e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration File No.: 333-166217
PROSPECTUS
Revlon Consumer Products
Corporation
Offer to exchange $330 million aggregate principal
amount of
93/4% Senior
Secured Notes Due 2015 (CUSIP Nos. U8000E AG4 and 761519 BA4)
(which we refer to as the old notes) for
$330 million aggregate principal amount of
93/4% Senior
Secured Notes Due 2015 (CUSIP No. 761519 BB2) (which we
refer to as the new notes) which have been
registered under the Securities Act of 1933, as amended (the
Securities Act), and fully and unconditionally
guaranteed by the guarantors listed on page ii of this
prospectus. When we use the term notes in this
prospectus, the term includes the old notes and the new
notes.
The exchange offer will expire at 5:00 p.m., New York City
time, on July 1, 2010 (the 30th day following the date of
this prospectus), unless we extend the exchange offer.
Terms of the exchange offer:
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We will exchange new notes for all outstanding old notes that
are validly tendered and not withdrawn prior to the expiration
or termination of the exchange offer.
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You may withdraw tenders of old notes at any time prior to the
expiration or termination of the exchange offer.
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The terms of the new notes are substantially identical to those
of the outstanding old notes, except that the transfer
restrictions and registration rights (including interest rate
increases) relating to the old notes do not apply to the new
notes.
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The exchange of old notes for new notes will not be a taxable
transaction for U.S. federal income tax purposes. You
should see the discussion under the caption Certain
Material U.S. Federal Income Tax Considerations for
more information.
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We will not receive any proceeds from the exchange offer.
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We issued the old notes in a transaction not requiring
registration under the Securities Act, and as a result, their
transfer is restricted. We are making the exchange offer to
satisfy your registration rights, as a holder of the old notes.
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We do not intend to list the new notes on any securities
exchange or to seek approval for quotation through any automated
quotation system.
Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such new
notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an underwriter within the
meaning of the Securities Act. This prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of new notes received
in exchange for old notes where such old notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities. We have agreed that, for a period of
210 days after the expiration of the exchange offer, we
will make this prospectus available to any broker-dealer for use
in connection with any such resale. See Plan of
Distribution.
See Risk Factors beginning on page 22 for a
discussion of risks you should consider prior to tendering your
outstanding old notes for exchange.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is June 1, 2010.
Table of
Contents
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Unless otherwise indicated or the context requires otherwise,
the terms Products Corporation, the
Company, we, our,
ours and us refer to Revlon Consumer
Products Corporation and its subsidiaries. However, in the
descriptions of the notes and related matters, these terms refer
solely to Revlon Consumer Products Corporation and not to any of
its subsidiaries. Unless otherwise indicated or the context
requires otherwise, the term Revlon refers to
Revlon, Inc., our parent company.
i
GUARANTORS
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Revlon, Inc.
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Almay, Inc.
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Charles of the Ritz Group Ltd.
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Charles Revson Inc.
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Cosmetics & More Inc.
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North America Revsale Inc.
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PPI Two Corporation
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Revlon Consumer Corp.
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Revlon Development Corp.
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Revlon Government Sales, Inc.
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Revlon International Corporation
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Revlon Real Estate Corporation
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RIROS Corporation
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RIROS Group Inc.
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ii
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission, or the SEC, allows
certain issuers, including Products Corporation and Revlon, to
incorporate by reference information into a
prospectus such as this one, which means that we can disclose
important information about us by referring you to those
documents that are considered part of this prospectus. Any
statement contained in this prospectus or a document
incorporated by reference into this prospectus will be deemed to
be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or therein, or in any
other subsequently filed document that also is deemed to be
incorporated herein or therein by reference, modifies or
supersedes such statement. A statement so modified or superseded
will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We incorporate by reference into this prospectus the documents
set forth below that have been previously filed with the SEC,
provided, however, that we are not incorporating any information
furnished rather than filed on any Current Report on
Form 8-K
or
Form 8-K/A:
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The Annual Report on
Form 10-K
of Products Corporation for the fiscal year ended
December 31, 2009 as filed with the SEC on
February 25, 2010;
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The Annual Report on
Form 10-K
of Revlon for the fiscal year ended December 31, 2009 as
filed with the SEC on February 25, 2010;
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The Definitive Proxy Statement on Schedule 14A of Revlon
filed with the SEC on April 21, 2010;
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The Quarterly Report on
Form 10-Q
of Products Corporation filed with the SEC on April 29,
2010;
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The Quarterly Report on
Form 10-Q
of Revlon filed with the SEC on April 29, 2010;
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The Current Reports on
Form 8-K
of Products Corporation filed with the SEC on March 11,
2010 and March 16, 2010;
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The Current Reports on
Form 8-K
of Revlon filed with the SEC on January 8, 2010,
March 11, 2010 and March 16, 2010; and
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Any future filings Products Corporation or Revlon make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
until the exchange offer expires or is otherwise terminated.
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WHERE YOU
CAN FIND MORE INFORMATION
Products Corporation and Revlon file and furnish annual,
quarterly and current reports and other information with the
SEC. You may read and copy any reports or other information that
they file or furnish with the SEC at the SECs Public
Reference Room located at Station Place, 100 F Street,
N.E., Washington, D.C. 20549. You may also receive copies
of these documents upon payment of a duplicating fee, by writing
to the SECs Public Reference Room. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room in Washington, D.C. and other locations. The SEC
filings of Products Corporation and Revlon are also available to
the public on the SECs website (www.sec.gov).
This prospectus incorporates important business and financial
information about us that is not included in or delivered with
this document. This information is available without charge to
security holders upon written or oral request to:
Investor
Relations
Revlon Consumer Products Corporation
237 Park Avenue
New York, New York 10017
(212) 527-4000
In order to obtain timely delivery of such materials, you
must request information from us no later than five business
days prior to the expiration of the exchange offer.
iii
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in
this prospectus. This summary is not complete and does not
contain all of the information that you should consider before
exchanging your old notes for new notes. You should carefully
read the entire prospectus, including the risk factors, the
financial data and financial statements included or incorporated
by reference herein and the other documents incorporated by
reference in this prospectus.
Our
Company
Our vision is glamour, excitement and innovation through
high-quality products at affordable prices. We manufacture,
market and sell an extensive array of cosmetics, womens
hair color, beauty tools, anti-perspirants/deodorants,
fragrances, skincare and other beauty care products. We are one
of the worlds leading cosmetics companies in the mass
retail channel (as defined herein). We believe that our global
brand name recognition, product quality and marketing experience
have enabled us to create one of the strongest consumer brand
franchises in the world. For the year ended December 31,
2009, we generated net sales of $1,295.9 million and income
from continuing operations of $58.5 million.
Our products are sold worldwide and marketed under such brand
names as Revlon, including the Revlon ColorStay,
Revlon Super Lustrous and Revlon Age Defying
franchises, as well as the Almay brand, including the
Almay Intense i-Color and Almay Smart Shade
franchises, in cosmetics; Revlon ColorSilk in
womens hair color; Revlon in beauty tools;
Mitchum in anti-perspirants/deodorants; Charlie
and Jean Naté in fragrances; and
Ultima II and Gatineau in skincare.
Our principal customers include large mass volume retailers and
chain drug and food stores (collectively, the mass retail
channel) in the U.S., as well as certain department stores
and other specialty stores, such as perfumeries, outside the
U.S. We also sell beauty products to U.S. military
exchanges and commissaries and have a licensing business
pursuant to which we license certain of our key brand names to
third parties for complementary beauty-related products and
accessories in exchange for royalties.
We were founded by Charles Revson, who revolutionized the
cosmetics industry by introducing nail enamels matched to
lipsticks in fashion colors over 75 years ago. Today, we
have leading market positions in a number of our principal
product categories in the U.S. mass retail channel,
including color cosmetics (face, lip, eye and nail categories),
womens hair color, beauty tools and
anti-perspirants/deodorants. We also have leading market
positions in several product categories in certain foreign
countries, including Australia, Canada and South Africa.
Our
Business Strategy
Our strategic goal is to profitably grow our business. The
business strategies employed by us to achieve this goal are:
1. Building our strong brands. We
continue to build our strong brands by focusing on innovative,
high-quality, consumer-preferred brand offering; effective
consumer brand communication; appropriate levels of advertising
and promotion; and superb execution with our retail partners.
2. Developing our organizational
capability. We continue to develop our
organizational capability through attracting, retaining and
rewarding highly capable people and through performance
management, development planning, succession planning and
training.
3. Driving our company to act
globally. We continue to drive common global
processes which are designed to provide the most efficient
allocation of our resources.
4. Increasing our operating profit and cash
flow. We continue to focus on increasing our
operating profit and cash flow.
5. Improving our capital
structure. We continue to improve our capital
structure by focusing on strengthening our balance sheet and
reducing debt.
1
Recent
Debt Reduction Transactions
We reduced our long-term indebtedness by $80.7 million
during 2009 and extended the maturity on a significant portion
of our long-term debt primarily as a result of the following
transactions:
2006 Bank Term Loan Facility. In
January 2009, we made a required quarterly amortization payment
of $2.1 million under our 2006 Bank Term Loan Facility (as
defined herein). In February 2009, we repaid $16.6 million
in principal amount under our 2006 Bank Term Loan Facility
pursuant to the requirement under the 2006 Bank Term Loan
Agreement (as defined herein) to repay term loan indebtedness
with 50% of our 2008 excess cash flow (as defined
under such agreement), which repayment satisfied our required
quarterly term loan amortization payments of $2.1 million
per quarter that would otherwise have been due on April 15,
2009, July 15, 2009, October 15, 2009,
January 15, 2010, April 15, 2010, July 15, 2010,
October 15, 2010 and $1.9 million of the amortization
payment otherwise due on January 15, 2011. At
December 31, 2009, the principal amount outstanding under
our 2006 Bank Term Loan Facility was $815.0 million.
On March 11, 2010, we refinanced our 2006 Bank Term Loan
Facility with our new 2010 Bank Term Loan Facility (as defined
herein). See Refinancing of our 2006 Bank Credit
Facilities below.
Extension of the maturity of the Senior Subordinated Term
Loan. In October 2009, Revlon consummated its
voluntary exchange offer (the 2009 Equity Exchange
Offer) in which Revlon issued to stockholders (other than
MacAndrews & Forbes Holdings Inc. and its affiliates
(MacAndrews & Forbes Holdings Inc. and, together with
its affiliates other than Revlon and Products Corporation,
MacAndrews & Forbes))
9,336,905 shares of Series A preferred stock, par
value $0.01 per share (the Preferred Stock), in
exchange for the same number of shares of Class A Common
Stock tendered for exchange in the 2009 Equity Exchange Offer.
Each share of the Preferred Stock issued in the 2009 Equity
Exchange Offer has a liquidation preference of $5.21 per share
and is entitled to receive a 12.75% annual dividend payable
quarterly in cash and is mandatorily redeemable for $5.21 in
cash on October 8, 2013. Each share of Preferred Stock
entitles its holder to receive cash payments of approximately
$7.87 over the four-year term of the Preferred Stock, through
the quarterly payment of 12.75% annual cash dividends (subject
to Revlon having sufficient surplus or net profits in accordance
with Delaware law available to effect such payments) and a $5.21
per share liquidation preference at maturity (assuming Revlon
does not engage in one of certain specified change of control
transactions), subject to Revlon having sufficient surplus in
accordance with Delaware law available to effect such payments.
Upon consummation of the 2009 Equity Exchange Offer,
MacAndrews & Forbes contributed to Revlon
$48.6 million of the $107.0 million aggregate
outstanding principal amount of the Senior Subordinated Term
Loan (the Senior Subordinated Term Loan) made by
MacAndrews & Forbes to Products Corporation (the
Contributed Loan), representing $5.21 of outstanding
principal amount for each of the 9,336,905 shares of Revlon
Class A Common Stock exchanged in the 2009 Equity Exchange
Offer, and Revlon issued to MacAndrews & Forbes
9,336,905 shares of Class A Common Stock at a ratio of
one share of Class A Common Stock for each $5.21 of
outstanding principal amount of the Senior Subordinated Term
Loan contributed to Revlon. Also upon consummation of the 2009
Equity Exchange Offer, the terms of the Senior Subordinated Term
Loan Agreement dated as of January 30, 2008, between
Products Corporation and MacAndrews & Forbes (the
Senior Subordinated Term Loan Agreement), were
amended:
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to extend the maturity date on the Contributed Loan which
remains owing from us to Revlon from August 2010 to
October 8, 2013;
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to change the annual interest rate on the Contributed Loan from
11% to 12.75%;
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to extend the maturity date on the $58.4 million principal
amount of the Senior Subordinated Term Loan which remains owing
from us to MacAndrews & Forbes (the
Non-Contributed Loan) from August 2010 to
October 8, 2014; and
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to change the annual interest rate on the Non-Contributed Loan
from 11% to 12%.
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As of March 31, 2010, MacAndrews & Forbes
beneficially owned in the aggregate 37,544,640 shares of
Revlon Class A Common Stock. MacAndrews & Forbes
is wholly-owned by Ronald O. Perelman. Mr. Perelman,
through MacAndrews & Forbes, also beneficially owns
all of the outstanding 3,125,000 shares of Revlons
Class B Common Stock. Based on such shares, as of
March 31, 2010, MacAndrews & Forbes beneficially
owned approximately 77% of Revlons Class A Common
Stock, 100% of Revlons Class B Common Stock and
approximately 78% of the combined Revlon Class A Common
Stock and Class B Common Stock (representing approximately
77% of the combined voting power of Revlons Class A
and Class B Common Stock and Revlons Preferred
Stock), and beneficially owned approximately 67% of the combined
Revlon Class A Common Stock, Class B Common Stock and
Preferred Stock.
Refinancing of the
91/2% Senior
Notes. In November 2009, we issued and sold
$330.0 million in aggregate principal amount of the old
notes in a private placement which was priced at 98.9% of par.
We used the $319.8 million of net proceeds from the old
notes (net of original issue discount and underwriters fees),
together with $42.6 million of other cash and borrowings
under the 2006 Bank Revolving Credit Facility (as defined
herein), to repay or redeem all of the $340.5 million
aggregate principal amount outstanding of our
91/2% Senior
Notes due April 1, 2011 (the
91/2% Senior
Notes), plus an aggregate of $21.9 million for
accrued interest, applicable redemption and tender premiums and
fees and expenses related to refinancing the
91/2% Senior
Notes, as well as the amendments to the 2006 Bank Credit
Agreements (as defined herein) required to permit such
refinancing to be conducted on a secured basis.
Prior to their complete refinancing in November 2009, we
repurchased $49.5 million in aggregate principal amount of
the
91/2% Senior
Notes at an aggregate purchase price of $41.0 million, net
of the write-off of the ratable portion of unamortized debt
discounts and deferred financing fees resulting from such
repurchases.
As a result of these transactions, all of our outstanding
91/2% Senior
Notes have been refinanced. In addition, as a result of these
transactions and the refinancing of the 2006 Bank Credit
Facilities (see Refinancing of our 2006 Bank Credit
Facilities below), we have no significant debt maturities
prior to October 2013.
Refinancing
of our 2006 Bank Credit Facilities
In December 2006, we entered into a
5-year,
$840.0 million term loan facility (the 2006 Bank Term
Loan Facility) pursuant to the term loan agreement, dated
as of December 20, 2006, among Products Corporation, as
borrower, the lenders party thereto, Citicorp USA, Inc.
(CUSA), as administrative agent and collateral
agent, Citigroup Global Markets Inc. (CGMI), as sole
lead arranger and sole bookrunner, and JPMorgan Chase Bank, N.A.
(JPMCB), as syndication agent (the 2006 Bank
Term Loan Agreement). In December 2006, we also entered
into a $160.0 million revolving credit agreement (the
2006 Bank Revolving Credit Agreement and, together
with the 2006 Term Loan Agreement, the 2006 Bank Credit
Agreements) that amended and restated our 2004 credit
agreement (with such revolving credit facility being the
2006 Bank Revolving Credit Facility and, together
with the 2006 Bank Term Loan Facility, the 2006 Bank
Credit Facilities). The 2006 Bank Credit Facilities were
scheduled to mature on January 15, 2012.
As part of our strategy to continue to improve our capital
structure, on March 11, 2010 we consummated our
previously-announced bank refinancing by refinancing our 2006
Bank Term Loan Facility with a new
5-year,
$800.0 million term loan facility (the 2010 Bank Term
Loan Facility) under a second amended and restated term
loan agreement, dated as of March 11, 2010, among Products
Corporation, as borrower, the lenders party thereto, CGMI,
J.P. Morgan Securities Inc. (JPM Securities),
Banc of America Securities LLC (BAS) and Credit
Suisse Securities (USA) LLC (Credit Suisse), as
joint lead arrangers, CGMI, JPM Securities, BAS, Credit Suisse
and Natixis, New York Branch (Natixis), as joint
bookrunners, JPMCB and Bank of America, N.A. as co-syndication
agents, Credit Suisse and Natixis as co-documentation agents,
and CUSA, as administrative agent and collateral agent (the
2010 Bank Term Loan Agreement).
On March 11, 2010, we also refinanced our 2006 Bank
Revolving Credit Facility, which had nil outstanding borrowings
at December 31, 2009, with a
4-year,
$140.0 million asset-based, multi-currency revolving credit
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facility (the 2010 Bank Revolving Credit Facility
and, together with the 2010 Bank Term Loan Facility, the
2010 Bank Credit Facilities) under a second amended
and restated revolving credit agreement, dated as of
March 11, 2010, among Products Corporation, as borrower,
the lenders party thereto, CGMI and Wells Fargo Capital Finance,
LLC (WFS), as joint lead arrangers, CGMI, WFS, BAS,
JPM Securities and Credit Suisse, as joint bookrunners, and
CUSA, as administrative agent and collateral agent (the
2010 Bank Revolving Credit Agreement and, together
with the 2010 Bank Term Loan Agreement, the 2010 Bank
Credit Agreements).
The 2010 Bank Term Loan Facility extended the maturity of our
2006 Bank Term Loan Facility to March 11, 2015 and the 2010
Bank Revolving Credit Facility extended the maturity of our 2006
Bank Revolving Credit Facility to March 11, 2014.
We used the approximately $786 million of proceeds from the
2010 Bank Term Loan Facility, which was drawn in full on the
March 11, 2010 closing date and issued to lenders at 98.25%
of par, plus approximately $31 million of available cash
and approximately $20 million drawn on the 2010 Bank
Revolving Credit Facility to refinance in full the approximately
$815 million of outstanding indebtedness under our 2006
Bank Term Loan Facility, to pay approximately $7 million of
accrued interest and to pay approximately $15 million of
fees and expenses incurred in connection with consummating the
refinancing, of which approximately $9 million was
capitalized.
Our
Strengths
Broad Beauty Care Brand Portfolio with Leading Retail
Share Positions. We believe that our global
brand name recognition, product quality and marketing experience
have enabled us to create one of the strongest consumer brand
franchises in the world. Our products are sold worldwide and
marketed under such brand names as Revlon, including the
Revlon ColorStay, Revlon Super Lustrous and
Revlon Age Defying franchises, as well as the
Almay brand, including the Almay Intense i-Color
and Almay Smart Shade franchises, in cosmetics; Revlon
ColorSilk in womens hair color; Revlon in
beauty tools; Mitchum in anti-perspirants/deodorants;
Charlie and Jean Naté in fragrances; and
Ultima II and Gatineau in skincare.
Strong and Diversified International
Business. Our products are sold worldwide,
and we have leading market positions in several product
categories in certain foreign countries, including Australia,
Canada and South Africa. In 2008 and 2009, our international
operations generated net sales of $564.2 million and
$548.0 million, respectively, which represented
approximately 42% of both our 2008 and 2009 worldwide
consolidated net sales. Based on our 2008 and 2009 net
sales, Asia Pacific and Africa represented approximately 47% and
49%, respectively, of our international net sales; Europe, which
was comprised of Europe, Canada and the Middle East, represented
approximately 36% and 31%, respectively, of our international
net sales; and Latin America, which is comprised of Mexico,
Central America and South America, represented approximately 17%
and 20%, respectively, of our international net sales.
Developing and Marketing Innovative
Products. We continue to build our strong
brands by focusing on innovative, high-quality,
consumer-preferred brand offering; effective consumer brand
communication; appropriate levels of advertising and promotion;
and superb execution with our retail partners. In meeting the
needs of consumers seeking new, innovative products, we
introduced several new products in the second half of 2009,
featuring
first-to-market
breakthrough technologies in Revlon and Almay
color cosmetics, including Revlon ColorStay Ultimate
liquid lipstick, Revlon DoubleTwist mascara,
Revlon ColorStay Mineral Mousse makeup and Almay Smart
Shade Smart Balance makeup. For the first half of 2010, we
have introduced several exciting new products in Revlon
and Almay color cosmetics, Revlon Beauty Tools
and Mitchum. These launches include several new
technologies and on-trend shades that are a hallmark of
Revlons color authority, including Revlon
PhotoReady makeup and Revlon ColorBurst lipstick. The
first-half of 2010 product offerings were available in retail
stores beginning in January 2010.
Well-Developed Relationships with Retail
Partners. We have long-established and
well-developed relationships with our retail partners around the
world. We work closely with our retail partners to ensure that
we have the appropriate product offering for our consumers.
These relationships enhance our ability to successfully and
profitably grow our business globally.
4
Strong Management Team. We have a
dedicated and experienced management team. In April 2009 we
announced a planned leadership transition to ensure that we have
highly capable executives to continue to strategically lead our
business. We believe that under the leadership of Alan T. Ennis,
our President and Chief Executive Officer; David L. Kennedy, our
Vice Chairman; Chris Elshaw, our Executive Vice President and
Chief Operating Officer; Robert K. Kretzman, our Executive Vice
President, Human Resources, Chief Legal Officer and General
Counsel; and Steven Berns, our Executive Vice President and
Chief Financial Officer, we have made significant progress in
the execution of our established business strategy, including
the significant improvement in our operating profit margins and
cash flows. In addition, we also formed an Office of the Vice
Chairman, consisting of Messrs. Kennedy, Ennis and Elshaw,
to oversee our strategic development.
Additional
Information
Our principal executive offices are located at 237 Park Avenue,
New York, New York 10017. Our telephone number at such principal
location is
(212) 527-4000.
5
SUMMARY
DESCRIPTION OF THE EXCHANGE OFFER
On November 23, 2009, Products Corporation completed the
private placement of $330,000,000 aggregate principal amount of
the old notes. As part of that offering, Products Corporation
entered into a registration rights agreement with the initial
purchasers of the old notes, dated as of November 23, 2009,
in which it agreed, among other things, to use its reasonable
best efforts to deliver this prospectus to you and to complete
an exchange offer for the old notes. Below is a summary of the
exchange offer.
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Old Notes |
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$330 million aggregate principal amount of
93/4% senior
secured notes due 2015. |
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New Notes |
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Up to $330 million aggregate principal amount of
93/4% senior
secured notes due 2015, the issuance of which has been
registered under the Securities Act. The form and terms of the
new notes are identical in all material respects to those of the
old notes, except that the transfer restrictions and
registration rights (including interest rate increases) relating
to the old notes do not apply to the new notes. |
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Exchange Offer |
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We are offering to issue up to $330 million aggregate
principal amount of the new notes in exchange for a like
principal amount of the old notes to satisfy our obligations
under the registration rights agreement that was executed when
the old notes were issued in a transaction in reliance upon the
exemption from registration provided by Rule 144A and
Regulation S of the Securities Act. Old notes may be
tendered in minimum denominations of principal amount of $2,000
and integral multiples of $1,000. We will issue the new notes
promptly after expiration of the exchange offer. See The
Exchange Offer Terms of the Exchange; Period for
Tendering Old Notes. |
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Expiration Date; Tenders |
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The exchange offer will expire at 5:00 p.m., New York City
time, on July 1, 2010 (the 30th day following the date of
this prospectus), unless extended in our sole discretion. By
tendering your old notes, you represent to us that: |
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any new notes you receive in the
exchange offer are being acquired by you in the ordinary course
of your business;
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neither you nor anyone receiving new
notes from you, has any arrangement or understanding with any
person to participate in a distribution of the old notes or the
new notes, as defined in the Securities Act;
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you are not our affiliate,
as defined in Rule 405 under the Securities Act or, if you
are, you acknowledge that you must comply with the registration
and prospectus delivery requirements of the Securities Act to
the extent applicable;
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if you are not a broker-dealer, you are
not engaged in, and do not intend to engage in, a distribution
of the new notes;
|
|
|
|
you are not holding old notes that have,
or are reasonably likely to have, the status of an unsold
allotment in the initial offering; and
|
|
|
|
if you are a broker-dealer, you will
receive new notes for your own account in exchange for old notes
that were acquired by you as a result of your market-making
activities or other trading activities, and you will deliver a
prospectus in connection with any resale of the new notes you
receive. For further information regarding resales
|
6
|
|
|
|
|
of the new notes by participating broker-dealers, see the
discussion under the caption Plan of Distribution. |
|
Withdrawal; Non-Acceptance |
|
You may withdraw any old notes tendered in the exchange offer at
any time prior to 5:00 p.m., New York City time, on
July 1, 2010. If we decide for any reason not to accept any
old notes tendered for exchange, the old notes will be returned
to the registered holder at our expense promptly after the
expiration or termination of the exchange offer. In the case of
the old notes tendered by book-entry transfer into the exchange
agents account at The Depository Trust Company
(DTC), any withdrawn or unaccepted old notes will be
credited to the tendering holders account at DTC. For
further information regarding the withdrawal of tendered old
notes, see The Exchange Offer Terms of the
Exchange Offer; Period for Tendering Old Notes and the
The Exchange Offer Withdrawal Rights. |
|
Conditions to the Exchange Offer |
|
The exchange offer is subject to customary conditions, which we
may waive. See the discussion below under the caption The
Exchange Offer Conditions to the Exchange
Offer for more information regarding the conditions to the
exchange offer. |
|
Procedures for Tendering the Old Notes |
|
You must do the following on or prior to the expiration or
termination of the exchange offer to participate in the exchange
offer: |
|
|
|
tender your old notes by sending the
certificates for your old notes, in proper form for transfer, a
properly completed and duly executed letter of transmittal, with
any required signature guarantees, and all other documents
required by the letter of transmittal, to U.S. Bank National
Association, as exchange agent, at one of the addresses listed
below under the caption The Exchange Offer
Exchange Agent; or
|
|
|
|
tender your old notes by using the
book-entry transfer procedures described below and transmitting
a properly completed and duly executed letter of transmittal,
with any required signature guarantees, or an agents
message instead of the letter of transmittal, to the exchange
agent. In order for a book-entry transfer to constitute a valid
tender of your old notes in the exchange offer, U.S. Bank
National Association, as exchange agent, must receive a
confirmation of book-entry transfer of your old notes into the
exchange agents account at DTC prior to the expiration or
termination of the exchange offer. For more information
regarding the use of book-entry transfer procedures, including a
description of the required agents message, see the
discussion below under the caption The Exchange
Offer Book-Entry Transfers.
|
|
Special Procedures for Beneficial Owners |
|
If you are a beneficial owner whose old notes are registered in
the name of the broker, dealer, commercial bank, trust company
or other nominee and you wish to tender your old notes in the
exchange offer, you should promptly contact the person in whose
name the old notes are registered and instruct that person to
tender on your behalf. If you wish to tender in the exchange
offer on your own behalf, prior to completing and executing the
letter of transmittal and delivering your old notes, you must
either make appropriate arrangements to register ownership of
the old notes in your name or obtain a properly |
7
|
|
|
|
|
completed bond power from the person in whose name the old notes
are registered. |
|
Certain Material U.S. Federal Income Tax Considerations |
|
The exchange of the old notes for new notes in the exchange
offer will not be a taxable transaction for United States
federal income tax purposes. See the discussion under the
caption Certain Material U.S. Federal Income Tax
Considerations for more information regarding the tax
consequences to you of the exchange offer. |
|
Use of Proceeds |
|
We will not receive any proceeds from the exchange offer. |
|
Exchange Agent |
|
U.S. Bank National Association is the exchange agent for the
exchange offer. You can find the address and telephone number of
the exchange agent below under the caption The Exchange
Offer Exchange Agent. |
|
Resales |
|
Based on interpretations by the staff of the SEC as set forth in
no-action letters issued to the third parties, we believe that
the new notes you receive in the exchange offer may be offered
for resale, resold or otherwise transferred without compliance
with the registration and prospectus delivery provisions of the
Securities Act. However, you will not be able to freely transfer
the new notes if: |
|
|
|
you are our affiliate, as
defined in Rule 405 under the Securities Act;
|
|
|
|
you are not acquiring the new notes in
the exchange offer in the ordinary course of your business;
|
|
|
|
you are participating or intend to
participate, or have an arrangement or understanding with any
person to participate in the distribution, as defined in the
Securities Act, of the new notes, you will receive in the
exchange offer;
|
|
|
|
you are holding old notes that have or
are reasonably likely to have the status of an unsold allotment
in the initial offering; or
|
|
|
|
you are a participating broker-dealer
that received new notes for its own account in the exchange
offer in exchange for old notes that were acquired as a result
of market-making activities or other trading activities.
|
|
|
|
If you fall within one of the exceptions listed above, you
cannot rely on the applicable interpretations of the staff of
the SEC and you must comply with the applicable registration and
prospectus delivery requirements of the Securities Act in
connection with any resale transaction involving the new notes.
See the discussion below under the caption The Exchange
Offer Procedures for Tendering Old Notes for
more information. |
|
Broker-Dealer |
|
Each broker-dealer that receives new notes for its own account
in exchange for old notes, where such old notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of new notes. See
Plan of Distribution. |
8
|
|
|
|
|
Furthermore, a broker-dealer that acquired any of its old notes
directly from us: |
|
|
|
may not rely on the applicable
interpretations of the staff or the SECs position
contained in Exxon Capital Holdings Corp., SEC no-action letter
(Apr. 13, 1988); Morgan Stanley & Co. Inc., SEC
no-action letter (June 5, 1991); or Shearman &
Sterling, SEC no-action letter (July 2, 1993); and
|
|
|
|
must also be named as a selling security
holder in connection with the registration and prospectus
delivery requirements of the Securities Act relating to any
resale transaction.
|
|
Registration Rights Agreement |
|
When the old notes were issued, we entered into a registration
rights agreement with the initial purchasers of the old notes.
Under the terms of the registration rights agreement, we agreed
to use our reasonable best efforts to file with the SEC and
cause to become effective, a registration statement relating to
an offer to exchange the old notes for the new notes. |
|
|
|
If we do not complete the exchange offer within 270 days of
the date of issuance of the old notes (i.e. by August 20,
2010) the interest rate borne by the old notes will be
increased at a rate of 0.25% per annum every 90 days (but
shall not exceed 0.50% per annum) until the exchange offer is
completed. |
|
|
|
Under some circumstances set forth in the registration rights
agreement, holders of old notes, including holders who are not
permitted to participate in the exchange offer or who may not
freely sell new notes received in the exchange offer, may
require us to file and cause to become effective, a shelf
registration statement covering resales of the old notes by
these holders. |
|
|
|
A copy of the registration rights agreement is incorporated by
reference as an exhibit to the registration statement of which
this prospectus is a part. See Description of the New
Notes Registration Rights and Additional
Interest. |
9
Consequences
of Not Exchanging Your Old Notes
If you do not exchange your old notes in the exchange offer,
your old notes will continue to be subject to the restrictions
on transfer described in the legend on the certificate for your
old notes. In general, you may offer or sell your old notes only:
|
|
|
|
|
if they are registered under the Securities Act and applicable
state securities laws;
|
|
|
|
if they are offered or sold under an exemption from registration
under the Securities Act and applicable state securities
laws; or
|
|
|
|
if they are offered or sold in a transaction not subject to the
Securities Act and applicable state securities laws.
|
We do not currently intend to register the old notes under the
Securities Act. Under some circumstances, however, holders of
the old notes, including holders who are not permitted to
participate in the exchange offer or who may not freely resell
new notes received in the exchange offer, may require us to
file, and to cause to become effective, a shelf registration
statement covering resales of old notes by these holders. For
more information regarding the consequences of not tendering
your old notes and our obligation to file a shelf registration
statement, see The Exchange Offer Consequences
of Exchanging or Failing to Exchange Old Notes and
Description of the New Notes Registration
Rights and Additional Interest.
10
SUMMARY
DESCRIPTION OF THE NEW NOTES
The terms of the new notes and those of the outstanding old
notes are substantially identical, except that the transfer
restrictions and registration rights (including interest rate
increases) relating to the old notes do not apply to the new
notes. When we use the term notes in this
prospectus, the term includes the old notes and the new notes.
