of another company, or (ii) to make the
payments and provide the benefits prescribed by the Executive Severance Policy
of the Company as in effect on the date of this Agreement (except that the
provision in Paragraph IIIC(ii) establishing a limit of six months of payments
shall not be applicable to the Executive) upon the Executive's compliance with
the terms thereof.
4.5 Litigation Expenses. If the Company and the Executive become
involved in any action, suit or proceeding relating to the alleged breach of
this Agreement by the Company or the Executive, then if and to the extent that
a final judgment in such action, suit or proceeding is rendered in favor of the
Executive, the Company shall reimburse the
5
Executive for all expenses (including reasonable attorneys' fees) incurred by
the Executive in connection with such action, suit or proceeding or the portion
thereof adjudicated in favor of the Executive. Such costs shall be paid to the
Executive promptly upon presentation of expense statements or other supporting
information evidencing the incurrence of such expenses.
5. Protection of Confidential Information;
Non-Competition.
5.1 The Executive acknowledges that the Executive's work for the
Company will bring the Executive into close contact with many confidential
affairs of the Company not readily available to the public, including trade
secrets and confidential marketing, sales, product development and other data
and plans which it would be impracticable for the Company to effectively
protect and preserve in the absence of this Section 5 and the disclosure or
misappropriation of which could materially adversely affect the Company.
Accordingly, the Executive agrees:
5.1.1 Except in the course of performing the Executive's duties
provided for in Section 1.1, not at any time, whether during or after the
Executive's employment with the Company, to divulge to any other entity or
person any confidential information acquired by the Executive concerning the
Company's or its affiliates' financial affairs or business processes or methods
or their research, development or marketing programs or plans, any other of its
or their trade secrets, any information regarding personal matters of any
directors, officers, employees or agents of the Company or its affiliates or
their respective family members, or any information concerning the
circumstances of the Executive's employment and any termination of the
Executive's employment with the Company or any information regarding
discussions related to any of the foregoing. The foregoing prohibitions shall
include, without limitation, directly or indirectly publishing (or causing,
participating in, assisting or providing any statement, opinion or information
in connection with the publication of) any diary, memoir, letter, story,
photograph, interview, article, essay, account or description (whether
fictionalized or not) concerning any of the foregoing, publication being deemed
to include any presentation or reproduction of any written, verbal or visual
material in any communication medium, including any book, magazine, newspaper,
theatrical production or movie, or television or radio programming or
commercial. In the event that the Executive is requested or required to make
disclosure of information subject to this Section 5.1.1 under any court order,
subpoena or other judicial process, the Executive will promptly notify the
Company, take all reasonable steps requested by the Company to defend against
the compulsory disclosure and permit the Company to control with counsel of its
choice any proceeding relating to the compulsory disclosure. The Executive
acknowledges that all information the disclosure of which is prohibited by this
section is of a confidential and proprietary character and of great value to
the Company.
6
5.1.2 To deliver promptly to the Company on termination of the
Executive's employment by the Company, or at any time the Company may so
request, all memoranda, notes, records, reports, manuals, drawings, blueprints
and other documents (and all copies thereof) relating to the Company's business
and all property associated therewith, which the Executive may then possess or
have under the Executive's control.
5.2 The Executive shall in all respects fully comply with the terms
of the Employee Agreement as to Confidentiality and Non-Competition referred to
in such Executive Severance Plan (whether or not the Executive is a signatory
thereof) with the same effect as of the same were set forth herein in full.
5.3 If the Executive commits a breach of any of the provisions of
Sections 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages and disgorgement of
profits will not provide an adequate remedy to the Company; and
5.3.2 The right and remedy to require the Executive to account for
and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or received by
the Executive as the result of any transactions constituting a breach of any of
the provisions of Sections 5.1 or 5.2 hereof, and the Executive hereby agrees
to account for and pay over such Benefits to the Company.
In addition, if the Executive attempts or threatens to commit a breach of any
of the provisions of Sections 5.1 or 5.2, the Executive consents to the Company
obtaining a preliminary and a permanent injunction in any court having equity
jurisdiction against the Executive committing the attempted or threatened
breach. Each of the rights and remedies enumerated above shall be independent
of the other, and shall be severally enforceable, and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity.
5.4 If any of the covenants contained in Sections 5.1, 5.2 or 5.3,
or any part thereof, hereafter are construed to be invalid or unenforceable,
the same shall not affect the remainder of the covenant or covenants, which
shall be given full effect, without regard to the invalid portions.
5.5 If any of the covenants contained in Sections 5.1 or 5.2, or any
part thereof, are held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the
7
power to reduce the duration and/or area of such provision so as to be
enforceable to the maximum extent permitted by applicable law and, in its
reduced form, said provision shall then be enforceable.
5.6 The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 5.1, 5.2 and 5.3 upon the courts of
any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold such covenants wholly
unenforceable by reason of the breadth of such covenants or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of
any other states within the geographical scope of such covenants as to breaches
of such covenants in such other respective jurisdictions, the above covenants
as they relate to each state being for this purpose severable into diverse and
independent covenants.
5.7 Any termination of the Term or this Agreement shall have no
effect on the continuing operation of this Section 5.
6. Inventions and Patents.
6.1 The Executive agrees that all processes, technologies and
inventions (collectively, "Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the Term shall belong to the Company,
provided that such Inventions grew out of the Executive's work with the Company
or any of its subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Company or any of its subsidiaries
or affiliates or are conceived or made on the Company's time or with the use of
the Company's facilities or materials. The Executive shall further: (a)
promptly disclose such Inventions to the Company; (b) assign to the Company,
without additional compensation, all patent and other rights to such Inventions
for the United States and foreign countries; (c) sign all papers necessary to
carry out the foregoing; and (d) give testimony in support of the Executive's
inventorship.
6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Executive within two
years after the termination of the Executive's employment by the Company, it is
to be presumed that the Invention was conceived or made during the Term.
6.3 The Executive agrees that the Executive will not assert any
rights to any Invention as having been made or acquired by the Executive prior
to the date of this Agreement, except for Inventions, if any, disclosed to the
Company in writing prior to the date hereof.
8
7. Intellectual Property.
Notwithstanding and without limitation of Section 6, the Company shall
be the sole owner of all the products and proceeds of the Executive's services
hereunder, including, but not limited to, all materials, ideas, concepts,
formats, suggestions, developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain, develop or
create in connection with or during the Term, free and clear of any claims by
the Executive (or anyone claiming under the Executive) of any kind or character
whatsoever (other than the Executive's right to receive payments hereunder).
The Executive shall, at the request of the Company, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title or interest in or to any such properties.
8. Indemnification.
The Company will indemnify the Executive, to the maximum extent
permitted by applicable law, against all costs, charges and expenses incurred
or sustained by the Executive in connection with any action, suit or proceeding
to which the Executive may be made a party, brought by any shareholder of the
Company directly or derivatively or by any third party by reason of any act or
omission of the Executive as an officer, director or employee of the Company or
of any subsidiary or affiliate of the Company.
9. Notices.
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, sent by overnight courier or mailed
first class, postage prepaid, by registered or certified mail (notices mailed
shall be deemed to have been given on the date mailed), as follows (or to such
other address as either party shall designate by notice in writing to the other
in accordance herewith):
If to the Company, to:
Revlon Consumer Products Corporation
625 Madison Avenue
New York, New York 10022
Attention: Wade H. Nichols III
Senior Vice President and
General Counsel
9
If to the Executive, to her principal residence as reflected in the
records of the Company.
10.General.
10.1 This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York applicable to agreements
made between residents thereof and to be performed entirely in New York. The
parties hereby consent and submit to the exclusive jurisdiction of the state
and federal courts sitting in Manhattan, New York, for the adjudication of any
disputes arising hereunder.
10.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof, including without limitation the
Employment Agreement among the parties dated as of January 1, 1996. No
representation, promise or inducement has been made by either party that is not
embodied in this Agreement, and neither party shall be bound by or liable for
any alleged representation, promise or inducement not so set forth.
10.4 This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder (i) to any affiliate or (ii)
to third parties in connection with any sale, transfer or other disposition of
all or substantially all of any business or assets in which the Executive's
services are then substantially involved; in any event the obligations of the
Company hereunder shall be binding on its successors or assigns, whether by
merger, consolidation or acquisition of all or substantially all of such
business or assets.
10.5 This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either party at any
time or times to require performance of any provision hereof shall in no manner
affect the right at a later time to enforce the same. No waiver by either party
of the breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
10
10.6 This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. Subsidiaries and Affiliates.
11.1 As used herein, the term "subsidiary" shall mean any
corporation or other business entity controlled directly or indirectly by the
corporation or other business entity in question, and the term "affiliate"
shall mean and include any corporation or other business entity directly or
indirectly controlling, controlled by or under common control with the
corporation or other business entity in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ George Fellows
--------------------------------
George Fellows
By: /s/ M. Katherine Dwyer
--------------------------------
M. Katherine Dwyer
REVLON EMPLOYEES' SAVINGS, INVESTMENT AND PROFIT SHARING PLAN
Amended and Restated
Effective as of January 1, 1997
July 1997 Edition
TABLE OF CONTENTS PAGE
ARTICLE 1 Definitions 1
ARTICLE 2 Participation 15
ARTICLE 3 Basic and Matching Contributions 20
ARTICLE 4 Accounts and Designation of Investment Funds 25
ARTICLE 5 Vesting 35
ARTICLE 6 Normal Withdrawals During Employment 38
ARTICLE 7 Withdrawals for Hardship 41
ARTICLE 8 Distributions on Termination of Employment 44
ARTICLE 9 Payment of Benefits 46
ARTICLE 10 Beneficiary Designation 52
ARTICLE 11 Administration 55
ARTICLE 12 Trust Agreement 62
ARTICLE 13 Amendment or Merger 63
ARTICLE 14 Termination of the Plan 65
ARTICLE 15 Miscellaneous 67
ARTICLE 16 Leased Employees 73
ARTICLE 17 Limitation on Maximum Benefits 75
and Contributions Under All Plans
ARTICLE 18 "Top Heavy" Provisions, Etc. 77
ARTICLE 19 Termination, etc. Prior to Amendment 84
ARTICLE 20 401(k) Deferral and 401(m) Contributions Tests 85
ARTICLE 21 Rollover Contributions 90
ARTICLE 22 Direct Rollover 92
ARTICLE 23 Profit Sharing 94
SCHEDULE A Schedule of Employees 99
SCHEDULE B Profit Sharing Employers 100
Participant Loan Program 101
REVLON EMPLOYEES' SAVINGS. INVESTMENT AND PROFIT SHARING PLAN
PREAMBLE
Effective February 1, 1969, a predecessor of Revlon, Inc., a
Delaware corporation, adopted the Revlon, Inc. Employees' Stock Purchase Plan.
Such Plan was subsequently amended from time to time.
Since 1983, Revlon, Inc. and its predecessor maintained the Revlon
PAYSOP (the "PAYSOP"), a tax credit employee stock ownership plan of benefits
administered in connection with the Plan, for the benefit of certain of its
employees and those of its adopting affiliates. The Tax Reform Act of 1986
eliminated the payroll based tax credit for contributions to tax credit
employee stock ownership plans, and, effective July 6, 1987: (i) the PAYSOP
provisions of the Plan were consolidated into a separate stock bonus plan of
benefits, and the PAYSOP plan was terminated as of that date; and (ii) each
affected participant's PAYSOP Account balance was either distributed to him or
transferred in cash to the Plan.
An amendment effective December 31, 1983 changed the name of the
Plan to the "Revlon Employees' Savings and Investment Plan" and the Plan
sponsor was subsequently changed, effective July 1, 1992, to Revlon Consumer
Products Corporation (the "Company").
The Plan is a profit-sharing plan which contains a cash or deferred
arrangement described in section 401(k) of the Internal Revenue Code of 1986,
as amended.
The Plan was amended and restated, generally effective January 1,
1989.
Generally effective January 1, 1996 the Plan was further amended
and restated, generally for the purposes of:
(i) providing that future employer matching contributions shall be
invested (and may be made) in shares of the common stock of Revlon, Inc. (a
Delaware corporation and the Company's parent), effective upon the completion
of an initial public offering by Revlon, Inc. in 1996;
(ii) changing the minimum service required for plan participation,
generally effective January 1, 1996; and
(iii) updating the list of participating employers effective
January 1, 1996.
Effective January 1, 1997, the Plan is renamed the Revlon
Employees' Savings, Investment and Profit Sharing Plan and hereby further
amended and restated, generally for the purposes of:
(i) effective January 1, 1997, providing for profit sharing
contributions by the employer to be invested in shares of the common stock of
Revlon, Inc. (a Delaware corporation and the Company's parent) to a select
group of employees who are not otherwise eligible to participate in any sales
or management incentive compensation plan of a Profit Sharing Employer; and
(ii) effective January 1, 1998, eliminating the requirement that employees
attaining age 70 1/2 must commence receipt of required minimum distributions
while actively employed.
ARTICLE 1
Definitions
When used in the Plan, the following terms shall have the
designated meanings, unless a different meaning is clearly required by the
context:
1.1 Accounts. A Participant's Basic Account, Pre-IPO Matching
Contributions Account, Post-IPO Matching Contributions Account, Segregated
Account or Profit Sharing Contributions Account or the aggregate thereof as the
context may indicate.
1.2 Affiliate. Any business entity, other than an Employer, whether
or not incorporated, which at the time of reference controls, is controlled by
or is under common control with an Employer (within the meaning of section
414(b) or 414(c) of the Code or, effective January 1, 1980, section 414(m)(2)
of the Code, or as effective December 31, 1983, section 414(m)(5) of the Code,
or as effective July 18, 1984, section 414(o) of the Code, and, for purposes of
applying Article 17 of the Plan, section 415(h) of the Code). In accordance
with rules which the Administrative Committee may adopt from time to time, the
term "Affiliate" may also include any joint venture or other business
organization with which the Company is affiliated, or in which it has an
interest or with which it has business dealings, either for all purposes of the
Plan or for such limited purposes as the Administrative Committee may specify
in such rules, and subject to such conditions and limitations (if any) as the
Committee may specify in such rules.
1.3 Appropriate Form. A form prescribed by the Committee for a
particular purpose specified in the Plan.
1
1.4 Basic Account. The aggregate of a Participant's Pre-Tax
Contributions Account, his Post-Tax Contributions Account and any amounts
attributable to prior participation in the tax credit employee stock ownership
plan maintained within the same Plan document until its termination on July 6,
1987.
1.5 Basic Contributions. Contributions made by an Employer or
Participant in accordance with the provisions of Section 3.1 and/or 3.2,
respectively.
1.6 Beneficiary. The person or persons entitled to benefits under
the Plan following a Participant's death, pursuant to Article 10.
1.7 Break in Service. A Severance Period of not less than twelve
(12) consecutive months. In the case of an individual who is absent from work
for maternity or paternity reasons (whether or not the employment relationship
has terminated) (or for any other reason which entitles such individual to a
FMLA leave (as described below)), the first twelve (12) consecutive months of
such absence (or such lesser period of the FMLA leave) shall not be included in
a Break in Service, but only to the extent required by applicable law. For
purposes of this Section 1.7, an absence from work for maternity or paternity
reasons means a cessation of active employment after 1984 which commences and
continues (a) by reason of the pregnancy of the individual, (b) by reason of
the birth of a child of the individual, (c) by reason of the placement of a
child with the individual in connection with the adoption of such child by such
individual, or (d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
For purposes of this Section 1.7, an absence from work for a FMLA
leave means a cessation of active employment (and continuous absence from such
employment) commencing on or after August 5, 1993, for a leave of absence for
one or more of the
2
following reasons: (a) because of the birth of a son or daughter of the
individual and in order to care for such son or daughter; (b) because of the
placement of a son or daughter with the individual for adoption or foster care;
(c) in order to care for the spouse, or a son, daughter, or parent of the
individual, if such spouse, son, daughter, or parent has a serious health
condition, or (d) because of a serious health condition that makes the
individual unable to perform the functions of the position of such individual,
in each case (a) through (d) which entitles the individual to be granted a
leave of absence under the provisions of the Family and Medical Leave Act of
1993, as it may be amended from time to time, and the regulations promulgated
thereunder.
Nothing in this Section 1.7 shall be construed to grant an employee
any right to a leave of absence for any reason.
1.8 Board of Directors. The Board of Directors of the Company, or
any duly authorized committee thereof.
1.9 Committee. The Administrative Committee or the Investment
Committee, as the context may indicate, provided for in Article 11.
1.10 Company Stock. The Class A common stock of Revlon, Inc., par
value $.01 per share.
1.11 Compensation. As used herein, the term Compensation shall
mean;
1.11.1 The amount paid by an Employer as straight time salary
or other regular straight time remuneration, for services performed as an
Eligible Employee, determined before giving effect to (a) any
Participation Agreement under this Plan or (b) any similar agreement
under any plan described in section 125 of the Code, but not including:
(i) deferred compensation, bonuses, overtime
3
pay, contributions under the Plan or any other program of fringe
benefits, or other additional remuneration; (ii) any remuneration for
services performed while an Employee who is employed primarily to render
services within the jurisdiction of a union and with respect to which
compensation, hours of work or conditions of employment are determined by
collective bargaining with such union; provided, however, that any such
remuneration not otherwise excluded from Compensation by the provisions
of this Section 1.11 shall be treated as Compensation if, and to the
extent, that the applicable collective bargaining agreement expressly so
provides.
1.11.2 For purposes of Section 20.4, Compensation shall
include Pre-Tax Contributions.
1.11.3 In no event shall the Plan take into account
Compensation in excess of $200,000 for Plan Years beginning after 1988,
or in excess of $150,000 for Plan Years beginning after 1993, each as
adjusted under sections 401(a)(17) and 415(d) of the Code, for any
Employee in any Plan Year. For purposes of applying the $200,000 and
$150,000 limitations, the Compensation of certain Employees shall include
the Compensation of any family member, as prescribed by section
414(q)(6), except that in applying such rules, the term "family" shall
include only the Spouse and any lineal descendants of an Employee who
have not attained age 19 before the close of the Plan Year.
1.12 Disability. Total inability of a Participant to perform the
customary duties of his employment, which is expected to be permanent or of
long-continued
4
duration, as determined by the Administrative Committee on the basis of medical
evidence satisfactory to it.
1.13 Eligible Employee. Except as may otherwise be provided in
Article 23, any Employee of an Employer who meets all of the following
requirements:
1.13.1 He is at least twenty-one (21) years of age;
1.13.2 He is employed in a division, subdivision, plant,
location or other identifiable group of Employees to which his Employer
has extended the Plan; provided, however, that in determining the
divisions, subdivisions, plants, locations or groups of Employees to
which the Plan shall be extended, the Employer shall not discriminate in
favor of Highly Compensated Employees so as to prevent the Plan from
qualifying under section 401(a) of the Code.