For a more detailed description of the new notes, see
Description of the New Notes.
|
|
|
Notes Offered |
|
Up to $330 million aggregate principal amount of
93/4% senior
secured notes due 2015. |
|
Maturity Date |
|
November 15, 2015. |
|
Interest Payment Dates |
|
May 15 and November 15 of each year, beginning May 15, 2010. |
|
Guarantees |
|
The new notes will be fully and unconditionally guaranteed on a
senior secured basis by Revlon, our parent company, and our
current domestic subsidiaries (other than certain immaterial
subsidiaries) that guarantee our old notes and our obligations
under our 2010 Bank Credit Agreements and certain future
domestic subsidiaries that may guarantee our obligations under
our 2010 Bank Credit Agreements. See Description of the
New Notes General Guarantees. |
|
|
|
For the year ended December 31, 2009, our non-guarantor
subsidiaries represented, on a consolidated basis, approximately
$500.9 million, or 38.7%, of our total net sales and
approximately $21.2 million, or 36.1%, of our total net
income. In addition, as of December 31, 2009, our
non-guarantor subsidiaries represented, on a consolidated basis,
63.4% of our total assets, or 27.2% of our total assets
(excluding intercompany assets), and approximately
$141.9 million, or 7.8%, of our outstanding indebtedness
and other liabilities (excluding intercompany liabilities), to
which the new notes and the guarantees would have been
structurally subordinated. The value of these assets does not
include the value of our internally developed intellectual
property, including the Revlon brand. |
|
Security |
|
As with the old notes and the related guarantees, the new notes
and the guarantees will be secured, subject to certain
exceptions and permitted liens, by second-priority liens on the
Term Loan Collateral (as defined herein) and by third-priority
liens on the Multi-Currency Collateral (as defined herein). See
Description of the New Notes Security for the
New Notes. |
|
Ranking |
|
As with the old notes, the new notes will: |
|
|
|
be our senior obligations;
|
|
|
|
rank senior in right of payment to any
of our future subordinated obligations;
|
|
|
|
be pari passu in right of payment with
all of our existing and future senior indebtedness;
|
|
|
|
be secured, together with the
Multi-Currency Secured Obligations (as defined herein) (on an
equal and ratable basis), by a second-priority lien on the Term
Loan Collateral, subject to a first-priority lien securing the
Term Loan Secured Obligations (as defined herein) and other
permitted liens, and therefore will be effectively subordinated
to the Term Loan Secured Obligations and any other obligations
secured by first-priority permitted liens on the Term Loan
|
11
|
|
|
|
|
Collateral (which could include indebtedness that refinances the
Multi-Currency Secured Obligations) to the extent that the value
of the Term Loan Collateral does not exceed the aggregate amount
of such obligations; |
|
|
|
be secured by a third-priority lien on
the Multi-Currency Collateral, subject to a first-priority lien
securing the Multi-Currency Secured Obligations and a
second-priority lien securing the Term Loan Secured Obligations
and other permitted liens, and therefore will be effectively
subordinated to the Multi-Currency Secured Obligations, the Term
Loan Secured Obligations and any other obligations secured by
first-priority or second-priority permitted liens on the
Multi-Currency Collateral to the extent that the value of the
Multi-Currency Collateral does not exceed the aggregate amount
of such obligations;
|
|
|
|
be fully and unconditionally guaranteed
by the subsidiary guarantors on a senior secured basis;
|
|
|
|
be fully and unconditionally guaranteed
by Revlon, our parent company, on a senior basis, secured by a
pledge of the Term Loan Collateral consisting of our capital
stock; and
|
|
|
|
be effectively subordinated to any
indebtedness or other liabilities, including trade payables, of
our non-guarantor subsidiaries.
|
|
|
|
As with the old notes and the related guarantees, each
guarantee of the new notes by a guarantor will: |
|
|
|
be a senior obligation of each guarantor;
|
|
|
|
rank senior in right of payment to any
future subordinated obligations of such guarantor;
|
|
|
|
be pari passu in right of payment with
all existing and future senior indebtedness of such guarantor;
|
|
|
|
in the case of subsidiary guarantees and
the guarantee of the new notes by Revlon, be secured, together
with the Multi-Currency Secured Obligations (on an equal and
ratable basis), by a second-priority lien on the Term Loan
Collateral, subject to a first-priority lien securing the Term
Loan Secured Obligations and other permitted liens, and
therefore will be effectively subordinated to the Term Loan
Secured Obligations and any other obligations secured by
first-priority permitted liens on the Term Loan Collateral
(which could include indebtedness that refinances the
Multi-Currency Secured Obligations) to the extent that the value
of the Term Loan Collateral does not exceed the aggregate amount
of such obligations; and
|
|
|
|
in the case of subsidiary guarantees, be
secured by a third-priority lien on the Multi-Currency
Collateral of such Subsidiary Guarantor, subject to a
first-priority lien securing the Multi-Currency Secured
Obligations and a second-priority lien securing the Term Loan
Secured Obligations and other Permitted Liens and therefore will
be effectively subordinated to the Multi-Currency Secured
Obligations, the Term Loan Secured Obligations and any other
obligations secured by first-priority or second-priority
permitted liens on the
|
12
|
|
|
|
|
Multi-Currency Collateral to the extent that the value of the
Multi-Currency Collateral does not exceed the aggregate amount
of such obligations. |
|
Optional Redemption |
|
On or after November 15, 2012, we will have the right to
redeem all or some of the new notes at the redemption prices
described in this prospectus, plus accrued and unpaid interest,
if any, to the applicable date of redemption. |
|
|
|
At any time prior to November 15, 2012, we may on any one
or more occasions redeem some or all of the new notes, at a
redemption price equal to 100% of the principal amount of the
new notes redeemed plus the applicable premium, plus accrued and
unpaid interest, if any, on the new notes redeemed, to the
applicable date of redemption. |
|
|
|
In addition, prior to November 15, 2012, we may redeem from
time to time up to 35% of the aggregate principal amount of the
new notes at a redemption price equal to 109.750%, plus accrued
and unpaid interest, if any, with the proceeds of certain equity
offerings. See Description of the New Notes
Optional Redemption. |
|
Change of Control Offer |
|
If a change of control occurs, the holders of the new notes will
have the right to require us to purchase their new notes, in
whole or in part, at a repurchase price of 101% of the principal
amount, plus accrued and unpaid interest, if any. See
Description of the New Notes Change of
Control. |
|
Certain Covenants |
|
The indenture governing the new notes contains covenants that,
among other things, with certain exceptions, limit: |
|
|
|
our ability to issue additional debt and
redeemable stock;
|
|
|
|
our ability and the ability of our
subsidiaries to incur certain liens;
|
|
|
|
the ability of our subsidiaries to issue
debt and preferred stock;
|
|
|
|
our ability and the ability of our
subsidiaries to pay dividends on capital stock and our ability
to redeem capital stock;
|
|
|
|
our ability and the ability of our
subsidiaries to make investments;
|
|
|
|
the sale of our assets and subsidiary
stock;
|
|
|
|
our ability and the ability of our
subsidiaries to enter into transactions with affiliates; and
|
|
|
|
consolidations, mergers and transfers of
all or substantially all of our assets.
|
|
|
|
The indenture also prohibits certain restrictions on
distributions from subsidiaries. |
|
|
|
These covenants are subject to important exceptions and
qualifications, which are described in the Description of
the New Notes section of this prospectus. |
|
Trading |
|
The new notes generally will be freely tradable but will also be
a new issue of securities for which there is currently no
established trading market. An active or liquid market may not
develop for the new notes or, if developed, be maintained. We
have not applied, and do not intend |
13
|
|
|
|
|
to apply, for the listing of the new notes on any exchange or
automated dealer quotation system. |
|
Risk Factors |
|
See Part I, Item 1A, Risk Factors, and
Part II, Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
in the Annual Reports on
Form 10-K
of Products Corporation and of Revlon for the year ended
December 31, 2009, each of which is incorporated by
reference in this prospectus. See Incorporation of Certain
Documents by Reference. |
|
|
|
|
|
For a discussion of significant risk factors applicable to the
new notes and the exchange offer, see Risk Factors
beginning on page 22 of this prospectus. You should
carefully consider the information under Risk
Factors and all other information in this prospectus and
in the documents incorporated herein by reference before
tendering any old notes and participating in the exchange offer. |
14
SUMMARY
HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRODUCTS
CORPORATION
The summary historical and other financial data as of
December 31, 2005, 2006, 2007, 2008 and 2009 and for each
of the years in the five-year period ended December 31,
2009 and the balance sheet data as of December 31, 2005,
2006, 2007, 2008 and 2009 are derived from Products
Corporations consolidated financial statements, which have
been audited by an independent registered public accounting
firm. The summary historical and other financial data for the
three-month period ended March 31, 2009 and 2010 and the
balance sheet data as of March 31, 2010 are derived from
Products Corporations unaudited consolidated financial
statements. Results from the three months ended March 31,
2010 are not necessarily indicative of the results that may be
expected for the full year 2010. The summary historical and
other financial data should be read in conjunction with Products
Corporations consolidated financial statements and the
related notes to those consolidated financial statements and
Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Annual Report
on
Form 10-K
of Products Corporation for the year ended December 31,
2009 and in the Quarterly Report on
Form 10-Q
of Products Corporation for the three months ended
March 31, 2010. See Incorporation of Certain
Documents by Reference.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2009(f)
|
|
|
2010(g)
|
|
|
|
(In millions, except per share amounts)
|
|
|
(Unaudited)
|
|
|
Net sales
|
|
$
|
1,303.5
|
|
|
$
|
1,298.7
|
|
|
$
|
1,367.1
|
|
|
$
|
1,346.8
|
|
|
$
|
1,295.9
|
|
|
$
|
303.3
|
|
|
$
|
305.5
|
|
Gross profit
|
|
|
810.5
|
|
|
|
771.0
|
|
|
|
861.4
|
|
|
|
855.9
|
|
|
|
821.2
|
|
|
|
192.3
|
|
|
|
196.8
|
|
Selling, general and administrative expenses
|
|
|
738.7
|
|
|
|
789.0
|
|
|
|
728.7
|
|
|
|
701.6
|
|
|
|
619.6
|
|
|
|
158.5
|
|
|
|
149.7
|
|
Restructuring costs and other, net
|
|
|
1.5
|
|
|
|
27.4
|
|
|
|
7.3
|
|
|
|
(8.4
|
)
|
|
|
21.3
|
|
|
|
0.5
|
|
|
|
|
|
Operating income (loss)
|
|
|
70.3
|
|
|
|
(45.4
|
)
|
|
|
125.4
|
|
|
|
162.7
|
|
|
|
180.3
|
|
|
|
33.3
|
|
|
|
47.1
|
|
Interest expense
|
|
|
129.5
|
|
|
|
147.7
|
|
|
|
135.6
|
|
|
|
119.7
|
|
|
|
93.0
|
|
|
|
24.1
|
|
|
|
22.9
|
|
Amortization of debt issuance costs
|
|
|
6.9
|
|
|
|
7.5
|
|
|
|
3.3
|
|
|
|
5.6
|
|
|
|
5.5
|
|
|
|
1.4
|
|
|
|
1.4
|
|
Loss (gain) on early extinguishment of debt, net
|
|
|
9.0
|
(h)
|
|
|
23.5
|
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
5.8
|
|
|
|
(7.0
|
)
|
|
|
9.7
|
|
Foreign currency losses (gains), net
|
|
|
0.5
|
|
|
|
(1.5
|
)
|
|
|
(6.8
|
)
|
|
|
0.1
|
|
|
|
8.9
|
|
|
|
2.4
|
|
|
|
3.8
|
|
(Loss) income from continuing operations
|
|
|
(79.4
|
)
|
|
|
(245.3
|
)
|
|
|
(11.9
|
)
|
|
|
21.0
|
|
|
|
58.5
|
|
|
|
14.5
|
|
|
|
4.2
|
|
Income from discontinued operations
|
|
|
1.6
|
|
|
|
0.8
|
|
|
|
2.9
|
|
|
|
44.8
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(77.8
|
)
|
|
|
(244.5
|
)
|
|
|
(9.0
|
)
|
|
|
65.8
|
|
|
|
58.8
|
|
|
|
14.5
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2010(g)
|
|
|
|
(In
millions)
|
|
|
(Unaudited)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
596.7
|
|
|
$
|
500.1
|
|
|
$
|
496.4
|
|
|
$
|
457.4
|
|
|
$
|
446.3
|
|
|
$
|
418.5
|
|
Total non-current assets
|
|
|
451.7
|
|
|
|
443.9
|
|
|
|
413.3
|
|
|
|
384.9
|
|
|
|
384.2
|
|
|
|
388.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,048.4
|
|
|
$
|
944.0
|
|
|
$
|
909.7
|
|
|
$
|
842.3
|
|
|
$
|
830.5
|
|
|
$
|
807.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
470.5
|
|
|
$
|
377.1
|
|
|
$
|
348.7
|
|
|
$
|
322.9
|
|
|
$
|
305.2
|
|
|
$
|
303.7
|
|
Total non-current liabilities
|
|
|
1,669.1
|
|
|
|
1,784.5
|
|
|
|
1,622.6
|
|
|
|
1,602.8
|
|
|
|
1,519.1
|
|
|
|
1,486.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,139.6
|
|
|
$
|
2,161.6
|
|
|
$
|
1,971.3
|
|
|
$
|
1,925.7
|
|
|
$
|
1,824.3
|
|
|
$
|
1,790.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
$
|
1,418.4
|
|
|
$
|
1,506.9
|
|
|
$
|
1,440.6
|
|
|
$
|
1,329.6
|
|
|
$
|
1,248.7
|
|
|
$
|
1,232.2
|
|
Total stockholders deficiency
|
|
|
(1,091.2
|
)
|
|
|
(1,217.6
|
)
|
|
|
(1,061.6
|
)
|
|
|
(1,083.4
|
)
|
|
|
(993.8
|
)
|
|
|
(983.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2009
|
|
|
2010
|
|
|
Ratio of earnings to fixed charges
|
|
|
0.5
|
|
|
|
(i)
|
|
|
|
1.0
|
|
|
|
1.3
|
|
|
|
1.6
|
|
|
|
1.5
|
|
|
|
1.4
|
|
15
|
|
|
(a) |
|
Results for 2005 include expenses of approximately
$44 million in incremental returns and allowances and
approximately $7 million in accelerated amortization cost
of certain permanent displays related to the launch of Vital
Radiance and the re-stage of the Almay brand. |
|
(b) |
|
Results for 2006 include charges of $9.4 million in
connection with the departure of Mr. Jack Stahl, our former
President and Chief Executive Officer, in September 2006
(including $6.2 million for severance and related costs and
$3.2 million for the accelerated amortization of
Mr. Stahls unvested options and unvested restricted
stock), $60.4 million in connection with the discontinuance
of the Vital Radiance brand and restructuring charges of
approximately $27.6 million in connection with the
restructurings announced in 2006 (the 2006 Programs). |
|
(c) |
|
Results for 2007 include restructuring charges of approximately
$4.4 million and $2.9 million in connection with the
2006 Programs and the restructurings announced in 2007 (the
2007 Programs), respectively. The $4.4 million
of restructuring charges associated with the 2006 Programs were
primarily for employee severance and other employee-related
termination costs principally relating to a broad organizational
streamlining. The $2.9 million of restructuring charges
associated with the 2007 Programs were primarily for employee
severance and other employee-related termination costs relating
principally to the closure of our facility in Irvington, New
Jersey and other employee-related termination costs relating to
personnel reductions in our information management function and
our sales force in Canada. |
|
(d) |
|
Results for 2008 include a $5.9 million gain from the sale
of a non-core trademark during the first quarter of 2008, and a
net $4.3 million gain related to the sale of the Mexico
facility (which is comprised of a $7.0 million gain on the
sale, partially offset by related restructuring charges of
$1.1 million, $1.2 million of SG&A and cost of
sales and $0.4 million of taxes). In addition, results for
2008 also include various other restructuring charges of
approximately $3.8 million. The results of discontinued
operations for 2008 included a one-time gain from the
disposition of the non-core Bozzano business and certain other
non-core brands, including Juvena and Aquamarine, which were
sold in the Brazilian market, of $45.2 million. |
|
(e) |
|
Results for 2009 include: (1) a $20.8 million charge
related to the worldwide organizational restructuring announced
in May 2009 (the May 2009 Program), which involved
consolidating certain functions; reducing layers of management,
where appropriate, to increase accountability and effectiveness;
streamlining support functions to reflect the new organizational
structure; and further consolidating our office facilities in
New Jersey; and (2) a $5.8 million net loss on
early extinguishment of debt in 2009 primarily due to a
$13.5 million loss resulting from applicable redemption and
tender premiums and the net write-off of unamortized debt
discounts and deferred financing fees in connection with the
refinancing of the
91/2% Senior
Notes in November 2009, partially offset by a $7.7 million
gain on repurchases of an aggregate principal amount of
$49.5 million of the
91/2% Senior
Notes prior to their complete refinancing in November 2009 at an
aggregate purchase price of $41.0 million, which is net of
the write-off of the ratable portion of unamortized debt
discounts and deferred financing fees resulting from such
repurchases. |
|
|
|
(f) |
|
Results for the three months ended March 31, 2009 include a
$7.0 million gain on the repurchase of an aggregate
principal amount of $23.9 million of the
91/2%
Senior Notes prior to their complete refinancing in November
2009 at an aggregate purchase price of $16.5 million, which
is net of the write-off of the ratable portion of unamortized
debt discount and deferred financing fees resulting from such
repurchase. |
|
|
|
(g) |
|
Results for the three months ended March 31, 2010 include a
$9.7 million loss on the extinguishment of debt as a result
of the refinancing of the 2006 Bank Credit Facilities in March
2010, primarily due to $5.9 million of fees and expenses
which were expensed as incurred in connection with such
refinancing, as well as the write-off of $3.8 million of
unamortized deferred financing fees in connection with such
refinancing. |
|
|
|
(h) |
|
The loss on early extinguishment of debt for 2005 includes:
(i) a $5.0 million prepayment fee related to the
prepayment in March 2005 of $100.0 million of indebtedness
outstanding under the 2004 term loan facility of the 2004 credit
agreement with a portion of the proceeds from the issuance of
Products Corporations
91/2% Senior
Notes (which notes were fully refinanced in November 2009); and
(ii) the aggregate $1.5 million loss on the redemption
of all of Products Corporations
81/8% Senior
Notes and 9% Senior Notes in April 2005, as well as the
write-off of the portion of deferred financing costs related to
such prepaid amount. |
|
|
|
(i) |
|
For the year ended December 31, 2006, earnings were
insufficient to cover fixed charges, therefore the ratio of
earnings to fixed charges is not a relevant measure for this
period. |
16
SUMMARY
UNAUDITED PRO FORMA FINANCIAL DATA OF PRODUCTS
CORPORATION
The Summary Pro Forma Data gives pro forma effect as described
below to the following transactions:
|
|
|
|
|
in connection with consummating the 2009 Equity Exchange Offer,
the amendment of the terms of the Senior Subordinated Term Loan
Agreement to extend the maturity date on the $48.6 million
Contributed Loan from August 2010 to October 8, 2013, to
change the annual interest rate on the Contributed Loan from 11%
to 12.75%, to extend the maturity date on the $58.4 million
principal amount of the Non-Contributed Loan from August 2010 to
October 8, 2014 and to change the annual interest rate on
the Non-Contributed Loan from 11% to 12% (such transactions are
referred to as the 2009 Equity Exchange Offer
Transactions);
|
|
|
|
the repurchases from January through October 2009 of an
aggregate principal amount of $49.5 million of the
91/2% Senior
Notes for $41.0 million of cash (prior to their complete
refinancing in November 2009). As a result of these repurchases,
we recorded a gain of $7.7 million, which is net of the
write off of the ratable portion of unamortized debt discount
and deferred financing fees (such transactions are referred to
as the 2009 Repurchase Transactions); and
|
|
|
|
the offering of the old notes and the related refinancing and
repayment of our existing
91/2% Senior
Notes (the November 2009 Transactions and, together
with the 2009 Equity Exchange Offer Transactions and the 2009
Repurchase Transactions, the 2009 Financing
Transactions). As a result of the November 2009
Transactions we recorded a $13.5 million loss on the early
extinguishment of debt.
|
The Pro Forma Statement of Operations Data for the year ended
December 31, 2009 shows the pro forma effect of the 2009
Financing Transactions as if such transactions had been
consummated on January 1, 2009.
The Statement of Operations for the three months ended
March 31, 2010 include the 2009 Financing Transactions,
therefore there are no pro forma adjustments for such period.
The Pro Forma Statement of Operations Data for the year ended
December 31, 2009 does not include adjustments for the pro
forma effect of the refinancing of our 2006 Bank Credit
Facilities, as such refinancing occurred in March 2010. See
Refinancing of our 2006 Bank Credit Facilities
beginning on page 3. If the Pro Forma Statement of
Operations Data for the year ended December 31, 2009
included adjustments for the pro forma effect of the refinancing
of our 2006 Bank Credit Facilities, the refinancing of our 2006
Bank Credit Facilities would have increased interest expense due
to higher weighted average borrowing rates. In addition, if the
Pro Forma Statement of Operations Data had been prepared for the
three months ended March 31, 2010 and included adjustments
for the pro forma effect of the refinancing of our 2006 Bank
Credit Facilities, the refinancing of our 2006 Bank Credit
Facilities would have increased interest expense due to higher
weighted average borrowing rates and the loss on the early
extinguishment of debt due to the refinancing of our 2006 Bank
Credit Facilities would have been reversed.
The 2009 Financing Transactions and the refinancing of our 2006
Bank Credit Facilities have been fully reflected on the Balance
Sheet at March 31, 2010 and, therefore, did not have a pro
forma impact on such Balance Sheet.
The adjustments reflected in the unaudited pro forma
condensed financial statements are based upon available
information and certain estimates and assumptions. Actual
results may differ from the pro forma adjustments and from the
estimates and assumptions used. We believe that the estimates
and assumptions used provide a reasonable basis for presenting
the effects of the 2009 Financing Transactions. We also believe
that the pro forma adjustments give appropriate effect to these
estimates and assumptions and are applied in conformity with
U.S. generally accepted accounting principles.
The pro forma adjustments made in connection with the
development of the pro forma information do not purport to be
indicative of our results of continuing operations or our
financial position that actually would have occurred had such
transactions been consummated on the aforementioned dates. The
pro forma financial data is not intended to indicate the results
that may be expected for any future period.
17
The pro forma financial data should be read in conjunction with
our consolidated financial statements and the notes to those
financial statements included in the documents incorporated by
reference in this prospectus. See Incorporation of Certain
Documents by Reference.
PRO FORMA
INCOME STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
Adjustments Related
|
|
|
|
|
|
|
|
|
|
to the 2009
|
|
|
Pro Forma 2009
|
|
|
|
|
|
|
Financing
|
|
|
Financing
|
|
|
|
As Reported
|
|
|
Transactions(a)
|
|
|
Transactions
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Net sales
|
|
$
|
1,295.9
|
|
|
$
|
|
|
|
$
|
1,295.9
|
|
Cost of sales
|
|
|
474.7
|
|
|
|
|
|
|
|
474.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
821.2
|
|
|
|
|
|
|
|
821.2
|
|
Selling, general and administrative
|
|
|
619.6
|
|
|
|
|
|
|
|
619.6
|
|
Restructuring costs and other, net
|
|
|
21.3
|
|
|
|
|
|
|
|
21.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
180.3
|
|
|
|
|
|
|
|
180.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
93.0
|
|
|
|
(1.9
|
)
|
|
|
91.1
|
|
Interest income
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(0.5
|
)
|
Amortization of debt issuance costs
|
|
|
5.5
|
|
|
|
(0.3
|
)
|
|
|
5.2
|
|
Loss on early extinguishment of debt, net
|
|
|
5.8
|
|
|
|
(5.8
|
)
|
|
|
|
|
Foreign currency losses, net
|
|
|
8.9
|
|
|
|
|
|
|
|
8.9
|
|
Miscellaneous, net
|
|
|
1.0
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses, net
|
|
|
113.7
|
|
|
|
(8.0
|
)
|
|
|
105.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
66.6
|
|
|
|
8.0
|
|
|
|
74.6
|
|
Provision from income taxes
|
|
|
(8.1
|
)
|
|
|
(0.1
|
)
|
|
|
(8.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
58.5
|
|
|
$
|
7.9
|
|
|
$
|
66.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges(b)
|
|
|
1.6
|
|
|
|
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Reflects the pro forma effect of the 2009 Financing
Transactions. The adjustments primarily include: |
|
|
|
|
|
the reversal of the $5.8 million net loss on early
extinguishment of debt, which is comprised of a
$13.5 million loss resulting from applicable redemption and
tender premiums and the net write-off of unamortized debt
discounts and deferred financing fees in connection with the
November 2009 Transactions, partially offset by a
$7.7 million gain on repurchases resulting from the 2009
Repurchase Transactions;
|
|
|
|
a $1.9 million net decrease in interest expense, primarily
due to a $3.0 million net decrease in interest expense
related to the 2009 Repurchase Transactions and the November
2009 Transactions, partially offset by a $1.1 million net
increase in interest expense related to the 2009 Equity Exchange
Offer Transactions; and
|
|
|
|
a $0.3 million net decrease in amortization of debt
issuance costs, primarily driven by a $1.0 million decrease
in the amortization of debt issuance costs related to the
extended term over which deferred financing costs related to the
Senior Subordinated Term Loan will be amortized as a result of
the 2009 Equity Exchange Offer Transactions, partially offset by
$0.7 million of amortization of new debt issuance costs
resulting from the issuance of the $330.0 million in
aggregate principal face amount of the old notes.
|
|
|
|
(b) |
|
Earnings used in computing the ratio of earnings to fixed
charges consist of income (loss) from continuing operations
before income taxes plus fixed charges. Fixed charges consist of
interest expense (including amortization of debt issuance costs,
but not losses relating to the loss on early extinguishment of
debt, net) and 33% of rental expense (considered to be
representative of the interest factor). Earnings exceeded fixed
charges by $66.6 million and $74.6 million as reported
and on a pro forma basis, respectively, for the year ended
December 31, 2009. |
18
SUMMARY
HISTORICAL CONSOLIDATED FINANCIAL DATA OF REVLON
The summary historical and other financial data as of
December 31, 2005, 2006, 2007, 2008, and 2009 and for each
of the years in the five-year period ended December 31,
2009 and the balance sheet data as of December 31, 2005,
2006, 2007, 2008 and 2009 are derived from Revlons
consolidated financial statements, which have been audited by an
independent registered public accounting firm. The summary
historical and other financial data for the three-month period
ended March 31, 2009 and 2010 and the balance sheet data as of
March 31, 2010 are derived from Revlons unaudited
consolidated financial statements. Results from the three months
ended March 31, 2010 are not necessarily indicative of the
results that may be expected for the full year 2010. The summary
historical and other financial data should be read in
conjunction with Revlons consolidated financial statements
and the related notes to those consolidated financial statements
and Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Annual Report
on
Form 10-K
of Revlon for the year ended December 31, 2009 and in the
Quarterly Report on Form 10-Q of Revlon for the three months
ended March 31, 2010. See Incorporation of Certain
Documents by Reference.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2009(f)
|
|
|
2010(g)
|
|
|
|
(In millions, except per share amounts)
|
|
|
(Unaudited)
|
|
|
Net sales
|
|
$
|
1,303.5
|
|
|
$
|
1,298.7
|
|
|
$
|
1,367.1
|
|
|
$
|
1,346.8
|
|
|
$
|
1,295.9
|
|
|
$
|
303.3
|
|
|
$
|
305.5
|
|
Gross profit
|
|
|
810.5
|
|
|
|
771.0
|
|
|
|
861.4
|
|
|
|
855.9
|
|
|
|
821.2
|
|
|
|
192.3
|
|
|
|
196.8
|
|
Selling, general and administrative expenses
|
|
|
746.3
|
|
|
|
795.6
|
|
|
|
735.7
|
|
|
|
709.3
|
|
|
|
629.1
|
|
|
|
160.2
|
|
|
|
151.4
|
|
Restructuring costs and other, net
|
|
|
1.5
|
|
|
|
27.4
|
|
|
|
7.3
|
|
|
|
(8.4
|
)
|
|
|
21.3
|
|
|
|
0.5
|
|
|
|
|
|
Operating income (loss)
|
|
|
62.7
|
|
|
|
(52.0
|
)
|
|
|
118.4
|
|
|
|
155.0
|
|
|
|
170.8
|
|
|
|
31.6
|
|
|
|
45.4
|
|
Interest expense
|
|
|
129.5
|
|
|
|
147.7
|
|
|
|
135.6
|
|
|
|
119.7
|
|
|
|
93.0
|
|
|
|
24.1
|
|
|
|
21.3
|
|
Interest expense preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
Amortization of debt issuance costs
|
|
|
6.9
|
|
|
|
7.5
|
|
|
|
3.3
|
|
|
|
5.6
|
|
|
|
5.8
|
|
|
|
1.4
|
|
|
|
1.7
|
|
Loss (gain) on early extinguishment of debt, net
|
|
|
9.0
|
(h)
|
|
|
23.5
|
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
5.8
|
|
|
|
(7.0
|
)
|
|
|
9.7
|
|
Foreign currency losses (gains), net
|
|
|
0.5
|
|
|
|
(1.5
|
)
|
|
|
(6.8
|
)
|
|
|
0.1
|
|
|
|
8.9
|
|
|
|
2.4
|
|
|
|
3.8
|
|
(Loss) income from continuing operations
|
|
|
(85.3
|
)
|
|
|
(252.1
|
)
|
|
|
(19.0
|
)
|
|
|
13.1
|
|
|
|
48.5
|
|
|
|
12.7
|
|
|
|
2.2
|
|
Income from discontinued operations
|
|
|
1.6
|
|
|
|
0.8
|
|
|
|
2.9
|
|
|
|
44.8
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(83.7
|
)
|
|
|
(251.3
|
)
|
|
|
(16.1
|
)
|
|
|
57.9
|
|
|
|
48.8
|
|
|
|
12.7
|
|
|
|
2.2
|
|
Basic (loss) income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(2.21
|
)
|
|
|
(6.04
|
)
|
|
|
(0.38
|
)
|
|
|
0.26
|
|
|
|
0.94
|
|
|
|
0.25
|
|
|
|
0.04
|
|
Discontinued operations
|
|
|
0.04
|
|
|
|
0.02
|
|
|
|
0.06
|
|
|
|
0.87
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(2.17
|
)
|
|
$
|
(6.03
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
1.13
|
|
|
$
|
0.95
|
|
|
$
|
0.25
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(2.21
|
)
|
|
|
(6.04
|
)
|
|
|
(0.38
|
)
|
|
|
0.26
|
|
|
|
0.94
|
|
|
|
0.25
|
|
|
|
0.04
|
|
Discontinued operations
|
|
|
0.04
|
|
|
|
0.02
|
|
|
|
0.06
|
|
|
|
0.87
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(2.17
|
)
|
|
$
|
(6.03
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
1.13
|
|
|
$
|
0.94
|
|
|
$
|
0.25
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38.6
|
|
|
|
41.7
|
|
|
|
50.4
|
|
|
|
51.2
|
|
|
|
51.6
|
|
|
|
51.5
|
|
|
|
51.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38.6
|
|
|
|
41.7
|
|
|
|
50.4
|
|
|
|
51.3
|
|
|
|
51.7
|
|
|
|
51.5
|
|
|
|
52.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2010(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
(Unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
592.0
|
|
|
$
|
488.0
|
|
|
$
|
476.0
|
|
|
$
|
428.5
|
|
|
$
|
403.6
|
|
|
$
|
371.2
|
|
Total non-current assets
|
|
|
451.7
|
|
|
|
443.9
|
|
|
|
413.3
|
|
|
|
384.9
|
|
|
|
390.6
|
|
|
|
394.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,043.7
|
|
|
$
|
931.9
|
|
|
$
|
889.3
|
|
|
$
|
813.4
|
|
|
$
|
794.2
|
|
|
$
|
765.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
470.5
|
|
|
$
|
377.2
|
|
|
$
|
348.7
|
|
|
$
|
323.4
|
|
|
$
|
309.3
|
|
|
$
|
307.3
|
|
Redeemable preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48.0
|
|
|
|
48.0
|
|
Total non-current liabilities
|
|
|
1,669.1
|
|
|
|
1,784.5
|
|
|
|
1,622.6
|
|
|
|
1,602.8
|
|
|
|
1,470.5
|
|
|
$
|
1,437.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,139.6
|
|
|
$
|
2,161.7
|
|
|
$
|
1,971.3
|
|
|
$
|
1,926.2
|
|
|
$
|
1,827.8
|
|
|
$
|
1,793.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
$
|
1,418.4
|
|
|
$
|
1,506.9
|
|
|
$
|
1,440.6
|
|
|
$
|
1,329.6
|
|
|
$
|
1,248.1
|
|
|
$
|
1,231.6
|
|
Total stockholders deficiency
|
|
|
(1,095.9
|
)
|
|
|
(1,229.8
|
)
|
|
|
(1,082.0
|
)
|
|
|
(1,112.8
|
)
|
|
|
(1,033.6
|
)
|
|
|
(1,027.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2009
|
|
|
2010
|
|
|
Ratio of earnings to fixed charges
|
|
|
0.5
|
|
|
(i)
|
|
|
0.9
|
|
|
|
1.2
|
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
1.3
|
|
|
|
|
(a) |
|
Results for 2005 include expenses of approximately
$44 million in incremental returns and allowances and
approximately $7 million in accelerated amortization cost
of certain permanent displays related to the launch of Vital
Radiance and the re-stage of the Almay brand. |
|
(b) |
|
Results for 2006 include charges of $9.4 million in
connection with the departure of Mr. Jack Stahl, our former
President and Chief Executive Officer, in September 2006
(including $6.2 million for severance and related costs and
$3.2 million for the accelerated amortization of
Mr. Stahls unvested options and unvested restricted
stock), $60.4 million in connection with the discontinuance
of the Vital Radiance brand and restructuring charges of
approximately $27.6 million in connection with the 2006
Programs. |
|
(c) |
|
Results for 2007 include restructuring charges of approximately
$4.4 million and $2.9 million in connection with 2006
Programs and 2007 Programs, respectively. The $4.4 million
of restructuring charges associated with the 2006 Programs were
primarily for employee severance and other employee-related
termination costs principally relating to a broad organizational
streamlining. The $2.9 million of restructuring charges
associated with the 2007 Programs were primarily for employee
severance and other employee-related termination costs relating
principally to the closure of the our facility in Irvington, New
Jersey and other employee-related termination costs relating to
personnel reductions in the our information management function
and our sales force in Canada. |
|
(d) |
|
Results for 2008 include a $5.9 million gain from the sale
of a non-core trademark during the first quarter of 2008, and a
net $4.3 million gain related to the sale of the Mexico
facility (which is comprised of a $7.0 million gain on the
sale, partially offset by related restructuring charges of
$1.1 million, $1.2 million of SG&A and cost of
sales and $0.4 million of taxes). In addition, results for
2008 also include various other restructuring charges of
approximately $3.8 million. The results of discontinued
operations for 2008 included a one-time gain from the
disposition of the non-core Bozzano business and certain other
non-core brands, including Juvena and Aquamarine, which were
sold in the Brazilian market, of $45.2 million. |
|
(e) |
|
Results for 2009 include: (1) a $20.8 million charge
related to the May 2009 Program, which involved consolidating
certain functions; reducing layers of management, where
appropriate, to increase accountability and effectiveness;
streamlining support functions to reflect the new organizational
structure; and further consolidating our office facilities in
New Jersey; and (2) a $5.8 million net loss on early
extinguishment of debt in 2009 primarily due to a
$13.5 million loss resulting from applicable redemption and
tender premiums and the net write-off of unamortized debt
discounts and deferred financing fees in connection with the
refinancing of the
91/2% Senior
Notes in November 2009, partially offset by a $7.7 million
gain on repurchases of an aggregate principal amount of
$49.5 million of the
91/2% Senior
Notes prior to their complete refinancing in |
20
|
|
|
|
|
November 2009 at an aggregate purchase price of
$41.0 million, which is net of the write-off of the ratable
portion of unamortized debt discounts and deferred financing
fees resulting from such repurchases. |
|
|
|
(f) |
|
Results for the three months ended March 31, 2009 include a
$7.0 million gain on the repurchase of an aggregate
principal amount of $23.9 million of the
91/2%
Senior Notes prior to their complete refinancing in November
2009 at an aggregate purchase price of $16.5 million, which
is net of the write-off of the ratable portion of unamortized
debt discount and deferred financing fees resulting from such
repurchase. |
|
|
|
(g) |
|
Results for the three months ended March 31, 2010 include a
$9.7 million loss on the extinguishment of debt as a result
of the refinancing of the 2006 Bank Credit Facilities in March
2010, primarily due to $5.9 million of fees and expenses
which were expensed as incurred in connection with such
refinancing, as well as the write-off of $3.8 million of
unamortized deferred financing fees in connection with such
refinancing. |
|
|
|
(h) |
|
The loss on early extinguishment of debt for 2005 includes:
(i) a $5.0 million prepayment fee related to the
prepayment in March 2005 of $100.0 million of indebtedness
outstanding under the 2004 term loan facility of the 2004 credit
agreement with a portion of the proceeds from the issuance of
Products Corporations
91/2% Senior
Notes (which notes were fully refinanced in November 2009); and
(ii) the aggregate $1.5 million loss on the redemption
of all of Products Corporations
81/8% Senior
Notes and 9% Senior Notes in April 2005, as well as the
write-off of the portion of deferred financing costs related to
such prepaid amount. |
|
|
|
(i) |
|
For the year ended December 31, 2006, earnings were
insufficient to cover fixed charges, therefore the ratio of
earnings to fixed charges is not a relevant measure for this
period. |
21
RISK
FACTORS
Before deciding to tender your old notes and participate in
the exchange offer, you should carefully consider the risks
described below and in Part I, Item 1A, Risk
Factors, and Part II, Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations, in the Annual Report on
Form 10-Ks
of Products Corporation and of Revlon for the year ended
December 31, 2009, each of which is incorporated by
reference in this prospectus, as well as all of the information
contained elsewhere in this prospectus and in the documents
incorporated by reference herein. Additional risks and
uncertainties not presently known to us, or that we currently
deem immaterial, may also impair our business operations and
financial condition. We cannot assure you that any of the events
discussed in the risk factors below and contained elsewhere in
this prospectus and in the documents incorporated herein will
not occur. If they do, our business, financial condition
and/or
results of operations could be materially adversely affected. In
such case, the trading price of the new notes could decline, and
you might lose all or part of your investment.
Risks
Relating to the Exchange Offer and Holding the Notes
Holders
who fail to exchange their old notes will continue to be subject
to restrictions on transfer.
If you do not exchange your old notes for new notes in the
exchange offer, you will continue to be subject to the
restrictions on transfer of your old notes described in the
legend on the certificates for your old notes. The restrictions
on transfer of your old notes arise because we issued the old
notes under exemptions from, or in transactions not subject to,
the registration requirements of the Securities Act and
applicable state securities laws. In general, you may only offer
or sell the old notes if they are registered under the
Securities Act and applicable state securities laws, or offered
and sold under an exemption from these requirements. We do not
plan to register the old notes under the Securities Act. In
addition, if a large number of old notes are exchanged for new
notes and there is only small amount of old notes outstanding,
there may not be an active market in the old notes, which may
adversely affect the market price and liquidity of the old
notes. For further information regarding the consequences of
tendering your old notes in the exchange offer, see the
discussions below under the captions The Exchange
Offer Consequences of Exchanging or Failing to
Exchange Old Notes and Certain Material
U.S. Federal Income Tax Considerations.
You
must comply with the exchange offer procedures in order to
receive freely tradable new notes.
Delivery of new notes in exchange for old notes tendered and
accepted for exchange pursuant to the exchange offer will be
made only after timely receipt by the exchange agent of the
following:
|
|
|
|
|
certificates for old notes or a book-entry confirmation of a
book-entry transfer of old notes into the exchange agents
account at DTC, New York, New York as depository, including an
agents message (as defined herein) if the tendering holder
does not deliver a letter of transmittal;
|
|
|
|
a completed and signed letter of transmittal (or facsimile
thereof), with any required signature guarantees, or an
agents message in lieu of the letter of
transmittal; and
|
|
|
|
any other documents required by the letter of transmittal.
|
Therefore, holders of old notes who would like to tender old
notes in exchange for new notes should be sure to allow enough
time for the old notes to be delivered on time. We are not
required to notify you of defects or irregularities in tenders
of old notes for exchange. Old notes that are not tendered or
that are tendered but we do not accept for exchange will,
following consummation of the exchange offer, continue to be
subject to the existing transfer restrictions under the
Securities Act and, upon consummation of the exchange offer,
certain registration and other rights under the registration
rights agreement will terminate. See The Exchange
Offer Procedures for Tendering Old Notes and
The Exchange Offer Consequences of Exchanging
or Failing to Exchange Old Notes.
22
You
may not be able to resell notes you receive in the exchange
offer without registering those notes or delivering a
prospectus.
Based on interpretations by the staff of the SEC in no-action
letters, we believe, with respect to new notes issued in the
exchange offer, that:
|
|
|
|
|
holders who are not our affiliates, within the
meaning of Rule 405 of the Securities Act;
|
|
|
|
holders who acquire their notes in the ordinary course of
business; and
|
|
|
|
holders who do not engage in, intend to engage in, or have
arrangements to participate in a distribution (within the
meaning of the Securities Act) of the new notes,
|
do not have to comply with the registration and prospectus
delivery requirements of the Securities Act.
Holders described in the preceding sentence must tell us in
writing at our request that they meet these criteria. Holders
that do not meet these criteria could not rely on
interpretations of the staff of the SEC in no-action letters,
and would have to register the notes they receive in the
exchange offer and deliver a prospectus for them. In addition,
holders that are broker-dealers may be deemed
underwriters within the meaning of the Securities
Act in connection with any resale of notes acquired in the
exchange offer. Holders that are broker-dealers must acknowledge
that they acquired their outstanding notes in market-making
activities or other trading activities and must deliver a
prospectus when they resell the notes they acquire in the
exchange offer in order not to be deemed an underwriter.
Our
substantial indebtedness could adversely affect our operations
and flexibility and our ability to service our debt, including
the notes.
We have a substantial amount of outstanding indebtedness. As of
March 31, 2010, our total indebtedness, net of discounts,
was $1,232.2 million, primarily including
$800.0 million aggregate principal amount, or
$786.1 million net of discounts, outstanding under our 2010
Bank Term Loan Facility, $10.5 million outstanding under
our 2010 Bank Revolving Credit Facility, $330.0 million in
aggregate principal face amount, or $326.5 million net of
discounts, outstanding of old notes and $107.0 million
aggregate principal amount outstanding under our Senior
Subordinated Term Loan (which is comprised of $58.4 million
of indebtedness due to MacAndrews & Forbes under the
Non-Contributed Loan and $48.6 million of indebtedness due
to Revlon under the Contributed Loan). Moreover, as of
March 31, 2010, $905.7 million of our total
indebtedness have stated maturities prior to the maturity of the
notes offered hereby. Our level of indebtedness could make it
more difficult for us to make interest payments on, or to
purchase or redeem, the notes. While we achieved net income of
$58.8 million (with $58.5 million of income from
continuing operations) and $65.8 million (with
$21.0 million of income from continuing operations) for the
years ended December 31, 2009 and 2008, respectively, we
have a history of net losses prior to 2008 and, in addition, if
we are unable to achieve sustained profitability and free cash
flow in future periods, it could adversely affect our operations
and our ability to service our debt, including the notes.
We are subject to the risks normally associated with substantial
indebtedness, including the risk that our operating revenues
will be insufficient to meet required payments of principal and
interest, and the risk that we will be unable to refinance
existing indebtedness when it becomes due or that the terms of
any such refinancing will be less favorable than the current
terms of such indebtedness. Our substantial indebtedness could
also have the effect of:
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limiting our ability to fund (including by obtaining additional
financing) the costs and expenses of the execution of our
business strategy, future working capital, capital expenditures,
advertising, promotional or marketing expenses, new product
development costs, purchases and reconfigurations of wall
displays, acquisitions, investments, restructuring programs and
other general corporate requirements;
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requiring us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow for the execution of
our business strategy and for other general corporate purposes;
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placing us at a competitive disadvantage compared to our
competitors that have less debt;
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limiting our flexibility in responding to changes in our
business and the industry in which we operate; and
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making us more vulnerable in the event of adverse economic
conditions or a downturn in our business.
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Although agreements governing our indebtedness, including the
indenture governing the notes, the 2010 Bank Credit Agreements
and the Senior Subordinated Term Loan Agreement, limit our
ability to borrow additional money, under certain circumstances
we are allowed to borrow a significant amount of additional
money, some of which, in certain circumstances and subject to
certain limitations, could be secured indebtedness. In addition,
under certain circumstances we are allowed to borrow a
significant amount of additional money, which would either rank
equally in right of payment with, or be subordinated in right of
payment to, the notes and some of which, in certain
circumstances and subject to certain limitations, could be
secured on a priority basis ahead of or on a pari passu basis
with the notes. See Description of the New
Notes Certain Covenants. Subject to certain
limitations contained in the indenture governing the notes, our
non-guarantor subsidiaries may also incur additional debt that
would be structurally senior to the notes. See
The notes are structurally junior to the
indebtedness and other liabilities of our non-guarantor
subsidiaries. To the extent that more debt is added to our
current debt levels, the risks described above may increase.
Our
ability to pay the principal of the notes depends on many
factors.
The Contributed Loan under the Senior Subordinated Term Loan
matures in October 2013, the 2010 Bank Revolving Credit
Agreement matures in March 2014, the Non-Contributed Loan under
the Senior Subordinated Term Loan matures in October 2014, the
2010 Bank Term Loan Agreement matures in March 2015 and the
notes mature in November 2015. We currently anticipate that, in
order to pay the principal amount of the notes upon the
occurrence of any event of default, or to repurchase our notes
if a change of control occurs or in the event that our cash
flows from operations are insufficient to allow us to pay the
principal amount of the notes at maturity, we may be required to
refinance our indebtedness, seek to sell assets or operations,
seek to sell additional debt securities of ours or seek
additional capital contributions or loans from
MacAndrews & Forbes, Revlon or from our other
affiliates
and/or third
parties. We may be unable to take any of these actions, because
of a variety of commercial or market factors or constraints in
our debt instruments, including, for example, market conditions
being unfavorable for an equity or debt issuance, additional
capital contributions or loans not being available from
affiliates
and/or third
parties, or that the transactions may not be permitted under the
terms of the various debt instruments then in effect, such as
due to restrictions on the incurrence of debt, incurrence of
liens, asset dispositions
and/or
related party transactions. Such actions, if ever taken, may not
enable us to satisfy our cash requirements or enable us to
comply with the financial covenants under the 2010 Bank Credit
Agreements if the actions do not result in sufficient savings or
generate a sufficient amount of additional capital, as the case
may be.
None of our affiliates is required to make any capital
contributions, loans or other payments to us regarding our
obligations on the notes. We may not be able to pay the
principal amount of the notes if we took any of the above
actions because, under certain circumstances, the indenture
governing the notes or any of our other debt instruments
(including the 2010 Bank Credit Agreements and the Senior
Subordinated Term Loan Agreement) or the debt instruments of our
subsidiaries then in effect may not permit us to take such
actions. See Restrictions and covenants in our
debt agreements limit our ability to take certain actions and
impose consequences in the event of failure to comply.
Additionally, the economic conditions during the latter part of
2008 and in 2009 and the volatility in the financial markets
contributed to a substantial tightening of the credit markets
and a reduction in credit availability, including lending by
financial institutions. Although we were able to successfully
refinance our
91/2% Senior
Notes with the issuance of the old notes in November 2009 and
our 2006 Bank Credit Facilities with the 2010 Bank Credit
Facilities in March 2010, the future state of the credit markets
could adversely impact our ability to refinance or replace our
outstanding indebtedness at or prior to their respective
maturity dates, which would have a material adverse effect on
our business, financial condition
and/or
results of operations.
24
A
substantial portion of the indebtedness under our 2010 Bank
Credit Agreements is, and certain additional future indebtedness
will be, effectively senior to the notes to the extent of the
value of the Collateral securing those
obligations.
As of March 31, 2010, we had outstanding secured
indebtedness, net of discounts, of $796.6 million, of which
$800.0 million, or $786.1 million net of discounts,
was outstanding under our 2010 Bank Term Loan Facility and
$10.5 million of which was outstanding under our 2010 Bank
Revolving Credit Facility. As at March 31, 2010, we also
had $87.2 million in available borrowings under the 2010
Bank Revolving Credit Facility, based upon the last calculated
borrowing base less $21.8 million of outstanding undrawn
letters of credit and $10.5 million then drawn on the 2010
Bank Revolving Credit Facility.
Obligations under our 2010 Bank Term Loan Facility are secured
by a first-priority lien and obligations under our 2010 Bank
Revolving Credit Facility are secured by a second-priority lien
on the Term Loan Collateral. The second-priority liens in the
Term Loan Collateral securing the notes and the guarantees are
therefore lower in priority than the liens securing our and the
guarantors obligations under the 2010 Bank Term Loan
Facility and equal in priority to the liens securing our and the
guarantors obligations under the 2010 Bank Revolving
Credit Agreement. In addition, under the indenture, we and the
guarantors may, from time to time, be permitted to incur
additional indebtedness, including indebtedness that refinances
the 2010 Bank Revolving Credit Agreement, which may be secured
by liens on the Term Loan Collateral that rank senior in
priority to the liens securing the notes and the guarantees. As
such, holders of the indebtedness under our 2010 Bank Term Loan
Facility and any such other indebtedness will be entitled to
realize proceeds from the realization of value of the Term Loan
Collateral to repay such indebtedness in full before the holders
of the notes and the guarantees will be entitled, together on a
pari passu basis with the holders of the indebtedness under our
2010 Bank Revolving Credit Facility, to any recovery from such
collateral. As a result, the notes and the guarantees are
effectively junior in right of payment to indebtedness under the
2010 Bank Term Loan Facility and any such other indebtedness, to
the extent that the realizable value of the Term Loan Collateral
does not exceed the aggregate amount of such indebtedness.
Moreover, obligations under our 2010 Bank Term Loan Facility are
secured by a second-priority lien and obligations under our 2010
Bank Revolving Credit Facility are secured by a first-priority
lien on the Multi-Currency Collateral. The third-priority liens
in the Multi-Currency Collateral securing the notes and the
guarantees are therefore lower in priority than the liens
securing our and the guarantors obligations under the 2010
Bank Revolving Credit Agreement and the 2010 Bank Term Loan
Facility. In addition, under the indenture, we and the
guarantors may, from time to time, be permitted to incur
additional indebtedness, which may be secured by liens on the
Multi-Currency Collateral that rank senior in priority to the
liens securing the notes and the guarantees. As such, holders of
the indebtedness under our 2010 Bank Term Loan Facility and 2010
Bank Revolving Credit Facility and any such other indebtedness
will be entitled to realize proceeds from the realization of
value of the Multi-Currency Collateral to repay such
indebtedness in full before the holders of the notes will be
entitled to any recovery from such Multi-Currency Collateral. As
a result, the notes are effectively junior in right of payment
to indebtedness under the 2010 Bank Term Loan Facility and 2010
Bank Revolving Credit Facility and any such other indebtedness,
to the extent that the realizable value of such Collateral (as
defined herein) does not exceed the aggregate amount of such
indebtedness. It is possible that the realizable value of the
Collateral securing the notes and the guarantees may not be
sufficient, in an insolvency or other similar proceeding, to
satisfy the claims of all effectively senior creditors, along
with those of the holders of the notes and the guarantees.
The
notes are structurally junior to the indebtedness and other
liabilities of our non-guarantor subsidiaries.
We conduct a significant portion of our operations through our
non-guarantor subsidiaries and depend, in part, on earnings and
cash flows of, and dividends from, our subsidiaries to pay our
obligations, including principal of and interest on our
indebtedness. Certain laws restrict the ability of our
subsidiaries to pay us dividends or make loans and advances to
us. To the extent these restrictions are applied to our
non-guarantor subsidiaries, we would not be able to use the
earnings of those subsidiaries to make payments on the notes.
Furthermore, in the event of any bankruptcy, liquidation or
reorganization of a non-guarantor subsidiary, the rights of the
holders of the notes offered hereby to participate in the
distribution of the assets of such non-guarantor subsidiary will
rank behind the claims of that subsidiarys creditors,
including trade creditors (except to the extent we have a claim
as a creditor of such
25
subsidiary). As a result, the notes are structurally
subordinated to the outstanding indebtedness, preferred stock,
and other liabilities, including trade payables, of our
non-guarantor subsidiaries. As of December 31, 2009, our
non- guarantor subsidiaries had approximately
$141.9 million of outstanding indebtedness and other
liabilities (excluding intercompany payables and receivables and
subsidiary guarantees of our 2006 Bank Credit Agreements), all
of which was structurally senior to the notes.
Restrictions
and covenants in our debt agreements limit our ability to take
certain actions and impose consequences in the event of failure
to comply.
The indenture governing the notes and the agreements governing
our other outstanding indebtedness, including the 2010 Bank
Credit Agreements and the Senior Subordinated Term Loan
Agreement, contain a number of significant restrictions and
covenants that limit our ability and our subsidiaries
ability (subject in each case to limited exceptions) to, among
other things:
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borrow money;
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use assets as security in other borrowings or transactions;
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pay dividends on stock or purchase stock;
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sell assets and use the proceeds from any such sales;
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enter into certain transactions with affiliates;
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make certain investments;
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prepay, redeem or repurchase specified indebtedness; and
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permit restrictions on the payment of dividends by us or our
subsidiaries to us.
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In addition, the 2010 Bank Credit Agreements contain financial
covenants limiting our first lien senior secured
debt-to-EBITDA
ratio (in the case of the 2010 Bank Term Loan Agreement) and,
under certain circumstances, requiring us to maintain a minimum
consolidated fixed charge coverage ratio (in the case of the
2010 Bank Revolving Credit Agreement). These covenants affect
our operating flexibility by, among other things, restricting
our ability to incur expenses and indebtedness that could be
used to fund the costs of executing our business strategy and to
grow our business, as well as to fund general corporate purposes.
The breach of the 2010 Bank Credit Agreements would permit our
lenders to accelerate amounts outstanding under the 2010 Bank
Credit Agreements, which would in turn constitute an event of
default under the Senior Subordinated Term Loan Agreement and
the indenture governing the notes, if the amount accelerated
exceeds $25.0 million and such default remains uncured for
10 days following notice from MacAndrews & Forbes
with respect to the Senior Subordinated Term Loan Agreement or
the trustee or the holders of at least 30% of the outstanding
principal amount of the notes. In addition, holders of our
outstanding notes may require us to repurchase their respective
notes in the event of a change of control under the notes
indenture. (See Our ability to pay the
principal of the notes depends on many factors.).We may
not have sufficient funds at the time of any such breach of any
such covenant or change of control to repay in full the
borrowings under the 2010 Bank Credit Agreements or the Senior
Subordinated Term Loan Agreement or to repurchase or redeem our
outstanding notes.
Events beyond our control could impair our operating
performance, which could affect our ability to comply with the
terms of our debt instruments. Such events may include decreased
consumer spending in response to weak economic conditions or
weakness in the cosmetics category in the mass retail channel;
adverse changes in currency exchange rates; decreased sales of
our products as a result of increased competitive activities by
our competitors; changes in consumer purchasing habits,
including with respect to shopping channels; retailer inventory
management; changes in retailer pricing or promotional
strategies; retailer space reconfigurations or reductions in
retailer display space; less than anticipated results from our
existing or new products or from our advertising, promotional
and/or
marketing plans; or if our expenses, including, without
limitation, for pension expense under our benefit plans,
advertising, promotions
and/or
marketing activities or for sales returns related to any
reduction of retail space, product discontinuances or otherwise,
exceed the anticipated level of expenses.
26
Under such circumstances, we may be unable to comply with the
provisions of our debt instruments, including the financial
covenants in the 2010 Bank Credit Agreements. If we are unable
to satisfy such covenants or other provisions at any future
time, we would need to seek an amendment or waiver of such
financial covenants or other provisions. The respective lenders
under the 2010 Bank Credit Agreements may not consent to any
amendment or waiver requests that we may make in the future,
and, if they do consent, they may not do so on terms which are
favorable to us
and/or
Revlon.
In the event that we were unable to obtain any such waiver or
amendment, our inability to meet the financial covenants or
other provisions of the 2010 Bank Credit Agreements would
constitute an event of default under the 2010 Bank Credit
Agreements, which would permit the bank lenders to accelerate
the 2010 Bank Credit Agreements, which in turn would constitute
an event of default under the Senior Subordinated Term Loan
Agreement and the indenture governing our outstanding notes, if
the amount accelerated exceeds $25.0 million and such
default remains uncured for 10 days following notice from
MacAndrews & Forbes with respect to the Senior
Subordinated Term Loan Agreement or the trustee or the holders
of at least 30% of the outstanding principal amount of the
outstanding notes.
Our assets
and/or cash
flow and/or
that of our subsidiaries may not be sufficient to fully repay
borrowings under our outstanding debt instruments, either upon
maturity or if accelerated upon an event of default, and if we
were required to repurchase our outstanding notes or repay the
Senior Subordinated Term Loan or repay the 2010 Bank Credit
Agreements upon a change of control, we may be unable to
refinance or restructure the payments on such debt. Further, if
we were unable to repay, refinance or restructure our
indebtedness under the 2010 Bank Credit Agreements
and/or our
notes, the lenders and the noteholders, as applicable, subject
to certain conditions and limitations as set forth in the second
amended and restated intercreditor agreement, could proceed
against the collateral securing that indebtedness.
Limits
on our borrowing capacity under the 2010 Bank Revolving Credit
Facility may affect our ability to finance our
operations.
While the 2010 Bank Revolving Credit Facility currently provides
for up to $140.0 million of commitments, our ability to
borrow funds under this facility is limited by a borrowing base
determined relative to the value, from time to time, of eligible
accounts receivable and eligible inventory in the U.S. and
the U.K. and eligible real property and equipment in the U.S.
If the value of these eligible assets is not sufficient to
support the full $140.0 million borrowing base, we will not
have full access to the 2010 Bank Revolving Credit Facility, but
rather could have access to a lesser amount determined by the
borrowing base. As we continue to manage our working capital,
this could reduce the borrowing base under the 2010 Bank
Revolving Credit Facility. Further, if we borrow funds under
this facility, subsequent changes in the value or eligibility of
the assets within the borrowing base could cause us to be
required to pay down the amounts outstanding so that there is no
amount outstanding in excess of the then-existing borrowing base.
Our ability to make borrowings under the 2010 Bank Revolving
Credit Facility is also conditioned upon our compliance with
other covenants in the 2010 Bank Revolving Credit Agreement,
including a fixed charge coverage ratio that applies when the
excess borrowing base (representing the difference
between (1) the borrowing base under the 2010 Bank
Revolving Credit Facility and (2) the amounts outstanding
under such facility) is less than $20.0 million. Because of
these limitations, we may not always be able to meet our cash
requirements with funds borrowed under the 2010 Bank Revolving
Credit Facility, which could have a material adverse effect on
our business, financial condition
and/or
results of operations.
At March 31, 2010, the 2010 Bank Term Loan Facility was
fully drawn, and we had a liquidity position (excluding cash in
compensating balance accounts) of $120.6 million,
consisting of cash and cash equivalents (net of any outstanding
checks) of $33.4 million, as well as $87.2 million in
available borrowings under the 2010 Bank Revolving Credit
Facility, based upon the last calculated borrowing base less
$21.8 million of outstanding undrawn letters of credit and
$10.5 million then drawn on the 2010 Bank Revolving Credit
Facility.
The 2010 Bank Revolving Credit Facility is syndicated to a group
of banks and financial institutions. Each bank is responsible to
lend its portion of the $140.0 million commitment if and
when we seek to draw under the 2010
27
Bank Revolving Credit Facility. The lenders may assign their
commitments to other banks and financial institutions in certain
cases without prior notice to us. If a lender is unable to meet
its lending commitment, then the other lenders under the 2010
Bank Revolving Credit Facility have the right, but not the
obligation, to lend additional funds to make up for the
defaulting lenders commitment, if any. While we have never
had any of our lenders under the 2010 Bank Revolving Credit
Facility or the 2006 Bank Revolving Credit Facility fail to
fulfill their lending commitment, economic conditions in late
2008 and 2009 and the volatility in the financial markets during
this time period have impacted the liquidity and financial
condition of certain banks and financial institutions. Based on
information available to us, we have no reason to believe that
any of the lenders under our 2010 Bank Revolving Credit Facility
would have been unable to fulfill their commitments under the
2010 Bank Revolving Credit Facility as of March 31, 2010.
However, if one or more lenders under the 2010 Bank Revolving
Credit Facility were unable to fulfill their commitment to lend,
such inability would impact our liquidity and, depending upon
the amount involved and our liquidity requirements, could have
an adverse affect on our ability to fund our operations, which
could have a material adverse effect on our business, financial
condition
and/or
results of operations.
Your
right to exercise remedies with respect to the Collateral is
limited by the Intercreditor Agreement and the lenders under our
2010 Bank Credit Agreements are able to control such
remedies.
The rights of the holders of the notes with respect to the
Collateral are limited by the Intercreditor Agreement (as
defined herein). To the extent that we have outstanding
obligations under our 2010 Bank Credit Agreements or other
senior or pari passu obligations secured by the Collateral, any
actions that may be taken in respect of any of the Collateral,
including the ability to cause the commencement of enforcement
proceedings against the Collateral and to control the conduct of
such proceedings, are limited and controlled and directed by the
lenders under the 2010 Bank Credit Agreements or the holders of
such other obligations. In those circumstances, the indenture
trustee, on behalf of the holders of the notes, does not have
the ability to control or direct such actions, even if an event
of default under the indenture has occurred or if the rights of
the holders of the notes are or may be adversely affected.
The collateral agent and the lenders under our 2010 Bank Credit
Agreements and the holders of such other obligations are under
no obligation to take into account the interests of holders of
the notes and guarantees when determining whether and how to
exercise their rights with respect to the Collateral, subject to
the Intercreditor Agreement, and their interests and rights may
be significantly different from or adverse to yours.
There
are circumstances other than repayment or discharge of the notes
under which the Collateral securing the notes and guarantees
would be released automatically, without your consent or the
consent of the indenture trustee.
Pursuant to the indenture, under various circumstances all or a
portion of the Collateral securing the notes and guarantees
would be released automatically without your consent or the
consent of the indenture trustee, including:
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in the absence of an event of default under the indenture at
such time, upon the release of liens securing our 2010 Bank
Credit Agreements in accordance with the terms of such
agreements;
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upon the sale, transfer or other disposition of such Collateral
in a transaction not prohibited under the indenture; and
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with respect to Collateral held by a guarantor, upon the release
of such guarantor from its guarantee in accordance with the
indenture.
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See Description of the New Notes Security for
the New Notes Release of Collateral.
The indenture also permits us to designate one or more of our
subsidiaries as non-recourse subsidiaries, subject to certain
conditions, including that such subsidiary has no debt other
than debt that is non-recourse to us or our subsidiaries and
that such subsidiary is in the same line of business as us or in
an otherwise permitted business. If we designate a subsidiary as
a non-recourse subsidiary, all of the liens on any Collateral
owned by such non-recourse subsidiary or any of its subsidiaries
and any guarantees of the notes by such non-recourse subsidiary
or any of its subsidiaries will be automatically released under
the indenture. Designation of one or more of our subsidiaries as
a non-recourse subsidiary will therefore reduce the aggregate
value of the Collateral securing the notes. See
Description of the New Notes Security for the
New Notes Release of Collateral.
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The
imposition of certain permitted liens may cause the assets on
which such liens are imposed to be excluded from the Collateral
securing the notes and the guarantees. There are also certain
other categories of property that are excluded from the
Collateral.
The indenture permits us and the guarantors to grant certain
permitted liens in favor of third parties and, in certain cases,
any assets subject to such liens will be automatically excluded
from the Collateral securing the notes and the guarantees to the
extent inclusion in such Collateral would be prohibited by the
documents relating to such permitted liens. See
Description of the New Notes Security for the
New Notes Release of Collateral.
Other categories of excluded assets and property include, among
others, certain real property interests, assets of non-recourse
subsidiaries and foreign subsidiaries, certain stock of foreign
subsidiaries and the proceeds from any of the foregoing. See
Description of the New Notes Security for the
New Notes General. Excluded property is not
available as Collateral to secure our obligations and the
obligations of the guarantors under the notes. As a result, with
respect to the excluded property, the notes and the guarantees
effectively rank equally with any of our and the
guarantors other senior indebtedness that is not itself
secured by the excluded property. In addition, some of the
excluded property currently secures our 2010 Bank Credit
Agreements and may secure other additional indebtedness secured
by liens that are pari passu with or higher priority than liens
securing the notes and the guarantees. As a result, the lenders
under our 2010 Bank Credit Agreements and such other
indebtedness may be able to access such excluded property to
satisfy their claims prior to accessing the collateral to
satisfy the claims under the notes and the guarantees.
The
pledge of the capital stock, other securities and similar items
of our subsidiaries that secure the notes and the guarantees are
automatically be excluded from the Collateral to the extent the
pledge of such capital stock or such other securities would
require the filing of separate financial statements with the SEC
for that subsidiary.
The notes and the guarantees are secured by a pledge of our
stock that is owned by Revlon and the capital stock, other
securities and similar items of certain of our subsidiaries.
Under
Rule 3-16
of
Regulation S-X
(as in effect from time to time), if the par value, book value
as carried by us or market value (whichever is greatest) of the
capital stock, other securities or similar items of a subsidiary
pledged as part of the Collateral is greater than or equal to
20% of the aggregate principal amount of the notes then
outstanding, such a subsidiary would be required to provide
separate financial statements to the SEC. Therefore, the
indenture and the collateral documents provide that any capital
stock and other securities of any of our subsidiaries are
excluded from the Collateral to the extent that the pledge of
such capital stock or other securities to secure the notes would
cause such subsidiary to be required to file separate financial
statements with the SEC in accordance with
Rule 3-16
of
Regulation S-X.
As a result, holders of the notes could lose a portion or all of
their security interest in the capital stock or other securities
of those subsidiaries. It may be more difficult, costly and
time-consuming for holders of the notes to foreclose on the
assets of a subsidiary than to foreclose on its capital stock or
other securities (and holders of the notes would not have any
ability to foreclose on any assets of any foreign subsidiary),
so the proceeds realized upon any such foreclosure could be
significantly less than those that would have been received upon
any sale of the capital stock or other securities of such
subsidiary. In addition, all of such capital stock and other
securities will continue to secure our 2010 Bank Credit
Agreements and may secure other additional secured indebtedness
because
Rule 3-16
of
Regulation S-X
does not apply to loans outstanding under bank loan agreements
such as our 2010 Bank Credit Agreements. As a result, the
lenders under our 2010 Bank Credit Agreements and such other
indebtedness may be able to access such stock to satisfy their
claims. See Description of the New Notes
Certain Definitions Other Excluded Assets.