1.13.3 If: (i) he is employed primarily to render services
within the jurisdiction of a union, (ii) his compensation, hours of work
or conditions of employment are determined by collective bargaining with
such union, and (iii) an applicable collective bargaining agreement
expressly provides that he shall be eligible to participate in the Plan,
then he shall be entitled to participate in the Plan only to the extent
and on the terms and conditions specified in such collective bargaining
agreement; and
1.13.4 He is not a nonresident alien.
1.13.5 He is not an employee with the job title (i) "direct
pay beauty advisor," or (ii) "field merchandiser" (unless he was
otherwise a Participant in the Plan as of January 1, 1994).
1.14 Employee. An employee of an Employer or Affiliate.
5
1.15 Employer. The Company and its subsidiaries and affiliates
listed on Schedule A attached hereto and any other corporation, partnership or
other entity which has adopted the Plan with the approval of the Board of
Directors.
1.16 Employer Contributions. Pre-Tax Contributions and Matching
Contributions.
1.17 Employment Date. The first day on which an Employee is
credited with an Hour of Service with an Employer or an Affiliate.
1.18 Entry Date. Each January 1, April 1, July 1, and October 1;
and any other date established as an "Entry Date" by the Administrative
Committee with respect to Eligible Employees generally, or such specified group
of Eligible Employees as the Administrative Committee may prescribe in its
discretion.
1.19 ERISA. The Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.20 Highly Compensated Employee. A "highly compensated employee"
as the term is defined in section 414(q) of the Code and the Treasury
Regulations thereunder.
1.21 Hour of Service. Subject to the equivalency rules of Section
2.1.4, an Employee is credited with an Hour of Service pursuant to the
following rules, determined without duplication:
(i) Each hour for which an Employee is paid, or entitled to
payment, by an Employer, for the performance of duties for the Employer;
(ii) Each hour for which an Employee is paid, or entitled to
payment [IF APPROVED LEAVE OF ABSENCE WE DON'T CARE IF THEY GET PAID], by an
Employer on account of a period of time during which no duties are performed
due to vacation, holiday, illness,
6
incapacity (including disability), layoff, jury duty, military duty or leave of
absence. No more than 501 Hours of Service will be credited under this
paragraph for any single continuous period (whether or not such period occurs
in a single computation period). Hours of Service under this paragraph will be
calculated and credited pursuant to section 2530.200b-2 of the Department of
Labor Regulations which are incorporated herein by this reference;
(iii) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer. These hours will be
credited to the Employee for the Year of Service or Plan Years to which the
award or agreement pertains rather than the Year of Service or Plan Year in
which the award, agreement or payment is made;
(iv) In addition to service with an Affiliate, Hours of Service
will also be credited for any individual considered an employee for purposes of
this Plan under section 414(n) of the Code;
1.22 Investment Fund. A portion of the Trust Fund which is
separately invested, as provided in Section 4.4.
1.23 Matched Contributions. (a) For periods prior to January 1,
1984, "Employee Contributions" (as that term was defined in the Plan
immediately prior to January 1, 1984) and (b) for periods on or after January
1, 1984, the aggregate Pre-Tax Contributions and Post-Tax Contributions to a
Participant's Basic Account for any month not in excess of six percent (6%) of
the Participant's Compensation for that month.
1.24 Matching Contributions. (a) "Employer Contributions" (as that
term was defined in the Plan immediately prior to January 1, 1984) made under
the Plan for periods prior to January 1, 1984 and (b) contributions made by an
Employer under Section
7
3.6 of this Plan for months ending after December 31, 1983, based on the amount
of Matched Contributions made for or by the Participant for any such month.
1.25 Matching Contributions Account. A separate account maintained
for each Participant which reflects his share of the Trust Fund attributable to
Matching Contributions. The Matching Contributions Account shall consist of two
sub-accounts: the Pre-IPO Matching Contributions Account and the Post-IPO
Matching Contributions Account.
1.26 `96 IPO. The date of the 1996 initial public offering of the
Class A common stock of Revlon, Inc., which for purposes of this Plan shall be
deemed to be March 1, 1996.
1.27 Normal Retirement Age. A Participant's sixty-fifth (65th)
birthday.
1.28 Participant. Any present Eligible Employee who has become a
Participant in this Plan in accordance with Article 2 or Article 23, and any
former Eligible Employee who (or whose Beneficiary) has an undistributed
Account under the Plan.
1.29 Participation Agreement. An agreement by an Eligible Employee
in an Appropriate Form (a) to reduce his cash base pay in order to share in
Pre-Tax Contributions under the Plan, as provided in Section 3.1, and/or (b) to
make Post-Tax Contributions to the Plan, in accordance with the provisions of
Section 3.2.
1.30 Plan. The Revlon Employees' Savings, Investment and Profit
Sharing Plan.
1.31 Plan Year. January 1 through December 31.
8
1.32 Post-IPO Matching Contributions. Matching Contributions which
are attributable to payroll periods ending on or after the first day of the
calendar month coincident with or next following the date of the `96 IPO.
1.33 Post-IPO Matching Contributions Account. A separate
sub-account maintained for each Participant which reflects his share of the
Trust Fund attributable to Post-IPO Matching Contributions made on behalf of
such Participant.
1.34 Post-Tax Contributions. Basic Contributions made by a
Participant in accordance with the provisions of Section 3.2.
1.35 Post-Tax Contributions Account. A subaccount of a
Participant's Basic Account which reflects his share of the Trust Fund
attributable to his (a) Post-Tax Contributions and (b) Employee Contributions
(as that term was defined in the Plan immediately prior to January l, 1984) for
periods prior to 1984.
1.36 Pre-IPO Matching Contributions. Matching Contributions which
are attributable to payroll periods ending before the first day of the calendar
month coincident with or next following the date of the `96 IPO.
1.37 Pre-IPO Matching Contributions Account. A separate sub-account
maintained for each Participant which reflects his share of the Trust Fund
attributable to Pre-IPO Matching Contributions made on behalf of such
Participant.
1.38 Pre-Tax Contributions. Basic Contributions made by an Employer
for the benefit of a Participant in accordance with the provisions of Section
3.1.
1.39 Pre-Tax Contributions Account. A sub-account of a
Participant's Basic Account which reflects his share of the Trust Fund
attributable to his Pre-Tax Contributions.
9
1.40 Profit Sharing Contributions. For Plan Years beginning on and
after January 1, 1997, contributions made by a Profit Sharing Employer under
section 23.2 of this Plan.
1.41 Profit Sharing Contributions Account. A separate account
maintained for each Participant eligible under Article 23 of this Plan which
reflects his share of the Trust Fund attributable to Profit Sharing
Contributions.
1.42 Profit Sharing Employers. The Company and its subsidiaries and
affiliates listed on Schedule B of this Plan which indicates the group of
Employers initially eligible to make Profit Sharing Contributions and any other
corporation, partnership or other entity which has elected to become a Profit
Sharing Employer with the approval of the Board of Directors..
1.43 Reemployment Date. The date on which an employee first
completes an Hour of Service after a Termination of Employment.
1.44 Savings Fund. The Investment Fund described in Section 4.3.1.
1.45 Segregated Account. A separate account maintained for a
Participant which reflects his share of the Trust Fund attributable to his
prior participation in another plan from which assets were transferred to this
Plan.
1.46 Service. Subject to Sections 2.2 and 5.3, the aggregate of the
following:
1.46.1 Each period from an employee's Employment Date (or
Reemployment Date) to his next Termination of Employment, and
10
1.46.2 If any employee shall perform an Hour of Service
within twelve (12) months of his Termination of Employment, the period
from such Termination of Employment to such Hour of Service.
Service shall be measured in whole years and fractions of a year in
months. Any fraction of a month remaining shall be rounded up to the nearest
whole month.
1.47 Severance Period. Each period from an employee's Termination
of Employment to his next Reemployment Date.
1.48 Spouse. A Participant's legal spouse. A former spouse will be
treated as the Participant's spouse to the extent provided in a qualified
domestic relations order (as defined in section 414(p) of the Code).
1.49 Spousal Consent. A written consent, on the Appropriate Form,
by a Participant's Spouse to an election, Beneficiary designation or similar
action by the Participant which meets the requirements of section 417(a)(2) of
the Code. If the Committee is satisfied that such Spousal Consent cannot be
obtained because the Spouse cannot be located, or because of other
circumstances which may be permitted under applicable law, Spousal Consent
shall be deemed to have been given. Any consent or deemed consent with respect
to a Spouse shall be effective only with respect to such Spouse. A consent that
permits designations by the Participant without any requirement of further
consent by such Spouse must acknowledge that the Spouse has the right to limit
consent to a specific beneficiary, and a specific form of benefit where
applicable, and that the Spouse voluntarily elects to relinquish either or both
of such rights. A revocation of a prior waiver may be made by a Participant
without the consent of the Spouse at any time before the commencement of
benefits.
11
1.50 Supplemental Investment Fund. The Investment Fund or Funds
described in Section 4.4.2.
1.51 Taxable Year. A taxable year of an Employer (or its
predecessor) applicable for Federal income tax purposes.
1.52 Termination of Employment. An Employee's ceasing to be
employed by an Employer or Affiliate for any reason (including, without
limitation, death, disability, quit, discharge, layoff, retirement, resignation
or entrance into military service); provided, however, that:
1.52.1 If an Employee is transferred to employment with
another Employer or Affiliate or a series of Employers or Affiliates, he
shall not be deemed to have terminated employment for purposes of the
Plan until such time as he is employed neither by any Employer nor by any
Affiliate.
1.52.2 If an Employee leaves employment with an Employer or
Affiliate to enter into military service with the Armed Forces of the
United States, he shall not be deemed to have terminated employment if
(a) the Employee has reemployment rights under applicable law throughout
the entire period of such service, (b) upon discharge from such service
he retains such reemployment rights (determined after taking into account
the terms of such discharge), and (c) he returns to the employ of an
Employer or Affiliate within ninety (90) days after the date of his
completion of such service (or within such longer period during which his
reemployment rights are protected by law). If the requirements of this
Section 1.49 are not met he shall be deemed to have terminated employment
as of his last day of employment prior to the date of entry into such
service.
12
References in the Plan to an individual's Termination of
Employment, termination or being terminated shall have the meaning ascribed to
Termination of Employment as provided in this Section 1.49. For purposes of
applying the provisions of Section 9.2.4, a Participant shall not be deemed to
have terminated employment unless he has incurred a "separation from service"
within the meaning of section 401(k) of the Code.
1.53 Trust Agreement. The trust agreement or agreements referred
to in Article 12.
1.54 Trust Fund. All of the assets at any time held under the Plan
by the Trustee as provided for in Article 12.
1.55 Trustee. The corporation or corporations, individual,
individuals, or combination thereof which may at any time be acting as trustee
or trustees under the Trust Agreement.
1.56 Unmatched Contributions. With respect to any monthly Pre-Tax
Contributions made by an Employer for the benefit of a Participant and/or
Post-Tax Contributions made by a Participant, which when aggregated are in
excess of six percent (6%) of the Participants' Compensation for such month.
1.57 Valuation Date. The last day of a calendar month, or any other
date or dates so designated by the Administrative Committee in a uniform and
nondiscriminatory manner. Effective July 1, 1993, the plan administration was
simplified and enhanced by allowing investment in Investment Funds comprised of
publicly traded mutual funds that allow for daily valuations and withdrawals.
13
1.58 Value. Except as otherwise expressly set forth in the Plan, as
of any date, the value of a Participant's interest in any Investment Fund shall
be determined on a reasonable and consistent basis by the Administrative
Committee or its agent designated for the determination of the value of such
interest.
14
ARTICLE 2
Participation
2.1 Participation Rules Effective January 1. 1996.
2.1.1 Continuing Participation. An individual who was a
Participant in the Plan on December 31, 1995 shall continue as a
Participant in the Plan if he still has an undistributed Account as of
such date.
2.1.2 Participation Based on Eligible Employment After 1995.
An Employee who was not a Participant in the Plan on December 31, 1995
may elect to become a Participant on any Entry Date coincident with or
next following the day on which he meets both of the following
requirements: (i) he has completed at least one Year of Service, and (ii)
he is an Eligible Employee. For these purposes, an Eligible Employee
shall be deemed to have completed a Year of Service if he is credited
with 1,000 Hours of Service during the twelve month period starting on
his Employment Date or during any Plan Year which begins after his
Employment Date.
Effective for Plan Years beginning on and after January 1,
1997 an Employee may also become a Participant if he meets the
eligibility requirements of Article 23, but only for purposes of being
eligible to receive Profit Sharing Contributions.
2.1.3 Special Transition Rule. If an Employee was actively
employed on December 31, 1995 and would be prevented from becoming a
Participant in 1996 because of the foregoing one Year of Service
requirement, he or she may nevertheless elect to become a Participant on
any Entry Date in 1996 if
15
he or she has both completed at least five-hundred (500) Hours of Service
within any six month consecutive period ending on such Entry Date and is
employed as an Eligible Employee on such Entry Date. Effective January 1,
1997, the service requirement set forth in Section 2.1.2 shall apply to
each Employee unless the individual had theretofore satisfied the
requirements for participation under this Section 2.1.3.
2.1.4 Determination of Hours of Service. Hours of Service
shall be determined in accordance with Section 1.21; provided, however,
that in determining the Hours of Service to be credited to an Employee an
Employer may either actually count the Hours of Service to be credited to
each of its Employees or such Employer may apply the following
equivalency method:
2.1.4.1 Salaried Employees. Any salaried Employee who would
be required to be credited with at least one Hour of Service in any month
shall be credited with one-hundred ninety (190) hours for such month.
2.1.4.2 Hourly Paid Employees. In the case of hourly paid
Employees the Employer shall determine the number of Hours of Service by
dividing the Employee's total earnings for the applicable 12-month
computation period by his lowest hourly rate of pay during the relevant
computation period, provided, however, that for any such Employee for
whom the method specified in this subsection 2.1.4.2 is applied eight
hundred seventy (870) Hours of Service shall be deemed to be the
equivalent of one thousand (1,000) Hours of Service.
2.2 Re-Employment. If a Participant or other Employee who has
terminated employment shall be rehired as an Eligible Employee, he shall be
eligible to
16
commence or resume participation under the Plan on the later of (a) the date of
rehire or (b) the first Entry Date on which he could have become a Participant
if his prior employment by the Employer or Affiliate had been in a position
eligible for participation in the Plan.
2.3 Transfer to Eligible Employment. If an Employee transfers to
employment as an Eligible Employee from employment with an Affiliate or from
employment with an Employer other than as an Eligible Employee, he shall become
a Participant on the later of (a) the date of transfer or (b) the first Entry
Date on which he could have become a Participant if his prior employment by the
Employer or Affiliate had been in a position eligible for participation in the
Plan.
Notwithstanding the foregoing, an Employee who transfers to
employment as an Eligible Employee from employment with an Affiliate shall
become eligible to receive a Profit Sharing Contribution upon satisfying the
eligibility requirements of Article 23 of this Plan.
2.4 Completion of Participation Agreement. Except as otherwise
provided herein, in order to receive the benefit of Pre-Tax Contributions or to
make Post-Tax Contributions a Participant must complete and return the
Participation Agreement to the Administrative Committee not later than the
fifteenth (15th) day of the month prior to such date (or within such other
period as the Administrative Committee may prescribe). If a rehired Eligible
Employee, or an Eligible Employee transferred from ineligible employment,
commences or resumes participation on his date of rehire (or date of transfer
to employment as an Eligible Employee) pursuant to clause (a) of Section 2.2
(or of Section 2.3), he shall become eligible to share in or make contributions
under Article 3
17
effective as of the first day of the first month following his rehire or
transfer, upon execution and filing of an appropriate Participation Agreement
at least fifteen (15) days prior to such "first day" (or within such other
period as the Administrative Committee may prescribe). If a Participant fails
to complete and return a Participation Agreement within the required time set
forth above, he may begin to share in or make contributions under Section 3.1
of Article 3 as of any subsequent Entry Date as of which he is an Eligible
Employee, by completing and returning such a Participation Agreement to the
Administrative Committee not later than the fifteenth (15th) day of the month
prior to such Entry Date (or within such other period as the Administrative
Committee may prescribe).
2.5 Suspension on Transfer to Ineligible Employment. If a
Participant ceases to be an Eligible Employee but continues in the employ of an
Employer or Affiliate, his Participation Agreement shall be suspended. No Basic
or Matching Contributions shall be made for a Participant with respect to the
period of such suspension. If and when the suspended Participant again becomes
an Eligible Employee, he may execute a new Participation Agreement, to be
effective as provided in Section 2.4.
2.6 Transfers Between Employers. If a Participant transfers from
employment as an Eligible Employee with one Employer to employment as an
Eligible Employee with another Employer, his Participation Agreement shall be
deemed to apply to his second Employer in the same manner as it applied to the
prior Employer.
2.7 Right of Discharge Reserved. The establishment of the Plan
shall not be construed to confer upon a Participant any legal right to be
retained in the employ of any Employer or Affiliate, or to give any Employee,
Spouse, Beneficiary or estate of any Employee, or any other person any right to
any share of the Trust Fund or payment
18
whatsoever, except to the extent of the benefits provided for hereunder. All
Employees shall remain subject to discharge to the same extent as if the Plan
had never been adopted and may be treated without regard to the effect such
treatment might have upon them under the Plan. Nothing in the Plan shall be
deemed to be an agreement, consideration, inducement or condition of
employment.
19
ARTICLE 3
Basic and Matching Contributions
Basic Contributions and Matching Contributions shall be made in
accordance with the following provisions of this Article 3:
3.1 Pre-Tax Contributions. In order to share in contributions under
this Section 3.1, a Participant must complete the Participation Agreement
referred to in Section 1.27 and elect to reduce the cash Compensation otherwise
payable to him in any month by 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%,
12%, 13%, 14%, 15%, or 16%, whichever he shall specify in such Participation
Agreement; provided, however, that for any Plan Year the Administrative
Committee may, for any subsequent Plan Year, establish a maximum percentage of
16% or some lesser percentage, but not less than 6%; and provided, further,
that the Administrative Committee may allow all Participants, or one or more
selected groups of Participants, to elect to reduce the cash Compensation
otherwise payable to each of them by a specified dollar amount rather than a
specified percentage of Compensation. No Participant shall be permitted to make
Pre-Tax contributions in any taxable year in excess of limitations provided
under section 402(g) of the Code, as adjusted under section 415(d) of the Code.
The Participant's Employer shall contribute to the Plan, during or as soon as
reasonably practicable after the close of each month, an amount equal to the
elected reduction in the Participant's cash Compensation for that month as
Pre-Tax Contributions to the Pre-Tax Contribution Account of his Basic Account.
3.2 Post-Tax Contributions. In lieu of or in addition to any
reduction in cash Compensation agreed to in accordance with the provisions of
Section 3.1, a
20
Participant may elect in his Participation Agreement to contribute 1%, 2%, 3%,
4%, 5% or 6% of his Compensation for any month to the Plan; provided, however,
for any Plan Year the Administrative Committee may establish a maximum
percentage of up to 16% or some lesser percentage but not less than 6%; and
provided, further, that the Administrative Committee may allow all
Participants, or one or more selected groups of Participants, to elect to
reduce the cash Compensation otherwise payable to each of them by a specified
dollar amount rather than a specified percentage of Compensation.