The
value of the Collateral securing the notes may not be sufficient
to satisfy our and the guarantors obligations under the
notes and the guarantees.
No appraisal of the value of the Collateral has been made in
connection with this exchange offer, and the fair market value
of the Collateral is subject to fluctuations based on factors
that include general economic conditions and similar factors.
The amount to be received upon a sale of the Collateral would be
dependent on numerous factors, including the actual fair market
value of the Collateral at such time, the timing and the manner
of the sale
29
and the availability of buyers. By its nature, portions of the
Collateral may be illiquid and may have no readily ascertainable
market value. Accordingly, in the event of a foreclosure,
liquidation, bankruptcy or similar proceeding, the Collateral
may not be sold in a timely or orderly manner, and the proceeds
from any sale or liquidation of the Collateral may not be
sufficient to satisfy our and the guarantors obligations
under the notes and the guarantees.
To the extent that pre-existing liens, liens permitted under the
indenture and other rights, including liens on excluded property
(in addition to the holders of obligations secured by
higher-priority liens), encumber any of the Collateral securing
the notes and the guarantees, those parties have or may exercise
rights and remedies with respect to the Collateral that could
adversely affect the value of the Collateral and the ability of
the collateral agent, the indenture trustee or the holders of
the notes to realize or foreclose on the Collateral.
Your
security interests in certain items of present and future
Collateral may not be perfected. Even if your security interests
in certain items of Collateral are perfected, it may not be
practicable for you to enforce or economically benefit from your
rights with respect to such security interests.
The security interests are not perfected with respect to certain
items of Collateral that cannot be perfected by the filing of
financing statements in each debtors jurisdiction of
organization, the filing of mortgages, the delivery of
possession of certificated securities, the filing of a notice of
security interest with the U.S. Patent and Trademark Office
or the U.S. Copyright Office or certain other conventional
methods to perfect security interests in the U.S. Security
interests in Collateral such as deposit accounts and securities
accounts, which require or benefit from additional special
filings or other actions or the obtaining of additional
consents, may not be perfected or may not have priority with
respect to the security interests of other creditors. In
addition, the Collateral for the notes and the guarantees are
pledged pursuant to collateral documents governed by New York
law and we do not have any obligation to perfect a security
interest in any Collateral under the laws of any other
jurisdiction to the extent that security interests securing
indebtedness under our 2010 Bank Credit Agreements are not
perfected under such other laws. To the extent that your
security interests in any items of Collateral are unperfected,
your rights with respect to such Collateral are equal to the
rights of our general unsecured creditors in the event of any
bankruptcy filed by or against us under applicable
U.S. federal bankruptcy laws.
In addition, applicable law requires that certain property and
rights acquired after the grant of a general security interest
can only be perfected at the time such property and rights are
acquired and identified. Necessary action may not be taken to
properly perfect the security interest in such after-acquired
Collateral. Failure to perfect security interests may invalidate
such security interests, limit the assets included in the
Collateral and block the exercise of remedies with respect to
such assets. Moreover, the collateral agent may need to obtain
the consent of a governmental agency to obtain or enforce a
security interest in certain of the Collateral or to otherwise
operate our business. We cannot assure you that the collateral
agent will be able to obtain any such consent or that any such
consent will not be delayed, the event of which may adversely
affect your rights as holders. Moreover, the collateral agent in
exercising its rights to foreclose on certain assets may need to
commence governmental proceedings in order to obtain any
necessary governmental approvals. As a result, there may be
prolonged delays in receiving such approval, or such approval
may not be granted to the collateral agent, the result of which
may adversely affect your rights as holders.
If we
were to file for bankruptcy protection, the ability of holders
of the notes to realize upon the Collateral will be subject to
certain bankruptcy law limitations, and if a bankruptcy petition
were filed by us or against us, holders of the notes may receive
a lesser amount for their claim than they would have been
entitled to receive under the indenture governing the
notes.
The ability of holders of the notes to realize upon the
Collateral will be subject to certain bankruptcy law limitations
if we were to file for bankruptcy protection. Under applicable
U.S. federal bankruptcy laws, secured creditors are
prohibited from repossessing their security from a debtor in a
bankruptcy case without bankruptcy court approval and may be
prohibited from disposing of security repossessed from such a
debtor without bankruptcy court approval. Moreover, applicable
U.S. federal bankruptcy laws generally permit the debtor to
continue to retain collateral, including cash collateral, even
though the debtor is in default under the applicable debt
instruments; provided that the secured creditor is given
adequate protection.
30
The meaning of the term adequate protection may vary
according to the circumstances, but is intended generally to
protect the value of the secured creditors interest in the
collateral at the commencement of the bankruptcy case and may
include cash payments or the granting of additional security if
and at such times as the court, in its discretion, determines
that a diminution in the value of the collateral occurs as a
result of the stay of repossession or the disposition of the
collateral during the pendency of the bankruptcy case. In view
of the lack of a precise definition of the term adequate
protection and the broad discretionary powers of a
U.S. bankruptcy court, we cannot predict whether or when
the collateral agent for the notes could foreclose upon or sell
the Collateral or whether or to what extent holders of notes
would be compensated for any delay in payment or loss of value
of the Collateral through the requirement of adequate
protection.
Moreover, if a bankruptcy petition were filed by or against us
under applicable U.S. federal bankruptcy laws after the
issuance of the notes, the claim by any holder of the notes for
the principal amount of the notes may be limited to an amount
equal to the sum of the original issue price for the notes and
that portion of the original issue discount that does not
constitute unmatured interest for purposes of
applicable U.S. federal bankruptcy laws.
In any bankruptcy proceeding with respect to us or any of the
guarantors, it is possible that any such bankruptcy trustee, any
debtor-in-possession
or any competing creditors will assert that the fair market
value of the Collateral with respect to the notes on the date of
any such bankruptcy filing was less than the then-current
principal amount of the notes. Upon a finding by any such
bankruptcy court that the notes are under-collateralized, the
claims in such bankruptcy proceeding with respect to the notes
would be bifurcated between a secured claim and an unsecured
claim, and the unsecured claim would not be entitled to the
benefits of security in the Collateral. Other consequences of a
finding of under collateralization would be, among other things,
a lack of entitlement on the part of the notes to receive
post-petition interest and a lack of entitlement on the part of
the unsecured portion of the notes to receive other
adequate protection under applicable
U.S. federal bankruptcy laws. In addition, if any payments
of post-petition interest had been made at the time of such a
finding of under-collateralization, those payments could be
recharacterized by any such bankruptcy court as a reduction of
the principal amount of the secured claim with respect to the
notes.
U.S.
federal and state fraudulent transfer laws may permit a court to
void the notes, the guarantees and the liens securing the notes
and the guarantees, subordinate claims in respect of the notes,
the guarantees and the liens securing the notes and the
guarantees, and require holders to return payments received and,
if that occurs, you may not receive any payments on the
notes.
U.S. federal and state fraudulent transfer and conveyance
statutes may apply to the issuance of the notes, the incurrence
of any guarantees of the notes entered into upon issuance of the
notes and subsidiary guarantees that may be entered into
thereafter under the terms of the indenture governing the notes
and the granting of liens to secure the notes and the
guarantees. Under applicable U.S. federal bankruptcy laws
and comparable provisions of state fraudulent transfer or
conveyance laws, which may vary from state to state, the notes
and any guarantee or any of the liens securing the notes could
be voided as a fraudulent transfer or conveyance if (1) we
or any of the guarantors, as applicable, issued the notes,
incurred its guarantee or granted the liens with the intent of
hindering, delaying or defrauding creditors or (2) we or
any of the guarantors, as applicable, received less than
reasonably equivalent value or fair consideration in return for
issuing the notes, incurring its guarantee or granting the liens
and, in the case of (2) only, one of the following is also
true at the time thereof:
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we or any of the guarantors, as applicable, were insolvent or
rendered insolvent by reason of the issuance of the notes or the
incurrence of the guarantees;
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the issuance of the notes or the incurrence of the guarantees
left us or any of the guarantors, as applicable, with an
unreasonably small amount of capital to carry on the
business; or
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we or any of the guarantors intended to, or believed that we or
such guarantor would, incur debts beyond our or such
guarantors ability to pay such debts as they mature.
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A court would likely find that we or a guarantor did not receive
reasonably equivalent value or fair consideration for the notes
or such guarantee if we or such guarantor did not substantially
benefit directly or indirectly from the issuance of the notes or
the applicable guarantee. As a general matter, value is given
for a transfer
31
or an obligation if, in exchange for the transfer or obligation,
property is transferred or current or antecedent debt is secured
or satisfied. We cannot be certain as to the standards a court
would use to determine whether or not we or the guarantors were
solvent at the relevant time or, regardless of the standard that
a court uses, that the issuance of the guarantees would not be
further subordinated to our or any of our guarantors other
debt. Generally, however, an entity would not be considered
solvent if, at the time it incurred indebtedness:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all its assets; or
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the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts as they become due.
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If a court were to find that the issuance of the notes or the
incurrence of the guarantee was a fraudulent transfer or
conveyance, the court could void the payment obligations under
the notes or such guarantee or subordinate the notes or such
guarantee to presently existing and future indebtedness of ours
or of the related guarantor, or require the holders of the notes
to repay any amounts received with respect to such notes or
guarantee. In addition, the court may avoid and set aside the
liens securing the Collateral in the case of a fraudulent
transfer or conveyance or as a preference. In the event of a
finding that a fraudulent transfer or conveyance or a preference
occurred, you may not receive any repayment on the notes.
Although each guarantee entered into contains a provision
intended to limit that guarantors liability to the maximum
amount that it could incur without causing the incurrence of
obligations under its guarantee to be a fraudulent transfer,
this provision may not be effective to protect those guarantees
from being voided under fraudulent transfer laws, or may reduce
that guarantors obligation to an amount that effectively
makes its guarantee worthless.
We may
not have the ability to purchase the notes upon a change of
control.
Upon the occurrence of specified change of control events, we
are required to offer to purchase each holders notes at a
price equal to 101% of their principal amount plus accrued and
unpaid interest, unless all notes have been previously called
for redemption. The occurrence of a change of control could
constitute an event of default under agreements governing other
indebtedness, some of which rank effectively senior to the notes
(including the 2010 Bank Credit Agreements), in which case our
lenders may terminate their commitments under those agreements
and accelerate all amounts outstanding under the relevant
facilities. The holders of other debt securities that we may
issue in the future, which may rank equally in right of payment
with or effectively senior to the notes, may also have this
right. Therefore, we may not have sufficient financial resources
to purchase all of the debt securities or other indebtedness
with such provisions as a result of a change of control.
You
cannot be sure that an active trading market will develop for
the new notes.
There is no existing trading market for the new notes. We have
not applied for, nor do we intend to apply for, listing or
quotation of the new notes on any exchange or any automated
dealer quotation system. We cannot assure you that a trading
market for the new notes will develop or exist. Therefore, we do
not know how liquid the market for the new notes might be, nor
can we make any assurances regarding the ability of holders of
the new notes to sell their new notes or the price at which the
new notes might be sold. As a result, the market price of the
new notes could be adversely affected. Historically, the market
for non-investment grade debt, such as the new notes, has been
subject to disruptions that have caused volatility in the prices
of such securities. Any such disruptions may have an adverse
effect on holders of the new notes.
32
FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking statements that involve
risks and uncertainties, which are based on the beliefs,
expectations, estimates, projections, assumptions, forecasts,
plans, anticipations, targets, outlooks, initiatives, visions,
objectives, strategies, opportunities, drivers, focus and
intents of our management, and therefore are subject to the safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995. While we believe that our estimates and assumptions
are reasonable, we caution that it is very difficult to predict
the impact of known factors, and, of course, it is impossible
for us to anticipate all factors that could affect our results.
Our actual results may differ materially from those discussed in
such forward-looking statements. Such statements include,
without limitation, our expectations and estimates (whether
qualitative or quantitative) as to:
(i) our future financial performance;
(ii) the effect on sales of decreased consumer spending in
response to weak economic conditions or weakness in the
cosmetics category in the mass retail channel; adverse changes
in currency exchange rates; decreased sales of our products as a
result of increased competitive activities by our competitors,
changes in consumer purchasing habits, including with respect to
shopping channels; retailer inventory management; retailer space
reconfigurations or reductions in retailer display space;
changes in retailer pricing or promotional strategies; less than
anticipated results from our existing or new products or from
our advertising, promotional
and/or
marketing plans; or if our expenses, including, without
limitation, for pension expense under our benefit plans,
advertising, promotions and marketing activities or for sales
returns related to any reduction of retail space, product
discontinuances or otherwise, exceed the anticipated level of
expenses;
(iii) our belief that the continued execution of our
business strategy could include taking advantage of additional
opportunities to reposition, repackage or reformulate one or
more brands or product lines, launching additional new products,
acquiring businesses or brands, further refining our approach to
retail merchandising
and/or
taking further actions to optimize our manufacturing, sourcing
and organizational size and structure, any of which, whose
intended purpose would be to create value through profitable
growth, could result in our making investments
and/or
recognizing charges related to executing against such
opportunities;
(iv) our expectations regarding our strategic goal to
profitably grow our business and as to the business strategies
employed to achieve this goal, which are: (a) continuing to
build our strong brands by focusing on innovative, high-quality,
consumer-preferred brand offering; effective consumer brand
communication; appropriate levels of advertising and promotion;
and superb execution with our retail partners;
(b) continuing to develop our organizational capability
through attracting, retaining and rewarding highly capable
people and through performance management, development planning,
succession planning and training; (c) continuing to drive
common global processes which are designed to provide the most
efficient allocation of our resources; (d) continuing to
focus on increasing our operating profit and cash flow; and
(e) continuing to improve our capital structure by focusing
on strengthening our balance sheet and reducing debt;
(v) our expectations regarding the implementation and
success of the various actions necessary to execute such
business strategies referred to in item (iv) above;
(vi) restructuring activities, restructuring costs and
charges, the timing of restructuring payments and the benefits
from such activities, including, without limitation, our
expectation of annualized savings of approximately
$30 million in 2010 and thereafter (inclusive of the
approximately $15 million in 2009) from the May 2009
Program;
(vii) our expectation that operating revenues, cash on hand
and funds available for borrowing under our 2010 Bank Revolving
Credit Facility and other permitted lines of credit will be
sufficient to enable us to cover our operating expenses for
2010, including the cash requirements referred to in item
(x) below;
(viii) our global brand name recognition, product quality,
marketing experience and consumer brand franchise;
(ix) our expected principal sources of funds, including
operating revenues, cash on hand and funds available for
borrowing under our 2010 Bank Revolving Credit Facility and
other permitted lines of credit, as well as the availability of
funds from refinancing our indebtedness, selling assets or
operations, capital
33
contributions
and/or loans
from MacAndrews & Forbes, Revlon, our other affiliates
and/or third
parties
and/or the
sale of additional debt securities of us;
(x) our expected principal uses of funds, including amounts
required for the payment of operating expenses, including
expenses in connection with the continued execution of our
business strategy, payments in connection with our purchases of
permanent wall displays, capital expenditure requirements,
restructuring programs, severance not otherwise included in our
restructuring programs, debt service payments and costs, debt
repurchases (including, without limitation, that we may also,
from time to time, seek to retire or purchase our outstanding
debt obligations in open market purchases, in privately
negotiated transactions or otherwise and may seek to refinance
some or all of our indebtedness based upon market conditions)
and regularly scheduled pension and post-retirement benefit plan
contributions and benefit payments, and our estimates of the
amount and timing of our operating expenses, restructuring costs
and payments, severance costs and payments, debt service
payments (including payments required under our debt
instruments), debt repurchases, cash contributions to our
pension plans and our other post-retirement benefit plans and
benefit payments in 2010, purchases of permanent wall displays
and capital expenditures;
(xi) matters concerning our market-risk sensitive
instruments, as well as our expectations as to the
counterpartys performance, including that any loss arising
from the non-performance by the counterparty would not be
material;
(xii) our plan to efficiently manage our cash and working
capital, including, among other things, programs to reduce
inventory levels over time; centralized purchasing to secure
discounts and efficiencies in procurement; providing discounts
to U.S. customers for more timely payment of receivables;
prudent management of accounts payable; and targeted controls on
general and administrative spending;
(xiii) our expectations regarding our future pension
expense, cash contributions and benefit payments under our
benefit plans;
(xiv) our expectation that the payment of the quarterly
dividends on Revlons Preferred Stock will be funded by
cash interest payments to be received by Revlon from Products
Corporation on the Contributed Loan, subject to Revlon having
sufficient surplus or net profits to effect such payments, and
our expectation of Revlon paying the liquidation preference of
its Preferred Stock on October 8, 2013 with the cash
payment to be received by Revlon from Products Corporation in
respect of the maturity of the Contributed Loan, subject to
Revlon having sufficient surplus in accordance with Delaware
law; and
(xv) our expectations as to the future impact of the
devaluation of Venezuelan Bolivars and Venezuela being
considered a highly inflationary economy in January 2010,
including, without limitation, that our consolidated financial
results in 2010 are expected to be adversely impacted as a
result of the currency devaluation.
Statements that are not historical facts, including statements
about our beliefs and expectations, are forward-looking
statements. Forward-looking statements can be identified by,
among other things, the use of forward-looking language such as
estimates, objectives,
visions, projects,
assumptions, forecasts,
focus, drive towards, plans,
targets, strategies,
opportunities, drivers,
believes, intends, outlooks,
initiatives, expects, scheduled
to, anticipates, seeks,
may, will or should or the
negative of those terms, or other variations of those terms or
comparable language, or by discussions of strategies, targets,
long-range plans, models or intentions. Forward-looking
statements speak only as of the date they are made, and except
for our ongoing obligations under the U.S. federal
securities laws, we undertake no obligation to publicly update
any forward-looking statements, whether as a result of new
information, future events or otherwise.
A number of important factors could cause actual results to
differ materially from those contained in any forward-looking
statement. In addition to factors that may be described in our
filings with the SEC, including this prospectus, the following
factors, among others, could cause our actual results to differ
materially from those expressed in any forward-looking
statements made by us:
(i) unanticipated circumstances or results affecting our
financial performance, including decreased consumer spending in
response to weak economic conditions or weakness in the
cosmetics category in the
34
mass retail channel; changes in consumer preferences, such as
reduced consumer demand for our color cosmetics and other
current products, including new product launches; changes in
consumer purchasing habits, including with respect to shopping
channels; lower than expected retail customer acceptance or
consumer acceptance of, or less than anticipated results from,
our existing or new products; higher than expected pension
expense
and/or cash
contributions under our benefit plans
and/or
benefit payments, advertising, promotional
and/or
marketing expenses or lower than expected results from our
advertising, promotional
and/or
marketing plans; higher than expected sales returns or decreased
sales of our existing or new products; actions by our customers,
such as retailer inventory management and greater than
anticipated retailer space reconfigurations or reductions in
retail space
and/or
product discontinuances or a greater than expected impact from
retailer pricing or promotional strategies; and changes in the
competitive environment and actions by our competitors,
including business combinations, technological breakthroughs,
new products offerings, increased advertising, promotional and
marketing spending and advertising, promotional
and/or
marketing successes by competitors, including increases in share
in the mass retail channel;
(ii) in addition to the items discussed in item
(i) above, the effects of and changes in economic
conditions (such as continued volatility in the financial
markets, inflation, monetary conditions and foreign currency
fluctuations, as well as in trade, monetary, fiscal and tax
policies in international markets) and political conditions
(such as military actions and terrorist activities);
(iii) unanticipated costs or difficulties or delays in
completing projects associated with the continued execution of
our business strategy or lower than expected revenues or the
inability to create value through profitable growth as a result
of such strategy, including lower than expected sales, or higher
than expected costs, including as may arise from any additional
repositioning, repackaging or reformulating of one or more
brands or product lines, launching of new product lines,
including difficulties or delays, or higher than expected
expenses, including for sales returns, in launching our new
products, acquiring businesses or brands, further refining our
approach to retail merchandising,
and/or
difficulties, delays or increased costs in connection with
taking further actions to optimize our manufacturing, sourcing,
supply chain or organizational size and structure;
(iv) difficulties, delays or unanticipated costs in
achieving our strategic goal to profitably grow our business and
as to the business strategies employed to achieve this goal,
such as (a) difficulties, delays or our inability to build
our strong brands, such as due to less than effective product
development, less than expected acceptance of our new or
existing products by consumers
and/or
retail customers, less than expected acceptance of our
advertising, promotional
and/or
marketing plans by our consumers
and/or
retail customers, less than expected investment in advertising,
promotional
and/or
marketing activities or greater than expected competitive
investment, less than expected acceptance of our brand
communication by consumers
and/or
retail partners, less than expected levels of advertising,
promotional
and/or
marketing activities for our new product launches
and/or less
than expected levels of execution with our retail partners or
higher than expected costs and expenses; (b) difficulties,
delays or the inability to develop our organizational
capability; (c) difficulties, delays or unanticipated costs
in connection with our plans to drive our company to act
globally, such as due to higher than anticipated levels of
investment required to support and build our brands globally or
less than anticipated results from our national and
multi-national brands; (d) difficulties, delays or
unanticipated costs in connection with our plans to improve our
operating profit and cash flow, such as difficulties, delays or
the inability to take actions intended to improve results in
sales returns, cost of goods sold, general and administrative
expenses, working capital management
and/or sales
growth;
and/or
(e) difficulties, delays or unanticipated costs in
consummating, or our inability to consummate, transactions to
improve our capital structure, strengthen our balance sheet
and/or
reduce debt, including higher than expected costs (including
interest rates);
(v) difficulties, delays or unanticipated costs or less
than expected savings and other benefits resulting from our
restructuring activities, such as less than anticipated cost
reductions or other benefits from the May 2009 Program, the 2008
restructuring plans (the 2008 Programs), the 2007
Programs
and/or the
2006 Programs and the risk that the May 2009 Program, the 2008
Programs, the 2007 Programs
and/or the
2006 Programs may not satisfy our objectives;
35
(vi) lower than expected operating revenues, cash on hand
and/or funds
available under the 2010 Bank Revolving Credit Facility
and/or other
permitted lines of credit or higher than anticipated operating
expenses, such as referred to in item (viii) below;
(vii) the unavailability of funds under our 2010 Bank
Revolving Credit Facility or other permitted lines of credit, or
from refinancing indebtedness, selling assets or operations or
from capital contributions or loans from MacAndrews &
Forbes, Revlon, our other affiliates
and/or third
parties
and/or the
sale of additional debt securities of us;
(viii) higher than expected operating expenses, sales
returns, working capital expenses, permanent wall display costs,
capital expenditures, restructuring costs, severance not
otherwise included in our restructuring programs, debt service
payments, debt repurchases, regularly scheduled cash pension
plan contributions
and/or
post-retirement benefit plan contributions
and/or
benefit payments;
(ix) interest rate or foreign exchange rate changes
affecting us and our market-risk sensitive financial instruments
and/or
difficulties, delays or the inability of the counterparty to
perform such transactions;
(x) difficulties, delays or the inability of us to
efficiently manage our cash and working capital;
(xi) lower than expected returns on pension plan assets
and/or lower
discount rates, which could result in higher than expected cash
contributions
and/or
pension expense;
(xii) difficulties, delays or the inability of Revlon to
pay the quarterly dividends or the liquidation preference on its
Preferred Stock, such as due to the unavailability of funds from
Products Corporation related to its payments to Revlon under the
Contributed Loan or the unavailability of sufficient surplus or
net profits to make such dividend payments in accordance with
Delaware law or the unavailability of sufficient surplus to make
such liquidation preference payments in accordance with Delaware
law; and/or
(xiii) unexpected consequences related to the future impact
of the devaluation of Venezuelan Bolivars and Venezuela being
considered a highly inflationary economy in January 2010, such
as greater than expected reduction of our financial results
and/or
greater than expected foreign currency losses and ongoing
charges related to the translation of our Venezuelan
subsidiarys financial statements at the new official
exchange rate.
Factors other than those listed above could also cause our
results to differ materially from expected results. This
discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.
You should consider the areas of risk above, as well as those
set forth in other documents Products Corporation and Revlon
have filed with the SEC and which are incorporated by reference
in this prospectus, in connection with any forward-looking
statements that may be made by us. You are advised to consult
any additional disclosures we made in the Annual Reports on
Form 10-K
of Products Corporation and Revlon for the fiscal year ended
December 31, 2009 and the Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K
of Products Corporation and Revlon, in each case filed with the
SEC in 2010 (which, among other places, can be found on the
SECs website at
http://www.sec.gov).
See Where You Can Find More Information. Other than
as specified under Incorporation of Certain Documents By
Reference, reports and other information that Products
Corporation and Revlon have filed or furnished, or may in the
future file, with the SEC are not incorporated by reference in,
and do not constitute a part of, this prospectus.
36
USE OF
PROCEEDS
We will not receive any proceeds from the exchange offer. Any
old notes that are properly tendered and exchanged pursuant to
the exchange offer will be retired and cancelled. Accordingly,
the issuance of the new notes will not increase our indebtedness.
37
RATIO OF
EARNINGS TO FIXED CHARGES OF PRODUCTS CORPORATION
The following table sets forth information regarding Products
Corporations ratio of earnings to fixed charges for each
of the periods shown.
For purposes of calculating these ratios: (a) earnings
consist of income (loss) from continuing operations before
income taxes of $(71.4) million, $(225.4) million,
$(4.5) million, $36.9 million and $66.6 million
for the years ended December 31, 2005, 2006, 2007, 2008 and
2009, respectively, and $12.4 million and $9.2 million
for the three-month periods ended March 31, 2009 and 2010,
respectively, and (b) fixed charges consist of interest
expense, amortization of debt issuance costs and the portion of
rental expense deemed to represent interest, which totaled
$142.1 million, $161.6 million, $144.9 million,
$130.3 million and $104.0 million for the years ended
December 31, 2005, 2006, 2007, 2008 and 2009, respectively
and $26.9 million and $25.7 million for the
three-month periods ended March 31, 2009 and 2010,
respectively.
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Three Months
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Year Ended December 31,
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Ended March 31,
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2005
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2006
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2007
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2008
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2009
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2009
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2010
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Ratio of earnings to fixed charges
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0.5
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*
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1.0
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1.3
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1.6
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1.5
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1.4
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For the year ended December 31, 2006, earnings were
insufficient to cover fixed charges, therefore the ratio of
earnings to fixed charges is not a relevant measure for this
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RATIO OF
EARNINGS TO FIXED CHARGES OF REVLON
The following table sets forth information regarding
Revlons ratio of earnings to fixed charges for each of the
periods shown.
For purposes of calculating these ratios: (a) earnings
consist of income (loss) from continuing operations before
income taxes of $(77.1) million, $(232.0) million,
$(11.5) million, $29.2 million and $56.8 million
for the years ended December 31, 2005, 2006, 2007, 2008 and
2009, respectively, and $10.7 million and $7.2 million
for the three-month periods ended March 31, 2009 and 2010,
respectively, and (b) fixed charges consist of interest
expense, amortization of debt issuance costs and the portion of
rental expense deemed to represent interest, which totaled
$142.1 million, $161.6 million, $144.9 million,
$130.3 million and $104.3 million for the years ended
December 31, 2005, 2006, 2007, 2008 and 2009, respectively
and $26.9 million and $26.0 million for the
three-month periods ended March 31, 2009 and 2010,
respectively.
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Three Months
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Year Ended December 31,
|
|
Ended March 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Ratio of earnings to fixed charges
|
|
|
0.5
|
|
|
|
*
|
|
|
|
0.9
|
|
|
|
1.2
|
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
1.3
|
|
|
|
|
* |
|
For the year ended December 31, 2006, earnings were
insufficient to cover fixed charges, therefore the ratio of
earnings to fixed charges is not a relevant measure for this
period. |
38
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRODUCTS
CORPORATION
The selected historical and other financial data as of
December 31, 2005, 2006, 2007, 2008 and 2009 and for each
of the years in the five-year period ended December 31,
2009 and the balance sheet data as of December 31, 2005,
2006, 2007, 2008 and 2009 are derived from Products
Corporations consolidated financial statements, which have
been audited by an independent registered public accounting
firm. The selected historical and other financial data for the
three-month period ended March 31, 2009 and 2010 and the
balance sheet data as of March 31, 2010 are derived from
Products Corporations unaudited consolidated financial
statements. Results from the three months ended March 31,
2010 are not necessarily indicative of the results that may be
expected for the full year 2010. The selected historical and
other financial data should be read in conjunction with Products
Corporations consolidated financial statements and the
related notes to those consolidated financial statements and
Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Annual Report
on
Form 10-K
of Products Corporation for the year ended December 31,
2009 and in the Quarterly Report on
Form 10-Q
of Products Corporation for the three months ended
March 31, 2010. See Incorporation of Certain
Documents by Reference.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2009(f)
|
|
|
2010(g)
|
|
|
|
(In millions, except per share amounts)
|
|
|
(Unaudited)
|
|
|
Net sales
|
|
$
|
1,303.5
|
|
|
$
|
1,298.7
|
|
|
$
|
1,367.1
|
|
|
$
|
1,346.8
|
|
|
$
|
1,295.9
|
|
|
$
|
303.3
|
|
|
$
|
305.5
|
|
Gross profit
|
|
|
810.5
|
|
|
|
771.0
|
|
|
|
861.4
|
|
|
|
855.9
|
|
|
|
821.2
|
|
|
|
192.3
|
|
|
|
196.8
|
|
Selling, general and administrative expenses
|
|
|
738.7
|
|
|
|
789.0
|
|
|
|
728.7
|
|
|
|
701.6
|
|
|
|
619.6
|
|
|
|
158.5
|
|
|
|
149.7
|
|
Restructuring costs and other, net
|
|
|
1.5
|
|
|
|
27.4
|
|
|
|
7.3
|
|
|
|
(8.4
|
)
|
|
|
21.3
|
|
|
|
0.5
|
|
|
|
|
|
Operating income (loss)
|
|
|
70.3
|
|
|
|
(45.4
|
)
|
|
|
125.4
|
|
|
|
162.7
|
|
|
|
180.3
|
|
|
|
33.3
|
|
|
|
47.1
|
|
Interest expense
|
|
|
129.5
|
|
|
|
147.7
|
|
|
|
135.6
|
|
|
|
119.7
|
|
|
|
93.0
|
|
|
|
24.1
|
|
|
|
22.9
|
|
Amortization of debt issuance costs
|
|
|
6.9
|
|
|
|
7.5
|
|
|
|
3.3
|
|
|
|
5.6
|
|
|
|
5.5
|
|
|
|
1.4
|
|
|
|
1.4
|
|
Loss (gain) on early extinguishment of debt, net
|
|
|
9.0
|
(h)
|
|
|
23.5
|
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
5.8
|
|
|
|
(7.0
|
)
|
|
|
9.7
|
|
Foreign currency losses (gains), net
|
|
|
0.5
|
|
|
|
(1.5
|
)
|
|
|
(6.8
|
)
|
|
|
0.1
|
|
|
|
8.9
|
|
|
|
2.4
|
|
|
|
3.8
|
|
(Loss) income from continuing operations
|
|
|
(79.4
|
)
|
|
|
(245.3
|
)
|
|
|
(11.9
|
)
|
|
|
21.0
|
|
|
|
58.5
|
|
|
|
14.5
|
|
|
|
4.2
|
|
Income from discontinued operations
|
|
|
1.6
|
|
|
|
0.8
|
|
|
|
2.9
|
|
|
|
44.8
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(77.8
|
)
|
|
|
(244.5
|
)
|
|
|
(9.0
|
)
|
|
|
65.8
|
|
|
|
58.8
|
|
|
|
14.5
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2010(g)
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
(Unaudited)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
596.7
|
|
|
$
|
500.1
|
|
|
$
|
496.4
|
|
|
$
|
457.4
|
|
|
$
|
446.3
|
|
|
$
|
418.5
|
|
Total non-current assets
|
|
|
451.7
|
|
|
|
443.9
|
|
|
|
413.3
|
|
|
|
384.9
|
|
|
|
384.2
|
|
|
|
388.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,048.4
|
|
|
$
|
944.0
|
|
|
$
|
909.7
|
|
|
$
|
842.3
|
|
|
$
|
830.5
|
|
|
$
|
807.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
470.5
|
|
|
$
|
377.1
|
|
|
$
|
348.7
|
|
|
$
|
322.9
|
|
|
$
|
305.2
|
|
|
$
|
303.7
|
|
Total non-current liabilities
|
|
|
1,669.1
|
|
|
|
1,784.5
|
|
|
|
1,622.6
|
|
|
|
1,602.8
|
|
|
|
1,519.1
|
|
|
|
1,486.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,139.6
|
|
|
$
|
2,161.6
|
|
|
$
|
1,971.3
|
|
|
$
|
1,925.7
|
|
|
$
|
1,824.3
|
|
|
$
|
1,790.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
$
|
1,418.4
|
|
|
$
|
1,506.9
|
|
|
$
|
1,440.6
|
|
|
$
|
1,329.6
|
|
|
$
|
1,248.7
|
|
|
$
|
1,232.2
|
|
Total stockholders deficiency
|
|
|
(1,091.2
|
)
|
|
|
(1,217.6
|
)
|
|
|
(1,061.6
|
)
|
|
|
(1,083.4
|
)
|
|
|
(993.8
|
)
|
|
|
(983.0
|
)
|
|
|
|
(a) |
|
Results for 2005 include expenses of approximately
$44 million in incremental returns and allowances and
approximately $7 million in accelerated amortization cost
of certain permanent displays related to the launch of Vital
Radiance and the re-stage of the Almay brand. |
|
(b) |
|
Results for 2006 include charges of $9.4 million in
connection with the departure of Mr. Jack Stahl, our former
President and Chief Executive Officer, in September 2006
(including $6.2 million for severance and related costs and
$3.2 million for the accelerated amortization of
Mr. Stahls unvested options and unvested restricted |
39
|
|
|
|
|
stock), $60.4 million in connection with the discontinuance
of the Vital Radiance brand and restructuring charges of
approximately $27.6 million in connection with the 2006
Programs. |
|
(c) |
|
Results for 2007 include restructuring charges of approximately
$4.4 million and $2.9 million in connection with the
2006 Programs and the 2007 Programs, respectively. The
$4.4 million of restructuring charges associated with the
2006 Programs were primarily for employee severance and other
employee-related termination costs principally relating to a
broad organizational streamlining. The $2.9 million of
restructuring charges associated with the 2007 Programs were
primarily for employee severance and other employee-related
termination costs relating principally to the closure of our
facility in Irvington, New Jersey and other employee-related
termination costs relating to personnel reductions in our
information management function and our sales force in Canada. |
|
(d) |
|
Results for 2008 include a $5.9 million gain from the sale
of a non-core trademark during the first quarter of 2008, and a
net $4.3 million gain related to the sale of the Mexico
facility (which is comprised of a $7.0 million gain on the
sale, partially offset by related restructuring charges of
$1.1 million, $1.2 million of SG&A and cost of
sales and $0.4 million of taxes). In addition, results for
2008 also include various other restructuring charges of
approximately $3.8 million. The results of discontinued
operations for 2008 included a one-time gain from the
disposition of the non-core Bozzano business and certain other
non-core brands, including Juvena and Aquamarine, which were
sold in the Brazilian market, of $45.2 million. |
|
(e) |
|
Results for 2009 include: (1) a $20.8 million charge
related to the May 2009 Program, which involved consolidating
certain functions; reducing layers of management, where
appropriate, to increase accountability and effectiveness;
streamlining support functions to reflect the new organizational
structure; and further consolidating our office facilities in
New Jersey; and (2) a $5.8 million net loss on early
extinguishment of debt in 2009 primarily due to a
$13.5 million loss resulting from applicable redemption and
tender premiums and the net write-off of unamortized debt
discounts and deferred financing fees in connection with the
refinancing of the
91/2% Senior
Notes in November 2009, partially offset by a $7.7 million
gain on repurchases of an aggregate principal amount of
$49.5 million of the
91/2% Senior
Notes prior to their complete refinancing in November 2009 at an
aggregate purchase price of $41.0 million, which is net of
the write-off of the ratable portion of unamortized debt
discounts and deferred financing fees resulting from such
repurchases. |
|
|
|
(f) |
|
Results for the three months ended March 31, 2009 include a
$7.0 million gain on the repurchase of an aggregate
principal amount of $23.9 million of the
91/2%
Senior Notes prior to their complete refinancing in November
2009 at an aggregate purchase price of $16.5 million, which
is net of the write-off of the ratable portion of unamortized
debt discount and deferred financing fees resulting from such
repurchase. |
|
|
|
(g) |
|
Results for the three months ended March 31, 2010 include a
$9.7 million loss on the extinguishment of debt as a result
of the refinancing of the 2006 Bank Credit Facilities in March
2010, primarily due to $5.9 million of fees and expenses
which were expensed as incurred in connection with such
refinancing, as well as the write-off of $3.8 million of
unamortized deferred financing fees in connection with such
refinancing. |
|
|
|
(h) |
|
The loss on early extinguishment of debt for 2005 includes:
(i) a $5.0 million prepayment fee related to the
prepayment in March 2005 of $100.0 million of indebtedness
outstanding under the 2004 term loan facility of the 2004 credit
agreement with a portion of the proceeds from the issuance of
Products Corporations
91/2% Senior
Notes (which notes were fully refinanced in November 2009); and
(ii) the aggregate $1.5 million loss on the redemption
of all of Products Corporations
81/8% Senior
Notes and 9% Senior Notes in April 2005, as well as the
write-off of the portion of deferred financing costs related to
such prepaid amount. |
40
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF REVLON
The selected historical and other financial data as of
December 31, 2005, 2006, 2007, 2008 and 2009 and for each
of the years in the five-year period ended December 31,
2009 and the balance sheet data as of December 31, 2005,
2006, 2007, 2008 and 2009 are derived from Revlons
consolidated financial statements, which have been audited by an
independent registered public accounting firm. The selected
historical and other financial data for the three-month period
ended March 31, 2009 and 2010 and the balance sheet data as
of March 31, 2010 are derived from Revlons unaudited
consolidated financial statements. Results from the three months
ended March 31, 2010 are not necessarily indicative of the
results that may be expected for the full year 2010. The
selected historical and other financial data should be read in
conjunction with Revlons consolidated financial statements
and the related notes to those consolidated financial statements
and Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Annual Report
on
Form 10-K
of Revlon for the year ended December 31, 2009 and in the
Quarterly Report on
Form 10-Q
of Revlon for the three months ended March 31, 2010. See
Incorporation of Certain Documents by Reference.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2009(f)
|
|
|
2010(g)
|
|
|
|
|
|
|
(In millions, except per share
amounts) (Unaudited)
|
|
|
Net sales
|
|
$
|
1,303.5
|
|
|
$
|
1,298.7
|
|
|
$
|
1,367.1
|
|
|
$
|
1,346.8
|
|
|
$
|
1,295.9
|
|
|
$
|
303.3
|
|
|
$
|
305.5
|
|
Gross profit
|
|
|
810.5
|
|
|
|
771.0
|
|
|
|
861.4
|
|
|
|
855.9
|
|
|
|
821.2
|
|
|
|
192.3
|
|
|
|
196.8
|
|
Selling, general and administrative expenses
|
|
|
746.3
|
|
|
|
795.6
|
|
|
|
735.7
|
|
|
|
709.3
|
|
|
|
629.1
|
|
|
|
160.2
|
|
|
|
151.4
|
|
Restructuring costs and other, net
|
|
|
1.5
|
|
|
|
27.4
|
|
|
|
7.3
|
|
|
|
(8.4
|
)
|
|
|
21.3
|
|
|
|
0.5
|
|
|
|
|
|
Operating income (loss)
|
|
|
62.7
|
|
|
|
(52.0
|
)
|
|
|
118.4
|
|
|
|
155.0
|
|
|
|
170.8
|
|
|
|
31.6
|
|
|
|
45.4
|
|
Interest expense
|
|
|
129.5
|
|
|
|
147.7
|
|
|
|
135.6
|
|
|
|
119.7
|
|
|
|
93.0
|
|
|
|
24.1
|
|
|
|
21.3
|
|
Interest expense-preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
Amortization of debt issuance costs
|
|
|
6.9
|
|
|
|
7.5
|
|
|
|
3.3
|
|
|
|
5.6
|
|
|
|
5.8
|
|
|
|
1.4
|
|
|
|
1.7
|
|
Loss (gain) on early extinguishment of debt, net
|
|
|
9.0
|
(h)
|
|
|
23.5
|
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
5.8
|
|
|
|
(7.0
|
)
|
|
|
9.7
|
|
Foreign currency losses (gains), net
|
|
|
0.5
|
|
|
|
(1.5
|
)
|
|
|
(6.8
|
)
|
|
|
0.1
|
|
|
|
8.9
|
|
|
|
2.4
|
|
|
|
3.8
|
|
(Loss) income from continuing operations
|
|
|
(85.3
|
)
|
|
|
(252.1
|
)
|
|
|
(19.0
|
)
|
|
|
13.1
|
|
|
|
48.5
|
|
|
|
12.7
|
|
|
|
2.2
|
|
Income from discontinued operations
|
|
|
1.6
|
|
|
|
0.8
|
|
|
|
2.9
|
|
|
|
44.8
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(83.7
|
)
|
|
|
(251.3
|
)
|
|
|
(16.1
|
)
|
|
|
57.9
|
|
|
|
48.8
|
|
|
|
12.7
|
|
|
|
2.2
|
|
Basic (loss) income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(2.21
|
)
|
|
|
(6.04
|
)
|
|
|
(0.38
|
)
|
|
|
0.26
|
|
|
|
0.94
|
|
|
|
0.25
|
|
|
|
0.04
|
|
Discontinued operations
|
|
|
0.04
|
|
|
|
0.02
|
|
|
|
0.06
|
|
|
|
0.87
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(2.17
|
)
|
|
$
|
(6.03
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
1.13
|
|
|
$
|
0.95
|
|
|
$
|
0.25
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(2.21
|
)
|
|
|
(6.04
|
)
|
|
|
(0.38
|
)
|
|
|
0.26
|
|
|
|
0.94
|
|
|
|
0.25
|
|
|
|
0.04
|
|
Discontinued operations
|
|
|
0.04
|
|
|
|
0.02
|
|
|
|
0.06
|
|
|
|
0.87
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(2.17
|
)
|
|
$
|
(6.03
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
1.13
|
|
|
$
|
0.94
|
|
|
$
|
0.25
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38.6
|
|
|
|
41.7
|
|
|
|
50.4
|
|
|
|
51.2
|
|
|
|
51.6
|
|
|
|
51.5
|
|
|
|
51.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38.6
|
|
|
|
41.7
|
|
|
|
50.4
|
|
|
|
51.3
|
|
|
|
51.7
|
|
|
|
51.5
|
|
|
|
52.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended March 31,
|
|
|
|
2005(a)
|
|
|
2006(b)
|
|
|
2007(c)
|
|
|
2008(d)
|
|
|
2009(e)
|
|
|
2010(g)
|
|
|
|
(In millions)
|
|
|
(Unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
592.0
|
|
|
$
|
488.0
|
|
|
$
|
476.0
|
|
|
$
|
428.5
|
|
|
$
|
403.6
|
|
|
$
|
371.2
|
|
Total non-current assets
|
|
|
451.7
|
|
|
|
443.9
|
|
|
|
413.3
|
|
|
|
384.9
|
|
|
|
390.6
|
|
|
|
394.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,043.7
|
|
|
$
|
931.9
|
|
|
$
|
889.3
|
|
|
$
|
813.4
|
|
|
$
|
794.2
|
|
|
$
|
765.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
470.5
|
|
|
$
|
377.2
|
|
|
$
|
348.7
|
|
|
$
|
323.4
|
|
|
$
|
309.3
|
|
|
$
|
307.3
|
|
Redeemable preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48.0
|
|
|
|
48.0
|
|
Total non-current liabilities
|
|
|
1,669.1
|
|
|
|
1,784.5
|
|
|
|
1,622.6
|
|
|
|
1,602.8
|
|
|
|
1,470.5
|
|
|
|
1,437.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,139.6
|
|
|
$
|
2,161.7
|
|
|
$
|
1,971.3
|
|
|
$
|
1,926.2
|
|
|
$
|
1,827.8
|
|
|
$
|
1,793.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
$
|
1,418.4
|
|
|
$
|
1,506.9
|
|
|
$
|
1,440.6
|
|
|
$
|
1,329.6
|
|
|
$
|
1,248.1
|
|
|
$
|
1,231.6
|
|
Total stockholders deficiency
|
|
|
(1,095.9
|
)
|
|
|
(1,229.8
|
)
|
|
|
(1,082.0
|
)
|
|
|
(1,112.8
|
)
|
|
|
(1,033.6
|
)
|
|
|
(1,027.2
|
)
|
|
|
|
(a) |
|
Results for 2005 include expenses of approximately
$44 million in incremental returns and allowances and
approximately $7 million in accelerated amortization cost
of certain permanent displays related to the launch of Vital
Radiance and the re-stage of the Almay brand. |
|
(b) |
|
Results for 2006 include charges of $9.4 million in
connection with the departure of Mr. Jack Stahl, our former
President and Chief Executive Officer, in September 2006
(including $6.2 million for severance and related costs and
$3.2 million for the accelerated amortization of
Mr. Stahls unvested options and unvested restricted
stock), $60.4 million in connection with the discontinuance
of the Vital Radiance brand and restructuring charges of
approximately $27.6 million in connection with the 2006
Programs. |
|
(c) |
|
Results for 2007 include restructuring charges of approximately
$4.4 million and $2.9 million in connection with 2006
Programs and 2007 Programs, respectively. The $4.4 million
of restructuring charges associated with the 2006 Programs were
primarily for employee severance and other employee-related
termination costs principally relating to a broad organizational
streamlining. The $2.9 million of restructuring charges
associated with the 2007 Programs were primarily for employee
severance and other employee-related termination costs relating
principally to the closure of the our facility in Irvington, New
Jersey and other employee-related termination costs relating to
personnel reductions in the our information management function
and our sales force in Canada. |
|
(d) |
|
Results for 2008 include a $5.9 million gain from the sale
of a non-core trademark during the first quarter of 2008, and a
net $4.3 million gain related to the sale of the Mexico
facility (which is comprised of a $7.0 million gain on the
sale, partially offset by related restructuring charges of
$1.1 million, $1.2 million of SG&A and cost of
sales and $0.4 million of taxes). In addition, results for
2008 also include various other restructuring charges of
approximately $3.8 million. The results of discontinued
operations for 2008 included a one-time gain from the
disposition of the non-core Bozzano business and certain other
non-core brands, including Juvena and Aquamarine, which were
sold in the Brazilian market, of $45.2 million. |
|
(e) |
|
Results for 2009 include: (1) a $20.8 million charge
related to the May 2009 Program, which involved consolidating
certain functions; reducing layers of management, where
appropriate, to increase accountability and effectiveness;
streamlining support functions to reflect the new organizational
structure; and further consolidating our office facilities in
New Jersey; and (2) a $5.8 million net loss on early
extinguishment of debt in 2009 primarily due to a
$13.5 million loss resulting from applicable redemption and
tender premiums and the net write-off of unamortized debt
discounts and deferred financing fees in connection with the
refinancing of the
91/2% Senior
Notes in November 2009, partially offset by a $7.7 million
gain on repurchases of an aggregate principal amount of
$49.5 million of the
91/2% Senior
Notes prior to their complete refinancing in November 2009 at an
aggregate purchase price of $41.0 million, which is net of
the write-off of the ratable portion of unamortized debt
discounts and deferred financing fees resulting from such
repurchases. |
|
|
|
(f) |
|
Results for the three months ended March 31, 2009 include a
$7.0 million gain on the repurchase of an aggregate
principal amount of $23.9 million of the
91/2%
Senior Notes prior to their complete refinancing in November
2009 at an aggregate purchase price of $16.5 million, which
is net of the write-off of the ratable portion of unamortized
debt discount and deferred financing fees resulting from such
repurchase. |
|
|
|
(g) |
|
Results for the three months ended March 31, 2010 include a
$9.7 million loss on the extinguishment of debt as a result
of the refinancing of the 2006 Bank Credit Facilities in March
2010, primarily due to $5.9 million of |
42
|
|
|
|
|
fees and expenses which were expensed as incurred in connection
with such refinancing, as well as the write-off of
$3.8 million of unamortized deferred financing fees in
connection with such refinancing. |
|
|
|
(h) |
|
The loss on early extinguishment of debt for 2005 includes:
(i) a $5.0 million prepayment fee related to the
prepayment in March 2005 of $100.0 million of indebtedness
outstanding under the 2004 term loan facility of the 2004 credit
agreement with a portion of the proceeds from the issuance of
Products Corporations
91/2% Senior
Notes (which notes were fully refinanced in November 2009); and
(ii) the aggregate $1.5 million loss on the redemption
of all of Products Corporations
81/8% Senior
Notes and 9% Senior Notes in April 2005, as well as the
write-off of the portion of deferred financing costs related to
such prepaid amount. |
43
THE
EXCHANGE OFFER
Terms of
the Exchange Offer; Period for Tendering Old Notes
Subject to terms and conditions detailed in this prospectus, we
will accept for exchange old notes which are properly tendered
on or prior to the expiration date and not withdrawn as
permitted below. As used herein, the term expiration
date means 5:00 p.m., New York City time, on
July 1, 2010, the
30th day
following the date of this prospectus. We may, however, in our
sole discretion, extend the period of time during which the
exchange offer is open. The term expiration date
means the latest time and date to which the exchange offer is
extended.
As of the date of this prospectus, $330.0 million aggregate
principal amount of old notes are outstanding. This prospectus,
together with the letter of transmittal, is first being sent on
or about the date hereof, to all holders of old notes known to
us.
We expressly reserve the right, at any time, to extend the
period of time during which the exchange offer is open, and
delay acceptance for exchange of any old notes, by giving oral
or written notice of such extension to the holders thereof as
described below. During any such extension, all old notes
previously tendered will remain subject to the exchange offer
and may be accepted for exchange by us. Any old notes not
accepted for exchange for any reason will be returned without
expense to the tendering holder as promptly as practicable after
the expiration or termination of the exchange offer.
Old notes tendered in the exchange offer must be in
denominations of principal amount of $2,000 and integral
multiples of $1,000. No dissenters rights of appraisal
exist with respect to the exchange offer.
We expressly reserve the right to amend or terminate the
exchange offer, and not to accept for exchange any old notes,
upon the occurrence of any of the conditions of the exchange
offer specified under Conditions to the
exchange offer. We will give oral or written notice of any
extension, amendment, non-acceptance or termination to the
holders of the old notes as promptly as practicable. Such
notice, in the case of any extension, will be issued by means of
a press release or other public announcement no later than
9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
Procedures
for Tendering Old Notes
The tender to us of old notes by you as set forth below and our
acceptance of the old notes will constitute a binding agreement
between us and you upon the terms and subject to the conditions
set forth in this prospectus and in the accompanying letter of
transmittal. Except as set forth below, to tender old notes for
exchange pursuant to the exchange offer, you must transmit a
properly completed and duly executed letter of transmittal,
including all other documents required by such letter of
transmittal or, in the case of a book-entry transfer, an
agents message in lieu of such letter of transmittal, to
U.S. Bank National Association, as exchange agent, at the
address set forth below under Exchange
Agent on or prior to the expiration date. In addition,
either:
|
|
|
|
|
certificates for such old notes must be received by the exchange
agent along with the letter of transmittal; or
|
|
|
|
a timely confirmation of a book-entry transfer (a
book-entry confirmation) of such old notes, if such
procedure is available, into the exchange agents account
at DTC pursuant to the procedure for book-entry transfer must be
received by the exchange agent, prior to the expiration date,
with the letter of transmittal or an agents message in
lieu of such letter of transmittal.
|
The term agents message means a message,
transmitted by DTC to and received by the exchange agent and
forming a part of a book-entry confirmation, which states that
DTC has received an express acknowledgment from the tendering
participant stating that such participant has received and
agrees to be bound by the letter of transmittal and that we may
enforce such letter of transmittal against such participant.
The method of delivery of old notes, letters of transmittal and
all other required documents is at your election and risk. If
such delivery is by mail, it is recommended that you use
registered mail, properly insured, with return receipt
requested. In all cases, you should allow sufficient time to
assure timely delivery. No letter of transmittal or old notes
should be sent to us.
44
Signatures on a letter of transmittal or a notice of withdrawal,
as the case may be, must be guaranteed unless the old notes
surrendered for exchange are tendered:
|
|
|
|
|
by a holder of the old notes who has not completed the box
entitled Special Issuance Instructions or
Special Delivery Instructions on the letter of
transmittal; or
|
|
|
|
for the account of an eligible institution (as defined below).
|
In the event that signatures on a letter of transmittal or a
notice of withdrawal are required to be guaranteed, such
guarantees must be by a firm which is a member of the Securities
Transfer Agent Medallion Program, the Stock Exchanges Medallion
Program or the New York Stock Exchange Medallion Program (each
such entity being hereinafter referred to as an eligible
institution). If old notes are registered in the name of a
person other than the signer of the letter of transmittal, the
old notes surrendered for exchange must be endorsed by, or be
accompanied by a written instrument or instruments of transfer
or exchange, in satisfactory form as we or the exchange agent
determine in our sole discretion, duly executed by the
registered holders with the signature thereon guaranteed by an
eligible institution.
We or the exchange agent in our sole discretion will make a
final and binding determination on all questions as to the
validity, form, eligibility (including time of receipt) and
acceptance of old notes tendered for exchange. We reserve the
absolute right to reject any and all tenders of any particular
old note not properly tendered or to not accept any particular
old note which acceptance might, in our judgment or our
counsels, be unlawful. We also reserve the absolute right
to waive any defects or irregularities or conditions of the
exchange offer as to any particular old note either before or
after the expiration date (including the right to waive the
ineligibility of any holder who seeks to tender old notes in the
exchange offer). Our or the exchange agents interpretation
of the terms and conditions of the exchange offer as to any
particular old note either before or after the expiration date
(including the letter of transmittal and the instructions
thereto) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders
of old notes for exchange must be cured within a reasonable
period of time, as we determine. We are not, nor is the exchange
agent or any other person, under any duty to notify you of any
defect or irregularity with respect to your tender of old notes
for exchange, and no one will be liable for failing to provide
such notification.
If the letter of transmittal is signed by a person or persons
other than the registered holder or holders of old notes, such
old notes must be endorsed or accompanied by powers of attorney
signed exactly as the name(s) of the registered holder(s) that
appear on the old notes.
If the letter of transmittal or any old notes or powers of
attorney are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons
should so indicate when signing. Unless waived by us or the
exchange agent, proper evidence satisfactory to us of their
authority to so act must be submitted with the letter of
transmittal.
By tendering old notes, you represent to us that, among other
things, the new notes acquired pursuant to the exchange offer
are being obtained in the ordinary course of business of the
person receiving such new notes, whether or not such person is
the holder, that neither the holder nor such other person has
any arrangement or understanding with any person, to participate
in a distribution of the old notes or the new notes, and that
you are not holding old notes that have, or are reasonably
likely to have, the status of an unsold allotment in the initial
offering. If you are our affiliate, as defined under
Rule 405 under the Securities Act, and engage in or intend
to engage in or have an arrangement or understanding with any
person to participate in a distribution of such new notes to be
acquired pursuant to the exchange offer, you or any such other
person:
|
|
|
|
|
could not rely on the applicable interpretations of the staff of
the SEC; and
|
|
|
|
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.
|
Each broker-dealer that receives new notes for its own account
in exchange for old notes, where such old notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of new notes. See
Plan of Distribution.
45
Acceptance
of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the expiration
date, all old notes properly tendered and will issue the new
notes promptly after acceptance of the old notes. See
Conditions to the Exchange Offer. For
purposes of the exchange offer, we will be deemed to have
accepted properly tendered old notes for exchange if and when we
give oral (confirmed in writing) or written notice to the
exchange agent.
The holder of each old note accepted for exchange will receive a
new note in the amount equal to the surrendered old note.
Holders of new notes on the relevant record date for the first
interest payment date following the consummation of the exchange
offer will receive interest accruing from the most recent date
to which interest has been paid on the old notes. Holders of new
notes will not receive any payment in respect of accrued
interest on old notes otherwise payable on any interest payment
date, the record date for which occurs on or after the
consummation of the exchange offer.
In all cases, issuance of new notes for old notes that are
accepted for exchange will be made only after timely receipt by
the exchange agent of:
|
|
|
|
|
a timely book-entry confirmation of such old notes into the
exchange agents account at DTC;
|
|
|
|
a properly completed and duly executed letter of transmittal or
an agents message in lieu thereof; and
|
|
|
|
all other required documents.
|
If any tendered old notes are not accepted for any reason set
forth in the terms and conditions of the exchange offer or if
old notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged old
notes will be returned without expense to the tendering holder
(or, in the case of old notes tendered by book entry transfer
into the exchange agents account at DTC pursuant to the
book-entry procedures described below, such non-exchanged old
notes will be credited to an account maintained with DTC) as
promptly as practicable after the expiration or termination of
the exchange offer.
Book-Entry
Transfers
For purposes of the exchange offer, the exchange agent will
request that an account be established with respect to the old
notes at DTC within two business days after the date of this
prospectus, unless the exchange agent has already established an
account with DTC suitable for the exchange offer. Any financial
institution that is a participant in DTC may make book-entry
delivery of old notes by causing DTC to transfer such old notes
into the exchange agents account at DTC in accordance with
DTCs procedures for transfer. Although delivery of old
notes may be effected through book-entry transfer at DTC, the
letter of transmittal or facsimile thereof or an agents
message in lieu thereof, with any required signature guarantees
and any other required documents, must, in any case, be
transmitted to and received by the exchange agent at the address
set forth under Exchange Agent on or
prior to the expiration date.
Withdrawal
Rights
You may withdraw your tender of old notes at any time prior to
5:00 p.m., New York City time, on the expiration date. To
be effective, a written notice of withdrawal must be received by
the exchange agent at one of the addresses set forth under
Exchange Agent. This notice must specify:
|
|
|
|
|
the name of the person having tendered the old notes to be
withdrawn;
|
|
|
|
the old notes to be withdrawn (including the principal amount of
such old notes); and
|
|
|
|
where certificates for old notes have been transmitted, the name
in which such old notes are registered, if different from that
of the withdrawing holder.
|
If certificates for old notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of
such certificates, the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by
an eligible institution, unless such
46
holder is an eligible institution. If old notes have been
tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name
and number of the account at DTC to be credited with the
withdrawn old notes and otherwise comply with the procedures of
DTC.
We or the exchange agent will make a final and binding
determination on all questions as to the validity, form and
eligibility (including time of receipt) of such notices. Any old
notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the exchange offer. Any
old notes tendered for exchange but not exchanged for any reason
will be returned to the holder without cost to such holder (or,
in the case of old notes tendered by book-entry transfer into
the exchange agents account at DTC pursuant to the
book-entry transfer procedures described above, such old notes
will be credited to an account maintained with DTC for the old
notes) as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn
old notes may be retendered by following one of the procedures
described under Procedures for tendering old
notes above at any time on or prior to the expiration date.
Conditions
to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we
are not required to accept for exchange, or to issue new notes
in exchange for, any old notes and may terminate or amend the
exchange offer, if any of the following events occur prior to
acceptance of such old notes:
(a) the exchange offer violates any applicable law or
applicable interpretation of the staff of the SEC;
(b) there is threatened, instituted or pending any action
or proceeding before, or any injunction, order or decree has
been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission,
(1) seeking to restrain or prohibit the making or
consummation of the exchange offer or any other transaction
contemplated by the exchange offer, or assessing or seeking any
damages as a result thereof, or
(2) resulting in a material delay in our ability to accept
for exchange or exchange some or all of the old notes pursuant
to the exchange offer;
(c) any statute, rule, regulation, order or injunction has
been sought, proposed, introduced, enacted, promulgated or
deemed applicable to the exchange offer or any of the
transactions contemplated by the exchange offer by any
government or governmental authority, domestic or foreign, or
any action has been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or
foreign, that in our sole judgment might, directly or
indirectly, result in any of the consequences referred to in
clauses (1) or (2) above or, in our reasonable
judgment, might result in the holders of new notes having
obligations with respect to resales and transfers of new notes
which are greater than those described in the interpretation of
the SEC referred to on the cover page of this prospectus, or
would otherwise make it inadvisable to proceed with the exchange
offer; or
(d) there has occurred:
(1) any general suspension of or general limitation on
prices for, or trading in, our debt or equity securities on any
national securities exchange or in the
over-the-counter
market,
(2) any limitation by a governmental agency or authority
which may adversely affect our ability to complete the
transactions contemplated by the exchange offer,
(3) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which
adversely affects the extension of credit, or
(4) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing
existing at the time of the commencement of the exchange offer,
a material acceleration or worsening thereof; which in our
reasonable judgment in any case, and regardless of the
circumstances (including any action by us) giving
47
rise to any such condition, makes it inadvisable to proceed with
the exchange offer
and/or with
such acceptance for exchange or with such exchange.
The foregoing conditions are for our sole benefit and may be
asserted by us regardless of the circumstances giving rise to
any condition or may be waived by us in whole or in part at any
time in our reasonable discretion. Our failure at any time to
exercise any of the foregoing rights will not be deemed a waiver
of any such right and each such right will be deemed an ongoing
right which may be asserted at any time.
In addition, we will not accept for exchange any old notes
tendered, and no new notes will be issued in exchange for any
such old notes, if at such time any stop order is threatened or
in effect with respect to the registration statement, of which
this prospectus constitutes a part, or the qualification of the
indenture under the Trust Indenture Act of 1939.
Exchange
Agent
We have appointed U.S. Bank National Association as the
exchange agent for the exchange offer. All executed letters of
transmittal should be directed to the exchange agent at the
address set forth below. Questions and requests for assistance,
requests for additional copies of this prospectus or of the
letter of transmittal should be directed to the exchange agent
addressed as follows:
U.S. Bank
National Association, Exchange Agent
By
Registered or Certified Mail, Overnight Delivery:
U.S. Bank National Association
Corporate Trust Services
60 Livingston Avenue
EP-MN-WS2N
St. Paul, MN
55107-2292
Attn: Specialized Finance
For
Information Call:
(800) 934-6802
or go to
www.usbank.com/corp_trust/bondholder_contact.html
By
Facsimile Transmission
(for Eligible Institutions only):
(651) 495-8158
Confirm
by Telephone:
(800) 934-6802
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF SUCH LETTER OF
TRANSMITTAL VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
Fees and
Expenses
The principal solicitation is being made by mail by
U.S. Bank National Association, as exchange agent. We will
pay the exchange agent customary fees for its services,
reimburse the exchange agent for its reasonable
out-of-pocket
expenses incurred in connection with the provision of these
services and pay other registration expenses, including fees and
expenses of the trustee under the indenture relating to the new
notes, filing fees, blue sky fees and printing and distribution
expenses. We will not make any payment to brokers, dealers or
others soliciting acceptances of the exchange offer.
Additional solicitation may be made by telephone, facsimile or
in person by our and our affiliates officers and regular
employees and by persons so engaged by the exchange agent.
48
Accounting
Treatment
We will record the new notes at the same carrying value as the
old notes, as reflected in our accounting records on the date of
the exchange. Accordingly, we will not recognize any gain or
loss for accounting purposes. The fees and expenses related to
the issuance of the new notes will be amortized over the term of
such notes.
Consequences
of Exchanging or Failing to Exchange Old Notes
If you do not exchange your old notes for new notes in the
exchange offer, your old notes will continue to be subject to
the provisions of the indenture relating to the notes regarding
transfer and exchange of the old notes and the restrictions on
transfer of the old notes described in the legend on your
certificates. These transfer restrictions are required because
the old notes were issued under an exemption from, or in
transactions not subject to, the registration requirements of
the Securities Act and applicable state securities laws. In
general, the old notes may not be offered or sold unless
registered under the Securities Act, except under an exemption
from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. We do not plan to register the
old notes under the Securities Act. Based on interpretations by
the staff of the SEC, as set forth in no-action letters issued
to third parties, we believe that the new notes you receive in
the exchange offer may be offered for resale, resold or
otherwise transferred without compliance with the registration
and prospectus delivery provisions of the Securities Act.
However, you will not be able to freely transfer the new notes
if:
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you are our affiliate, as defined in Rule 405
under the Securities Act;
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you are not acquiring the new notes in the exchange offer in the
ordinary course of your business;
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you have an arrangement or understanding with any person to
participate in a distribution, as defined in the Securities Act,
of the new notes you will receive in the exchange offer;
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you are holding old notes that have, or are reasonably likely to
have, the status of an unsold allotment in the initial
offering; or
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you are a participating broker-dealer.
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We do not intend to request the SEC to consider, and the SEC has
not considered, the exchange offer in the context of a similar
no-action letter. As a result, we cannot guarantee that the
staff of the SEC would make a similar determination with respect
to the exchange offer as in the circumstances described in the
no action letters discussed above. Each holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and
does not intend to engage in, a distribution of new notes and
has no arrangement or understanding to participate in a
distribution of new notes. If you are our affiliate, are engaged
in or intend to engage in a distribution of the new notes or
have any arrangement or understanding with respect to the
distribution of the new notes you will receive in the exchange
offer, you may not rely on the applicable interpretations of the
staff of the SEC and you must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any resale transaction involving the new notes.
If you are a participating broker-dealer, you must acknowledge
that you will deliver a prospectus in connection with any resale
of the new notes. In addition, to comply with state securities
laws, you may not offer or sell the new notes in any state
unless they have been registered or qualified for sale in that
state or an exemption from registration or qualification is
available and is complied with. The offer and sale of the new
notes to qualified institutional buyers (as defined
in Rule 144A of the Securities Act) is generally exempt
from registration or qualification under state securities laws.
We do not plan to register or qualify the sale of the new notes
in any state where an exemption from registration or
qualification is required and not available.
49
DESCRIPTION
OF THE NEW NOTES
The new notes (the New Notes) will be issued under
the Indenture dated as of November 23, 2009 (as amended,
modified or supplemented from time to time in accordance with
its terms, the Indenture) between the Company, the
Guarantors and U.S. Bank National Association, as trustee
(the Trustee). This is the same indenture under
which the old notes were issued. Unless the context otherwise
requires, the old notes and the New Notes are referred to
collectively as the Notes.
We urge you to read the Indenture because it, and not this
description, defines your rights as a holder of the New Notes.