3.3 Limit on Aggregate Pre-Tax And Post-Tax Contributions. In no
case shall the total amount of Pre-Tax Contributions made pursuant to Section
3.1 and Post-Tax Contributions made pursuant to Section 3.2 exceed an amount,
to be determined by the Administrative Committee but not more than 16% of the
Participant's Compensation for that month.
3.4 Voluntary Suspension. A Participant may voluntarily suspend
either his Pre-Tax Contributions, Post-Tax Contributions or both, effective as
of the first day of the next scheduled payroll period for such Participant, by
filing the Appropriate Form with the Administrative Committee at least fifteen
(15) days prior to the first day of that month (or within such other period as
the Administrative Committee may prescribe). No Basic or Matching Contributions
will be made for or by a Participant with respect to any period for which his
Participation Agreement has been so suspended. An Eligible Employee may
reinstate his Participation Agreement as of any Entry Date after the month in
which his suspension of such agreement became effective, by filing the
Appropriate Form with the Administrative Committee at least fifteen (15) days
before such Entry Date (or within such other period as the Committee may
prescribe).
21
3.5 Change in Contribution Rate. A Participant who has a
Participation Agreement in effect may increase or decrease the amount of his
Pre-Tax and/or Post-Tax Contributions within the limits specified in Sections
3.1, 3.2 and 3.3, effective as of any Entry Date by filing the Appropriate Form
with the Administrative Committee not later than the fifteenth (15th) day of
the month prior to such Entry Date (or within such other period as the
Administrative Committee may prescribe).
3.6 Matching Contributions--Amount. Each Participant's Employer
shall make a contribution to the Plan for each calendar month, on behalf of
each Participant who has a Participation Agreement in effect for such month, in
cash if the contribution is a Pre-IPO Matching Contribution or in cash or
Company Stock if the contribution is a Post-IPO Matching Contribution. The
amount shall be, or in the case of shares shall have a fair market value
(determined as of the last day of such month) equal to, one-half (1/2) of the
Matched Contributions made by or for the benefit of such Participant for such
month, less an allocable portion of any amount forfeited pursuant to Section
5.4 then to be applied to reduce the Employer's contributions. Shares of
Company Stock contributed to the Plan may be treasury shares, authorized but
unissued shares, or any combination of the foregoing. The Company is authorized
to contribute shares of Company Stock to the Plan on behalf of any other
Employer, and to the extent that the Company makes any such contribution, such
Employer shall reimburse the Company for the value thereof.
3.7 Matching Contributions--Payment. The contributions required for
any month under Section 5.3 shall be paid to the Trustee after the first day of
such month, but in no case later than as soon as reasonably practicable after
the close of such month.
22
3.8 Limit on Contributions. Notwithstanding any other provision in
this Plan to the contrary, all contributions for any Plan Year on behalf of a
Participant who is a Highly Compensated Employee shall be reduced if and to the
extent necessary in order that the requirements of Article 17 and Sections 20.2
and 20.6 are met.
3.9 Determination by Administrative Committee. If the
Administrative Committee shall conclude that a reduction in the Pre-Tax
Contributions made for any Participant is or may be necessary or advisable in
order to comply with the limitations of Section 3.8 for any Plan Year, the
maximum percentage allowable for Pre-Tax Contributions under Section 3.1 shall
be reduced in accordance with the direction of the Administrative Committee,
and the Committee may, in its sole discretion, take the following action:
3.9.1 The Committee may direct that the Participation
Agreement of each Participant affected by such determination be modified
accordingly, with respect to Pre-Tax Contributions not yet paid into the
Plan, so as to (i) reduce the elected percentage (or dollar amount, if
applicable) of payroll reduction and (ii) to recharacterize the
Participant's election in accordance with Section 3.1.
3.9.2 The Committee shall notify each affected Participant
and his Employer of any such reduction or recharacterization. Any such
reduction or recharacterization may apply either to all Participants, to
a relevant group of Participants or to individual Participants determined
by the Committee, whichever the Administrative Committee shall determine
in its sole discretion. If amounts are not paid into the Plan as Pre-Tax
Contributions or Post-Tax Contributions in accordance with any
determination pursuant to this Section 3.9, such amounts
23
shall instead be distributed to the affected Participant in accordance
with Article 20.
3.10 Contributions May Not Exceed Amount Deductible. In no event
shall Employer Contributions under this Article 3 or under Article 23 for any
taxable year of an Employer exceed the maximum amount (including amounts
carried forward) deductible for that taxable year under section 404(a)(3) of
the Code. In the case of an Employer that is a joint venture between two or
more corporations or other entities, the limitation under this Section 3.10
shall be determined by reference to the applicable deductible limit of each
corporation or other entity which is entitled to deduct its distributable share
of such contributions for Federal income tax purposes.
3.11 Contributions Conditioned on Deductibility. Notwithstanding
any other provision of the Plan, each contribution by an Employer under this
Article 3 and Article 23 is conditioned on the deductibility of such
contribution under section 404 of the Code, and on the initial qualification of
the Plan under section 401(a) of the Code.
3.12 Adjustment of Contributions Based on Limit on Annual
Additions. Notwithstanding any of the foregoing provisions to the contrary, a
Participant may, at such time and in such manner as the Administrative
Committee may prescribe, suspend or change the amount of reduction in his cash
Compensation or the amount of his Post-Tax Contributions provided for under any
applicable Participation Agreement in order to avoid an allocation of
contributions to his Account which would violate the limitations of Article 17.
24
ARTICLE 4
Accounts and Designation of Investment Funds
4.1 Basic Account. A Basic Account shall be maintained for each
Participant in which shall be entered to separate subaccounts: (a) the amount
of Pre-Tax Contributions made by his Employer as a result of his election to
reduce his cash Compensation as described in Section 3.1 and (b) the amount of
Post-Tax Contributions made by the Participant for periods after 1983 in
accordance with the provisions of Section 3.2 and his Employee Contributions
(as that term was defined in the Plan immediately prior to January 1, 1984) for
periods prior to 1984.
4.2 Pre-IPO Matching Contributions Account. A Pre-IPO Matching
Contributions Account shall be maintained for each Participant in which shall
be entered the amount of Pre-IPO Matching Contributions made for his benefit
under Section 3.6.
4.3 Post-IPO Matching Contributions Account. A Post-IPO Matching
Contributions Account shall be maintained for each Participant in which shall
be entered the amount of Post-IPO Matching Contributions made for his benefit
under Section 3.6.
4.4 Profit Sharing Contributions Account. A Profit Sharing
Contributions Account shall be maintained for each Participant under Article 23
of this Plan in which shall be entered the amount of Profit Sharing
Contributions made for his benefit pursuant to Article 23.
4.5 Investment Funds. The Investment Committee shall direct that
the Trust Fund be subdivided into three or more Investment Funds which shall be
separately invested, which shall include but need not be limited to the
following:
25
4.5.1 Savings Fund. A Savings Fund which shall be invested
and reinvested in interest-bearing and/or similar securities, which may
include bonds, short and medium term notes, or other obligations,
certificates of deposit, commercial paper, or part interests therein,
obligations issued or guaranteed as to interest and principal by the
United States Government or any instrumentality or agency thereof, a
guaranteed investment contract or contracts between the Trustee and an
insurance company or companies containing such terms and conditions with
respect to payment of principal and interest as shall be agreed upon by
the parties to such contract or contracts, and/or any common, collective
or commingled trust fund which is invested virtually exclusively in
property of the kind specified in this Section 4.5.1. In the discretion
of the Investment Committee, the Savings Fund shall be subdivided into
such two or more sub-funds as the Investment Committee shall specify,
each to be separately invested in property of the kind described in this
Section 4.5.1 having such characteristics as the Investment Committee
shall specify. Except as the Investment Committee shall otherwise direct
each such sub-fund shall not constitute a separate Investment Fund for
purposes of this Plan.
4.5.2 Supplemental Investment Fund. One or more Supplemental
Investment Funds which shall be invested and reinvested principally in
securities or other property, real or personal, directly or through the
medium of any insurance company, separate account, any mutual fund or
family of mutual funds, or any common, collective or commingled trust
fund which is invested principally in property of any kind. In the
discretion of the Investment Committee, any Supplemental Investment Fund
shall be subdivided into such two or more subfunds
26
as the Investment Committee shall specify, each to be separately invested
as the Investment Committee shall specify. Except as the Investment
Committee shall otherwise direct each such sub-fund shall constitute a
separate Investment Fund for purposes of this Plan.
4.5.3 Company Stock Fund. Company Stock Fund invested solely
in Company Stock as more fully described in the Trust Agreement, except
that pending investment or to the extent necessary to effect
distributions (or to meet other administrative requirements of the Plan),
amounts held in the Company Stock Fund may be held in cash or such other
short term investments as the Investment Committee deems suitable.
Notwithstanding any other provision of the Plan, the Post-IPO Matching
Contribution Account and the Profit Sharing Contributions Accounts are
the only Plan Accounts that may be invested in the Company Stock Fund.
4.6 Direction as to Basic Contributions. A Participant may, by
giving notice on the Appropriate Form or as the Administrative Committee may
otherwise prescribe and within such time as the Administrative Committee may
prescribe, designate the proportion of the future Basic Contributions made for
his behalf for periods from and after January 1, 1984, which shall be allocated
to and invested in any Investment Fund (other than the Company Stock Fund),
provided, however, that the percentage of such contributions to be invested in
any such Fund shall be either 10%, 20%, 30%, 40%, 50%, 60%, 70%, 80%, 90% or
100% thereof; provided, further, however, that from and after July 1, 1993,
such percentage shall be any whole percentage as approved by the Administrative
Committee and designated by the Participant. Such designation shall apply
27
equally to his Matched Contributions and Unmatched Contributions, if any. Any
election under this Section 4.5 shall continue in effect until changed by a new
designation. A Participant may change his election as of any Entry Date, by
filing a new designation on the Appropriate Form with the Administrative
Committee or as the Administrative Committee may otherwise prescribe not later
than the fifteenth (15th) day of the month prior to such date or within such
other period as the Administrative Committee may prescribe. The Administrative
Committee may refuse to accept any Participation Agreement that is deficient in
respect of any election as to the designation of the investment of Basic
Contributions; or, the Administrative Committee may accept such deficient form
provided, however, that in such case all of the Participant's Basic
Contributions shall be deemed to have been designated by the Participant for
investment in the Savings Fund.
4.7 Matching Contributions.
4.7.1 General Rule. All Pre-IPO Matching Contributions shall
be invested in the same Investment Funds (and in the same proportions)
which the Participant has designated under Section 4.6 with respect to
his Basic Contributions, together with all dividends and other
distributions resulting from such investments. All Post-IPO Matching
Contributions shall be invested in the Company Stock Fund, without regard
to the investment direction of the Participant, together with all
dividends and other distributions resulting from such investments.
4.7.2 Special Rule for Post-IPO Matching Contributions and
Profit Sharing Contributions. If the Investment Committee determines that
legal or
28
contractual restrictions and/or blockage and/or other market
considerations would make the Plan's acquisition or sale of Company Stock
from or to the public markets illegal, impracticable or inadvisable, the
Investment Committee shall direct the Trustee to suspend all future
acquisitions of Company Stock in the Company Stock Fund until further
notice. Subsequent Matching and Profit Sharing Contributions shall be
received in the Company Stock Fund nevertheless, and shall be invested in
cash or such other short term investments as the Investment Committee
deems appropriate, pending the determination contemplated in the next
sentence. The Investment Committee shall promptly determine whether
further investments in Company Stock can be safely resumed or if such
further investments should be suspended indefinitely. If the Investment
Committee directs indefinite suspension, all future Matching and Profit
Sharing Contributions made on a Participant's behalf, and all prior
contributions then held on the Participant's behalf in cash or short term
investments pursuant to this subsection, together with all dividends and
other distributions resulting from such investments, shall be allocated
to and invested in the same Investment Funds (and in the same
proportions) which the Participant has designated under Section 4.5 with
respect to his Basic Contributions.
4.7.3 Redesignation of Amounts in Company Stock Fund. A
Participant who has attained age 65 or has attained age 55 and has 10
years of Service, may, by giving notice on the Appropriate Form to the
Administrative Committee, or as the Administrative Committee may
otherwise prescribe, direct the Trustee to transfer all or a portion of
his interest in the Company Stock Fund
29
to any other Investment Fund and to have the amount transferred invested,
in the future, only in Investment Funds other than the Company Stock
Fund. A Participant shall be permitted to make only two elections under
this Section 4.6.3, each of which shall be irrevocable.
4.8 Reallocation Permitted. A Participant may elect to reallocate
the investment of his Accounts (other than his Post-IPO Matching and Profit
Sharing Contributions Accounts) among the Investment Funds (other than the
Company Stock Fund); provided, however, that reallocation among the Investment
Funds shall only be made in increments of 10% of the value of the Participant's
aggregate Accounts, or any other increments that the Administrative Committee
in its sole discretion shall prescribe. Each Participant may reallocate his
Accounts as of the end of any month, or on a more frequent basis as the
Administrative Committee shall prescribe, based on the balance of such
Participant's Accounts as of the end of such month (or such other date), as
determined after giving effect to all other adjustments made to such Account as
of that date. Any such reallocation shall be effected in such manner permitted
by the Administrative Committee not later than the fifteenth (15th) day of such
month (or within such other period as the Administrative Committee shall
prescribe). Each Participant shall be permitted to make such changes as
frequently as the Administrative Committee in its sole discretion shall
prescribe, and shall be permitted to make at least one such change in any
three-month period.
4.9 Account Adjustments.
4.9.1 Subject to the provisions of Section 4.9.2, as of each
Valuation Date the Administrative Committee shall adjust appropriately
each
30
Participant's Accounts to reflect, with respect to each Investment Fund
in which each such Account is invested, (i) his proportionate share
(based on the prior value of his Account in the applicable Investment
Fund) of income, expenses (if any) payable from the Trust Fund, and any
increase or decrease in the fair market value of Trust Fund assets since
the preceding Valuation Date, (ii) any contributions made on his behalf,
including for this purpose contributions made after such Valuation Date
but credited as of such Valuation Date, (iii) forfeiture allocations in
lieu of Matching Contributions, (iv) withdrawals, (v) distributions and
(vi) transfers between Investment Funds. For this purpose:
4.9.1.1 Allocation of Basic Contributions. Basic
Contributions for the benefit of a Participant made during any month
shall be credited to his Basic Account as of the day immediately
following the date on which such contribution was made.
4.9.1.2 Allocation of Matching Contributions. Matching
Contributions (and forfeitures in lieu thereof) made on behalf of a
Participant made during any month shall be credited to his Pre-IPO
Matching Contributions Account or Post-IPO Matching Contributions
Account, pursuant to Sections 4.2 and 4.3 hereof, as of the day
immediately following the date on which such contribution was made.
4.9.1.3 Adjustment for Withdrawals. Withdrawals from a
Participant's Accounts shall be charged against his Basic, Matching and
Profit Sharing Contributions and Segregated Accounts as of the date on
which such withdrawal is effective pursuant to Article 7 or 8.
31
4.9.2 Notwithstanding any other provision of the Plan, to the
extent that Participants' Accounts are invested in mutual funds or other assets
for which daily pricing is available ("Daily Pricing Media"), all amounts
contributed to the Trust Fund will be invested at the time of their actual
receipt by the Daily Pricing Media, and the balance of each Account shall
reflect the results of such daily pricing from the time of actual receipt until
the time of distribution. Participant investment elections and changes made
pursuant to the Plan shall be effective upon receipt by the Daily Pricing
Media, and Basic Contributions and Matching Contributions (and forfeitures in
lieu thereof) made on behalf of a Participant to the extent invested in Daily
Pricing Media shall be credited to such Participant's Basic Contributions or
Matching Contributions Account, as appropriate, on the business day such
contributions are so invested. References elsewhere in the Plan to the
investment of contributions "as of" a date other than that described in this
Section 4.9.2 shall apply only to the extent, if any, that assets of the Trust
Fund are not invested in Daily Pricing Media.
4.10 Unit Accounting for the Company Stock Fund. The Committee may,
for administrative purposes, establish unit values for the Company Stock Fund
(or any portion thereof) and maintain the accounts setting forth each
Participant's interest in the Company Stock Fund (or portion thereof), in terms
of such units, all in accordance with such rules and procedures as such
Committee shall deem to be fair, equitable and administratively practicable. In
the event that unit accounting is thus established for the Company Stock Fund
(or portion thereof), the value of a Participant's interest in the Company
Stock Fund (or portion thereof) at any time shall be an amount equal to the
then
32
value of a unit in such Company Stock Fund (or portion thereof) multiplied by
the number of units then credited to the Participant.
4.11 Correction of Error. The Administrative Committee may adjust
the Accounts of any or all Participants and Beneficiaries in order to correct
errors or rectify omissions, in such manner as such Committee believes will
best result in the efficient administration of the Plan on an equitable and
nondiscriminatory basis.
4.12 Allocation Shall Not Vest Title. The fact that allocation is
made and amounts are credited to an Account of a Participant shall not vest in
such Participant any right, title or interest in or to any assets except at the
time or times and upon the terms and conditions expressly set forth in this
Plan, nor shall the Trustee be required to segregate physically the assets of
the Trust Fund by reason thereof.
4.13 Statement of Accounts. At least twice within each calendar
year, the Administrative Committee shall distribute to each Participant a
statement showing the balance in each of his Accounts. Such statement may be
distributed, in the discretion of the Administrative Committee, in connection
with or as a part of a general statement of employee benefits given to
Employees on a regular or periodic basis.
4.14 Special Rules for the Company Stock Fund. All cash
contributions, cash dividends and other cash increments of any kind received by
the Trustee in the Company Stock Fund from time to time shall be applied as
soon as reasonably practicable to the purchase of shares of Company Stock.
Pending any such investment in Company Stock, the Trustee may make temporary
investments in short-term fixed income obligations. Any net income realized
from such temporary investments shall be applied to
33
the purchase of Company Stock to be allocated among Participant's Accounts in
the same manner as the assets temporarily applied to such investments.
34
ARTICLE 5
Vesting
5.1 Vesting.
5.1.1 Matching Contributions. A Participant's entire Matching
Contributions Account shall be fully vested on the earliest of (a) Normal
Retirement Age, (b) Termination of Employment on account of Disability,
or (c) death. Prior to the occurrence of any of the foregoing events, a
Participant shall be vested in his Matching Contribution Account as
follows:
With respect to Matching Contributions made for any Plan Year
commencing on or after January 1, 1976 (and dividends and other
increments derived directly or indirectly therefrom), at the rate of one
third for each January l following the close of such Plan Year and
occurring on or before such Participant's Termination of Employment;
provided, that effective January 1, 1989, all such Matching Contributions
shall be vested one hundred (100) percent after the Participant completes
five (5) years of Service.
In the case of a Participant who has five (5) or more
consecutive 1year Breaks in Service all Service after such Breaks in
Service will be disregarded for the purpose of vesting the Matching
Contributions Account balance that accrued before such Breaks in Service.
Such Participant's pre-Break Service will count in vesting his post-Break
Matching Contributions Account balance only if either:
(i) such Participant has any nonforfeitable interest in such
account balance at the time of Termination of Employment; or
35
(ii) upon returning to Service the number of consecutive
1-year Breaks in Service is less than the number of years of Service.
5.1.2 Basic Account and Segregated Account. A Participant's
interest in his Basic Account and Segregated Account shall at all times
be fully vested, and shall not be subject to forfeiture pursuant to any
provision of this Plan.
5.2 Forfeiture of Non-Vested Account Balances upon Termination of
Employment. If, upon Termination of Employment, a Participant's vested Account
balance is less than or equal to $3,500 (or such other amount prescribed by
applicable law), the Participant shall receive a distribution of the vested
portion of such Accounts as set forth in Article 9, and the non-vested portion
will be treated as a forfeiture. If on Termination of Employment the balance of
the Participant's vested Accounts is greater than $3,500 (or such other amount
prescribed by applicable law), and the Participant elects to receive the
balance of his vested Accounts, the non-vested portion will be treated as a
forfeiture under Section 5.4. For purposes of this Section 5.2 if the value of
a Participant's vested Account balance is zero, the Participant shall be deemed
to have received a distribution of such vested account balance upon Termination
of Employment.
5.3 Reinstatement of Forfeited Balances. If subsequent to the
Termination of Employment of a Participant such Participant is rehired by an
Employer or any Affiliate prior to the end of the Plan Year in which his
employment was terminated or prior to the time when such Participant has
incurred 5 or more consecutive 1-year Breaks in Service pursuant to Sections
5.1 or 23.7, any non-vested balance in such Participant's Matching
Contributions or Profit Sharing Contributions Account, as the case may be,
shall be restored to him as follows:
36
5.3.1 If not previously forfeited, such non-vested balance
shall not be forfeited, except as may be otherwise provided for in the
event of his subsequent Termination of Employment or pursuant to Section
9.3 hereof.
5.3.2 If previously forfeited, such balance shall be restored
out of contributions for the month of rehire made by the Employer
formerly employing such Participant, and such Employer shall make
Matching and Profit Sharing Contributions for such month in amounts
sufficient to effect such restoration.
5.4 Application of Forfeitures. All forfeitures for a Plan Year
shall be applied, first to reduce future Matching Contributions and then, if
any forfeitures remain, allocated as if they were Profit Sharing Contributions
made for such Plan Year.
37
ARTICLE 6
Normal Withdrawals During Employment
6.1 Withdrawal Options. No more frequently than the Administrative
Committee may allow, and subject to such procedures as the Administrative
Committee may prescribe, a Participant who is an Employee may elect, with the
approval of the Administrative Committee, by filing the appropriate form as
directed by the Administrative Committee, to withdraw (a) all or any portion of
his Post-Tax Contribution Account, (b) if the maximum withdrawal permitted
under clause (a) has been made, all or any portion of his vested Pre-IPO
Matching Contributions Account and (c) if the maximum withdrawal under clause
(b) has been made, all or any portion of his vested Post-IPO Matching
Contributions Account which have been in the Plan for three (3) consecutive
January 1sts, (d) if the maximum withdrawal under clause (c) has been made, all
or any portion of his Segregated Account, and (e) if the maximum withdrawal
under clause (d) has been made, all or any portion of his vested Profit Sharing
Contributions Account which has been in the Plan for at least two (2)
consecutive January 1sts.
6.2 Values. The amount withdrawn pursuant to Section 6.1 shall be
based on the Value of the Participant's Accounts as of the Valuation Date on
which the Appropriate Form filed by the Participant was received by the
Administrative Committee or its designee for a withdrawal effective prior to
July 1, 1993, and shall be based on the Value of the Participant's Accounts as
of the withdrawal date for a withdrawal effective on or after July 1, 1993.
6.3 No Replacement of Withdrawn Amounts. A Participant may not
replace any amounts withdrawn hereunder.
38
6.4 Payment of Withdrawals. Any amounts withdrawn pursuant to this
Article 6 shall be paid or distributed as soon as administratively practicable
after the Valuation Date as of which the withdrawal election is effective.
Except as the Administrative Committee shall otherwise direct, all withdrawals
shall be paid in cash.
6.5 Accounts to Which Withdrawals to be Charged. Any withdrawals
under this Article 6 shall be charged first to a Participant's Post-Tax
Contributions Account and then, after such Account has been exhausted, to his
Pre-IPO Matching Contributions Account, then, after such Account has been
exhausted, to his Post-IPO Matching Contributions Account, then, after such
Account has been exhausted, to his Segregated Account and finally, the vested
portion of his Profit Sharing Contributions Account. No withdrawals may be made
under this Article from a Participant's Pre-Tax Contributions Account.
6.6 Values and Allocation Among Investment Funds. All withdrawals
pursuant to this Article 6 shall be based upon the value of the relevant
Account(s) on the Valuation Date as of which the withdrawal is effective. If
the Participant's Basic Account and Pre-IPO Matching Contributions Account are
invested in more than one Investment Fund, such withdrawal shall be allocated
pro rata among such Funds unless the Administrative Committee shall otherwise
direct. Any amounts withdrawn pursuant to this Article 6 shall be paid to a
Participant in cash as soon as administratively practicable after the Valuation
Date as of which such withdrawal is effective.
6.7 Participant Loans. The Administrative Committee may instruct
the Trustee to make one or more loans to a Participant from the Trust Fund, in
accordance
39
with the terms and conditions of a participant loan program established by such
Committee for the Plan and as may be modified by such Committee from time to
time.
40
ARTICLE 7
Withdrawals for Hardship
7.1 Definition of Hardship. Upon the occurrence of hardship a
Participant who is an Employee may withdraw, effective as of such Valuation
Date as the Administrative Committee shall designate, amounts from his Post-Tax
Contributions Account, the vested portion of his Pre-IPO Matching Contributions
Account and Post-IPO Matching Contributions Account, his Segregated Account,
his Pre-Tax Contributions Account and the vested portion of his Profit Sharing
Contributions Account. For purposes of this Article 7, the term "hardship"
shall mean immediate and substantial financial need arising out of any one or
more of the following:
7.1.1 Expenses or debts incurred or assumed by a Participant,
and not covered by insurance, arising out of an accident to or the death,
illness, disability, or other medical or dental needs of a Participant,
his dependent, or a member of his family,
7.1.2 Sudden and unexpected losses, not covered by insurance,
through casualty, theft or a judgment against Participant or a dependent;
7.1.3 Expenses of education of a Participant, his dependent,
or of a member of his family;
7.1.4 Severe curtailment of income of a Participant due to
reasons beyond his control;
7.1.5 Substantial expenditures required in connection with
a Participant's primary residence; or
41
7.1.6 Any other emergency condition in the financial affairs
of a Participant.
Distribution pursuant to this Section 7.1 shall be made from and
charged to, first, his Post-Tax Contributions Account, second, his Segregated
Account, third, his Pre-IPO Matching Contributions Account, fourth, his
Post-IPO Matching Contributions Account, fifth, his Pre-Tax Contributions
Account, and last, his Profit Sharing Contributions Account except as the
Administrative Committee shall otherwise direct. The withdrawal request shall
be made on the Appropriate Form within such time as the Administrative
Committee may prescribe.
7.2 Distribution Deemed Necessary to Satisfy Financial Need. A
distribution pursuant to this Article 7 shall be deemed necessary to satisfy an
immediate and heavy financial need of an Employee if both of the following
requirements are satisfied:
7.2.1 The distribution is not in excess of the amount of the
immediate and heavy financial need of the Employee (after taking into
account the Employee's other reasonably available resources, based on
such representations or other information as the Administrative Committee
may, in its discretion, request); and
7.2.2 The Employee has obtained all distributions, and all
nontaxable loans currently available under all employee benefit plans
maintained by the Employer, including under this Plan in accordance with
Section 6.7 and the participant loan program thereunder.
42
7.3 Values and Allocation Among Investment Funds. All withdrawals
pursuant to this Article 7 shall be based upon the value of the relevant
Account(s) on the Valuation Date as of which the Administrative Committee
directs the withdrawal to be effective. If the Participant's Basic Account is
invested in more than one Investment Fund, such withdrawal shall be allocated
pro rata among such Funds unless the Administrative Committee shall otherwise
direct. Any amounts withdrawn pursuant to this Article 7 shall be paid to a
Participant in cash (except as the Administrative Committee shall otherwise
direct), as soon as administratively practicable after the Valuation Date as of
which such withdrawal is effective.
7.4 Post-1988 Earnings on Pre-Tax Contributions. Notwithstanding
anything to the contrary in this Article 7, post-1988 earnings on Pre-Tax
Contributions may not be withdrawn on account of financial hardship.
43
ARTICLE 8
Distributions on Termination of Employment
8.1 Distribution on Termination of Employment. Upon a Participant's
Termination of Employment, the entire balance of his vested Accounts shall be
distributed to him or, if he dies prior to distribution, to his Beneficiary.
Such distribution shall be made in accordance with the provisions of Article 9.
Any portion of a Participant's Accounts in which he does not have a vested
interest, in accordance with Section 5.1, at the time of Termination of
Employment shall be forfeited as provided in Section 5.2 and shall be applied
to reduce future Matching and Profit Sharing Contributions.
Notwithstanding the foregoing, a Participant may elect to take
periodic distributions. Such distributions shall be paid not more frequently
than quarterly. The distribution period shall be limited by the requirements of
Plan Section 9.2. Any installments remaining at the Participant's death shall
be paid to the Participant's Beneficiary in accordance with the installment
schedule.
8.2 Valuation. The balance of a Participant's vested Accounts for
purposes of Section 8.1 shall be determined as of the Valuation Date coincident
with or next following the date of his Termination of Employment for a
determination made prior to July 1, 1993, and shall be determined as of the
date of sale of Company Stock, if in fact sold, for a determination made on or
after July 1, 1993.
8.3 Delay of Distributions or Withdrawals.
(a) Notwithstanding any other provision of this Plan, the
Administrative Committee may, in its discretion, defer the making of all or any
part of a distribution or withdrawal to which any person may otherwise be
entitled under this Plan until receipt of a
44
favorable determination letter with respect to the qualification of the Plan
under sections 401(a) of the Code.
(b) Notwithstanding the provisions of Section 8.1, the
Administrative Committee shall not be required to make the distributions
otherwise required under this Article 8 until after filing of the Appropriate
Form by the Participant (or his Beneficiary) with the Administrative Committee;
provided, that the Administration Committee may, in its sole discretion, waive
such filing requirement and proceed to make distribution accordingly.
8.4 30-Day Notice Requirement; Waiver.
8.4.1 30-Day Notice Requirement. Subject to Section 8.4.2, a
distribution under the Plan may not commence less than 30 days after notice (if
applicable) is given to the Participant (or his Beneficiary, if applicable)
pursuant to Section 1.41 l(a)-1 l(c) of the Income Tax Regulations.
8.4.2 Waiver. If a distribution is one to which sections 401(a)(11)
and 417 of the Code do not apply, such distribution may commence less than 30
days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(i) the Administrative Committee clearly informs the Participant
that the Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively
elects a distribution.
45
ARTICLE 9
Payment of Benefits
9.1 In General. Subject to Section 9.5, distribution required upon
Termination of Employment for any reason shall be made promptly following
Termination of Employment by one or more payments within a single Plan Year;
provided that contributions with respect to the Plan Year in which his
employment terminates may be paid in a later year. All Accounts other than
amounts in the Post-IPO Matching and Profit Sharing Contributions Accounts
shall be distributed in cash based on their Value as of the date of sale of
Company Stock, if in fact sold, pursuant to Section 8.2. Amounts in the
Post-IPO Matching and Profit Sharing Contributions Accounts may be distributed
in cash or stock, determined as follows: If the Participant's combined Post-IPO
Matching and Profit Sharing Contributions Accounts is credited with 100 or more
shares of Company Stock, the distribution from such Account for whole shares
shall be made in Company Stock. Payment of partial shares from such Accounts
shall be made in cash. If the Participant's combined Post-IPO Matching and
Profit Sharing Contributions Account is credited with fewer than l00 shares of
Company Stock, the distribution from such Account shall be made entirely in
cash.
9.2 Time of Commencement of Benefits. Notwithstanding any other
provision of the Plan, the following provisions of this Section 9.2 shall be
applicable to all benefit payments:
9.2.1 In General. All distributions under this Plan will be
effected so as to comply with section 401(a)(9) of the Code and the
regulations thereunder, which are hereby incorporated fully by reference.
The aggregate Account balance
46
of a Participant must be distributed or begin to be distributed no later
than the Participant's required beginning date. The required beginning
date for a Participant shall be determined as follows:
(a) General Rule. For Plan Years beginning after December 31,
1987 and prior to January 1, 1998, the required beginning date of a
Participant is the first day of April of the calendar year following the
calendar year in which the Participant attains age 70 1/2. For plan years
beginning on and after January 1, 1998, a Participant (other than a 5%
Owner) may elect to begin to receive distributions of all or part of his
Accounts as of the first day of any month on or after the first day of
April of the calendar year in which the Participant attains age 70 1/2,
but in no event shall a Participant be permitted to defer beginning to
receive distributions to a date later than the first day of April
following the calendar year in which he terminates employment with the
Employer.
(b) Transitional Rule. The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988, shall be
determined in accordance with (i) or (ii) below:
(i) Non-5-percent Owners. The required beginning date of a
Participant who is not a "5-percent owner" (as defined in (c) below) is
the first day of April of the calendar year following the calendar year
in which the later of retirement or attainment of age 70 1/2 occurs.
(ii) 5-percent Owners. The required beginning date of a
Participant who is a 5-percent owner during any year beginning after
December 31, 1979, is the first day of April following the later of:
47
(1) the calendar year in which the Participant attains age
70 1/2, or
(2) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a 5-percent owner, or
the calendar year in which the Participant retires.
The required beginning date of a Participant who is not a
5-percent owner who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(c) 5-percent Owner. A Participant is treated as a 5-percent
owner for purposes of this Section if such Participant is a 5-percent
owner as defined in section 416(i) of the Code (determined in accordance
with section 416 but without regard to whether the Plan is top-heavy) at
any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 / or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under
this Section, they must continue to be distributed, even if the
Participant ceases to be 5-percent owner in a subsequent year.
9.2.2 Benefit Commencement Date. Except if otherwise elected
by a Participant, the Participant's benefits will commence no later than
the 60th day after the close of the Plan Year in which the latest of the
following occurs: (a) the attainment by the Participant of Normal
Retirement Age; or (b) the tenth anniversary of the year in which the
Participant commenced participation in the Plan; or (c) the Participant's
most recent Termination of Employment.
48
9.2.3 Retroactive Payments. If the amount of a payment
required to commence on the date determined under Section 9.2.1 or 9.2.2
cannot be ascertained by such date, or if it is not possible to make such
payment on such date because the Administrative Committee has been unable
to locate the Participant, Beneficiary or Spouse after making reasonable
efforts to do so, or if the Appropriate Form has not been filed by the
Participant, Beneficiary or Spouse with the Administrative Committee, a
payment retroactive to such date may be made no later than sixty (60)
days after the earliest date on which the amount of such payment can be
ascertained under the Plan or the date on which the Participant,
Beneficiary or Spouse is located (whichever is applicable).
9.2.4 Pre-Tax Contributions. Notwithstanding any other
provision of this Plan, Pre-Tax Contributions are distributable only in
the event that one of the following events occurs: (i) the Employee's
death, Disability or Termination of Employment, (ii) the Employee's
attainment of age 59 1/2, (iii) a distribution on account of hardship as
defined in Article 7, (iv) a distribution on account of Excess Elective
Deferrals, as defined in Section 20.3, (v) termination of the Plan
without establishment of a successor plan (within the meaning of section
401(k)(10) of the Code and the regulations thereunder), or (vi) one of
the other events specified in section 401(k)(10) of the Code.
9.3 Inability to Locate Distributee. Notwithstanding any other
provision of the Plan, if the Administrative Committee cannot locate any person
to whom a payment is due under the Plan and no other payee has become entitled
thereto pursuant to any provision of the Plan, the benefit in respect of which
such payment is to be made shall be
49
forfeited at such time as the Committee shall determine in its sole discretion
(but in all events prior to the time such benefit would otherwise escheat under
any applicable state law); provided, however, that any benefit so forfeited
shall be reinstated if such person subsequently makes a valid claim for such
benefit and shall be paid out of any forfeited amounts and, if and to the
extent necessary, out of other Employer contributions made for this purpose.
9.4 Distribution to Beneficiary. Distribution to a Participant's
Beneficiary in accordance with the provisions of this Article 9 shall be made
as soon as administratively practicable after the Participant's death, except
as otherwise provided in the following provisions of this Section 9.4.
Notwithstanding anything in Section 9.1 to the contrary:
9.4.1 A Participant may elect to cause any distribution due
to his Beneficiary to be made over a period of two or more calendar years
(provided, that such period shall end not later than the fifth
anniversary of the Participant's death), in such manner as the
Participant shall designate in such election.
9.4.2 If no election by a Participant becomes effective under
Section 9.4.1, his Beneficiary may make such an election.
9.5 Limitation on Distribution. Notwithstanding any other provision
of this Plan, but subject to Article 14, if a Participant's employment
terminates and his vested interest under the Plan exceeds $3,500 as calculated
under section 41l (a) (11) of the Code (or such other amount prescribed by
applicable law), such vested interest shall not be "immediately distributed"
(within the meaning of section 411 (a) (11) of the Code) without his written
consent, except as otherwise permitted by law.
50
9.6 Benefits Deemed Offered. Notwithstanding any other provision of
this Article 9 any optional form of benefit, form of distribution or joint and
survivor annuity required to be offered in this Plan to meet the requirements
of sections 411(d)(6), 401(a)(11) or 417 of the Code is deemed offered to those
Participants to whom such requirements apply.
9.7 GCM 39824 Clarification. It is the intention of this Plan not
to make distributions to any individual whose employment with an Employer (or
an Affiliate) has terminated unless a "severance of employment" has occurred,
in accordance with GCM 39824 (Aug. 15, 1990).
51
ARTICLE 10
Beneficiary Designation
10. 1 Beneficiary.
10.1.1 Designation of Beneficiary. Notwithstanding any other
provision of this Plan, but subject to the further provisions of this
Section 10.1. each Participant may designate, at such time and in such
manner as the Administrative Committee shall prescribe, a Beneficiary or
Beneficiaries (who may be any one or more members of his family or any
other persons, executor, administrator, any trust, foundation or other
entity) to receive any benefits distributable hereunder after the death
of the Participant as provided herein. Such designation of a Beneficiary
or Beneficiaries shall not be effective for any purpose unless and until
it has been filed by the Participant with the Administrative Committee,
provided, however, that a designation mailed by the Participant to the
Committee prior to death and received by it after his death shall take
effect upon such receipt, but prospectively only and without prejudice to
any payor or payee on account of any payments made before receipt by the
Committee.
10.1.2 Spouse as Presumptive Beneficiary. Notwithstanding
Section 10.1.1, a Participant's sole Beneficiary shall be his surviving
Spouse (if the Participant has a surviving Spouse) unless the Participant
has designated another Beneficiary with Spousal Consent.