The following summary, which describes certain provisions of the
Indenture and the New Notes, does not purport to be complete and
is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act of 1939, as in effect on the date
of the original issue of the New Notes (the TIA),
and all the provisions of the Indenture and the New Notes,
including the definitions therein of terms not defined in this
prospectus. A copy of the Indenture is included as an exhibit to
the registration statement on
Form S-4
of which this prospectus forms a part. Certain terms used herein
are defined below under Certain
Definitions.
The terms of the New Notes we are issuing in this exchange offer
and the old notes that are outstanding are identical in all
material respects, except:
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the New Notes will have been registered under the Securities
Act; and
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the New Notes will not contain certain transfer restrictions and
registration rights (including interest rate increases) that
relate to the old notes.
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General
Notes
The New Notes will be unsubordinated, secured obligations of the
Company, and will mature on November 15, 2015. The Trustee
will authenticate and deliver the New Notes for original issue
in an aggregate principal amount of up to $330,000,000 and,
subject to compliance with the debt incurrence covenants in the
Indenture, we can issue additional Notes at later dates under
the same Indenture. The New Notes will bear interest at a rate
equal to
93/4%
per annum, payable semi-annually in arrears on May 15 and
November 15 of each year, commencing May 15, 2010, to the
persons who are registered holders thereof at the close of
business on May 1 or November 1 immediately preceding such
interest payment date. Interest on the New Notes will accrue
from November 23, 2009 or, if interest has already been
paid, from the date it was most recently paid.
All interest on the New Notes will be computed on the basis of a
360-day year
of twelve
30-day
months. Principal, premium and interest will be payable by wire
transfer, subject to certain exceptions. The New Notes will be
transferable and exchangeable at the office of the Trustee and
will be issued only in fully registered form, without coupons,
in denominations of $2,000 and any integral multiple of $1,000
in excess thereof.
Any old notes that remain outstanding after the consummation of
the exchange offer described in this prospectus (the
Exchange Offer), together with the New Notes and any
additional Notes issued under the Indenture at a later date (the
Additional Notes), will be treated as a single class
of securities under the Indenture.
To the extent required by applicable tax regulations, Additional
Notes that are issued with original issue discount may not trade
fungibly with other Notes, may trade under a separate CUSIP
number and may be treated as a separate class for purposes of
transfer and exchange. Nevertheless, any such Additional Notes
will be treated for all other purposes under the Indenture as a
single class with the other Notes.
Guarantees
The New Notes will be guaranteed on a senior secured basis by
the Parent Guarantor and the Subsidiaries required to guarantee
the New Notes by the covenant described under
Certain Covenants Future
Subsidiary Guarantors; Releases of Subsidiary Guarantees.
These Guarantees will be joint and several obligations of the
Guarantors. The obligations of each Guarantor under its
Guarantee will contain certain limitations intended to mitigate
the risk of that Subsidiary Guarantee constituting a fraudulent
conveyance under applicable law. See Risk
50
Factors Risks Relating to the Notes
U.S. federal and state fraudulent transfer laws may permit
a court to void the notes, the guarantees and the liens securing
the notes and the guarantees, subordinate claims in respect of
the notes, the guarantees and the liens securing the notes and
the guarantees, and require holders to return payments received
and, if that occurs, you may not receive any payments on the
notes.
The ability of each Subsidiary Guarantor to merge, consolidate
or sell all or substantially all of its assets is limited as
described under paragraph (c) of the provisions described
under Certain Covenants Successor
Company.
Under certain circumstances, a Subsidiary Guarantor will be
released from all its obligations under its Subsidiary
Guarantee. See Certain Covenants
Future Subsidiary Guarantors; Releases of Subsidiary
Guarantees.
Ranking,
Security
The New Notes:
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will be unsubordinated obligations of the Company;
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will rank senior in right of payment to any future Subordinated
Obligations of the Company;
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will be pari passu in right of payment with all existing and
future senior Debt of the Company;
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will be secured, together with the Multi-Currency Secured
Obligations (on an equal and ratable basis), by a
second-priority Lien on the Term Loan Collateral, subject to a
first-priority Lien securing the Term Loan Secured Obligations
and other Permitted Liens, and therefore will be effectively
subordinated to the Term Loan Secured Obligations and any other
obligations secured by first-priority Permitted Liens on the
Term Loan Collateral (which could include Debt that refinances
the Multi-Currency Secured Obligations) to the extent that the
value of the Term Loan Collateral does not exceed the aggregate
amount of such obligations;
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will be secured by a third-priority Lien on the Multi-Currency
Collateral, subject to a first-priority Lien securing the
Multi-Currency Secured Obligations, a second-priority Lien
securing the Term Loan Secured Obligations and other Permitted
Liens, and therefore will be effectively subordinated to the
Multi-Currency Secured Obligations, the Term Loan Secured
Obligations and any other obligations secured by first-priority
or second-priority Permitted Liens on the Multi-Currency
Collateral to the extent that the value of the Multi-Currency
Collateral does not exceed the aggregate amount of such
obligations;
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will be fully and unconditionally guaranteed by the Subsidiary
Guarantors on a senior secured basis; and
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will be fully and unconditionally guaranteed by Revlon, Inc.,
the Parent Guarantor, on a senior basis, secured by a pledge of
Term Loan Collateral consisting of Capital Stock of the Company.
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The New Notes will be guaranteed by the Parent Guarantor and
each of the Companys Domestic Subsidiaries (other than
Immaterial Subsidiaries) and certain future Domestic
Subsidiaries required to guarantee the New Notes under the
covenant described under Certain
Covenants Future Subsidiary Guarantors; Releases of
Subsidiary Guarantees.
Each Guarantee of the New Notes by a Guarantor:
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will be an unsubordinated obligation of each Guarantor;
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will rank senior in right of payment to any future Subordinated
Obligations of such Guarantor;
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will be pari passu in right of payment with all existing and
future senior Debt of such Guarantor;
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in the case of Subsidiary Guarantees and the Guarantee of the
New Notes by the Parent Guarantor, will be secured, together
with the Multi-Currency Secured Obligations (on an equal and
ratable basis), by a second-priority Lien on the Term Loan
Collateral, subject to a first-priority Lien securing the Term
Loan Secured Obligations and other Permitted Liens, and
therefore will be effectively subordinated to the Term Loan
Secured Obligations and any other obligations secured by
first-priority Permitted Liens on the Term Loan
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Collateral (which could include Debt that refinances the
Multi-Currency Secured Obligations) to the extent that the value
of the Term Loan Collateral does not exceed the aggregate amount
of such obligations; and
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in the case of Subsidiary Guarantees, will be secured by a
third-priority Lien on the Multi-Currency Collateral of such
Subsidiary Guarantor, subject to a first-priority Lien securing
the Multi-Currency Secured Obligations, a second-priority Lien
securing the Term Loan Secured Obligations and other Permitted
Liens and therefore will be effectively subordinated to the
Multi-Currency Secured Obligations, the Term Loan Secured
Obligations and any other obligations secured by first-priority
or second-priority Permitted Liens on the Multi-Currency
Collateral to the extent that the value of the Multi-Currency
Collateral does not exceed the aggregate amount of such
obligations.
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Although the Liens securing the New Notes and the Guarantees are
equal in Lien priority with the Liens securing the
Multi-Currency Secured Obligations with respect to the Term Loan
Collateral, they have different rights as to enforcement,
procedural provisions and other similar matters than the holders
of Liens securing the Multi-Currency Secured Obligations, as
provided in the Intercreditor Agreement. See
Security for the New Notes
Intercreditor Agreement.
The New Notes will not be guaranteed by the Companys
Foreign Subsidiaries and Immaterial Subsidiaries (the
Non-Guarantor Subsidiaries). For the year ended
December 31, 2009, the Companys Non-Guarantor
Subsidiaries represented, on a consolidated basis, approximately
$500.9 million, or 38.7%, of the Companys total net
sales and approximately $21.2 million, or 36.1%, of the
Companys total net income. In addition, as of
December 31, 2009, the Companys Non-Guarantor
Subsidiaries represented, on a consolidated basis, 63.4% of the
Companys total assets, or 27.2% of the Companys
total assets (excluding intercompany assets), and approximately
$141.9 million, or 7.8%, of the Companys outstanding
indebtedness and other liabilities (excluding intercompany
liabilities), to which the New Notes and the Guarantees would
have been structurally subordinated. The value of these assets
does not include the value of the Companys internally
developed intellectual property, including the Revlon brand.
Security
for the New Notes
General
The New Notes and the Guarantees will have the benefit of the
Collateral, which will consist of (i) the Term Loan
Collateral, as to which the Term Loan Secured Parties will have
a first-priority security interest and the holders of the New
Notes and the Multi-Currency Secured Parties will have a
second-priority security interest (subject to Permitted Liens),
and (ii) the Multi-Currency Collateral, as to which the
Multi-Currency Secured Parties will have a first-priority
security interest, the Term Loan Secured Parties will have a
second-priority security interest and the holders of the New
Notes will have a third-priority security interest (subject to
Permitted Liens).
The Collateral will not include any Excluded Property or any
Other Excluded Assets, even though the Term Loan Secured
Obligations and the Multi-Currency Secured Obligations may be
secured by certain of the Other Excluded Assets. Certain of the
Multi-Currency Secured Obligations consist of obligations of the
Companys foreign subsidiaries which may also be secured by
assets of those foreign subsidiaries that are not included in
the Collateral. Subject to certain exceptions, the Lien on any
item of Collateral securing the New Notes will terminate and be
released automatically if the Liens on such item of Collateral
securing the Multi-Currency Secured Obligations and Term Loan
Secured Obligations are released.
The Liens on the Collateral will be created pursuant to
agreements governed by New York law, and neither the Company nor
any Guarantor will have any obligation to perfect a security
interest in any assets under the laws of any other jurisdiction
except to the extent that such perfection is obtained in such
assets for the benefit of the Multi-Currency Secured Obligations
and the Term Loan Secured Obligations. In addition, with respect
to Collateral consisting of certain deposit accounts, motor
vehicles and certain other assets, neither the Company nor any
Guarantor will have any obligation to perfect the security
interests therein except to the extent that such perfection is
obtained in such assets for the benefit of the Multi-Currency
Secured Obligations and the Term Loan Secured Obligations.
52
The Company and the Guarantors will be able to incur additional
Debt which may share in the Collateral on a senior, junior or
pari passu basis. The amount of such additional Debt will be
limited by the covenants described under
Certain Covenants Limitation on
Liens and Certain Covenants
Limitation on Debt. Under certain circumstances the amount
of such additional Secured Debt could be significant.
Except as provided in the Intercreditor Agreement, any actions
that may be taken in respect of any of the Collateral, including
the ability to cause the commencement of enforcement proceedings
against the Collateral and to control the conduct of such
proceedings, are limited and controlled and directed by the
Controlling Agent. The Trustee will not be the Controlling Agent
at any time when there are outstanding Multi-Currency Secured
Obligations (whether secured on a senior or pari passu basis),
Term Loan Secured Obligations or other obligations secured on a
pari passu basis with the New Notes. Except as provided in the
Intercreditor Agreement, holders of obligations secured on a
junior basis to the New Notes will not be able to take any
enforcement action with respect to the Collateral so long as any
New Notes are outstanding.
Subject to the terms of the Security Documents, the Company and
the Guarantors will have the right to remain in possession and
retain control of the Collateral securing the New Notes (other
than as set forth in the Security Documents), to freely operate
the Collateral and to collect, invest and dispose of any income
therefrom.
See Risk Factors Risks Relating to the
Notes If we were to file for bankruptcy protection,
the ability of holders of the notes to realize upon the
Collateral will be subject to certain bankruptcy law
limitations, and if a bankruptcy petition were filed by us or
against us, holders of the notes may receive a lesser amount for
their claim than they would have been entitled to receive under
the indenture governing the notes.
As used in this Description of the New Notes, any
references to Liens securing the New Notes or the
like will be deemed to include the Liens securing the Guarantees
as well.
Term
Loan Collateral
The New Notes and the Guarantees will be secured by
second-priority security interests in the Term Loan Collateral,
pari passu with the Multi-Currency Secured Obligations and
subject to Permitted Liens. The Term Loan Collateral generally
consists of capital stock of the Company and its Subsidiaries
(other than certain stock of Foreign Subsidiaries and certain
other exceptions) and substantially all of the other tangible
and intangible assets (including intellectual property) of the
Company and the Subsidiary Guarantors, other than the
Multi-Currency Collateral and the Excluded Property.
Multi-Currency
Collateral
The New Notes and the Guarantees will also be secured by
third-priority security interests in the Multi-Currency
Collateral (subject to Permitted Liens). The Multi-Currency
Collateral generally consists of substantially all inventory,
accounts receivable, deposit accounts, instruments, investment
property (other than the Capital Stock of the Company and its
Subsidiaries), equipment, fixtures, chattel paper and certain
assets related thereto, in each case held by the Company and the
Subsidiary Guarantors, other than Excluded Property. The
Multi-Currency Collateral will also include mortgages on the
Companys owned real property in Oxford, North Carolina and
any owned real property located in the United States acquired in
the future by the Company or any Subsidiary Guarantor that has a
value greater than $7.5 million (collectively, the
Mortgaged Properties).
Security
Documents
The Company, the Guarantors and the Collateral Agent entered
into one or more Security Documents (including by means of
amendments to or amendment and restatements of existing security
agreements in favor of the Collateral Agent for the benefit of
the Multi-Currency Secured Parties and Term Loan Secured
Parties) creating and establishing the terms of the security
interests that secure the New Notes and the Guarantees. These
security interests secure the payment and performance when due
of all of the obligations of the Company and the Guarantors
under the New Notes, the Indenture, the Guarantees and the
Security Documents, as provided in the Security Documents. To
the extent that the Company and the Guarantors were unable to
complete on or prior to the issue date of the old notes certain
filings and other similar actions required in connection with
the perfection of such security
53
interests, they completed such actions as soon as reasonably
practicable after such date. Citicorp USA, Inc. has been
appointed, pursuant to the Intercreditor Agreement, as the
Collateral Agent for the benefit of the Multi-Currency Secured
Parties, the Term Loan Secured Parties and the Noteholder
Secured Parties. The Security Documents may be amended from time
to time without the consent of the Trustee or the Noteholders to
the extent provided in Amendment below.
Intercreditor
Agreement
On the issue date of the old notes, the Company, the Guarantors,
the Multi-Currency Administrative Agent, the Term Loan
Administrative Agent, the Collateral Agent and the Trustee
entered into the Intercreditor Agreement. Although the holders
of the New Notes are not party to the Intercreditor Agreement,
by their acceptance of the New Notes they will agree to be bound
thereby. The Intercreditor Agreement provides that, if there is
no acting Trustee under the Indenture at any time, the term
Trustee as used in the Intercreditor Agreement will
mean the Required Holders.
Certain capitalized terms that are used in this
Intercreditor Agreement section (such as
Senior Agent, Senior Claims, Senior Liens, Senior Secured
Parties, Junior Agents, Junior Claims, Junior Liens and Junior
Secured Parties), the definitions of which are set forth under
Certain Definitions below, are intended
to express the fact that, in the case of Multi-Currency
Collateral, the New Notes are secured by a third-priority Lien
on the Multi-Currency Collateral, subject to a first-priority
Lien securing the Multi-Currency Secured Obligations and a
second-priority Lien securing the Term Loan Secured Obligations,
and in the case of Term-Loan Collateral, the New Notes are
secured pari passu with the Multi-Currency Secured Obligations
by a second-priority Lien on the Term-Loan Collateral, subject
to a first-priority Lien securing the Term Loan Secured
Obligations. The Intercreditor Agreement may be amended from
time to time without the consent of the Trustee or the
Noteholders to the extent provided in
Amendment below. The Intercreditor
Agreement was amended and restated on March 11, 2010 in
conjunction with the amendment and restatement of the Credit
Agreements in order to reflect expressly in the recitals and
defined terms set forth therein the amendment and restatement of
the Credit Agreements and as a matter of convenience and for
ease of reference.
Actions of Collateral Agent; Direction by Controlling
Agent. The Intercreditor Agreement provides that,
from and after the receipt of any Notice of Actionable Default
and prior to the withdrawal of all pending Notices of Actionable
Default, the Collateral Agent will take, or refrain from taking,
any action, with respect to any Collateral (and any provision of
the Intercreditor Collateral Documents related thereto), as
directed in writing by the Controlling Agent in respect of such
Collateral. Each Representative, in the event all of the Events
of Default (as defined in the applicable Financing Document)
giving rise to any Notice of Actionable Default issued by such
Representative have been cured or waived or otherwise have
ceased to exist pursuant to the applicable Financing Document,
will withdraw such Notice of Actionable Default by written
notice to the Collateral Agent. The Indenture provides that the
Trustee will not deliver any Notice of Actionable Default to the
Collateral Agent unless (i) an Event of Default under the
Indenture has occurred and is continuing, (ii) any required
notice thereof has been given and any grace periods provided for
in the Indenture have expired and (iii) holders of at least
30% in principal amount of the outstanding New Notes have
requested the Trustee in writing to deliver such Notice of
Actionable Default.
Except as set forth in the preceding paragraph, the Collateral
Agent will take, or refrain from taking, any action as directed
in writing (i) by the applicable Representative as
designated in the Multi-Currency Credit Agreement, the Term Loan
Agreement or (to the extent permitted by the Intercreditor
Agreement and the Indenture) the Indenture, as applicable, or
any other Financing Document with respect to such action,
(ii) collectively by the Representatives or (iii) in
the absence of such events, with respect to any Collateral (and
any provision of the Intercreditor Collateral Documents related
thereto), by the Controlling Agent in respect of such Collateral.
In addition, under the Intercreditor Agreement, the Collateral
Agent is obliged to perform only such duties as are specifically
set forth in the Intercreditor Agreement or any other
Intercreditor Collateral Document, and no implied covenants or
obligations will be read into any Intercreditor Collateral
Document against the Collateral Agent. The Collateral Agent
will, upon receipt of any written direction permitted under the
Intercreditor Agreement, exercise the rights and powers vested
in it by any Intercreditor Collateral Document with respect
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to such direction, and the Collateral Agent will not be liable
with respect to any action taken or omitted in accordance with
such direction. If the Collateral Agent seeks directions from
any Representative or the Required Secured Parties with respect
to any action under any Intercreditor Collateral Document, the
Collateral Agent will not be required to take, or refrain from
taking, such action until it has received such direction.
Prohibition On Contesting Liens, etc. In the
Intercreditor Agreement, the Trustee, on behalf of each
Noteholder Secured Party, in respect of any Collateral:
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agreed that it will not, and will waive any right to, contest,
or support any other Person in contesting, in any proceeding
(including any Insolvency Proceeding), the priority, validity or
enforceability of any Senior Lien or Pari Passu Lien on such
Collateral; or demand, request, plead or otherwise assert or
claim the benefit of any marshalling, appraisal, valuation or
similar right which it may have in respect of such Collateral or
the Senior Liens or Pari Passu Liens on such Collateral, except
to the extent that such rights are expressly granted in the
Intercreditor Agreement;
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agreed that, prior to the payment in full of the Senior Claims
in respect of such Collateral, it will not take or receive any
such Collateral or any proceeds of such Collateral in connection
with the exercise of any right or remedy (including setoff) with
respect to such Collateral. Without limiting the generality of
the foregoing, prior to the payment in full of the Senior Claims
in respect of any Collateral, the sole right of the Trustee and
the Noteholder Secured Parties with respect to such Collateral
will be the right to receive a share of the proceeds thereof
pursuant to the Intercreditor Agreement;
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agreed that neither it nor any Noteholder Secured Party will
take any action that would hinder any exercise of remedies
undertaken by any Senior Secured Party in respect of such
Collateral under the Intercreditor Collateral Documents,
including any sale, lease, exchange, transfer or other
disposition of such Collateral, whether by foreclosure or
otherwise, and waive any and all rights it or any Noteholder
Secured Party may have as a junior creditor or otherwise to
object to the manner in which any Senior Secured Party may seek
to enforce or collect the Senior Claims or the Liens granted in
any of such Collateral;
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waived any rights of subrogation it may acquire as a result of
any payment under the Intercreditor Agreement until the Senior
Claims in respect of such Collateral will have been paid in
full. Upon payment in full of such Senior Claims, the Noteholder
Secured Parties will be subrogated to the rights of the Senior
Secured Parties to receive payments or distributions applicable
to such Senior Claims;
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irrevocably constituted and appointed the Senior Agent or the
Controlling Agent, as the case may be, in respect of such
Collateral and any officer or agent (including the Collateral
Agent) of such Senior Agent or Controlling Agent, with full
power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead
of the Trustee or such holder or in such Senior Agents or
Controlling Agents own name, from time to time in such
Senior Agents or Controlling Agents discretion, for
the purpose of carrying out the terms of the Intercreditor
Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of the Intercreditor
Agreement, including any financing statements, endorsements or
other instruments or transfer or release;
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agreed that no Senior Secured Party will have any duty or
liability to any Noteholder Secured Party, and will waive all
claims against each Senior Secured Party arising out of any and
all actions which any Senior Secured Party may take or permit or
omit to take with respect to: (i) the Senior Documents,
(ii) the collection of the Senior Claims, (iii) the
foreclosure upon, or sale, liquidation or other disposition of,
the Senior Collateral, (iv) the release of any Lien in
respect of any Senior Collateral, or (v) the maintenance or
preservation of the Senior Collateral, the Senior Claims or
otherwise; and
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agreed not to assert and will waive, to the fullest extent
permitted by law, any right to demand, request, plead or
otherwise assert or otherwise claim the benefit of, any
marshalling, appraisal, valuation or other similar right that
may otherwise be available under applicable law or any other
similar rights a junior secured creditor may have under
applicable law in respect of such Collateral.
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New Liens; Separate Liens. The parties to the
Intercreditor Agreement agreed that, prior to the payment in
full of the Secured Claims, any Lien on any asset of any Loan
Party securing any Secured Claim (and which asset is not also
subject to a Lien securing all of the Secured Claims in
accordance with the priorities set forth in the Intercreditor
Agreement) will immediately be released upon demand by any Agent
or assigned to the Collateral Agent on behalf of the Secured
Parties, subject to the priorities set forth in the
Intercreditor Agreement, and, at all times prior to such release
or assignment, the Secured Party to whom such Lien was granted
will be acting as a
sub-agent of
the Collateral Agent for the sole purpose of perfecting the Lien
on such asset; provided, however, that if the
Multi-Currency Credit Agreement, the Term Loan Agreement or the
Indenture, as the case may be, specifically does not require the
relevant Secured Claims to be secured by a Lien on such asset,
then this paragraph will not apply to such asset solely in
respect of such Secured Claims. The Indenture provides that this
paragraph will not apply to any Other Excluded Assets or to any
assets of any Subsidiary that is not required by the Indenture
to be a Guarantor.
Under the Intercreditor Agreement, each Loan Party agreed not to
grant, or to permit any of its Subsidiaries to grant, except as
expressly permitted by the Financing Documents, any Lien on any
of its respective assets securing the Senior Claims or the
Junior Claims, as the case may be, to any Person other than the
Collateral Agent on behalf of the Secured Parties, subject to
the priorities set forth in the Intercreditor Agreement.
Under the Intercreditor Agreement, the grants of Liens pursuant
to the Intercreditor Collateral Documents constitute separate
and distinct grants of Liens. The Intercreditor Agreement states
that, because of, among other things, their differing rights in
the Collateral, the Noteholder Claims in respect of any
Collateral are fundamentally different from the Senior Claims in
respect of such Collateral, and the Noteholder Claims and Senior
Claims in respect of any Collateral must be separately
classified in any Insolvency Proceeding. If it is held that, in
respect of any Collateral, the Noteholder Claims and the Senior
Claims in respect of such Collateral constitute only one secured
claim (rather than separate classes of senior and junior secured
claims), then the Noteholder Secured Parties acknowledge and
agree that all distributions will be made as if there were
separate classes of senior and junior secured claims against the
Loan Parties in respect of any Collateral (with the effect that,
to the extent that the aggregate value of the Senior Collateral
is sufficient (for this purpose ignoring all claims held by the
Noteholder Secured Parties), the Senior Secured Parties will be
entitled to receive, in addition to amounts distributed to them
in respect of principal, pre-petition interest and other claims,
all amounts owing in respect of post-petition interest before
any distribution is made in respect of the claims held by the
Noteholder Secured Parties with respect to the Senior
Collateral, with the Noteholder Secured Parties acknowledging
and agreeing to turn over to the Senior Secured Parties amounts
otherwise received or receivable by them to the extent necessary
to effectuate the intent of this sentence, even if such turnover
has the effect of reducing the claim or recovery of the
Noteholder Secured Parties).
Remedies. Under the Intercreditor Agreement,
prior to the payment in full of the Senior Claims in respect of
any Collateral, whether or not any Insolvency Proceeding has
been commenced by or against any Loan Party, with respect to
such Collateral:
(i) no Noteholder Secured Party will (or direct the
Collateral Agent to) (A) exercise or seek to exercise any
rights or remedies, (B) institute any action or proceeding
with respect to such rights or remedies, including any action of
foreclosure, contest, protest, (C) object to any
foreclosure proceeding or action brought by the Collateral Agent
or any Senior Secured Party or any other exercise of any rights
and remedies relating to such Collateral under the Intercreditor
Collateral Documents or otherwise, or (D) object to the
forbearance by the Senior Secured Parties from bringing or
pursuing any foreclosure proceeding or action or any other
exercise of any rights or remedies relating to such
Collateral; and
(ii) the Senior Agent or the Controlling Agent, as the case
may be, on behalf of the Senior Secured Parties, will have the
exclusive right to (and the exclusive right to direct the
Collateral Agent to) enforce rights, exercise remedies and make
determinations regarding release, disposition (including under
§ 363(f) of the Bankruptcy Code) or restrictions with
respect to such Collateral without any consultation with, or the
consent of, any Noteholder Secured Party.
In exercising rights and remedies with respect to any
Collateral, the Senior Agent or the Controlling Agent, as the
case may be, on behalf of the Senior Secured Parties, in respect
of such Collateral may enforce (and direct the
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Collateral Agent to enforce) the provisions of the Senior
Documents and exercise remedies thereunder, all in such order
and in such manner as they may determine in the exercise of
their sole discretion. Such exercise and enforcement will
include, without limitation, the rights of an agent appointed by
them to sell or otherwise dispose of such Collateral upon
foreclosure, to incur expenses in connection with such sale or
disposition, and to exercise all the rights and remedies of a
secured lender under the UCC of any applicable jurisdiction and
of a secured creditor under any Bankruptcy Law.
Notwithstanding anything to the contrary in the Intercreditor
Agreement, each Noteholder Secured Party may exercise its rights
and remedies as an unsecured creditor against the Loan Parties
in accordance with the terms of the Indenture Documents and
applicable law. In the event any Noteholder Secured Party in
respect of any Collateral becomes a judgment lien creditor in
respect of such Collateral as a result of its enforcement of its
rights as an unsecured creditor, such judgment lien will be
subordinated to any Lien on such Collateral securing any Senior
Claim in respect of such Collateral on the same basis and to the
same extent as the other Liens on such Collateral securing the
Noteholder Claims are subordinated to those securing the Senior
Claims under the Intercreditor Agreement. Nothing in the
Intercreditor Agreement modifies any rights or remedies which
any Senior Secured Party in respect of any Collateral may have
with respect to such Collateral.
Insolvency Proceedings. Under the
Intercreditor Agreement, until the payment in full of all Senior
Claims in respect of any Collateral, the Senior Agent will have
the right, but not the obligation, to vote the claim of any
Noteholder Secured Party in respect of such Collateral in any
Insolvency Proceeding if such Noteholder Secured Party has not
voted its claim on or prior to 10 days before the
expiration of the time to vote any such claim. If the Senior
Agent exercises such right to vote, no Noteholder Secured Party
will be entitled to change or withdraw such vote.
In the event an Insolvency Proceeding is commenced by or against
any Loan Party, in respect of any part of the Senior Collateral
or proceeds thereof or any Senior Lien which may exist thereon,
each of the Noteholder Secured Parties in respect of such
Collateral will agree in the Intercreditor Agreement that such
Person will not, until the payment in full of the Senior Claims
in respect of such Collateral:
(a) seek any relief from, or modification of, the automatic
stay as provided in § 362 of the Bankruptcy Code or
seek or accept any form of adequate protection under either or
both of § 362 and § 363 of the Bankruptcy
Code with respect to the Senior Collateral, except
(i) replacement Liens, which Liens at all times will
(A) also secure the Senior Claims and (B) be
subordinated to the Senior Liens in accordance with, and subject
to, the terms of the Intercreditor Agreement, and (ii) the
accrual or the current payment of interest and
out-of-pocket
expenses, including fees and disbursements of counsel and other
professional advisors, incurred by the Trustee (which the
Noteholder Secured Parties agree will constitute adequate
protection of their claims and interests);
(b) oppose or object to any adequate protection sought by
or granted to any Senior Secured Parties with respect to the
Senior Collateral;
(c) oppose or object to the use of any Senior Collateral
constituting cash collateral by any Loan Party, unless the
Senior Secured Parties will have opposed or objected to such use
of such cash collateral;
(d) oppose or object to any financing with respect to any
Loan Party provided under any Bankruptcy Law (regardless of
whether any Indebtedness thereunder is senior to the Noteholder
Claims or secured by Liens on the Senior Collateral that are
senior in priority to the Noteholder Liens on such Collateral),
unless (i) the Senior Agent or the Senior Secured Parties
will have opposed or objected to such financing or (ii) any
Indebtedness thereunder is secured by any Collateral on which
the Noteholder Secured Parties have a first-priority Lien under
the Intercreditor Agreement and the Liens on such Collateral
securing such Indebtedness would be senior in priority to such
first-priority Liens of the Noteholder Secured Parties;
(e) object to (i) the amount of the Senior Claims
allowed or permitted to be asserted under any Bankruptcy Law or
(ii) the extent to which the Senior Claims are deemed
secured claims, including under § 506(a) of the
Bankruptcy Code;
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(f) oppose or object to any protection provided to the
Senior Secured Parties, including any form of adequate
protection under § 362 or § 363 of the
Bankruptcy Code and the payment of amounts equal to interest and
expenses allowed under § 506(b) and (c) of the
Bankruptcy Code to any Senior Secured Parties; or
(g) object to the treatment of the Senior Claims under a
chapter 11 plan of reorganization under the Bankruptcy Code
or similar plan or reorganization or arrangement under any other
applicable Insolvency Proceeding, except on the grounds that the
present value of all property received by the Senior Secured
Parties exceeds the amount of the claims of the Senior Secured
Parties in such Insolvency Proceeding.
Nothing contained in the Intercreditor Agreement will prohibit
or in any way limit any Senior Secured Party from, with respect
to the Senior Collateral, objecting in any Insolvency Proceeding
(or otherwise) to any action taken by any Noteholder Secured
Party, including the seeking by such Noteholder Secured Party of
adequate protection with respect to such Collateral or the
asserting by such Noteholder Secured Party of any of its rights
and remedies under the Indenture Documents (or otherwise) with
respect to such Collateral.
Proceeds of Collateral. Under the
Intercreditor Agreement, from and after the receipt by the
Collateral Agent of any Notice of Actionable Default and prior
to the withdrawal of all pending Notices of Actionable Default,
proceeds of any Collateral received by any Secured Parties, and
all payments made by any Loan Parties in respect of any Secured
Claims, will be applied as follows:
(a) first, to pay interest on and then principal of
any portion of the Senior Claims in respect of such Collateral
that the Senior Agent may have advanced on behalf of any Senior
Secured Party for which the Senior Agent has not then been
reimbursed by such Senior Secured Party or the Loan Parties;
(b) second, to pay Secured Claims in respect of any
expense reimbursements or indemnities then due to the Senior
Agent and the Collateral Agent;
(c) third, to pay Secured Claims in respect of any
expense reimbursements or indemnities then due to the other
Senior Secured Parties;
(d) fourth, to pay Secured Claims in respect of any
fees then due to the Senior Agent and the Collateral Agent;
(e) fifth, to pay Secured Claims in respect of any
fees then due to the other Senior Secured Parties;
(f) sixth, to pay interest then due and payable in
respect of all Senior Claims in respect of such Collateral;
(g) seventh, to pay or prepay principal payments for
all Senior Claims (and, when applicable, to provide cash
collateral for letters of credit or interest rate Hedging
Obligations constituting Senior Claims) in respect of such
Collateral;
(h) eighth, to pay all other Senior Claims in
respect of such Collateral;
(i) ninth, to pay interest on and then principal of
any portion of the Junior Claims that any Junior Agent may have
advanced on behalf of any Junior Secured Party for which such
Junior Agent has not then been reimbursed by such Junior Secured
Party or the Loan Parties;
(j) tenth, to pay Secured Claims in respect of any
expense reimbursements or indemnities then due to any Junior
Agent;
(k) eleventh, to pay Secured Claims in respect of
any expense reimbursements or indemnities then due to the other
Junior Secured Parties;
(l) twelfth, to pay Secured Claims in respect of any
fees then due to any Junior Agent;
(m) thirteenth, to pay Secured Claims in respect of
any fees then due to the other Junior Secured Parties;
(n) fourteenth, to pay interest then due and payable
in respect of all Junior Claims in respect of such Collateral;
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(o) fifteenth, to pay or prepay principal payments
for all Junior Claims (and, when applicable, to provide cash
collateral for letters of credit or interest rate Hedging
Obligations constituting Junior Claims) in respect of such
Collateral;
(p) sixteenth, to pay all other Junior Claims in
respect of such Collateral; and
(q) seventeenth, as directed by the Company (subject
to applicable laws);
provided, however, that, if sufficient funds are
not available to fund all payments required to be made in any of
clauses first through sixteenth above, the available funds being
applied to the Secured Claims specified in any such clause
(unless otherwise specified in such clause) will be allocated to
the payment of such Secured Claims ratably, based on the
proportion of each Agents and each Secured Partys
interest in the aggregate outstanding Secured Claims described
in such clause. The order of payment application set forth in
clauses (a) through (p) above may be amended at any
time and from time to time by the Required Secured Parties
without any notice to or consent of or approval by any Loan
Party or any other Person (including, without limitation, any
holder of Designated Eligible Obligations) that is not a party
to the Multi-Currency Credit Agreement, the Term Loan Agreement
or the Indenture (provided that for purposes of this
clause the holders of the New Notes will be deemed to be parties
to the Indenture), as the case may be, subject to certain
exceptions; provided, however, that (i) any
such amendment adversely affecting any Agent will also require
the prior written consent of such Agent, (ii) any such
amendment not adversely affecting the Multi-Currency Lenders
will not require the consent of any Lender (as defined in the
Multi-Currency Credit Agreement), (iii) any such amendment
not adversely affecting the Term Loan Lenders will not require
the consent of any Lender (as defined in the Term Loan
Agreement) and (iv) any such amendment not adversely
affecting the holders of New Notes will not require the consent
or signature of the Trustee or any holder of New Notes.