10.1.3 Change of Beneficiary. A Participant may, from time to
time in such manner as the Administrative Committee shall prescribe,
revoke any prior designation of Beneficiary (without Spousal Consent) and
make a new designation
52
of Beneficiary; provided that any such new designation which has the
effect of naming a person other than the Participant's surviving Spouse
as sole Beneficiary is subject to the Spousal Consent requirement of
Section 10.1.2.
10.1.4 Failure to Designate. If a Participant has failed to
designate effectively a Beneficiary to receive the Participant's death
benefits under the Plan, or if a Beneficiary previously designated has
predeceased the Participant and no alternative designation has become
effective, such benefits shall be distributed to the Participant's
surviving Spouse, if any, or if no Spouse survives the Participant, to
the Participant's estate.
10.1.5 Proof of Death. The Administrative Committee may, as a
condition precedent to making payment to any Beneficiary, require that a
death certificate, burial certificate or other evidence of death
acceptable to it be furnished.
10.1.6 Discharge of Liability. If distribution in respect of
a Participant is made under this Plan in a form, or to a person
reasonably believed by the Administrative Committee or its delegate to be
proper (taking into account any document purporting to be a valid consent
of the Participant's Spouse, or any representation by the Participant
that he is not married or any election or revocation with respect to form
of payment or designation of Beneficiary), the Plan shall have no further
liability with respect to the Participant (or his Spouse or Beneficiary)
to the extent of such distribution.
10.1.7 Effective Date. The provisions of this amended Section
10.1 shall apply with respect to any Participant who dies on or after
January l, 1985.
53
With respect to a Participant who (a) dies in the period August 23 -
December 31, 1984 (inclusive) and (b) had at least one paid hour of
service or at least one hour of paid leave in such period: (i) the
provisions of amended Section 10.1 shall apply with respect to one-half
of his Account balance; (ii) the provisions of Section 10.1 as in effect
on August 22, 1984 shall apply with respect to the other one-half of his
Account balance; and (iii) any distribution to be made to his surviving
Spouse (whether by reason of this sentence or otherwise) shall,
notwithstanding any other provision of the Plan, be made by applying the
amount distributable to such surviving Spouse to the purchase of an
annuity contract which will provide lifetime income to such surviving
Spouse, unless the surviving Spouse consents to another form of
distribution or unless the amount to be distributed is $3,500 (or such
other amount prescribed by applicable law) or less (in either of which
events distribution to the surviving Spouse shall be made in accordance
with the otherwise applicable provisions of the Plan).
10.2 Common Disaster. If a Participant and any of his Spouse or
Beneficiary shall die in a manner such that there is no sufficient evidence (as
determined by the Administrative Committee, without regard to any presumption
of law otherwise applicable) that the persons have died otherwise than through
a common disaster or if a Participant's Beneficiary (other than his Spouse)
died within five days after the Participant, it shall be presumed for all
purposes of the Plan that the Participant died last.
54
ARTICLE 11
Administration
11.1 Appointment of Committees.
11.1.1 There are hereby created an Administrative Committee
and an Investment Committee, each of which shall consist of not less than
three members to be appointed by the Board of Directors of the Company.
Each member of a Committee may resign, or may be removed at any time by
the Board of Directors of the Company (with or without cause), and, in
the event of the removal, death or resignation of any member, his
successor shall be appointed by such Board. In the event that a vacancy
or vacancies shall occur on a Committee, the remaining member or members
shall act as the Committee until the Board of Directors of the Company
fills such vacancy or vacancies. The members of each Committee shall
serve without compensation for their services as such members.
11.1.2 No person shall be ineligible to be a member of a
Committee because he is, was or may become entitled to benefits under the
Plan or because he is a director and/or officer of an Employer or
Affiliate; provided, that no member of a Committee shall participate in
any determination by the Committee relating specifically to his own
benefits under the Plan.
11.1.3 The members of each Committee shall serve without bond
except to the extent required by applicable law.
11.2 Powers and Authority; Action Conclusive. Except as otherwise
expressly provided in the Plan or in the Trust Agreement, or by the Board of
Directors of the Company:
55
11.2.1 The Administrative Committee shall be responsible for
the administration of the Plan and shall have the exclusive right,
responsibility and authority with respect to the construction,
interpretation, application or administration of the Plan and eligibility
for Plan benefits except for those matters which are the responsibility
of the Investment Committee.
11.2.2 The Investment Committee shall be responsible for
making appropriate provision for the investment and reinvestment of the
Trust Fund and shall have the exclusive right, responsibility and
authority with respect thereto.
11.2.3 Each Committee shall have all powers necessary or
helpful for the carrying out of its responsibilities, and the decisions
or actions of such Committee in good faith in respect of any matter
hereunder shall be final, conclusive and binding upon all parties
concerned, including, without limitation, any and all Employees,
Participants, Spouses, Beneficiaries, heirs, distributees, estates,
executors, administrators and assignees. Any determination made by a
Committee shall be given deference in the event it is subject to judicial
review and shall be overturned only if it is arbitrary and capricious.
11.2.4 Each Committee may delegate to one or more of its
members the right to act on its behalf in any one or more matters
connected with the administration of the Plan.
11.2.5 Without limiting the generality of the foregoing, the
Administrative Committee shall have the power:
11.2.5.1 To make rules and regulations for the administration
of the Plan which are not inconsistent with the terms and provisions of
the Plan;
56
11.2.5.2 To construe all terms, provisions, conditions and
limitations of the Plan, or determine eligibility for benefits;
11.2.5.3 To determine all questions arising out of or in
connection with the provisions of the Plan or its administration in any
and all cases in which the Administrative Committee deems such a
determination advisable, including, without limitation, the power to
resolve ambiguities, to rectify errors, and to supply omissions;
11.2.5.4 To establish procedures for determining the validity
of any qualified domestic relations order and for complying with any such
valid order.
The foregoing list of powers is not intended to be either
complete or exclusive, and each Committee shall, in addition, have such
powers as it may determine to be necessary for the performance of its
duties under the Plan and the Trust Agreement.
11.3 Liability Limited and Indemnification. Except as otherwise
provided by law, no person who is a member of a Committee or who is an
employee, officer director of an Employer or Affiliate, shall incur any
liability whatsoever on account of any matter connected with or related to the
Plan or the administration of the Plan, unless such person shall have acted in
bad faith, or have willfully neglected his duties, in respect of the Plan. The
Company shall indemnify and save each such person harmless against any and all
loss, liability, claim, damage, cost and expense which may arise by reason of,
or be based upon, any matter connected with or related to the Plan or the
administration of the Plan (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or
57
in settlement of any such claim whatsoever) to the fullest extent permitted
under the Certificate of Incorporation and By-laws of the Company.
11.4 Quorum and Voting: Procedures. A majority of the members of a
Committee at the time in office shall constitute a quorum for the transaction
of business. Each Committee shall select from among its members a Chairman, and
shall appoint (from its members or otherwise) a Secretary. Each Committee may
act by vote or consent of the majority of its members then in office and may
establish its own procedures. Each Committee may authorize any one or more of
its members or the Secretary of the Committee to sign and deliver any
instrument, certificate or other paper or document on its behalf.
11.5 Subcommittees, Counsel and Agents. Each Committee may appoint
from its members such subcommittees (of one or more such members), with such
powers, as such Committee shall determine. Each Committee may employ such
counsel (including legal counsel, who may be counsel for an Employer or
Affiliate) and agents and such clerical and other services as it may require in
carrying out the provisions of the Plan, and may charge the fees, charges and
costs resulting from such employment as an expense to the Company. Unless
otherwise required by law, persons employed by a Committee as counsel, or as
its agents or otherwise, may include members of either Committee, or of the
Board or Boards of Directors of an Employer or Affiliate, or firms with which
members of either Committee or Board or Boards of Directors of any Employer or
Affiliate are associated as partners, employees or otherwise. Persons serving
on a Committee or on any such subcommittee shall be fully protected in acting
or refraining from acting in accordance with the advice of legal or other
counsel.
58
11.6 Reliance on Information. The members of each Committee and any
Employer and Affiliate and their respective officers, directors and employees,
shall be entitled to rely upon all tables, valuations, certificates, opinions
and reports furnished by any actuary, accountant, trustee, insurance company,
counsel, physician or other expert who shall be engaged by either Committee, an
Employer or Affiliate, members of each Committee and any Employer and Affiliate
and their respective officers, directors and employees, shall be fully
protected in respect of any action taken or suffered by them in good faith in
reliance thereon, and all action so taken or suffered shall be conclusive upon
all persons affected thereby.
11.7 Instructions to Trustee. The Administrative Committee shall
provide appropriate written instructions in accordance with the Trust Agreement
to enable the Trustee to make the distributions provided for in the Plan.
11.8 Fiduciaries. The provisions of this Section 11.8 shall apply
notwithstanding any contrary provisions of the Plan or of the Trust Agreement.
11.8.1 Named Fiduciaries. The named fiduciaries under the
Plan shall be (a) the Administrative Committee, which shall have
authority to control and manage the operation and administration of the
Plan, except with respect to those matters which under the Plan or the
Trust Agreement are the responsibility, or subject to the authority, of
the Investment Committee, and (b) the Investment Committee, which shall
be the named fiduciary with respect to control or management of the
assets of the Plan.
11.8.2 Allocation of Fiduciary and Other Responsibilities.
Each Committee shall have the right, which shall be exercised in
accordance with the
59
procedures set forth in the Plan or in the Trust Agreement for action by
such Committee, to allocate responsibilities (fiduciary or otherwise)
among it and the other Committee, and each Committee shall have the right
to designate persons other than such Committees to carry out
responsibilities (fiduciary or otherwise) under the Plan.
11.8.3 Funding Policy. The funding policy and method for this
Plan shall consist of the making of contributions, the making of
investments and reinvestments in respect thereof, and the making of
withdrawals and distributions, as provided in the provisions of the Plan.
11.8.4 Service in Multiple Capacities. Any person or group of
persons may serve in more than one fiduciary capacity with respect to the
Plan.
11.8.5 Advisers. Each Committee, and any fiduciary designated
by a Committee pursuant to Section 11.8.2 above to whom such power is
granted by a Committee, may employ one or more persons to render advice
with regard to any responsibility such fiduciary has under the Plan.
11.8.6 Investment Manager. The Investment Committee may
appoint an investment manager or managers, as defined in ERISA, to manage
(including the power to acquire, invest and dispose of) any assets of the
Plan.
11.8.7 Limitation of Liability. Except to the extent
otherwise provided by law, if any duty or responsibility of a named
fiduciary has been allocated or delegated to any other person in
accordance with any provision of this Plan or of the Trust Agreement,
then such named fiduciary shall not be liable for any act or omission of
such person in carrying out such duty or responsibility.
60
11.9 Genuineness of Documents. Each Committee, and any Employer and
Affiliate and their respective officers, directors and employees, shall be
entitled to rely upon any notice, request, consent, letter, telegram or other
paper or document believed by them or any of them to be genuine, and to have
been signed or sent by the proper person, and shall be fully protected in
respect of any action taken or suffered by them in good faith in reliance
thereon.
11.10 Proper Proof. In any case in which an Employer or any
Committee shall be required under the Plan to take action upon the occurrence
of any event, they shall be under no obligation to take such action unless and
until proper and satisfactory evidence of such occurrence shall have been
received by them.
11.11 Claims Procedure. The Administrative Committee shall
establish a claims procedure in accordance with applicable law and shall afford
a reasonable opportunity to any Participant whose claim for benefits has been
denied for a full and fair review of the decision denying such claim.
11.12 Filing with Committee. For all purposes of this Plan, the
date on which an Appropriate Form, Participation Agreement, or any other
document is deemed to be returned to or filed with the Administrative Committee
shall be the date on which such Appropriate Form, Participation Agreement or
other document is actually received by the Administrative Committee or its
designated agent.
11.13 Plan Administrator. The Company shall be the administrator
of the Plan, as defined in section 3(16)(A) of ERISA.
61
ARTICLE 12
Trust Agreement
12.1 Trust Agreement. As part of the Plan, the Company shall enter
into a Trust Agreement or agreements under which the Trustee shall receive the
contributions of the Employers and Participants to the Trust Fund and shall
hold. invest and distribute the Trust Fund in accordance with the terms and
provisions of the Trust Agreement. Any and all rights or benefits which may
accrue to any person under the Plan shall be subject to all the terms and
provisions of the Trust Agreement.
12.2 Investment in Interest-Bearing Deposits. If the Trustee shall
be a bank or similar financial institution supervised by the United States or
any State thereof, the Investment Committee, in its discretion, may authorize
the Trustee to invest all or a part of the Plan's assets in deposits which bear
a reasonable interest rate in such bank or financial institution.
12.3 Company as Agent. The Company is hereby authorized to act as
agent for all other Employers in dealings with the Trustee under the Plan.
62
ARTICLE 13
Amendment or Merger
13.1 Right Reserved. Subject to the further provisions of this
Article 13 the Company may, by resolution of the Board of Directors, amend the
Plan in whole or in part at any time or from time to time, by resolution of the
Company's Board of Directors or action by its Executive Committee. Any such
amendment shall be evidenced in writing. No amendment shall divest any
Participant of any amount credited to him under the Plan except as provided in
Section 13.2 or as otherwise permitted by law. No amendment shall vest in an
Employer, directly or indirectly, any interest in or ownership or control of
any part of the Trust Fund.
13.2 Amendments Required for Qualification etc. All provisions of
the Plan and all benefits and rights granted under the Plan are subject to any
amendments, modifications or alterations that may be necessary or advisable
from time to time to qualify the Plan under the Code, to continue the Plan as
so qualified, or to comply with any other provision of law. Accordingly,
notwithstanding any other provision of the Plan, the Company may, by resolution
of the Board of Directors, amend, modify or alter the Plan with retroactive
effect in any respect or manner necessary or advisable to qualify the Plan
under the Code or to continue the Plan as so qualified, or to comply with any
other provision of applicable law.
13.3 Contributions Following Amendment. If the Plan is amended in
any respect, no Employer shall have any liability or obligation to make any
contribution or payment to the Trust Fund except in such manner and amounts as
may be specifically provided for in the Plan as so amended.
63
13.4 Merger. Subject to the provisions of this Section 13.4, the
Plan may be amended to provide for the merger of the Plan, in whole or in part,
or a transfer of all or a part of its assets, to any other qualified plan
within the meaning of section 401(a) or 403(a) of the Code, including such a
merger or transfer in lieu of a distribution which might otherwise be required
under the Plan. The Plan shall not be merged or consolidated with, nor may its
assets or liabilities be transferred to, any other plan in whole or in part,
unless each Participant would be entitled to a benefit immediately after the
merger, consolidation or transfer (if such other plan then terminated) which is
equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
been terminated).
64
ARTICLE 14
Termination of the Plan
14.1 Right Reserved. The Company reserves the right at any time, by
resolution of its Board of Directors, to terminate the Plan, in whole or in
part, by resolution of the Company's Board of Directors or action by its
Executive Committee. Any such termination shall be evidenced in writing. If the
Plan is terminated, no Employer shall have any liability or obligation to make
any contribution or payment to the Trust Fund with respect to any period after
the date of such termination. Any such termination shall be evidenced in
writing.
14.2 Vesting Upon Termination. Upon the termination or partial
termination of the Plan (within the meaning of section 41l (d) (3) of the Code)
or the complete discontinuance of all contributions under the Plan, the rights
of all affected employees to their Accounts as of the date of such termination
or partial termination shall be nonforfeitable.
14.3 Termination of Trust. If the Plan is terminated pursuant to
Section 14.1 and the Board of Directors determines that the Trust Fund shall be
terminated, the Trust Fund shall be revalued as if the termination date were a
Valuation Date, and the current value of all Accounts shall be distributed in
accordance with Articles 8 and 9, as if such Plan termination were a
Termination of Employment; provided, however, that the value of such Accounts
shall be adjusted to reflect the expenses of termination to the extent such
expenses are not paid by the Company. Until all Accounts are fully distributed,
any Accounts held in the Trust Fund shall continue to be adjusted in accordance
with Article 4, and to reflect the expenses of termination.
65
14.4 Continuation of Trust. If the Plan is terminated by the Board
of Directors but the Board of Directors determines that the Trust Fund shall be
continued, no further contributions shall be made by the Employers, but the
Trust Fund shall be administered as though the Plan were otherwise in full
force and effect. If the Trust Fund is subsequently terminated, the provisions
of Section 14.3 shall then apply.
14.5 Withdrawal of Subsidiary Affiliate. The withdrawal of an
Affiliate as an Employer by reason of a sale or other disposition of the stock
or assets of such Affiliate shall not be deemed a complete or partial
termination or a complete discontinuance of contributions if following such
sale or disposition the successor to such Employer adopts or maintains a
comparable plan.
66
ARTICLE 15
Miscellaneous
15.1 Payment to a Minor or Incompetent. If any amount is payable
hereunder to a minor or other legally incompetent person, such amount may be
paid in any one or more of the following ways, as the Administrative Committee
in its sole discretion shall determine:
15.1.1 To the legal representative of such minor or other
incompetent person, if the Administrative Committee has been notified of
the appointment of such representative; or
15.1.2 To a parent or guardian of such minor or other
incompetent person, or to the person with whom such minor or other
incompetent person resides; or
15.1.3 To a custodian for such minor under the Uniform Gifts
to Minors Act (or similar statute) of any jurisdiction; or
15.1.4 If none, directly to such minor or other incompetent
person. Payment to any person in accordance with the foregoing provisions
of this Section 15.1 shall, to that extent, discharge all Employers, the
members of the Administrative Committee, the Trustee and any person or
corporation making such payment pursuant to the direction of the
Administrative Committee, and none of the foregoing shall be required to
see to the proper application of any such payment to such person pursuant
to the provisions of this Section 15.1. Without in any manner limiting or
qualifying the provisions of this Section 15.1, if any amount is payable
hereunder to a minor or any other legally incompetent person, the
67
Administrative Committee may in its discretion institute the procedures
which are available to it under Section 15.2.
15.2 Doubt as to Right to Payment. If at any time any doubt exists
as to the right of any person to any payment under the Plan or as to the amount
or time of such payment (including, without limitation, any case of doubt as to
identity and any case in which any notice has been received from any other
person claiming any interest in amounts payable under the Plan or a claim for
other persons may exist by reason of community property or similar laws), the
Administrative Committee shall be entitled, in its discretion, to direct the
Trustee to hold such sum as a segregated amount in trust until such right or
amount or time is determined or an order of a court of competent jurisdiction
is obtained, to pay such sum into court in accordance with appropriate rules of
law in such case then provided, or to make payment only upon receipt of a bond
or similar indemnification (in such amount and in such form as is satisfactory
to the Administrative Committee).
15.3 Spendthrift Clause. Except as may be other-wise required by
law, or provided by this Plan, no benefit or payment under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, whether voluntary or involuntary, and no attempt
so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge
the same shall be valid, nor shall any such benefit or payment be in any way
liable for or subject to the debts, contracts, liabilities, engagements or
torts of any person entitled to such benefit or payment, or subject to
attachment, garnishment, levy, execution or other legal or equitable process.
Notwithstanding the foregoing, benefits under the Plan shall be subject to the
provisions of a qualified domestic relations order.
68
15.4 Voting and Disposition of Company Stock. Each Participant
shall have the right to direct the Trustee as to the manner in which to vote
and to exercise tender, exchange offer or similar rights as to any shares of
Company Stock allocated to his Post-IPO Matching Contributions Account. The
Company shall furnish the Trustee and the Participants with notices and
information statements when voting, tender or such other rights are to be
exercised, in such time and manner as may be required by applicable law and the
Certificate of Incorporation and By-laws of Revlon, Inc. Such statements shall
be substantially the same for Participants as for holders of Company Stock in
general. The Trustee shall vote, tender or exercise such rights with respect to
such Company Stock in accordance with the direction of the Participant. If no
direction is received from the Participant by the Trustee within an
administratively practicable time prior to the date on which action is
required, the Trustee shall take action with respect to those shares in
accordance with the direction of the Investment Committee.
15.5 Additional Action. Notwithstanding any other provision of the
Plan or the Trust Agreement, the Investment Committee shall be the sole named
fiduciary with respect to the control and management of the Company Stock Fund,
except as provided in Section 15.4; and the Trustee shall have no authority or
responsibility with respect to such control or management. Without limiting the
generality of the foregoing, if for any reason the provisions of Section 15.4
can no longer be validly applied, the Investment Committee shall direct the
Trustee with respect to all matters and all actions affecting the assets of the
Company Stock Fund.
15.6 Benefits Payable Only from Trust Fund. All benefits under the
Plan shall be paid or provided for solely from the Trust Fund, and neither the
Employers, their
69
directors or employees nor any member of any Committee shall have any liability
or responsibility therefor. Except as otherwise provided by law, no Employer
assumes any obligations under the Plan except those specifically set forth in
the Plan.
15.7 Estoppel of Participants and Their Beneficiaries. The
Employers, the Committees and Trustee may rely upon any certificate, statement
or other representation made to them by any Employee, Participant, Spouse, or
Beneficiary with respect to age, length of service, leave of absence, date of
cessation of employment or other fact required to be determined under any of
the provisions of the Plan and shall not be liable on account of the payment of
any moneys or the doing of any act in reliance upon any such certificate,
statement or other representation. Any such certificate, statement or other
representation made by an Employee, Participant or Spouse of a Participant or
Employee shall be conclusively binding upon such Employee, Participant and
Spouse and the Beneficiary of such Participant; and such Employee, Participant,
Spouse or Beneficiary shall thereafter and forever be estopped for disputing
the truth and correctness of such certificate, statement or other
representation. Any such certificate, statement or other representation made by
a Participant's Beneficiary shall be conclusively binding upon such
Beneficiary, and such Beneficiary shall thereafter and forever be estopped from
disputing the truth and correctness of such certificate, statement or other
representation.
15.8 Plan to Be Available for Inspection. A copy of the Plan and of
all amendments thereto, if any, shall be available for inspection at all
reasonable times by Eligible Employees and Participants at the office of the
Company and at such other locations (if any) as may be required by law.
70
15.9 No Diversion of Trust Fund. At no time prior to the
satisfaction of all liabilities with respect to Participants and their Spouses
and Beneficiaries under the Plan shall any part of the Trust Fund be (within
the taxable year or thereafter) used for or diverted to purposes other than the
exclusive benefit of the Participants and their Spouses and Beneficiaries or
the payment of the expenses of the administration of the Plan and of the Trust;
provided, however, that:
15.9.1 A contribution that is made by an Employer by a
mistake of fact shall be returned to such Employer upon its request
within one year after the payment of the contribution;
15.9.2 A contribution that is conditioned upon its
deductibility under section 404 of the Code shall be returned to the
contributing Employer upon its request, to the extent that the
contribution is disallowed as a deduction, within one year after such
disallowance; and
15.9.3 A contribution that is conditioned on initial
qualification of the Plan under section 401 of the Code may, if the Plan
does not qualify, be returned (along with any earnings thereon) to the
contributing Employer within one year after the date of denial of
qualification of the Plan.
15.10 Limitation of Liability. Subject to Section 11.3, no
liability shall attach to or be incurred by any stockholder, officer or
director of an Employer or any Affiliate under or by reason of the terms,
conditions and provisions contained in the Plan or in the Trust Agreement or
for the acts or decisions taken or made thereunder or in connection therewith;
and as a condition precedent to his participation in the Plan or the receipt of
benefits thereunder, or both, such liability, if any, is expressly waived and
71
released by each Participant, Spouse or Beneficiary, and by any and all persons
claiming under or through such persons, such waiver and release to be
conclusively evidenced by any act or participation in or the acceptance of
benefits or the making of elections under the Plan.
15.11 Usage. Whenever applicable the masculine gender, when used in
the Plan, shall include the feminine gender, and the singular shall include the
plural.
15.12 Separability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included herein.
15.13 Captions. The captions contained herein and in the table of
contents prefixed thereto are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or intent
of the Plan, and they shall not in any way affect the Plan or the construction
of any provision thereof.
15.14 Statutory References. References in this Plan to a section or
other provision of the Code or ERISA shall be deemed to refer to such section
or provision as it may be amended from time to time, or to equivalent
provisions of subsequent law.
15.15 Name. The Revlon Employees' Savings, Investment and Profit
Sharing Plan.
15.16 Governing Law. This Plan shall be governed in all respects
under the laws of the State of New York (without regard to its laws on conflict
of laws) to the extent not governed by ERISA.
72
ARTICLE 16
Leased Employees
16.1 Definitions. For purposes of this Article 16, the term "Leased
Employee" means any person performing services for an Employer or Affiliate
(hereinafter referred to as the "Recipient") pursuant to an Agreement between
the Recipient and any other person (hereinafter referred to as the "Leasing
Organization"), who has performed such services for the Recipient (including
persons related to the Recipient within the meaning of section 414(n)(6)(A) of
the Code) on a substantially full-time basis for a period of at least one
year, if such services are of a type historically performed by employees in the
business field of the Recipient. For this purpose, a person is considered to
have performed services on a substantially full-time basis for a period of at
least one year if: (1) during any consecutive 12-month period such person has
performed at least 1,500 hours of service for the Recipient, or (2) during any
consecutive 12-month period such person performs services for the Recipient for
a number of hours of service at least equal to seventy-five percent (75%) of
the average number of hours that are customarily performed by an employee of
that Recipient in the particular position.
16.2 Treatment of Leased Employees. For purposes of this Plan, a
Leased Employee's service for the Recipient (including Service during the one
year period referred to in Section 16.1 and Service prior to the effective date
of this Article 16) is to be taken into account in determining compliance with
the Service requirements of the Plan relating to participation and vesting.
However, the Leased Employee shall not be entitled to share in contributions
(or forfeitures applied in lieu thereof) under the Plan with respect to any
Service or Compensation attributable to the period during which he is a Leased
73
Employee, and shall not be eligible to become a Participant eligible to receive
contributions under the Plan unless and except to the extent that he shall at
some time, either before or after his Service as a Leased Employee, qualify as
an Eligible Employee without regard to the provisions of this Article 16.
16.3 Exception for Employees Covered by Plans of Leasing
Organization. Section 16.2 shall not apply to any Leased Employee if: (i) such
employee is covered by a money purchase pension plan of the Leasing
Organization which provides (a) a nonintegrated employer contribution rate of
at least ten percent (10%) of compensation, as defined in section 415(c) of the
Code, but including amounts contributed by the Recipient pursuant to a salary
reduction agreement which are excludable from the Leased Employee's gross
income under sections 125, 402(e)(3), section 402(h) or 403(b) of the Code, (b)
immediate participation, and (c) full and immediate vesting; and (ii) Leased
Employees do not constitute more than twenty (20) percent of the Recipient's
work force who are not Highly Compensated Employees.
16.4 Effective Date. The provisions of this Article 16 are
effective as of January 1, 1984, and no individual shall be eligible to become
a Participant or accrue benefits under this Plan for any period prior thereto
by reason of anything in this Article 16.
16.5 Construction. The purpose of this Article 16 is to comply with
the provisions of section 414(n) of the Code. All provisions of this Article
shall be construed consistently therewith, and, without limiting the generality
of the foregoing, no individual shall be treated as a Leased Employee except as
required under such Code section.
74
ARTICLE 17
Limitation on Maximum Benefits and
Contributions Under All Plans
17.1 Section 415 Limitations. Effective January 1, 1984, and
notwithstanding any other contrary provisions of this Plan, the "annual
additions" which may be credited to any Participant's accounts for any
"limitation year" will not exceed the permissible limitations of section 415 of
the Code. For purposes of applying such limits, section 415 of the Code and
Treasury regulations thereunder are incorporated herein by reference. It is
intended that any limitation imposed by said section 415 of the Code on the
allocation of contributions and forfeitures to a Participant under this Plan
shall be implemented in accordance with the provisions of this Article 17. The
provisions of this Article 17 shall apply notwithstanding any other contrary
provisions in this Plan.
17.2 Coverage by Defined Benefit Plan.
17.2.1 Reductions in benefits under this Article 17 arising
by reason of a Participant's participation in multiple plans shall,
except as any other such plan may otherwise expressly provide, be
effected as follows: (a) benefits and annual additions under continuing
plans shall be reduced before benefits under any terminated plan, (b)
benefits under defined benefit plans shall be reduced before any
reduction in annual additions under defined contribution plans, and (c)
annual additions under continuing defined contribution plans shall be
reduced in the reverse order in which such annual additions would
otherwise be allocated; provided, that benefits under multiemployer plans
shall be reduced last. Any
75
resulting required reductions under this Plan shall be made first to
Unmatched Contributions, and second, on a pro rata basis, to Matched
Contributions, and the Matching Contribution relating thereto.
17.2.2 In computing the denominator of the "defined
contribution plan fraction" as defined in section 415(e) of the Code for
any year ending after 1982, the Administrative Committee may elect to
determine the portion of such denominator which relates to 1982 and prior
years under the method described in section 415(e)(6) of the Code in lieu
of the method described above. Such election may be made at such time and
in such manner as may be provided in applicable Treasury regulations.
17.2.3 In the case of a Participant who would have fewer than
ten (10) Years of Service (including service in the year with respect to
which any determination under this Section 17.2.3 is made) with an
Employer and all Affiliates at the time his retirement pension starts,
the 1.25 and 1.40 limitations referred to in sections 415(e)(2)-(3) of
the Code shall be reduced proportionately.
17.3 Limitation Year. All determinations under this Article 17
shall be made by reference to the calendar year.
76
ARTICLE 18
"Top Heavy" Provisions, Etc.
18.1 Determination of "Top Heavy" Status
18.1.1 For purposes of this Article 18, "Applicable Plans"
shall include (i) each plan of an Employer or Affiliate in which a Key
Employee (as defined in Section 18.1.2 for this Plan, and as defined in
section 416(i) of the Code for each other Applicable Plan) is a
Participant and (ii) each other plan of an Employer or Affiliate which
enables any plan in clause (i) of this sentence to meet the requirements
of section 401(a)(4) or 410 of the Code. Any plan not required to be
included under the preceding sentence also may be included, at the option
of the Company, provided that the requirements of section 401 (a)(4) and
410 of the Code continue to be met for the group of Applicable Plans
after such inclusion.
18.1.2 For purposes of this Article 18, "Key Employee" shall
mean an employee of an Employer or Affiliate who, at any time during a
given Plan Year or any of the four (4) preceding Plan Years, is one or
more of the following:
(A) An officer of an Employer or Affiliate having annual
compensation greater than fifty percent (50%) of the dollar amount
described in section 415(b)(1)(A) of the Code for any such Plan Year;
provided, that the number of employees treated as officers shall be no
more than fifty (50) employees or, if fewer, the greater of three (3)
employees or ten percent (10%) of the employees (including "Leased
Employees" as defined in Article 16). For purposes of this subsection,
employees described in section 414(q)(8) of the Code shall be excluded.
77
(B) One of the ten (10) employees (A) having annual
compensation from an Employer or Affiliate of more than the limitation in
effect under section 415(c)(1)(A), and (B) owning (or considered as
owning, within the meaning of section 318 of the Code applied by
substituting five percent (5%) for fifty percent (50%) in section
318(a)(2)(C) the largest interests in an Employer or Affiliate. If two
employees have the same interest in an Employer or Affiliate, the
employee having greater annual compensation from the Employer or
Affiliate shall be treated as having a larger interest.
(C) A person owning (or considered as owning, within the
meaning of section 318 applied by substituting five percent (5%) for
fifty percent (50%) in section 318(a)(2)(C)), more than five percent (5%)
of the outstanding stock of an Employer or Affiliate that is a
corporation, or stock possessing more than five percent (5%) of the total
combined voting power of all stock of an Employer or Affiliate (or having
more than five percent (5%) of the capital or profits interest in any
Employer or Affiliate that is not a corporation, determined under similar
principles).
(D) A one-percent (1%) owner of an Employer or Affiliate
having aggregate annual compensation from all Employers or Affiliates of
more than $150,000. "One-percent owner" means any person who would be
described in paragraph (iii) of this Section 18.1.2 if "one percent (1%)"
were substituted for "five percent (5%)" in each place where it appears
in paragraph (iii), except that such substitution shall not be made in
applying section 318(a)(2) of the Code.
78
18.1.3 For the purposes of this Article 18, "annual
compensation" means compensation as defined in section 415(c)(3) of the
Code, but including amounts contributed by an Employer or an Affiliate
pursuant to a salary reduction agreement which are excludable from the
employee's gross income under sections 125, 402(e)(3), 402(h)(1)(B) or
403(b) of the Code.
18.1.4 In any Plan Year starting after 1983 or thereafter
during which the sum, for all Key Employees (as defined in Section 18.1.2
for this Plan and as defined in section 416(i) of the Code for each other
Applicable Plan) if the present value of the cumulative accrued benefits
under all Applicable Plans which are defined benefit plans (determined
based on the actuarial assumptions set forth in the "top heavy"
provisions of such plans) and the aggregate of the accounts under all
Applicable Plans which are defined contribution plans, exceeds sixty
percent (60%) of a similar sum determined for all participants in such
plans (but excluding participants who are former Key Employees), the Plan
shall be deemed "Top Heavy."
18.1.5 For the first Plan Year, the determination as to
whether this Plan is "Top Heavy" shall be made on the last day of such
Plan Year, and for each succeeding Plan Year the determination as to
whether this Plan is "Top Heavy" shall be made on the last day of the
preceding Plan Year (the "Determination Date"); and other plans shall be
included in determining whether this Plan is "Top Heavy" based on the
determination date for each such plan which occurs in the same calendar
year as such determination date for this Plan.
79
18.1.6 A Participant's Accounts under this Plan as of any
determination date shall be determined without regard to amounts
allocated as of that date based on contributions made after such date.
18.1.7 Subject to Section 18.1.8, distributions from the Plan
or any other Applicable Plan during the 5-year period ending on the
applicable Determination Date shall be taken into account in determining
whether the Plan is "Top Heavy."
18.1.8 For Plan Years beginning on or after January 1, 1985,
any accrued benefit shall not be taken into account with respect to any
individual who has not performed any service at any time during the
5-year period ending on the applicable Determination Date for an Employer
or Affiliate maintaining this Plan or any other Applicable Plan.
18.1.9 Amounts attributable to rollover contributions or
similar transfers to this Plan or any other Applicable Plan shall not be
taken into account except to the extent provided in applicable
regulations.
18.1.10 The terms "Key Employee" and "Participant" include
their beneficiaries.
18.2 Provisions Applicable in "Top Heavy" Years. For any Plan Year
in which the Plan is deemed to be "Top Heavy," the following provisions shall
apply:
18.2.1 The amount of Employer contributions and forfeitures
which shall be allocated to the account of any active Participant who (i)
is employed by an Employer or Affiliate on the last date of the Plan Year
and (ii) is not a Key Employee shall be (x) at least three percent (3%)
of such Participant's
80
compensation (as defined in section 415 of the Code) for such Plan Year,
or, (y) if less, an amount equal to such compensation multiplied by the
highest contribution rate for any Key Employee. For purposes of this
Section 18.2.1, the contribution rate for each individual Key Employee
shall be determined by dividing the contributions and forfeitures
allocated to such Key Employee's account, including amounts allocated
under defined contribution plans required to be aggregated with this Plan
to determine whether it is "Top Heavy;" provided, however, that clause
(y) above does not apply if any such plan enables a defined benefit plan
required to be so aggregated to meet the requirements of section
401(a)(4) or 410 of the Code. The minimum allocation provisions of this
Section 18.2.1 shall, to the extent necessary or appropriate, be deemed
satisfied in whole or in part by benefits to the Participant provided
under any other plan maintained by an Employer or Affiliate (whether or
not an Applicable Plan).
18.2.2 For purposes of complying with the provisions of
section 415(e) of the Code, the 1.25 under section 415(e) is reduced to
1.00 unless the following conditions are met:
(i) the percentage described in Section 18.1.4 does not
exceed ninety percent (90%), and
(ii) "four percent (4%)" is substituted for "three percent
(3%)" in Section 18.2.1.
Notwithstanding any other provisions of this Plan, if the sum
of the fractions described in sections 415(e)(2) and (3) of the Code as
applied to this Plan, calculated by substituting "100%" for "125%" in
each such section, for any
81
Participant exceeds 100% for the last Plan Year before the Plan becomes
"Top Heavy," such fractions shall be adjusted, in accordance with
applicable regulations, so that their sum does not exceed 100% for such
Plan Year.
18.2.3 Six-Year Graded Vesting. Any Participant who has at
least one Hour of Service after the Plan becomes "Top Heavy" shall be
vested in his Matching Contributions Account on a basis at least as
favorable as is provided under the following schedule:
Years of Employment Percentage Vested
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
In any Plan Year in which the Plan is not deemed to be "Top
Heavy," the minimum vested percentage shall be no less than that which
was determined as of the last day of the last Plan Year in which the Plan
was deemed to be "Top Heavy."
18.2.4 The provisions of Sections 18.2.1 and 18.2.2 shall not
apply to any employee included in a unit of employees covered by a
collective bargaining agreement if retirement benefits were the subject
of good faith bargaining.
82
18.3 Inapplicability in the Event of Change in Law. In the event
that any provision of this Article 18 is no longer required to qualify this
Plan under the Code, then such provision shall thereupon be void without the
necessity of further amendment of the Plan.
83
ARTICLE 19
Termination, etc. Prior to Amendment
Notwithstanding any other provision of this Plan, but subject to
any provision hereof which has an express effective date earlier than January
1, 1997, the benefits (if any) payable in respect of any Participant in the
Plan who retired, terminated employment or died prior to January 1, 1997 shall
be determined under the applicable provisions of the Plan as in effect at the
relevant time or times prior to such date. Any such individual shall be a
Participant under this Plan solely with respect to such benefits, unless he
shall again become a Participant pursuant to the provisions of Article 2
hereof.
84
ARTICLE 20
401(k) Deferral and 401(m) Contributions Tests
20.1 Definitions. For the purposes of this Article the following
words shall have the following meanings:
20.1.1 "Elective Deferrals" means elective deferrals within
the meaning of section 402(g)(3) of the Code.
20.1.2 "Excess Aggregate Contributions" means excess
aggregate contributions within the meaning of section 401 (m)(6)(B) of
the Code.