Indemnification and Expenses. Under the
Intercreditor Agreement, each Secured Party agreed to indemnify
each Agent and each of its Affiliates, and each of their
respective directors, officers, employees, agents and advisors
(to the extent not reimbursed by the Company), from and against
such Secured Partys ratable share of any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements (including
fees, expenses and disbursements of financial and legal
advisors) of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against, such Agent or any of its
Affiliates, directors, officers, employees, agents and advisors
in any way relating to or arising out of the Intercreditor
Agreement or the other Intercreditor Collateral Documents or any
action taken or omitted by such Agent under the Intercreditor
Agreement or the other Collateral Documents; provided,
however, that no Secured Party will be liable for any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Agents or such
Affiliates gross negligence or willful misconduct.
Without limiting the foregoing, each Secured Party agreed to
reimburse each Agent promptly upon demand for its ratable share
of any
out-of-pocket
expenses (including fees, expenses and disbursements of
financial and legal advisors) incurred by such Agent in
connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of its rights or responsibilities under,
the Intercreditor Agreement or the other Collateral Documents,
to the extent that such Agent is not reimbursed for such
expenses by the Company or another Loan Party.
Release
of Collateral
The Company and the Guarantors will be entitled to the releases
of property and other assets included in the Collateral from the
Liens securing the New Notes under any one or more of the
following circumstances:
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to enable the sale, transfer or other disposition of such
property or assets to the extent not prohibited under the
covenant described under Certain
Covenants Limitation on Asset Sales;
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in the case of a Subsidiary Guarantor that is released from its
Subsidiary Guarantee, the release of the property and assets of
such Subsidiary Guarantor;
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if such property or other assets is or becomes Excluded
Property; or
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as described under Amendment below.
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Without limiting the foregoing, the Lien on any item of
Collateral securing the New Notes will terminate and be released
automatically, or will be subordinated, if the Liens on such
item of Collateral securing the Multi-Currency Secured
Obligations and Term Loan Secured Obligations are released or
subordinated, respectively (unless, at the time of such release
or subordination of such Liens, an Event of Default shall have
occurred and be continuing under the Indenture). Notwithstanding
the existence of an Event of Default, the Liens on the
Collateral securing the New Notes shall also terminate and be
released automatically to the extent the Liens on the Collateral
securing the Multi-Currency Secured Obligations and Term Loan
Secured Obligations are released in connection with a sale,
transfer or disposition of such Collateral that is either not
prohibited under the Indenture or occurs in connection with the
foreclosure of, or other exercise of remedies with respect to,
such Collateral by the Collateral Agent (except with respect to
any proceeds of such sale, transfer or disposition that remain
after satisfaction in full of the Multi-Currency Secured
Obligations and Term Loan Secured Obligations). The Liens on the
Collateral securing the New Notes, that otherwise would have
been released pursuant to the first sentence of this paragraph
but for the occurrence and continuation of an Event of Default,
will be released when such Event of Default and all other Events
of Default under the Indenture cease to exist.
The security interests in all Collateral securing the New Notes
also will be released upon (i) payment in full of the
principal of, together with accrued and unpaid interest on, the
New Notes and all other obligations under the Indenture, the
Guarantees under the Indenture and the Security Documents that
are due and payable at or prior to the time such principal,
together with accrued and unpaid interest, are paid or
(ii) a legal defeasance or covenant defeasance under the
Indenture as described below under
Defeasance or a discharge of the
Indenture as described under Satisfaction and
Discharge.
At the request of the Company (which request shall be contained
in an Officers Certificate) for a release of Collateral in
accordance with the above provisions, the Trustee and the
Collateral Agent shall promptly take all necessary actions to
cause the relevant Collateral to be released.
In addition, at the request of the Company or the applicable
Guarantor, as the case may be, (i) the security interests
in any part of the Collateral that is subject to any Permitted
Lien described in clauses (1), (2)(iii), (2)(iv), (2)(v),
(2)(vii), (2)(viii), (2)(xii), (2)(xiii), (4), (13), (14), (16),
(20) and (21) under Certain
Covenants Limitation on Liens below shall be
released or subordinated as required by law or by the holder of
such Permitted Lien to the extent documents relating to such
Permitted Lien would not permit such asset to be subject to the
Liens created under the Security Documents; provided,
however, that immediately upon the ineffectiveness, lapse
or termination of any such restriction, the Company or the
applicable Guarantor, as the case may be, will take all
necessary actions in order to secure the Collateral subject to
such Permitted Lien in the same manner upon which it was secured
prior to the imposition of the Permitted Lien; and (ii) the
security interests in patents or trademarks that are licensed to
third parties in a transaction that does not violate the
Indenture shall be subordinated to such license agreement. Upon
receipt of such request, the Trustee and the Collateral Agent
shall promptly take all necessary actions to effect such release
or subordination.
Notwithstanding anything to the contrary herein, the Company and
the Guarantors will not be required to comply with all or any
portion of Section 314(d) of the TIA if they determine, in
good faith based on advice of counsel, that under the terms of
that section
and/or any
interpretation or guidance as to the meaning thereof of the
Commission and its staff, including no action
letters or exemptive orders, all or any portion of
Section 314(d) of the TIA is inapplicable to the released
Collateral. Without limiting the generality of the foregoing,
certain no-action letters issued by the Commission have
permitted an indenture qualified under the TIA to contain
provisions permitting the release of collateral from Liens under
such indenture in the ordinary course of the issuers
business without requiring the issuer to provide certificates
and other documents under Section 314(d) of the TIA.
The Company and its Subsidiaries may, among other things,
without any release or consent by the Trustee or the Collateral
Agent, but otherwise in compliance with the covenants of the
Indenture and the Security Documents, conduct ordinary course
activities with respect to the Collateral, including
(i) selling or otherwise disposing of, in any transaction
or series of related transactions, any property subject to the
Lien of the Security Documents which has become worn out,
defective or obsolete or not used or useful in the business;
(ii) abandoning, terminating, canceling, releasing or
making alterations in or substitutions of any leases or
contracts subject to the Lien of the Indenture or any of the
Security Documents; (iii) surrendering or modifying any
franchise, license or permit subject
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to the Lien of the Indenture or any of the Security Documents
which it may own or under which it may be operating; altering,
repairing, replacing, changing the location or position of and
adding to its structures, machinery, systems, equipment,
fixtures and appurtenances; (iv) granting a license of any
intellectual property; (v) selling, transferring or
otherwise disposing of inventory in the ordinary course of
business; (vi) collecting accounts receivable in the
ordinary course of business or selling, liquidating, factoring
or otherwise disposing of accounts receivable in the ordinary
course of business; (vii) making cash payments (including
for the repayment of Debt or interest) from cash that is at any
time part of the Collateral in the ordinary course of business
that are not otherwise prohibited by the Indenture and the
Security Documents; and (viii) abandoning, selling or
otherwise disposing of any intellectual property which is no
longer used or useful in the Companys business. The
Company must deliver to the Trustee, within 30 calendar days
following the end of each fiscal year (or such later date as the
Trustee shall agree), an Officers Certificate to the
effect that all releases and withdrawals during the preceding
fiscal year (or since the issue date of the old notes, in the
case of the first such certificate) in which no release or
consent of the Collateral Agent was obtained in the ordinary
course of the Companys and its Subsidiaries business
were not prohibited by the Indenture.
Impairment
of Security Interest
Subject to the rights of the holders of Permitted Liens, the
Company will not, and will not permit any of its Subsidiaries
(other than Non-Recourse Subsidiaries) to, take or knowingly
omit to take, any action which action or omission would or could
reasonably be expected to have the result of materially
impairing the security interest with respect to the Collateral
for the benefit of the Trustee and the holders of the New Notes,
except as otherwise permitted by the Indenture, the
Intercreditor Agreement and the Security Documents.
After-Acquired
Property
Promptly following the acquisition by the Company or any
Subsidiary Guarantor of any After-Acquired Property (but subject
to the limitations, if applicable, described under
Security for the New Notes
General, Security for the New
Notes Term Loan Collateral and
Multi-Currency Collateral), the Company
or such Subsidiary Guarantor shall execute and deliver such
mortgages, deeds of trust, security instruments, financing
statements and certificates and opinions of counsel as the
Collateral Agent shall reasonably request and shall be
reasonably necessary to vest in the Collateral Agent a perfected
security interest in such After-Acquired Property and to have
such After-Acquired Property added to the Term Loan Collateral
or the Multi-Currency Collateral, as applicable, and thereupon
all provisions of the Indenture relating to the Term Loan
Collateral or the Multi-Currency Collateral, as applicable,
shall be deemed to relate to such After-Acquired Property to the
same extent and with the same force and effect.
Information
Regarding Collateral
The Company will furnish to the Collateral Agent, with respect
to the Company or any Guarantor, prompt written notice of any
change in such Persons (i) corporate name,
(ii) jurisdiction of organization or formation or
(iii) Federal Taxpayer Identification Number. The Company
will agree to give the notice of any change referred to in the
preceding sentence to the Collateral Agent in a manner
sufficient to permit the Collateral Agent to promptly make all
filings under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all
times following such change to have a valid, legal and perfected
security interest in all the Collateral except to the extent
that any failure to have such a perfected security interest
would not cause an Event of Default under clause (viii) of
the definition thereof.
Further
Assurances
The Company and the Guarantors shall execute any and all further
documents, financing statements, agreements and instruments, and
take all further action that may be required to their knowledge
under applicable law to be taken by the Company or the
Guarantors to grant or perfect, or that the Collateral Agent may
reasonably request in order to grant, preserve, protect and
perfect, the validity and priority of the security interests
created or intended to be created by the Security Documents in
the Collateral except to the extent any failure to perfect such
61
security interest would not cause an Event of Default under
clause (viii) of the definition thereof and except to the
extent provided under Security for the New
Notes General.
Optional
Redemption
Except as set forth below, the New Notes will not be redeemable
at the option of the Company prior to November 15, 2012. On
and after such date, the New Notes may be redeemed at the option
of the Company, at any time as a whole, or from time to time in
part, at the following redemption prices (expressed as
percentages of principal amount), plus accrued interest to the
date of redemption, if redeemed during the
12-month
period beginning on November 15 of the years indicated below:
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|
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Year
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Redemption Price
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2012
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104.875
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%
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2013
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102.438
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%
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2014
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100.000
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%
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The Company will be entitled to redeem the New Notes at its
option at any time or from time to time prior to
November 15, 2012, as a whole or in part, at a redemption
price per New Note equal to the sum of (1) the then
outstanding principal amount thereof, plus (2) accrued and
unpaid interest (if any) to the date of redemption, plus
(3) the Applicable Premium.
Prior to November 15, 2012, the Company will be entitled,
from time to time, to redeem up to 35% of the aggregate
principal amount of the New Notes and any Additional Notes with,
and to the extent the Company actually receives, the net
proceeds of one or more Equity Offerings from time to time, at
109.750% of the principal amount thereof, plus accrued interest
to the date of redemption; provided, however, that
at least 65% of the aggregate principal amount of the New Notes
must remain outstanding after each such redemption.
Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each
holder of New Notes to be redeemed at his registered address.
New Notes in denominations larger than $2,000 may be redeemed in
part but only in whole multiples of $1,000 in excess thereof. If
money sufficient to pay the redemption price of and accrued
interest on all New Notes (or portions thereof) to be redeemed
on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on
such New Notes (or such portions thereof) called for redemption.
The following definitions are used to determine the Applicable
Premium:
Applicable Premium means, with respect to a
New Note at any redemption date, the greater of (i) 1.0% of
the then outstanding principal amount of such New Note at such
time and (ii) the excess of (A) the present value at
such redemption date of (1) the redemption price of such
New Note on November 15, 2012 (such redemption price being
described in the first paragraph of this
Optional Redemption section, exclusive
of any accrued interest) plus (2) all required remaining
scheduled interest payments due on such New Note through
November 15, 2012, computed using a discount rate equal to
the Treasury Rate plus 75 basis points, over (B) the
then outstanding principal amount of such New Note at such time
Treasury Rate means the yield to maturity at
the time of computation of United States Treasury securities
with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15(519) which has
become publicly available at least two Business Days prior to
the date fixed for repayment or, in the case of defeasance,
prior to the date of deposit (or, if such Statistical Release is
no longer published, any publicly available source of similar
market data)) most nearly equal to the then remaining average
life to November 15, 2012; provided, however,
that if the average life to November 15, 2012 is not equal
to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly yields of United
States Treasury securities for which such yields are given,
except that if the average life to November 15, 2012 is
less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant
maturity of one year shall be used.
62
Sinking
Fund
There will be no mandatory sinking fund payments for the New
Notes.
Change of
Control
Upon the occurrence of any of the following events (each a
Change of Control), each holder of New Notes will
have the right to require the Company to repurchase all or any
part of such holders New Notes at a repurchase price in
cash equal to their Put Amount as of the date of repurchase plus
accrued and unpaid interest to the date of repurchase:
(i) any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than
one or more Permitted Holders, is or becomes the beneficial
owner (as defined in
Rules 13d-3
and 13d-5
under the Exchange Act, except that a person will be deemed to
have beneficial ownership of all shares that any
such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting
power of the Voting Stock of the Company; provided,
however, that the Permitted Holders do not have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of
the Company (for the purposes of this clause (i), such other
person will be deemed to beneficially own any Voting Stock of a
specified corporation held by a parent corporation, if such
other person beneficially owns, directly or indirectly, more
than 50% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders do not have the right or
ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of
such parent corporation);
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors of the Company
then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in
office; or
(iii) a Change of Control shall have occurred
under any instrument governing Subordinated Obligations so long
as such Subordinated Obligations are outstanding;
provided that, prior to the mailing of the notice to
holders of New Notes provided for in the second following
paragraph below, but in any event within 30 days following
any Change of Control, the Company covenants to (i) repay
in full all Bank Debt or to offer to repay in full all Bank Debt
and to repay the Bank Debt of each lender who has accepted such
offer or (ii) obtain the requisite consent under the Bank
Debt to permit the repurchase of the New Notes as provided for
below. The Company must first comply with the covenant in the
preceding sentence before it will be required to purchase New
Notes in connection with a Change of Control.
Notwithstanding the foregoing, a person or
group shall not be deemed to have beneficial
ownership of securities subject to a stock purchase agreement,
merger agreement or similar agreement (or voting or option
agreement related thereto) until the consummation of the
transactions contemplated by such agreement.
Within 45 days following any Change of Control, the Company
will mail a notice to each holder with a copy to the Trustee
stating (i) that a Change of Control has occurred and that
such holder has the right to require the Company to repurchase
all or any part of such holders New Notes at a repurchase
price in cash equal to their Put Amount as of the date of
repurchase plus accrued and unpaid interest to the date of
repurchase; (ii) the circumstances and relevant facts
regarding such Change of Control; (iii) the repurchase date
(which will be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and
(iv) the instructions, determined by the Company consistent
with this provision, that a holder must follow in order to have
its New Notes repurchased.
Holders electing to have a New Note repurchased will be required
to surrender the New Note, with an appropriate form duly
completed, to the Company at the address specified in the notice
at least 10 Business Days prior to the purchase date. Holders
will be entitled to withdraw their election if the Trustee or
the Company receives
63
not later than three Business Days prior to the purchase date, a
facsimile transmission or letter setting forth the name of the
holder, the principal amount of the New Note which was delivered
for purchase by the holder and a statement that such holder is
withdrawing his election to have such New Note repurchased.
On the repurchase date, all New Notes repurchased by the Company
shall be delivered to the Trustee for cancellation, and the
Company shall pay the repurchase price plus accrued and unpaid
interest to the holders entitled thereto. Upon surrender of a
New Note that is repurchased under this provision in part, the
Company shall execute and the Trustee shall authenticate for the
holder thereof (at the Companys expense) a new New Note
having a principal amount equal to the principal amount of the
New Note surrendered less the portion of the principal amount of
the New Note repurchased.
The Company will not be required to make a Change of Control
offer upon a Change of Control if (1) a third party makes
the Change of Control offer in the manner, at or prior to the
times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control offer
made by the Company and purchases all New Notes properly
tendered and not withdrawn under the Change of Control offer (it
being understood that such third-party may make a Change of
Control offer that is conditioned on and prior to the occurrence
of a Change of Control pursuant to this clause (1)) or
(2) notice of redemption has been given pursuant to the
Indenture as described above under the caption
Optional Redemption, unless and until
there is a default in payment of the applicable redemption price.
A Change of Control offer may be made in advance of a Change of
Control, conditional upon such Change of Control, if a
definitive agreement is in place for the Change of Control at
the time of making of the Change of Control offer.
Our ability to pay cash to holders of New Notes upon a
repurchase may be limited by the Companys then existing
financial resources. See Risk Factors Risks
Relating to the Notes Our ability to pay principal
of the notes depends on many factors and
Risks Relating to the Company Our
ability to service our debt and meet our cash requirements
depends on many factors, including achieving anticipated levels
of revenue growth and expenses. If such revenue or expense
levels prove to be other than as anticipated, we may be unable
to meet our cash requirements or we may be unable to meet the
requirements of financial covenants under the 2010 Bank Credit
Agreements, which could have a material adverse effect on our
business, financial condition
and/or
results of operations.
Holders will not be entitled to require the Company to purchase
their New Notes in the event of a takeover, recapitalization,
leveraged buyout or similar transaction that is not a Change of
Control. In addition, holders may not be entitled to require the
Company to purchase their New Notes in certain circumstances
involving a significant change in the composition of the
Companys Board of Directors, including in connection with
a proxy contest where the Companys Board of Directors does
not approve a dissident slate of directors but approves them as
required by clause (ii) of the first paragraph of the
definition of Change of Control.
The Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with the repurchase of the New
Notes as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the Indenture, the Company
will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under
the Change of Control provisions of the Indenture by virtue of
such compliance.
The Credit Agreements and other existing indebtedness of the
Company contain, and future indebtedness of the Company may
contain, prohibitions on the occurrence of certain events that
would constitute a Change of Control or require such
indebtedness to be purchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to
repurchase the New Notes could cause a default under such
indebtedness, even if the Change of Control itself does not.
Finally, our ability to pay cash to the holders of New Notes
following the occurrence of a Change of Control may be limited
by our then-existing financial resources. There can be no
assurance that sufficient funds will be available when necessary
to make any required repurchases and there can be no assurance
that we would be able to obtain financing to make such
repurchases. The provisions relating to our
64
obligation to make an offer to repurchase the New Notes as a
result of a Change of Control may be waived or modified with the
written consent of the holders of a majority in principal amount
of the New Notes.
Certain
Covenants
Covenant
Suspension
During any period of time that:
(a) the New Notes have Investment Grade Ratings from the
Rating Agencies and
(b) no Default or Event of Default has occurred and is
continuing under the Indenture,
the Company and the Subsidiaries of the Company (other than the
Non-Recourse Subsidiaries) will not be subject to the following
provisions of the Indenture.
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|
|
|
|
Limitation on Debt,
|
|
|
|
Limitation on Restricted Payments,
|
|
|
|
Limitation on Asset Sales,
|
|
|
|
Limitation on Restrictions on Distributions
from Subsidiaries, and
|
|
|
|
clause (iii) of the first paragraph of
Successor Company
|
(collectively, the Suspended Covenants). In the
event that the Company and the Subsidiaries of the Company
(other than the Non-Recourse Subsidiaries) are not subject to
the Suspended Covenants for any period of time as a result of
the preceding sentence and, subsequently, one or both of the
Rating Agencies withdraws its ratings or downgrades the ratings
assigned to the New Notes below the required Investment Grade
Ratings or a Default or Event of Default occurs and is
continuing, then the Company and the Subsidiaries of the Company
(other than the Non-Recourse Subsidiaries) will thereafter again
be subject to the Suspended Covenants for all periods after that
withdrawal, downgrade, Default or Event of Default and,
furthermore, compliance with the provisions of the covenant
described in Limitation on Restricted
Payments with respect to Restricted Payments made after
the time of withdrawal, downgrade, Default or Event of Default
will be calculated in accordance with the terms of that covenant
as though that covenant had been in effect during the entire
period of time from the issue date of the old notes,
provided, however, that there will not be deemed
to have occurred a Default or Event of Default with respect to
that covenant or any other Suspended Covenants during the time
that the Company and the Subsidiaries of the Company (other than
the Non-Recourse Subsidiaries) were not subject to the Suspended
Covenants (or after that time based solely on the events that
occurred during that time).
Limitation
on Debt
(a) The Company shall not, and shall not permit any
Subsidiary of the Company to, Issue, directly or indirectly, any
Debt; provided, however, that the Company and any
Subsidiary of the Company shall be permitted to Issue Debt if,
at the time of such Issuance, the Consolidated EBITDA Coverage
Ratio for the period of the most recently completed four
consecutive fiscal quarters for which financial statements are
available exceeds the ratio of 2.0 to 1.0; provided,
further, that the amount of Debt that may be Issued
pursuant to the foregoing by Subsidiaries (other than
Non-Recourse Subsidiaries) that are not Subsidiary Guarantors
shall not exceed $125.0 million at any one time outstanding.
(b) Notwithstanding the foregoing, the Company and its
Subsidiaries may Issue the following Debt:
(1) Debt, including Refinancing Debt, Issued pursuant to
the Credit Agreements or otherwise in an aggregate principal
amount, measured on the date of such issuance, which, when taken
together with all other Debt Issued pursuant to this
clause (1) and then outstanding, does not exceed the
greater of (A) $1,100.0 million plus any Refinancing
Costs less the sum of all principal payments with respect to
such Debt (other than the Revolving Credit Facility) that are
made pursuant to the proviso to clause (a) of the third
paragraph of the covenant described under
Limitation on Asset Sales and
(B) 3.5 times Pro Forma EBITDA for the period of the most
recently completed four consecutive fiscal quarters for which
financial statements are available;
65
(2) Debt (other than Debt described in clause (1)
above), including Refinancing Debt, in respect of the undrawn
portion of the face amount of or unpaid reimbursement
obligations in respect of letters of credit for the account of
the Company or any of the Subsidiaries in an aggregate amount at
any time outstanding not to exceed the excess of
(i) $150.0 million over (ii) the undrawn portion
of the face amount of or unpaid reimbursement obligations in
respect of letters of credit Issued under the Credit Agreements
or any Refinancing thereof or any other credit agreement,
indenture or other agreement pursuant to clause (1) above;
(3) Debt of the Company Issued to and held by a Subsidiary
of the Company (other than a Non-Recourse Subsidiary) and Debt
of a Subsidiary of the Company Issued to and held by the Company
or a Subsidiary of the Company (other than a Non-Recourse
Subsidiary); provided, however, that (i) any
subsequent Issuance or transfer of any Capital Stock that
results in any such Subsidiary ceasing to be a Subsidiary of the
Company or any subsequent transfer of such Debt (other than to
the Company or a Subsidiary of the Company ((other than a
Non-Recourse Subsidiary)) will be deemed, in each case, to
constitute the Issuance of such Debt by the Company or of such
Debt by such Subsidiary, and (ii) in the case of such Debt
issued by the Company or a Subsidiary Guarantor to a Subsidiary
of the Company (other than a Non-Recourse Subsidiary) that is
not a Subsidiary Guarantor, such Debt is subordinated to the
Subsidiary Guarantee of such Subsidiary Guarantor;
(4) the old notes (other than Additional Notes), the New
Notes and Debt of the Company Issued to Refinance any Debt
permitted by this clause (4); provided, however,
that, in the case of a Refinancing, the proceeds of any such
Refinancing Debt, net of any underwriting discounts or Permitted
OID, do not exceed the principal amount of the Debt so
Refinanced plus any Refinancing Costs thereof;
(5) Subordinated Obligations not to exceed
$110.0 million at any one time outstanding;
(6) Debt (other than Debt described in clause (1), (4),
(5) or (18)) of the Company or any of its Subsidiaries
outstanding on the issue date of the old notes and Debt Issued
to Refinance any Debt permitted by this clause (6), or by
paragraph (a) above;
(7) Debt (including Capital Lease Obligations) Issued to
finance or reimburse the cost of the acquisition, development,
construction, purchase, lease, repair, addition or improvement
of property (real or personal), equipment or other fixed or
capital assets used or useful in a Permitted Business, whether
through the direct purchase of assets or the Capital Stock of
any Person owning such assets (which Debt may be Issued at any
time within 365 days of such acquisition, development,
construction, purchase, lease, repair, addition or improvement),
and Debt Issued to Refinance such Debt, in an amount, measured
on the date of such Issuance which, when taken together with all
other Debt Issued pursuant to this clause (7) and then
outstanding, does not exceed the sum of (A) the greater of
(x) 10% of Consolidated Total Assets at the time of such
Issuance and (y) 10% of Consolidated Total Assets as of the
issue date of the old notes, plus (B) as of
December 31, 2009, $7.5 million, plus for each period
of twelve consecutive months ending on any December 31
thereafter, $7.5 million, plus any Refinancing Costs;
provided, however, that any such amounts which are
available to be utilized during any such twelve month period and
are not so utilized may be utilized during any succeeding period;
(8) Debt of a Subsidiary of the Company Issued and
outstanding on or prior to the date on which such Subsidiary was
acquired by the Company (other than Debt Issued as consideration
in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a
Subsidiary of the Company or was acquired by the Company), and
Debt Issued to Refinance such Debt; provided,
however, that on the date of such acquisition and after
giving Pro Forma effect thereto, the Consolidated EBITDA
Coverage Ratio for the period of the most recently completed
four consecutive fiscal quarters for which financial statements
are available shall be equal to or greater than the Consolidated
EBITDA Coverage Ratio for such period without giving Pro Forma
effect to such acquisition;
(9) Non-Recourse Debt of a Non-Recourse Subsidiary;
provided, however, that if any such Debt
thereafter ceases to be Non-Recourse Debt of a Non-Recourse
Subsidiary, then such event will be deemed for the purposes of
this covenant to constitute the Issuance of such Debt by the
issuer thereof;
(10) Qualified Affiliate Debt;
66
(11) Debt of Foreign Subsidiaries in an aggregate principal
amount at the time of Issuance which, when taken together with
all other Debt issued by Foreign Subsidiaries pursuant to this
clause (11) and then outstanding, does not exceed the
greater of (x) $60.0 million or (y) 7.5% of
Consolidated Total Assets;
(12) Debt incurred by the Company or any Subsidiary
constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including
letters of credit in respect of workers compensation
claims, or other Debt with respect to reimbursement type
obligations regarding workers compensation claims,
self-insurance obligations and bankers acceptances in the
ordinary course of business; provided that upon the
drawing of such letters of credit or the incurrence of such
Debt, such obligations are reimbursed within 30 days
following such drawing or incurrence;
(13) Debt arising from agreements of the Company or a
Subsidiary of the Company providing for indemnification,
adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the acquisition or
disposition of any business, assets or a Subsidiary of the
Company, other than guarantees of Debt incurred by any Person
acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition;
provided that (1) such Debt is not reflected on the
balance sheet of the Company or any Subsidiary of the Company
(contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet
shall not be deemed to be reflected on such balance sheet for
purposes of this clause (1)), and (2) in the case of a
disposition, the maximum assumable liability in respect of all
such Debt (other than liability for those indemnification
obligations that are not customarily subject to a cap) shall at
no time exceed the gross proceeds including noncash proceeds
(the fair market value of such noncash proceeds being measured
at the time received and without giving effect to any subsequent
changes in value) actually received by the Company and the
Subsidiaries of the Company in connection with such disposition;
(14) obligations in respect of performance, bid, appeal and
surety bonds and completion guarantees and similar obligations
provided by the Company or any Subsidiary of the Company in the
ordinary course of business;
(15) Debt (A) arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business; provided that such Debt is
extinguished within two Business Days after its incurrence, or
(B) supported by a letter of credit, in a principal amount
not in excess of the stated amount of such letter of credit;
(16) Debt in an aggregate principal amount outstanding at
any time not to exceed $200.0 million plus any Refinancing
Costs; provided, however, that the aggregate
principal amount of Debt Issued pursuant to this
clause (16) by any Subsidiary other than a Subsidiary
Guarantor and Debt Issued pursuant to this clause (16) by
the Company or any Subsidiary Guarantor that is secured by a
Lien permitted by clause (5)(ii) of the covenant described under
Limitation on Liens shall not exceed
$100.0 million at any time outstanding plus any Refinancing
Costs;
(17) Debt in an aggregate principal amount outstanding at
any time not to exceed 100% of the net cash proceeds received by
the Company after the issue date of the old notes from the issue
or sale of Capital Stock of the Company or cash contributed to
the capital of the Company (in each case, other than proceeds of
Redeemable Stock or sales of Capital Stock to the Company or any
of its Subsidiaries) to the extent such net cash proceeds or
cash have not been applied to make Restricted Payments or to
make other Investments, payments or exchanges pursuant to
paragraph (b) of the covenant described under
Limitation on Restricted Payments or to
make Permitted Investments (other than Permitted Investments
specified in clauses (a) and (d) of the definition
thereof);
(18) Debt outstanding on the issue date of the old notes
under the Existing Subordinated Loans, including Refinancing
Debt in respect thereof, provided that (A) the
proceeds of any such Refinancing Debt, net of any underwriting
discounts or Permitted OID, do not exceed the principal amount
of the Debt so Refinanced plus any Refinancing Costs thereof,
(B) such Refinancing Debt shall be unsecured obligations,
(C) such Refinancing Debt shall be subordinated in right of
payment to the New Notes and the Guarantees to the same extent
as the Debt so Refinanced was subordinated in right of payment
to the New Notes and the Guarantees, unless
67
such Refinancing is a Permitted Existing Subordinated Loans
Refinancing, and (D) the Stated Maturity of each
installment of principal of such Refinancing Debt shall not be,
(x) in the case of a Permitted Existing Subordinated Loans
Refinancing, earlier than the Stated Maturity of the New Notes
and (y) in all other cases, earlier than the Stated
Maturity of the Debt so Refinanced; and
(19) Guarantees by (x) any Subsidiary Guarantors of
any Debt of the Company or a Subsidiary Guarantor or
(y) the Company of any Debt of a Subsidiary Guarantor, in
each case permitted by paragraph (a) above or clauses
(b)(1) through (18) of this paragraph.
(c) To the extent the Company or any Subsidiary of the
Company guarantees any Debt of the Company or of a Subsidiary of
the Company, such guarantee and such Debt will be deemed to be
the same indebtedness and only the amount of the Debt will be
deemed to be outstanding. If the Company or a Subsidiary of the
Company guarantees any Debt of a Person that, subsequent to the
Issuance of such guarantee, becomes a Subsidiary, such guarantee
and the Debt so guaranteed will be deemed to be the same
indebtedness, which will be deemed to have been Issued when the
guarantee was Issued and will be deemed to be permitted to the
extent the guarantee was permitted when Issued.
(d) For purposes of determining the compliance of any Debt
Issued pursuant to any of the clauses of paragraph
(b) above to Refinance other Debt, to the extent that the
principal amount of such Refinancing Debt, when taken together
with the principal amount of any other Debt Issued pursuant to
the same clause of paragraph (b) and then outstanding,
exceeds the maximum principal amount of Debt permitted at such
time by such clause, such Debt shall nevertheless be deemed to
be Issued in compliance with such clause and this covenant if
the aggregate principal amount of Debt outstanding pursuant to
such clause, after giving effect to such Issuance, does not
exceed the sum of the principal amount of the Debt to be
Refinanced, plus any Refinancing Costs associated therewith,
plus the principal amount of any other Debt Issued pursuant to
such clause and then outstanding.