20.1.3 "Excess Contributions" means excess contributions
within the meaning of section 401(k)(8)(B) of the Code.
20.1.4 "Excess Elective Deferrals" means those Elective
Deferrals that are includible in a Participant's gross income under
section 402(g) of the Code to the extent such Participant's Elective
Deferrals for a taxable year exceed the dollar limitation under such Code
section.
20.2 Maximum Amount of Elective Deferrals. Notwithstanding anything
to the contrary herein, the amount of Elective Deferrals made with respect to
any individual during a calendar year under the Plan and all other plans,
contracts or arrangements of an Employer or an Affiliate may not exceed the
amount of the limitation in effect under section 402(g)(1) of the Code for
taxable years beginning in such calendar year. Such limit shall not apply to
any such Elective Deferrals made which are amounts attributable to service
performed by such Participant prior to January 1, 1987.
20.3 Distribution of Excess Elective Deferrals. A Participant may
assign to the Plan any Excess Elective Deferrals made during a taxable year of
the Participant by
85
notifying the Committee on or before March 1 following the close of such
taxable year of the amount of the Excess Elective Deferrals to be assigned to
the Plan. A Participant is deemed to notify the Administrative Committee of any
Excess Elective Deferrals that arise by taking into account only those Elective
Deferrals made to this Plan and any other plans of his Employer.
Notwithstanding any other provision of the Plan, Excess Elective Deferrals,
plus any income and minus any loss allocable thereto, shall be distributed no
later than April 15 following such taxable year to any Participant to whose
account Excess Elective Deferrals were assigned for the preceding year and who
claims Excess Elective Deferrals for such taxable year. Excess Elective
Deferrals shall be treated as annual additions under the Plan, unless such
amounts are distributed no later than the first April 15 following the close of
the Participant's taxable year.
20.4 Actual Deferral Percentage Test. Pre-Tax Contributions
hereunder shall not exceed the limits set forth in section 401(k)(3) of the
Code. For purposes of applying such limits, section 401(k) of the Code and the
Treasury regulations thereunder are incorporated herein by reference.
20.5 Distribution of Excess Contributions: Recharacterization.
20.5.1 Notwithstanding any other provision of the Plan,
Excess Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of any Plan Year
beginning after December 31, 1987 to Participants to whose Accounts
Pre-Tax Contributions were allocated for the preceding Plan Year. The
Excess Contributions shall be adjusted for income or loss up to the date
of distribution. The income or loss allocable to Excess Contributions
shall be determined by multiplying the income or loss
86
allocable to the Participant's Pre-Tax Contributions for the Plan Year by
a fraction, the numerator of which is the Excess Contribution on behalf
of the Participant for the preceding Plan Year and the denominator of
which is the sum of the Participant's account balances attributable to
Pre-Tax Contributions on the last day of the preceding Plan Year. Amounts
distributed under this Section 20.5.1 shall be made from the
Participant's Pre-Tax Contribution Accounts in proportion to the
Participant's Pre-Tax Contributions for the Plan Year.
20.5.2 A Participant may treat his Excess Contributions as an
amount distributed to the Participant and then contributed by the
Participant to the Plan as Post-Tax Contributions. Such recharacterized
amounts will remain nonforfeitable and subject to the same distribution
requirements as Pre-Tax Contributions. Amounts may not be recharacterized
by a Highly Compensated Employee to the extent that such amount in
combination with other Post-Tax Contributions and Matching Contributions
made by or with respect to that Employee would exceed any limit under
Section 20.6 or section 402(g) of the Code. Recharacterization must occur
no later than two and one-half months after the last day of the Plan Year
in which the Excess Contributions arose and is deemed to occur no earlier
than the date the last Highly Compensated Employee is informed in writing
of the amount which may be recharacterized and the consequences thereof.
20.6 Actual Contributions Percentage Test.
20.6.1 Matching Contributions and Post-Tax Contributions
hereunder shall not exceed the limits set forth in section 401 (m) of the
Code. For
87
purposes of applying such limits, section 401(m) of the Code and the
regulations thereunder are incorporated herein by reference.
20.6.2 Contributions made by or on behalf of Highly
Compensated Employees shall not exceed the limits imposed upon multiple
use of the alternative limitation by section 401(m)(9) of the Code. For
this purpose, section 401(m)(9) of the Code and Treasury regulation
section 401(m)-2(b) are incorporated herein by reference. If one or more
Highly Compensated Employees' contributions exceed the multiple use
limit, then the actual contribution ratio ("ACR") of Highly Compensated
Employees shall be reduced (starting with such Highly Compensated
Employee whose ACR is the highest) so that the limit is not exceeded. The
amount of any such reduction shall be treated as an Excess Aggregate
Contribution. The actual deferral ratio ("ADR") and ACR of Highly
Compensated Employees shall be determined hereunder after any adjustments
required to pass the tests described in Sections 20.4 and 20.6.1.
Multiple use shall not occur if the actual deferral percentage ("ADP")
and the actual contributions percentage ("ACP") (as such terms are
defined in the regulations under sections 401(k) and 401(m) of the Code,
respectively) of Highly Compensated Employees is not greater than 125
percent of the ADP and ACP of Employees who are not Highly Compensated
Employees.
20.7 Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall be
forfeited, if forfeitable, or if not forfeitable, distributed no later than the
last day of each Plan Year beginning after December 31, 1987, to
88
Participants to whose accounts Post-Tax or Matching Contributions were
allocated for the preceding Plan Year. The Excess Aggregate Contributions shall
be adjusted for income or loss. The income or loss allocable to Excess
Aggregate Contributions shall be determined by multiplying the income or loss
allocable to the Participant's Post-Tax and Matching Contributions for the Plan
Year by a fraction, the numerator of which is the Excess Aggregate
Contributions on behalf of the Participant for the preceding Plan Year and the
denominator of which is the sum of the Participant's account balance
attributable to Post-Tax and Matching Contributions, and any other employee and
matching contributions within the meaning of section 401 (m) of the Code, on
the last day of the preceding Plan Year. Excess Aggregate Contributions shall
be distributed from the Participant's Post-Tax Contribution Account, and
forfeited if otherwise forfeitable under the terms of the Plan (or, if not
forfeitable, distributed) from the Participant's Matching Contribution Accounts
in proportion to the Participant's Post-Tax and Matching Contributions for the
Plan Year. The determination of the Excess Aggregate Contributions shall be
made after first determining the Excess Elective Deferrals and then determining
the Excess Contributions.
89
ARTICLE 21
Rollover Contributions
21.1 Rollover Contributions. This Article applies to rollover
contributions made by a Participant to the Plan. The Administrative Committee
may authorize, in its sole discretion, a Participant to contribute any portion
of an "eligible rollover contribution" from another "eligible retirement plan"
(as such terms are defined in Article 22) on the Appropriate Form and in such
manner as the Administrative Committee may prescribe.
21.2 Rollover Account. Any such contribution by a Participant (and
any earnings, losses and expenses attributable thereto) shall be credited to a
separate "Rollover Account" on behalf of such Participant which reflects his
share of the Trust Fund attributable to such rollover contributions.
21.3 Investment Elections. A Participant may, by giving notice on
the Appropriate Form and within such time as the Administrative Committee may
prescribe designate the proportion of his Rollover Account, in any whole
percentage, which shall be allocated to and invested in any Investment Fund.
Any such election shall continue in effect until changed by a new designation
in accordance with the same procedures then in effect for any change in a
Participant's election as to Basic Contributions under Section 4.4, and may be
reallocated by the Participant in accordance with the provisions of Section
4.6.
21.4 Vesting: Withdrawals: Loans. Amounts in each Rollover Account
shall at all times be fully vested and shall not be subject to forfeiture
pursuant to any provision of this Plan. A Participant may withdraw the entire
balance of his Rollover Account in accordance with the provisions of Articles 6
and 7 as applicable to a
90
Participant's Post-Tax Contribution Account. Amounts in a Participant's
Rollover Account shall be taken into account for all purposes of any loan made
to the Participant in accordance with Section 6.7 and the participant loan
program established thereunder.
21.5 Implementation and Suspension. Implementation of this Article
shall be delayed until such date, not earlier than January 1, 1995, as the
Administrative Committee, in its sole discretion, shall determine. In addition,
the Administrative Committee may suspend the authorization contained in this
Article as to future rollover contributions, provided, however that any such
suspension shall not affect any Participant rollover contribution to the Plan
made prior to such suspension date.
91
ARTICLE 22
Direct Rollover
22.1 This Article applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Article, a distributee may
elect, at the time and in the manner prescribed by the Administrative
Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a
direct rollover.
22.2 Definitions.
22.2.1 Eligible Rollover Distribution. An eligible rollover
distribution is any distribution of all or any portion of the
unencumbered cash balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution that
is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributed or the joint lives (or joint life expectancies) of the
distributed and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
22.2.2 Eligible Retirement Plan. An eligible retirement plan
is an individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b) of the
Code, an annuity plan
92
described in section 403(a) of the Code, or a qualified trust described
in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
22.2.3 Distributee. A distributed includes an employee or
former employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse or former
spouse who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
22.2.4 Direct Rollover. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
93
ARTICLE 23
Profit Sharing
Profit Sharing Contributions shall be made in accordance with the provisions of
this Article 23:
23.1 Eligibility. In order to be eligible to receive a Profit
Sharing Contribution for a Plan Year under this Section 23.1 an Employee must
be an Eligible Employee, except that the Employee must be at least 18 years of
age and actively employed by a Profit Sharing Employer at the beginning of a
Plan Year. In addition, the Eligible Employee must: (1) not be covered by a
collective bargaining agreement unless the applicable collective bargaining
agreement expressly provides that he shall be eligible to participate in the
Plan; (2) not participate in any other sales or management incentive program
offered by a Profit Sharing Employer during a Plan year, subject to the
provisions of the following paragraph; (3) complete at least 1,000 Hours of
Service during a Plan Year; and (4) be actively employed by the Profit Sharing
Employer on the date in the succeeding Plan Year on which Profit Sharing
Contributions are made for the preceding Plan Year. The provisions of
subparagraphs (2) and (3) shall apply to contributions made during a Plan Year
or with respect to the Plan Year for which such contributions are made.An
Employee who meets the eligibility requirements set forth in the preceding
paragraph but for the fact that such employee is promoted or transferred after
March 31 of a Plan Year to a position or salary grade which is ineligible to
receive a Profit Sharing Contribution shall be eligible to receive a Profit
Sharing Contribution, for such Plan Year based on the period of time during
such Plan Year for which he was eligible and based on his Compensation earned
during such period of eligibility. An Employee who
94
meets the eligibility requirements set forth in the preceding
paragraph but who takes an approved leave of absence during a Plan Year shall
be eligible to receive a Profit Sharing Contribution for such Plan Year based
on his period of active employment as an eligible employee under this Article
23.
Only Employees of Profit Sharing Employers who are Eligible
Employees and who meet the criteria set forth in Section 23.1 shall be eligible
to receive a Profit Sharing Contribution under this Article 23. Notwithstanding
the foregoing, however, Eligible Employees who are Highly Compensated Employees
shall not be eligible to receive a Profit Sharing Contribution for a Plan Year
if such receipt would result in the Plan's violation of Code Section 410(b).
23.2 Profit Sharing Contributions--Amount. The amount of Profit
Sharing Contributions (if any) for a Plan Year shall be based upon the
achievement (or failure thereof) of financial objectives of the Profit Sharing
Employer, which objectives shall be established by the Profit Sharing
Employer's authorized officers at the beginning of each Plan Year (or as soon
as practicable thereafter).
In its discretion, a Profit Sharing Employer may elect not to
establish Profit Sharing objectives for a Plan Year, in which event such Profit
Sharing Employer shall have no obligation to make Profit Sharing Contributions
for any such Plan Year.
23.3 Profit Sharing Contributions--Payment. Profit Sharing
Contributions for a Plan Year (if any) shall be paid to the Trustee as soon as
practicable after the Employer has determined the degree to which the financial
objectives for such Plan Year have been achieved.
95
23.4 Form of Profit Sharing Contributions. Profit Sharing
Contributions shall be made only in the form of Company Stock, or in cash which
is used by the Trustee to purchase shares of Company Stock, as more fully
described in the Trust Agreement. All Profit Sharing Contributions shall be
invested in the Company Stock Fund, without regard to the investment direction
of a Participant, together with all dividends and other distributions resulting
from such investments.
23.5 Allocation of Profit Sharing Contributions. Profit Sharing
Contributions (and forfeitures in lieu thereof) made on behalf of a Participant
made during any month shall be credited to his Profit Sharing Contributions
Account as of the day immediately following the date on which such
contributions were made.
23.6 Vesting. A Participant's entire Profit Sharing Contributions
Account shall be fully vested on the earliest of (a) Normal Retirement Age, (b)
Termination of Employment on account of Disability, or (c) death. Prior to the
occurrence of any of the foregoing events, a Participant shall be vested in his
Profit Sharing Contributions Account as follows:
With respect to Profit Sharing Contributions made for any Plan Year
(and dividends and other increments derived directly or indirectly therefrom),
at the rate of one third on the date a Profit Sharing Contribution is made and
one third on each of the two immediately succeeding January lst following the
Plan Year in which such Profit Sharing Contribution is made occurring on or
before such Participant's Termination of Employment; provided, that all such
Profit Sharing Contributions shall be vested one hundred (100) percent after
the Participant completes five (5) years of Service.
96
In the case of a Participant who has five (5) or more consecutive 1
year Breaks in Service, all Service after such Breaks in Service will be
disregarded for the purpose of vesting the Profit Sharing Contributions Account
balance that accrued before such Breaks in Service. Such Participant's
pre-Break Service will count in vesting his post-Break Profit Sharing
Contributions Account balance only if either:
(i) such Participant has any nonforfeitable interest in such
account balance at the time of Termination of Employment; or
(ii) upon returning to Service the number of consecutive 1-year
Breaks in Service is less than the number of years of Service.
97
IN WITNESS WHEREOF, and as evidence of the adoption of this amended
and restated Plan, the Company has caused this instrument to be executed by its
duly authorized officer this 15th day of October, 1997.
REVLON CONSUMER PRODUCTS CORPORATION
By: /s/ Ronald H. Dunbar
---------------------------------
98
SCHEDULE A
As of January 1, 1997
REVLON EMPLOYEES' SAVINGS, INVESTMENT AND PROFIT SHARING PLAN
SCHEDULE OF EMPLOYERS
American Crew, Inc.
Amerinail, Inc.
Applied Science & Technologies Inc.
Creative Nail Design, Inc.
General Wig Manufacturers, Inc.
North American Revsale Inc. (except direct pay beauty advisors and those
field merchandisers who are not participants on January 1, 1994)
Prestige Fragrance & Cosmetics, Inc.
Realistic/Roux Professional Products Inc.
Revlon Consumer Corp.
Revlon Consumer Products Corporation
Revlon Government Sales, Inc.
Revlon, Inc.
Revlon Receivable Subsidiary, Inc.
RIROS Corporation
Roux Laboratories, Inc.
99
SCHEDULE B
As of January 1, 1997
Profit Sharing Employers
Applied Science & Technologies Inc. January 1, 1997
Realistic/Roux Professional Products Inc. January 1, 1997
Revlon Consumer Corp. January 1, 1997
Revlon Consumer Products Corporation January 1, 1997
Revlon Government Sales, Inc. January 1, 1997
Revlon, Inc. January 1, 1997
RIROS Corporation January 1, 1997
Roux Laboratories, Inc. January 1, 1997
100
REVLON EMPLOYEES' SAVINGS, INVESTMENT AND PROFIT SHARING PLAN
Participant Loan Program
1. Participant Loans Authorized. Upon the application of a Participant at
any time prior to the Participant's termination of employment, the
Administrative Committee may, in its sole discretion, instruct the Trustee to
make one or more loans to such Participant from the Trust Fund, effective as
soon as practicable after the Administrative Committee shall receive such
application (or in accordance with such other procedures as the Administrative
Committee may prescribe); provided that such loan meets the requirements of
this Program. Loans made pursuant to this Program and payments thereof,
including loan expenses, as described below, shall be appropriately charged and
credited against first, the Participant's Basic Account, second, his Pre-IPO
Matching Contributions Account, third, the vested portion of his Post-IPO
Matching Contributions Account and fourth, the vested portion of his Profit
Sharing Contributions Account. The loan request shall be made on an Appropriate
Form and within such time and pursuant to such manner as the Administrative
Committee may prescribe. The Administrative Committee shall notify the
Participant in writing within a reasonable time of the approval or denial of
such loan request. If a Participant obtains a loan under this Program, his
status as a Participant in the Plan and his rights with respect to his Plan
benefits shall not be affected, except to the extent that the Participant has
assigned his interests in his Accounts pursuant to Section 2. A Participant
taking a loan pursuant to this Program shall not be eligible to take another
such loan more than once within any full twelve (12) calendar month period
101
following the date that such loan is approved; provided, however, that the
Administrative Committee may adopt rules permitting more frequent loans, for
example, where the Participant certifies in writing to the Administrative
Committee that the loan proceeds are to be used to acquire a dwelling unit
which, within a reasonable period of time, is to be used as the principal
residence of such Participant. A Participant shall not be eligible to have more
than two loans under this Program outstanding at any time. All loans shall be
granted according to rules applicable to all participants on a uniform and
nondiscriminatory basis.
2. Loan Requirements. A loan shall not be made to a Participant pursuant
to Section 1 unless such loan meets all of the following requirements:
2.1 Amount. Such loan must be in an amount that is not less than
one thousand dollars ($1,000), and not more than the lesser of (a) fifty
thousand dollars ($50,000), or (b) fifty percent (50%) of the sum of the
Participant's Basic Account and vested Pre-IPO Matching Contributions Account
and Post-IPO Matching Contributions Account and vested Profit Sharing
Contributions Account at the time of the loan. In determining the maximum
amount of a loan under this Section 2.1, there shall be added to any loan
amount requested, the excess (if any) of the highest outstanding balance of
loans during the one-year period ending on the day before the date on which
such loan is made over the outstanding balance on that date of all loans made
to the Participant from this Plan and from all other "qualified employer plans"
(as described in section 72(p)(4) of the Code) which are maintained by the
Company or any Employer or Affiliate referred to in section 72(p)(2)(D) of the
Code. If any outstanding balance of a loan (other than a loan made under this
Program) is required to be taken into account under the preceding
102
sentence, the value of the Participant's vested interest under the plan from
which such loan was made shall also be taken into account under clause (b) of
the first sentence of this Section 2.1.
2.2 Adequate Security. Such loan must be adequately secured by an
amount equal to fifty percent (50%) of the present value of the Participant's
vested interest in the Plan at the time of the loan and such other or
additional security as the Administrative Committee may in its sole discretion
require. The loan shall be secured first by amounts in the Participant's Basic
Account, second, by his Pre-IPO Matching Contributions Account, third, by his
Post-IPO Matching Contributions Account and fourth, by his Profit Sharing
Contributions Account.
2.3 Interest. Such loan must bear interest, payable at annual
intervals (or more frequent intervals, if the Administrative Committee so
requires), at a reasonable rate as determined by the Investment Committee from
time to time in a nondiscriminatory manner for such loans entered into for the
relevant period and shall otherwise conform to the repayment terms set forth in
this Program.
2.4 Repayment Terms. The principal amount of any loan made pursuant
to this Program must be payable upon the earlier of the following dates: (a)
the expiration of a fixed term to be determined by the Administrative Committee
but not to exceed five (5) years from the date of the loan, unless the
Participant certifies in writing to the Administrative Committee that the loan
proceeds are to be used to acquire a dwelling unit which, within a reasonable
period of time, is to be used as the principal residence of such Participant,
in which case, the loan shall be repaid over a period not to exceed ten years
from the date of such loan; and (b) the date on which distribution is made or
otherwise
103
commences following the Participant's Termination of Employment. Such repayment
shall be made in substantially level installments of principal and interest
which the Participant shall authorize to be paid, to the extent practicable, by
payroll deductions, which payroll deductions shall not exceed 15% of the
Participant's salary per pay period. Notwithstanding the foregoing, a
Participant shall have the right to repay all of such principal and/or interest
amount without penalty at any time. In the event of default, foreclosure on the
note and attachment of security will not occur until a distributable event
occurs in the Plan.
2.5 Promissory Note and Loan Agreement. A loan granted pursuant to
this Program shall be evidenced by a promissory note as contained in an
Appropriate Form executed by the Participant and containing such terms and
provisions as the Committees shall determine. Such loan must also be made
pursuant to a loan agreement executed by the Participant on an Appropriate Form
containing such terms and provisions as the Committees shall determine. The
occurrence of any event of default under the loan note shall entitle the
Trustee of the Plan to reduce the balance of the Participant's Accounts up to
the amount of the Plan's security interest therein. The loan note shall be an
asset solely of the borrowing Participant's Accounts and interest on the loan
shall be credited to his Accounts.
3. Loan Expenses. Any fees, taxes, charges or other expenses (including
without limitation any asset liquidation charge or similar extraordinary
expense) incurred in connection with a loan shall be charged against the
Accounts of the Participant obtaining such loan.
104
4. Loan Fund. Prior to receiving the proceeds of a loan, the Participant
shall direct that funds in an amount equal to the loan amount be transferred
from the Participant's Accounts in which it is invested, in a proportion
elected by the Participant, to a special loan fund established by the
Investment Committee (consisting solely of that Participant's loans)
established for purposes of disbursing the loan amount to the Participant. Any
such transfer shall be disregarded for purposes of any transfer limitations
under Program of the Plan.
5. Source of Funds. Any Participant who enters into an agreement to
effect a Participant loan shall be deemed to have redesignated his existing
Accounts balances in a manner similar to that provided for in Section 5.6 of
the Plan, so that an amount equal to the initial amount of any such Participant
loan is invested in the Participant's loan fund immediately coincident with the
effective date of such Participant loan. Amounts redesignated in accordance
with the preceding sentence shall be charged against each Investment Fund (to
the extent available) that the Participant's Accounts are then invested in on a
pro rata basis, except as the Participant may otherwise direct.
6. Reallocation to Other Investment Funds. Payments of principal and
interest on a Participant's loan shall be initially deposited in the
Participant's loan fund for allocation to such Participant's Accounts and shall
be reallocated as soon as administratively practicable following such deposit
to such other Investment Fund or Funds as the Participant shall have then
designated for investment of his Basic Account in accordance with the
provisions of Section 5.4 of the Plan or as otherwise directed by the
Participant.
7. Suspension. Notwithstanding any other provision of this Plan, the
Administrative Committee may suspend the authorization contained in this
Program as to
105
future Participant loans, provided, however that any such suspension shall not
affect any Participant loan then outstanding.
8. Compliance with Applicable Laws. The Committees shall take actions as
they, upon the advice of counsel, may deem appropriate in order to assure full
compliance with all applicable laws and regulations relating to Participant
loans and the granting and repayment thereof.
9. Loans Available on Nondiscriminatory Basis.
(a) All loans made pursuant to this Program shall be made available
to all Participants on a reasonably equivalent, nondiscriminatory basis.
(b) Notwithstanding the preceding provisions of this Program, loans
may be made to a Participant who is, at the time of the loan, both a former
employee and a "party in interest" as defined in section 3(14) of ERISA with
respect to the Plan. In the case of any such loan, the preceding provisions of
this Program dealing with payment by payroll deduction and acceleration on
termination of employment shall not be applicable. The provisions of this
Section 9(b) shall apply only if and to the extent required by ERISA section
408 or Code section 4975.
(c) Loans shall not be made available to highly compensated
employees (as defined in Code section 414(q)) in an amount greater than the
amount made available to other employees.
REVLON, INC.
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Set forth below is a list of certain of the Registrant's subsidiaries.
Such subsidiaries are incorporated or organized in the jurisdictions indicated.
Revlon Consumer Products Corporation is wholly owned by the Registrant. Except
as otherwise indicated, each of the other listed subsidiaries is wholly owned
by Revlon Consumer Products Corporation directly, or indirectly as indicated,
and all listed subsidiaries are included in the Registrant's consolidated
financial statements. The names of the Registrant's remaining subsidiaries have
been omitted from the following list, but such omitted subsidiaries, considered
in the aggregate as a single subsidiary, would not constitute a significant
subsidiary.
DOMESTIC SUBSIDIARIES
ALMAY, INC., a Delaware corporation
AMERICAN CREW, INC., a Delaware corporation
AMERINAIL INC., a Delaware corporation
APPLIED SCIENCE & TECHNOLOGIES INC., a Delaware corporation
CARRINGTON PARFUMS LTD., a Delaware corporation
CHARLES REVSON INC., a New York corporation
CREATIVE NAIL DESIGN, INC., a California corporation
(d/b/a CREATIVE NAIL DESIGN SYSTEMS AND CND INC. in California)
FERMODYL PROFESSIONALS INC., a Delaware corporation
GENERAL WIG MANUFACTURERS, INC., a Florida corporation (1)
(d/b/a REVLON GENERAL WIG AND BEAUTY TRENDS in Florida)
NORTH AMERICA REVSALE INC., a New York corporation
OXFORD PROPERTIES CO., a Delaware corporation
(d/b/a OXFORD PROPERTIES OF DELAWARE in North Carolina)
PACIFIC FINANCE & DEVELOPMENT CORP., a California corporation
PPI TWO CORPORATION, a Delaware corporation
PRESTIGE FRAGRANCES, LTD., a Delaware corporation
REALISTIC/ROUX PROFESSIONAL PRODUCTS INC., a Delaware corporation (1)
REVLON COMMISSARY SALES, INC., a Delaware corporation (2)
REVLON CONSUMER CORP., a Delaware corporation
REVLON CONSUMER PRODUCTS CORPORATION, a Delaware corporation
DOMESTIC SUBSIDIARIES, CONTINUED
REVLON GOVERNMENT SALES, INC., a Delaware corporation
REVLON INTERNATIONAL CORPORATION, a Delaware corporation
REVLON PROFESSIONAL, INC., a Delaware corporation (1)
REVLON PROFESSIONAL PRODUCTS INC., a Delaware corporation (1)
REVLON RECEIVABLES SUBSIDIARY, INC., a Delaware corporation
RIROS CORPORATION, a New York corporation
RIT INC., a Delaware corporation (3)
ROUX LABORATORIES, INC., a New York corporation
(d/b/a REVLON PROFESSIONAL in Florida and New York)
THE COSMETIC CENTER, INC. (a Delaware corporation) (33)
(d/b/a PRESTIGE FRAGRANCE & COSMETICS in Arizona, California, Colorado,
Connecticut, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska,
Nevada, New Hampshire, New Jersey, New York, North Carolina, Oregon,
Pennsylvania, South Carolina, Texas, Vermont, Virginia, Washington and
Wisconsin)
(d/b/a COLOURS & SCENTS in Arizona, California, Colorado, Florida, Georgia,
Hawaii, Massachusetts, New York, Nevada, Ohio, Oregon, Pennsylvania,
Tennessee, Texas, Virginia and Washington)
(d/b/a VISAGE BEAUTE in Florida)
(d/b/a THE COSMETIC WAREHOUSE in Florida)
-2-
FOREIGN SUBSIDIARIES
FOREIGN SUBSIDIARIES
CEIL - COMERCIAL, EXPORTADORA, INDUSTRIAL LTDA. (Brazil) (4)
CENDICO B.V. (Netherlands) (5)
DEUTSCHE REVLON GMBH (Germany) (31)
DEUTSCHE REVLON GMBH & CO. KG (Germany) (27)
EUROPEAN BEAUTY PRODUCTS S.P.A. (Italy) (21)
EUROPEENNE DE PRODUITS DE BEAUTE S.A. (France) (9)
INTERCOSMO S.P.A. (Italy) (10)
LABORATORIOS ZUSKA S.A. (Spain) (36)
REVLON A.B. (Sweden) (11)
REVLON (AUST.) PTY. LIMITED (Australia) (12)
REVLON BELGIUM S.A. (Belgium) (29)
REVLON BERMUDA HOLDINGS LTD. (Bermuda) (35)
REVLON B.V. (Netherlands) (3)
REVLON CANADA INC. (Canada) (3)
REVLON (CAYMAN) LIMITED (Cayman Islands) (22)
REVLON CHILE S.A. (31)
REVLON CHINA HOLDINGS LIMITED (3)
REVLON COIFFURE SNC (France) (13)
REVLON COSMETICS AND FRAGRANCES LIMITED (United Kingdom) (14)
REVLON DE ARGENTINA, S.A.I.C. (Argentina) (15)
REVLON EUROPE, MIDDLE EAST AND AFRICA LTD. (Bermuda) (5)
REVLON FINANCE IRELAND (Ireland) (34)
REVLON GESELLSCHAFT M.B.H. (Austria) (16)
REVLON GROUP LIMITED (United Kingdom)
REVLON (HONG KONG) LIMITED (Hong Kong) (3)
REVLON (ISRAEL) LIMITED (Israel) (17)
REVLON K.K. (Japan) (3)
REVLON REAL ESTATE K.K. (Japan) (3)
REVLON LATIN AMERICA AND CARIBBEAN, LTD. (Bermuda) (5)
REVLON (MALAYSIA) SDN. BHD. (Malaysia) (3)
REVLON MANUFACTURING LTD. (Bermuda) (3)
REVLON MANUFACTURING (U.K.) LIMITED (United Kingdom) (18)
REVLON MAURITIUS LTD. (Mauritius) (3)
REVLON NEDERLAND B.V. (Netherlands) (8)
REVLON NEW ZEALAND LIMITED (New Zealand) (3)
REVLON OFFSHORE LIMITED (Bermuda)
REVLON OVERSEAS CORPORATION, C.A. (Venezuela) (19)
REVLON PENSION TRUSTEE COMPANY (U.K.) LIMITED (United Kingdom)
REVLON - PRODUTOS COSMETICOS, LTDA. (Portugal) (8)
REVLON PROFESIONAL, S.A. DE C.V. (Mexico) (6)
REVLON PROFESSIONAL LIMITED (Ireland) (1)
REVLON (PUERTO RICO) INC. (Puerto Rico) (3)
-3-
FOREIGN SUBSIDIARIES, CONTINUED
REVLON-REALISTIC INTERNATIONAL LIMITED (Ireland) (28)
REVLON, S.A. (Mexico) (3)
REVLON, S.A. (Spain) (20)
REVLON (SHANGHAI) LIMITED (32)
REVLON (SINGAPORE) PTE. LTD. (Singapore) (3)
REVLON SOUTH AFRICA (PROPRIETARY) LIMITED (South Africa) (7)
REVLON (SUISSE) S.A. (Switzerland) (3)
REVLON TAIWAN LIMITED (Taiwan) (7)
RGI BEAUTY PRODUCTS (PROPRIETARY) LIMITED (South Africa)
RGI (CAYMAN) LIMITED (Cayman Islands) (30)
RGI LIMITED (Cayman Islands) (23)
RGI MEDICAL PRODUCTS (PTY.) LIMITED (South Africa) (24)
RIC PTY. LIMITED (Australia) (5)
R.I.F.C. BANK LIMITED (Bahamas) (7)
R.O.C. HOLDING C.A. (Venezuela) (3)
SHANGHAI REVSTAR COSMETIC MARKETING SERVICES Limited (32)
TINDAFIL, S.A. (Uruguay) (25)
ULTIMA II COSMETICS GMBH (Germany) (26)
YAE ARTISTIC PACKINGS INDUSTRY LTD. (Israel) (17)
YAE PRESS 2000 (1987) LTD. (Israel) (37)
-4-
OWNERSHIP
(1) Owned 100% by ROUX LABORATORIES INC. (New York)
(2) Owned 100% by REVLON GOVERNMENT SALES, INC. (Delaware)
(3) Owned 100% by REVLON INTERNATIONAL CORPORATION (Delaware)
(4) Owned 99% by RGI LIMITED (Cayman Islands)
and less than 1%by REVLON INTERNATIONAL CORPORATION (Delaware)
(5) Owned 100% by REVLON MANUFACTURING LIMITED (Bermuda)
(6) Owned 95% by ROUX LABORATORIES INC. (New York)
and 5% by THIRD PARTIES
(7) Owned 100% by REVLON OFFSHORE LIMITED (Bermuda)
(8) Owned 100% by REVLON, S.A. (Spain)
(9) Owned 62% by REVLON EUROPE, MIDDLE EAST AND AFRICA LTD. (Bermuda),
37% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 1% by REVLON, S.A. (Spain)
(10) Owned 100% by EUROPEAN BEAUTY PRODUCTS S.P.A. (Italy)
(11) Owned 100% by REVLON B.V. (Netherlands)
(12) Owned 50% by REVLON MANUFACTURING LIMITED (Bermuda)
and 50% by RIC PTY. LIMITED (Australia)
(13) Owned 100% by EUROPEENNE DE PRODUITS DE BEAUTE, S.A. (France)
(14) Owned 100% by REVLON MANUFACTURING (UK) LIMITED (United Kingdom)
(15) Owned 84.6% by REVLON INTERNATIONAL CORPORATION (Delaware), 10% by
REVLON (BERMUDA) HOLDINGS LTD. (Bermuda) and 6% by REVLON
MANUFACTURING LTD. (Bermuda)
(16) Owned 74% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 26% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
(17) Owned 99.8% by REVLON AB, the remainder by third parties (Sweden)
(18) Owned 100% by REVLON GROUP LIMITED (United Kingdom)
(19) Owned 100% by R.O.C. HOLDING C.A. (Venezuela)
(20) Owned 54% by REVLON EUROPE, MIDDLE EAST AND AFRICA LTD. (Bermuda)
and 46% by REVLON INTERNATIONAL CORPORATION (Delaware)
(21) Owned 95.45% by REVLON, S.A. (Spain)
and 4.55% by REVLON INTERNATIONAL CORPORATION (Delaware)
(22) Owned 100% by PPI TWO CORPORATION (Delaware)
(23) Owned 98% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
and 2% by REVLON (CAYMAN) LIMITED (Cayman Islands)
(24) Owned 100% by REVLON SOUTH AFRICA (PTY.) LTD. (South Africa)
(25) Owned 100% by CEIL - COMERCIAL, EXPORTADORA, INDUSTRIAL LTDA. (Brazil)
(26) Owned 75% by REVLON INTERNATIONAL CORPORATION (Delaware)
and 25% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
(27) Owned 50% by DEUTSCHE REVLON GMBH (Germany)
and 50% by REVLON OFFSHORE LIMITED (Bermuda)
(28) Owned 97% by REVLON PROFESSIONAL LIMITED (Ireland)
and 3% by ROUX LABORATORIES INC. (New York)
(29) Owned 100% by REVLON NEDERLAND B.V. (Netherlands)
-5-
(30) Owned 100% by REVLON (CAYMAN) LIMITED (Cayman Islands)
(31) Owned 99% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware)
and 1% by REVLON INTERNATIONAL CORPORATION (Delaware)
(32) Owned 95% by REVLON CHINA HOLDINGS LIMITED and 5% by BEIJING SUMSTAR
INDUSTRIAL COMPANY LIMITED, an unrelated third party
(33) Owned 85% by REVLON CONSUMER PRODUCTS CORPORATION (Delaware) and the
remainder is publicly held
(34) Owned 99.9% by REVLON CANADA, INC. (Canada) and the remainder is held
by REVLON BERMUDA HOLDINGS LTD. (Bermuda)
(35) Owned 99.9% by REVLON CANADA INC. (Canada) and the remainder is held
by a nominee shareholder
(36) Owned 100% by REVLON S.A. (Spain)
(37) Owned 100% by REVLON AB (Sweden)
Exhibit 24.1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 18
day of February, 1998.
/s/ RONALD O. PERELMAN
-------------------------
RONALD O. PERELMAN
Exhibit 24.2
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 18
day of February, 1998.
/s/ DONALD G. DRAPKIN
-------------------------
DONALD G. DRAPKIN
Exhibit 24.3
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 18
day of February, 1998.
/s/ JERRY W. LEVIN
------------------------
JERRY W. LEVIN
Exhibit 24.4
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 18
day of February, 1998.
/s/ HOWARD GITTIS
---------------------
HOWARD GITTIS
Exhibit 24.5
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
19th day of January, 1998.
/s/ VERNON E. JORDAN, JR.
--------------------------
VERNON E. JORDAN, JR.
Exhibit 24.6
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
26th day of January, 1998.
/s/ HENRY A. KISSINGER
-----------------------
HENRY A. KISSINGER
Exhibit 24.7
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 19
day of January, 1998.
/s/ EDWARD J. LANDAU
-------------------------
EDWARD J. LANDAU
Exhibit 24.8
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 21
day of January, 1998.
/s/ LINDA GOSDEN ROBINSON
--------------------------
LINDA GOSDEN ROBINSON
Exhibit 24.9
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 18
day of February, 1998.
/s/ TERRY S. SEMEL
------------------------
TERRY S. SEMEL
Exhibit 24.10
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
26th day of January, 1998.
/s/ MARTHA STEWART
------------------------
MARTHA STEWART
Exhibit 24.11
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 17
day of January, 1998.
/s/ MEYER FELDBERG
-----------------------------
MEYER FELDBERG
Exhibit 24.12
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
20th day of January, 1998.
/s/ MORTON L. JANKLOW
------------------------
MORTON L. JANKLOW
Exhibit 24.13
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Wade H. Nichols III, Robert K. Kretzman,
Lawrence E. Kreider and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and his name, place and stead, in any and all capacities, in connection
with the REVLON, INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K") under the Securities Exchange
Act of 1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name and on behalf of the Corporation
or on behalf of the undersigned as a director or officer of the Corporation,
and any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities and
Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 13
day of February, 1998.
/s/ WILLIAM J. FOX
--------------------------
WILLIAM J. FOX
5
12-MOS
DEC-31-1997
DEC-31-1997
42,800
0
519,800
25,900
349,300
983,500
595,200
217,000
1,834,600
609,800
1,427,800
0
54,600
500
(513,600)
1,834,600
2,390,900
2,390,900
832,100
832,100
0
3,600
136,200
67,900
9,400
58,500
0
(14,900)
0
43,600
0.85
0.85