(e) For purposes of determining compliance with any
U.S. dollar denominated restriction on the Issuance of Debt
where the Debt Issued is denominated in a different currency,
the amount of such Debt will be the U.S. Dollar Equivalent
determined on the date of the Issuance of such Debt,
provided, however, that if any such Debt
denominated in a different currency is subject to a Hedging
Obligation with respect to U.S. dollars covering all
principal, premium, if any, and interest payable on such Debt,
the amount of such Debt expressed in U.S. dollars will be
as provided in such Hedging Obligation. The principal amount of
any Refinancing Debt Issued in the same currency as the Debt
being Refinanced will be the U.S. Dollar Equivalent of the
Debt Refinanced, except to the extent that (1) such
U.S. Dollar Equivalent was determined based on a Hedging
Obligation, in which case the Refinancing Debt will be
determined in accordance with the preceding sentence, and
(2) the principal amount of the Refinancing Debt exceeds
the principal amount of the Debt being Refinanced, in which case
the U.S. Dollar Equivalent of such excess will be
determined on the date such Refinancing Debt is Issued.
(f) For purposes of determining compliance with this
Limitation on Debt covenant, in the
event that an item of proposed Debt meets the criteria (or would
meet the criteria at the time of application of this clause (f)
as if such item of Debt were Issued at such time) of more than
one of the categories of permitted Debt described in clauses
(b)(1) through (19) above or is (or would at such time be)
entitled to be Issued pursuant to the first paragraph of this
covenant, the Company, in its sole discretion and at its option,
will be permitted to classify or divide such item of Debt on the
date of its incurrence, or later redivide, classify or
reclassify (based on circumstances existing at the time of such
reclassification or redivision) all or a portion of such item of
Debt, in each case to any category of permitted Debt described
in such clauses (b)(1) through (19) or the first paragraph
of this covenant in a manner that complies with this covenant,
including by allocation to more than one other type of Debt, and
such item of Debt (or portion thereof, as applicable) will be
treated as having been Issued pursuant to only such clause or
clauses or the first paragraph of this covenant (and in the case
of a subsequent division, classification or reclassification,
such item of Debt shall cease to be divided or classified as it
was prior to such subsequent division, classification or
reclassification).
(g) Any Debt Issued under a Credit Agreement pursuant to
paragraph (1) of clause (b) of this covenant shall be
deemed for purposes of this covenant to have been incurred on
the date such Debt was first Issued until such Debt is actually
repaid, other than pursuant to cash sweep provisions
or any similar provisions under any Credit Agreement that
provide that such Debt is deemed to be repaid daily (or
otherwise periodically), but only to the extent such Debt is
promptly reborrowed.
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(h) The accrual of interest, the accretion or amortization
of original issue discount, the payment or accretion of interest
on any Debt in the form of additional Debt with the same terms,
the reclassification of Preferred Stock as Debt due to a change
in accounting principles, and the payment of dividends on
Preferred Stock in the form of additional shares of the same
class of Preferred Stock will not be deemed to be an Issuance of
Debt. Notwithstanding any other provision of this covenant, the
maximum amount of Debt that the Company or any Subsidiary of the
Company may incur pursuant to this covenant shall not be deemed
to be exceeded solely as a result of fluctuations in exchange
rates or currency values.
(i) The amount of any Debt outstanding as of any date will
be:
(1) the accreted value of the Debt, in the case of any Debt
Issued with original issue discount;
(2) the principal amount of the Debt, in the case of any
other Debt; and
(3) in respect of Debt of another Person secured by a Lien
on the assets of the specified Person, the lesser of:
(a) the Fair Market Value of such assets at the date of
determination; and
(b) the amount of the Debt of the other Person.
Limitation
on Liens
The Company shall not, and shall not permit any Subsidiary
Guarantor to, create or suffer to exist any Lien upon any of its
property or assets (including Capital Stock or Debt of any
Subsidiary of the Company) now owned or hereafter acquired by
it, securing any obligation under any Debt unless
contemporaneously therewith effective provision is made to
secure the New Notes equally and ratably with such obligation
with a Lien on the same assets securing such obligation for so
long as such obligation is secured by such Lien. The preceding
sentence shall not require the Company or any Subsidiary
Guarantor to equally and ratably secure the New Notes if the
Lien consists of the following (collectively, Permitted
Liens):
(1) Liens existing as of the issue date of the old notes;
(2) any Lien arising by reason of (i) any judgment,
decree or order of any court or arbitrator, so long as such
judgment, decree or order is being contested in good faith and
any appropriate legal proceedings which may have been duly
initiated for the review of such judgment, decree or order shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired,
(ii) taxes, assessments or other governmental charges or
claims not delinquent or which are being contested in good
faith, for which adequate reserves (as determined by the
Company) have been established, (iii) security for payment
of workers compensation or other insurance,
(iv) security for the performance of tenders, contracts
(other than contracts for the payment of borrowed money) or
leases in the ordinary course of business, (v) deposits to
secure public or statutory obligations, or in lieu of surety or
appeal bonds entered into in the ordinary course of business,
(vi) operation of law in favor of carriers, warehousemen,
landlords, mechanics, materialmen, laborers, employees,
suppliers or similar Persons, incurred in the ordinary course of
business for sums which are not delinquent for a period of more
than 30 days or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the
collection thereof, (vii) security for surety, appeal,
reclamation, performance or other similar bonds or with respect
to other regulatory requirements or letters of credit issued
pursuant to the request of and for the account of such Person,
(viii) security for Hedging Obligations, (ix) Liens
arising from financing statement filings under the Uniform
Commercial Code or similar state laws regarding operating leases
entered into by the Company and its Subsidiaries in the ordinary
course of business, (x) Liens in favor of the Company or
any Subsidiary Guarantor, (xi) Liens on inventory or
equipment of the Company or any Subsidiary granted in the
ordinary course of business to the Companys client or
customer at which such inventory or equipment is located,
(xii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties
in connection with the importation of goods in the ordinary
course of business and (xiii) security for rent payments;
(3) Liens to secure the payment of all or a part of the
purchase price (or financing or reimbursement thereof) of, or
Capital Lease Obligations with respect to, assets (including
Capital Stock) or property or
69
business acquired, developed, constructed purchased, leased,
repaired, added or improved; provided, however,
that (i) the Debt secured by such Liens shall have
otherwise been permitted to be Issued under the Indenture,
(ii) such Liens shall not encumber any assets or property
of the Company or any of its Subsidiaries (other than
Non-Recourse Subsidiaries) other than the assets or property
(including Capital Stock and any assets or property owned by the
issuer of such Capital Stock) leased, in the case of a Capital
Lease Obligation, or the cost of which is financed or reimbursed
by such Debt, or which secure any such Debt that is assumed in
connection therewith, and the proceeds and products thereof and
any improvements thereto or as otherwise permitted under
Limitation on Liens, and (iii) to
the extent such Debt is incurred pursuant to clause (7) of
paragraph (b) of Limitation on
Debt, such Liens shall attach to such assets or property
within 365 days of such acquisition, development,
construction, purchase, lease, repair, addition or improvement;
(4) Liens (A) on the assets or property (including
shares of Capital Stock) of a Subsidiary of the Company existing
(or required pursuant to agreements existing) at the time such
Subsidiary became a Subsidiary of the Company or (B) on
property at the time the Company or a Subsidiary of the Company
acquired the property (including any acquisition by means of a
merger or consolidation with or into the Company or any
Subsidiary of the Company), in each case not incurred or created
in connection with or in anticipation of) such Subsidiary
becoming a Subsidiary of the Company or such acquisition;
provided, however, that such Liens do not extend
to or cover any other property or assets of the Company or any
of its Subsidiaries (other than Non-Recourse Subsidiaries) other
than the proceeds and products thereof and any improvements
thereto or as otherwise permitted under
Limitation on Liens;
(5) Liens on any assets of the Company or any Subsidiary of
the Company securing obligations in respect of (i) any Debt
originally Issued under clause (1) of paragraph (b) of
Limitation on Debt, (ii) any Debt
originally Issued under the proviso to clause (16) of
paragraph (b) of Limitation on
Debt, which Liens in the case of assets of the Company or
any Guarantor (except Other Excluded Assets) shall be no higher
in priority under the Intercreditor Agreement than the Liens
securing the New Notes and the Guarantees, (iii) any Debt
originally Issued under clause (11) of paragraph
(b) of Limitation on Debt and
(iv) any other Debt originally Issued under paragraph
(a) of Limitation on Debt if at the
time of Issuance of such Debt under this clause (iv) and
after giving Pro Forma effect thereto the Consolidated Secured
Debt Ratio would be no greater than 5.0 to 1.0, so long as, in
the case of clauses (i), (ii) and (iv), with respect to any
Lien on any assets of the Company or any Guarantor (other than
any Other Excluded Assets), the Noteholders have a lien on such
assets with a relative priority in accordance with the
priorities set forth in the Intercreditor Agreement as the same
may be amended or supplemented as provided under
Amendment below;
(6) leases, licenses, subleases and sublicenses of property
granted by the Company and its Subsidiaries in the ordinary
conduct of the business of the Company or any of its
Subsidiaries and which do not secure any Debt;
(7) Liens securing Debt Issued to Refinance Debt which has
been secured by a Lien permitted under the Indenture and is
permitted to be Refinanced under the Indenture; provided,
however, that (A) such Liens do not extend to or
cover any property or assets of the Company or any of its
Subsidiaries not securing (or required to secure) the Debt so
Refinanced, other than the proceeds and products thereof and any
improvements thereto or as otherwise permitted under
Limitation on Liens and (B) any
refinancing Lien incurred pursuant to this clause (7) in
respect of a Lien incurred pursuant to clause (5)(i),
(ii) or (iii) or clause (24) shall be deemed to
have been incurred pursuant to such clause 5(i),
(ii) or (iii) or clause (24) (as applicable) until the
refinancing Lien incurred pursuant to this clause (7) (and any
refinancing Lien incurred in respect thereof) is discharged;
(8) easements, reservations, licenses,
rights-of-way,
zoning restrictions and covenants, conditions and restrictions
and other similar encumbrances or title defects or other
restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to
the ownership of its properties which, in the aggregate, do not
materially detract from the use of the property subject thereto
or materially interfere with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(9) Liens on assets of a Non-Recourse Subsidiary to secure
obligations of a Non-Recourse Subsidiary;
70
(10) Liens on assets located outside the United States of
America to secure Debt Issued by Foreign Subsidiaries permitted
under Limitation on Debt above;
(11) Liens in favor of the United States of America for
amounts paid by the Company or any of its Subsidiaries as
progress payments under government contracts entered into by
them;
(12) other Liens incidental to the conduct of the business
of the Company and its Subsidiaries or the ownership of any of
their assets not incurred in connection with Debt, which Liens
do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct
of the business of the Company or any of its Subsidiaries;
(13) Liens granted in favor of issuers of documentary or
trade letters of credit for the account of the Company or such
Subsidiary or bankers acceptances, which Liens secure the
reimbursement obligations of the Company or such Subsidiary on
account of such letters of credit or bankers acceptances;
provided that each such Lien is limited to (i) the
assets acquired or shipped with the support of such letter of
credit or bankers acceptances and (ii) any assets of
the Company or such Subsidiary which are in the care, custody or
control of such issuer;
(14) Liens on (i) the net proceeds of the Issuance of
Debt to secure any redemption, repurchase or defeasance
obligations in respect of such Debt or any other Debt being
Refinanced with the proceeds of such Debt and (ii) any
additional cash to secure such redemption, repurchase or
defeasance obligations in an amount which, when added to such
net proceeds, is necessary to effect such redemption, repurchase
or defeasance;
(15) Liens securing Debt of a Subsidiary Guarantor owing to
the Company or another Subsidiary Guarantor permitted by
paragraph (b) of Limitation on Debt
above;
(16) deposits in the ordinary course of business to secure
liability to insurance carriers;
(17) Liens (i) of a collection bank arising under
Section 4-210
of the Uniform Commercial Code on items in the course of
collection, (ii) attaching to commodity trading accounts or
other commodity brokerage accounts incurred in the ordinary
course of business and (iii) in favor of banking
institutions arising as a matter of law encumbering deposits
(including the right of set-off) and which are within the
general parameters customary in the banking industry;
(18) Liens that are contractual rights of set-off
(i) relating to the establishment of depository relations
with banks not given in connection with the issuance of Debt,
(ii) relating to pooled deposit or sweep accounts of the
Company or any of its Subsidiaries (other than Non-Recourse
Subsidiaries) to permit satisfaction of overdraft or similar
obligations incurred in the ordinary course of business of the
Company and its Subsidiaries (other than Non-Recourse
Subsidiaries) or (iii) relating to purchase orders and
other agreements entered into with customers of the Company or
any of its Subsidiaries (other than Non-Recourse Subsidiaries)
in the ordinary course of business;
(19) Liens encumbering reasonable customary initial
deposits and margin deposits and similar Liens attaching to
commodity trading accounts or other brokerage accounts incurred
in the ordinary course of business and not for speculative
purposes;
(20) Liens on accounts receivable, payment intangibles and
related assets incurred in connection with a Receivables
Facility and limited recourse Liens on the Capital Stock of any
Receivables Subsidiary;
(21) Liens deemed to exist in connection with Investments
in repurchase agreements permitted under
Limitation on Debt; provided that
such Liens do not extend to any assets other than those assets
that are the subject of such repurchase agreement;
(22) Liens securing secured Cash Management Obligations;
(23) Liens securing the old notes (other than Additional
Notes), the New Notes and Guarantees of any of the
foregoing; and
71
(24) Liens securing obligations which, together with all
other obligations secured by Liens (excluding Liens permitted by
clauses (1) through (23) above) at the time of
determination do not exceed the greater of
(x) $15.0 million and (y) 1.5% of Consolidated
Total Assets at the time of such determination.
For purposes of determining compliance with this covenant,
(A) Liens securing Debt obligations need not be incurred
solely by reference to one category of Permitted Liens described
in clauses (1) through (24) above (or subparts
thereof) but are permitted to be incurred in part under any
combination thereof, and (B) in the event that a Lien meets
the criteria of one or more of the categories of Permitted Liens
described in clauses (1) through (24) above (or
subparts thereof), the Company shall, in its sole discretion,
classify, divide or later reclassify or redivide (based on
circumstances existing at the time of such reclassification or
redivision) such Liens (or any portions thereof) in any manner
that complies with the definition of Permitted Liens, including
by allocation to more than one other clause or subpart of the
definition of Permitted Liens, and such Liens (or portions
thereof, as applicable) will be treated as having been incurred
pursuant to only such clause, clauses or subparts (and in the
case of a subsequent division, classification or
reclassification, such Liens shall cease to be divided or
classified as it was prior to such subsequent division,
classification or reclassification). Notwithstanding the
foregoing, Permitted Liens incurred pursuant to clause (5)(i),
which shall include Liens outstanding thereunder on the issue
date of the old notes, shall not be permitted to be reclassified
or redivided after the date of the incurrence thereof.
Permitted Liens may be of any priority relative to the Liens
securing the Note Obligations, except where otherwise specified.
Limitation
on Restricted Payments
(a) The Company shall not, and shall not permit any
Subsidiary of the Company (other than a Non-Recourse Subsidiary)
to, directly or indirectly, (i) declare or pay any dividend
or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or
consolidation involving the Company) or to the holders of its
Capital Stock (except dividends or distributions payable solely
in its Non-Convertible Capital Stock or in options, warrants or
other rights to purchase its Non-Convertible Capital Stock and
except dividends or distributions payable to the Company or a
Subsidiary of the Company and, if a Subsidiary of the Company is
not wholly owned, to its equity holders as a whole, in
accordance with their holdings), (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the
Company, (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment,
the principal amount of any Subordinated Obligations, other than
(x) Subordinated Obligations with respect to Debt permitted
under clause (3) of paragraph (b) of
Limitation on Debt or (y) the
purchase, repurchase, redemption, defeasance, other acquisition
or redemption for value of the principal amount of any
Subordinated Obligations (other than Non-Contributed Existing
Subordinated Loans) in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each
case due within one year of the date of purchase, repurchase,
redemption or acquisition, (iv) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value at any
time (including at scheduled maturity) the principal amount of
any Non-Contributed Existing Subordinated Loan, or (v) make
any Investment, other than a Permitted Investment (any such
dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being
herein referred to as a Restricted Payment), if at
the time the Company or such Subsidiary makes such Restricted
Payment and after giving effect thereto (the Fair Market Value
of any such Restricted Payment, if other than in cash, shall be
determined in accordance with the provisions herein):
(1) a Default shall have occurred and be continuing (after
giving effect to such Restricted Payment);
(2) the Company is not able to incur $1.00 of additional
Debt in accordance with the provisions of paragraph (a) of
Limitation on Debt; or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments, without duplication, after the issue
date of the old notes would exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company
accrued during the period (treated as one accounting period)
from October 1, 2009, to the end of the most recent fiscal
quarter for which financial
72
statements are available (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit);
(b) the aggregate Net Cash Proceeds and the Fair Market
Value of marketable securities or other property received by the
Company from the Issue or sale of its Capital Stock (other than
Redeemable Stock, Exchangeable Stock or Designated Preferred
Stock) subsequent to the issue date of the old notes (other than
an Issuance or sale to a Subsidiary of the Company or an
employee stock ownership plan or other trust established by the
Company or any Subsidiary for the benefit of their employees);
(c) the aggregate Net Cash Proceeds and the Fair Market
Value of marketable securities or other property received by the
Company from the Issue or sale of its Capital Stock (other than
Redeemable Stock, Exchangeable Stock or Designated Preferred
Stock) to an employee stock ownership plan subsequent to the
issue date of the old notes; provided, however,
that if such employee stock ownership plan Issues any Debt, such
aggregate amount shall be limited to an amount equal to any
increase in the Consolidated Net Worth of the Company resulting
from principal repayments made by such employee stock ownership
plan with respect to Debt incurred by it to finance the purchase
of such Capital Stock;
(d) the amount by which Debt of the Company is reduced on
the Companys balance sheet upon the conversion or exchange
(other than by a Subsidiary) subsequent to the issue date of the
old notes of any Debt of the Company convertible or exchangeable
for Capital Stock (other than Redeemable Stock or Exchangeable
Stock) of the Company (less the amount of any cash, or other
property, distributed by the Company upon such conversion or
exchange);
(e) the aggregate net cash proceeds and the Fair Market
Value of marketable securities or other property received by the
Company subsequent to the issue date of the old notes as capital
contributions (which shall not be deemed to include any net cash
proceeds received in connection with (i) the issuance of
any Qualified Affiliate Debt, and (ii) any contribution
designated at the time it is made as a restricted contribution
(a Restricted Contribution));
(f) to the extent that an Investment made by the Company or
a Subsidiary subsequent to the issue date of the old notes has
theretofore been included in the calculation of the amount of
Restricted Payments, the aggregate cash proceeds and the Fair
Market Value of marketable securities or other property received
by means of (A) the sale or other disposition (other than
to the Company or a Subsidiary of the Company that is not a
Non-Recourse Subsidiary) of such Investments, or any repayments,
repurchases or redemptions of such Investments or (B) the
sale (other than to the Company or a Subsidiary of the Company
that is not a Non-Recourse Subsidiary) of the Capital Stock of a
Non-Recourse Subsidiary or a distribution from a Non-Recourse
Subsidiary (other than in each case to the extent the Investment
in such Non-Recourse Subsidiary was made by the Company or a
Subsidiary of the Company that is not a Non-Recourse Subsidiary)
of the Capital Stock of a Non-Recourse Subsidiary or a
distribution from a Non-Recourse Subsidiary (other than in each
case to the extent the Investment in such Non-Recourse
Subsidiary was made by the Company or a Subsidiary of the
Company that is not a Non-Recourse Subsidiary pursuant to
clause (xi) of paragraph (b) below or to the extent
such Investment constituted a Permitted Investment) or a
dividend from a Non-Recourse Subsidiary; and
(g) in the case a Subsidiary of the Company ceases to be a
Non-Recourse Subsidiary (but remains a Subsidiary) after the
issue date of the old notes, the Fair Market Value of the
Investment in such Non-Recourse Subsidiary, to the extent the
Investment in such Non-Recourse Subsidiary was made by the
Company or a Subsidiary (other than a Non-Recourse Subsidiary)
pursuant to clause (xi) of paragraph (b) below or to
the extent such Investment constituted a Permitted Investment.
Notwithstanding the foregoing, the Company may take actions to
make a Restricted Payment in anticipation of the occurrence of
any of the events described in this paragraph (a) or
paragraph (b) below; provided, however, that
the making of such Restricted Payment shall be conditional upon
the occurrence of such event. For the purposes of this paragraph
(a) and paragraph (b) below, an Investment shall be
measured as of the date it is made and without giving effect to
subsequent changes in value.
73
(b) Paragraph (a) shall not prohibit the following:
(i) any Restricted Payment made by exchange for, or in an
amount equal to the proceeds of an Issue or sale of, Capital
Stock of the Company (other than Redeemable Stock or
Exchangeable Stock and other than Capital Stock issued or sold
to a Subsidiary or an employee stock ownership plan)
(Refunding Capital Stock) or of a cash capital
contribution to the Company, in each case, occurring within
60 days of such Restricted Payment, provided,
however, that (x) such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments
and (y) the Net Cash Proceeds from such sale shall be
excluded from clauses (3)(b), (3)(c) and 3(e) of paragraph
(a) above;
(ii) any purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of
(A) Subordinated Obligations of the Company or a Subsidiary
Guarantor made by exchange for, or out of the proceeds of a sale
of, Debt Issued pursuant to clause (b)(5) of the covenant
described under Limitation on Debt or
other Subordinated Obligations or (B) Existing Subordinated
Loans by exchange for or out of the proceeds of Refinancing Debt
permitted to be incurred under clause (b)(18) of the covenant
described under Limitation on Debt, in
each case, occurring within 60 days of such purchase,
redemption, defeasance or other acquisition or retirement for
value; provided, however, that any such purchase,
repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the
amount of Restricted Payments;
(iii) dividends, distributions or the consummation of any
irrevocable redemption paid within 60 days after the date
of declaration of the dividend, distribution or the giving of
the redemption notice, or Restricted Payments made within
60 days after the making of a binding commitment in respect
thereof, if at such date of declaration or of such commitment
such dividend, distribution, redemption notice or other
Restricted Payment would have complied with paragraph (a);
provided, however, that at the time of payment of
such dividend or the making of such Restricted Payment, no Event
of Default shall have occurred and be continuing after giving
effect to such payment; provided, further,
however, that such dividend or other Restricted Payment
shall be included in the calculation of the amount of Restricted
Payments;
(iv) so long as no Default has occurred and is continuing
after giving effect to such transactions: (A) amounts paid
or property transferred pursuant to the Permitted Transactions
and (B) dividends or distributions, redemptions of Capital
Stock and other Restricted Payments in an aggregate amount not
to exceed the sum of all Restricted Contributions;
provided, however, that such amounts paid,
property transferred, dividends, distributions, redemptions and
Restricted Payments shall be excluded in the calculation of the
amount of Restricted Payments;
(v) Restricted Payments in an aggregate amount not to
exceed $5.0 million per annum from the issue date of the
old notes (net of any applicable cash exercise price actually
received by the Company) made from time to time to purchase,
redeem, acquire or retire for value any Capital Stock of the
Company or Parent held by, or any Restricted Payments made to,
any future, current or former director, officer, manager,
consultant or employee of the Company or Parent or any
Subsidiary of the Company (other than a Non-Recourse Subsidiary)
or their estates or the beneficiaries of their estates;
provided, however, that amounts available pursuant
to this clause (v) to be utilized for Restricted Payments
during any such year may be carried forward and utilized in any
succeeding year; provided, further,
however, that such amounts shall be excluded in the
calculation of the amount of Restricted Payments;
(vi) any purchase, repurchase, redemption, defeasance or
other acquisition by any Non-Recourse Subsidiary of Non-Recourse
Debt of such Non-Recourse Subsidiary; provided,
however, that the amount of such purchase, repurchase,
redemption, defeasance or other acquisition shall be excluded in
the calculation of the amount of Restricted Payments;
(vii) any purchase of any other Subordinated Obligations
pursuant to an option given to a holder of such Subordinated
Obligations pursuant to a Change of Control or
Limitation on Asset Sales covenant which
is not materially more favorable taken as a whole to the holders
of such Subordinated Obligations than the provisions of the
Indenture relating to a Change of Control or
Limitation on Asset Sales, respectively,
are to holders as determined in good faith by an Officer of the
Company, the determination of which shall be
74
evidenced by an Officers Certificate; provided,
however, that no such purchases shall be permitted prior
to the time when the Company shall have purchased all New Notes
tendered for purchase and not withdrawn by holders electing to
have their New Notes purchased pursuant to the provisions of
Change of Control or
Limitation on Asset Sales;
provided, further, however, that such
purchases shall be excluded from the calculation of Restricted
Payments;
(viii) the declaration and payment of dividends by the
Company to, or the making of loans by the Company to, its Parent
in amounts required for the Parent to pay:
(a) actual expenses, other than those paid to Affiliates of
the Company, incidental to being a publicly reporting company;
(b) (without duplication for amounts paid pursuant to
clause (iv)(A) of this paragraph) so long as the Company is a
member of a consolidated, combined, unitary or similar group
with the Parent for U.S. federal, state or local income tax
purposes, (1) federal, state and local income taxes
incurred by such parent companies, but only to the extent such
income taxes are attributable to the income of the Company and
the Subsidiaries (other than Non-Recourse Subsidiaries),
provided that in each case the amount of such payments
with respect to any fiscal year does not exceed the amount that
the Company and the Subsidiaries (other than Non-Recourse
Subsidiaries) would have been required to pay in respect of such
income taxes for such fiscal year were the Company and its
Subsidiaries (other than Non-Recourse Subsidiaries) a
consolidated or combined group of which the Company was the
common parent, and (2) amounts required to pay federal,
state and local income taxes to the extent attributable to the
income of the Non-Recourse Subsidiaries, if any, but only to the
extent of the amount actually received by the Company from such
Non-Recourse Subsidiaries; and
(c) reasonable fees and expenses incurred in connection
with any successful or unsuccessful debt or equity offering or
any successful or unsuccessful acquisition or strategic
transaction by the Parent;
provided, however, that such amounts paid shall be
excluded in the calculation of the amount of Restricted Payments;
(ix) so long as no Default shall have occurred and be
continuing (after giving effect thereto), other Restricted
Payments in an amount which, when taken together with all other
Restricted Payments made pursuant to this clause (ix) and
then outstanding, does not exceed $20.0 million;
provided, however, that such amounts shall be
excluded in the calculation of the amount of Restricted Payments;
(x) repurchases of Capital Stock deemed to occur upon the
exercise of stock options or warrants if such Capital Stock
represents a portion of the exercise price of such options or
warrants; provided, however, that such amounts
shall be excluded in the calculation of the amount of Restricted
Payments;
(xi) Investments in Non-Recourse Subsidiaries, having an
aggregate Fair Market Value, taken together with all other
Investments made pursuant to this clause (xi) that are at
the time outstanding, without giving effect to the sale of a
Non-Recourse Subsidiary to the extent the proceeds of such sale
do not consist of cash or marketable securities, not to exceed
the greater of (x) $20.0 million and (y) 2.0% of
Consolidated Total Assets at the time of such Investment, net of
the cash return received after the issue date of the old notes
as a result of any sale for cash, repayment, redemption,
liquidation, distribution or other cash realization (not
included in Consolidated Net Income), not to exceed the amount
of such Investments after the issue date of the old notes;
provided, however, that such amounts shall be
excluded in the calculation of the amount of Restricted Payments;
(xii) payments of Receivables Fees other than to a Parent;
provided, however, that such amounts shall be
excluded in the calculation of the amount of Restricted Payments;
(xiii) the distribution, as a dividend or otherwise (and
the declaration of such dividend) of shares of Capital Stock of,
or Debt owed to the Company or any Subsidiary (other than a
Non-Recourse Subsidiary) by a Non-Recourse Subsidiary;
provided, however, that such amounts shall be
excluded in the calculation of the amount of Restricted Payments;
75
(xiv) so long as no Default has occurred and is continuing
(after giving effect thereto), additional Restricted Payments to
a Parent or any Affiliate of the Company, whether in respect of
management fees or otherwise, in an aggregate amount not to
exceed $5.0 million in any fiscal year; provided,
that the Company may carry over and pay in any subsequent fiscal
year, in addition to the amounts permitted for such fiscal year,
any portion of the amounts otherwise permitted for prior fiscal
years to be paid pursuant to this clause (xiv) that were
not in fact paid; provided, further,
however, that such amounts shall be excluded in the
calculation of the amount of Restricted Payments;
(xv) so long as no Default has occurred and is continuing
(after giving effect to such transaction), dividends paid on the
Companys common Capital Stock (or the payment of dividends
to any direct or indirect parent of the Company to fund the
payment by such Parent of the Company of dividends on such
entitys common Capital Stock) of up to 6.0% per annum of
the Net Cash Proceeds received by or contributed to the Company
from any public offering of Capital Stock after the issue date
of the old notes, other than public offerings with respect to
Capital Stock of the Company or any Parent registered on
Form S-4
or
Form S-8
and other than any public sale constituting a Restricted
Contribution; provided, however, that such
dividend or other Restricted Payment shall be included in the
calculation of the amount of Restricted Payments;
(xvi) any deemed dividend for accounting
purposes resulting from, or in connection with the filing of a
consolidated or combined federal income tax return by any Parent
or any direct or indirect parent or Subsidiary of any Parent
(and not involving any cash distribution from the Company except
as permitted by a Tax Sharing Agreement); provided,
however, that such amounts shall be excluded in the
calculation of the amount of Restricted Payments;
(xvii) (A) the declaration and payment of dividends to
holders of any class or series of Designated Preferred Stock
(other than Redeemable Stock or Exchangeable Stock) issued by
the Company after the issue date of the old notes; and
(B) the declaration and payment of dividends to a Parent,
the proceeds of which will be used to fund the payment of
dividends to holders of any class or series of Designated
Preferred Stock (other than Redeemable Stock or Exchangeable
Stock) of such parent company issued after the issue date of the
old notes; provided that the aggregate amount of
dividends paid pursuant to clauses (A) and (B) shall
not exceed the aggregate amount of cash actually contributed to
the Company from the sale of such Designated Preferred Stock;
provided, however, in the case of each of
(A) and (B) of this clause (xvii), that for the most
recently ended four full fiscal quarters for which financial
statements are available immediately preceding the date of
issuance of such Designated Preferred Stock, after giving effect
to such issuance on a Pro Forma basis, the Company would have
had a Consolidated EBITDA Coverage Ratio of at least 2.00 to
1.00; provided, however, that such amounts
specified in (A) and (B) above shall be excluded in
the calculation of the amount of Restricted Payments;
(xviii) (A) the declaration and payment of dividends
to holders of any class or series of Redeemable Stock or
Exchangeable Stock of the Company or any Subsidiary or Preferred
Stock of any Subsidiary issued in accordance with the covenant
described under Limitation on Debt to
the extent such dividends are included in the definition of
Consolidated Interest Expense and (B) payment of any
redemption price or liquidation value of any such Redeemable
Stock, Exchangeable Stock or Preferred Stock when due in
accordance with its terms; provided, however, that
such amounts shall be excluded in the calculation of the amount
of Restricted Payments; and
(xix) any purchase, repurchase, redemption, other
acquisition, payment or prepayment in respect of the Contributed
Existing Subordinated Loans; provided, however,
that such amounts shall be excluded in the calculation of the
amount of Restricted Payments.
For purposes of determining compliance with this covenant, in
the event that a proposed Restricted Payment (or portion
thereof) meets the criteria of more than one of the categories
of Restricted Payments described in clauses (i) through
(xix) above, or is entitled to be incurred pursuant to
paragraph (a) of this covenant, the Company will be
entitled to classify or re-classify such Restricted Payment (or
portion thereof) based on circumstances existing on the date of
such reclassification in any manner that complies with this
covenant and such Restricted Payment will be treated as having
been made pursuant to only such clause or clauses or paragraph
(a) of this covenant.
76
Limitation
on Restrictions on Distributions from Subsidiaries
The Company shall not, and shall not permit any Subsidiary of
the Company that is not a Subsidiary Guarantor to, create or
otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any
Subsidiary of the Company that is not a Subsidiary Guarantor to
(i) pay dividends or make any other distributions on its
Capital Stock to the Company (it being understood that the
priority of any Preferred Stock in receiving dividends or
liquidating distributions prior to dividends or liquidating
distributions being paid on common stock shall not be deemed a
restriction on the ability to make distributions on Capital
Stock), (ii) pay any Debt owed to the Company or to a
Subsidiary Guarantor or (iii) transfer any of its property
or assets to the Company, except:
(1) any encumbrance or restriction in effect at or entered
into on the issue date of the old notes, including pursuant to
the Credit Agreements, the Indenture Documents, the Security
Documents, the Intercreditor Agreement, any agreement entered
into pursuant thereto, any Hedging Obligation or any other
agreement;
(2) any encumbrance or restriction with respect to a
Subsidiary of the Company pursuant to an agreement relating to
any Debt Issued by such Subsidiary or pursuant to an agreement
or instrument governing the Capital Stock of such Subsidiary on
or prior to the date on which such Subsidiary was acquired by
the Company (other than Debt Issued as consideration in, or to
provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a
Subsidiary of the Company or was acquired by the Company) and
outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting an Issuance of Debt; provided, however,
that any such encumbrance or restriction with respect to any
Subsidiary is no less favorable to the holders of New Notes than
the least favorable of the encumbrances and restrictions with
respect to such Subsidiary contained in the agreements referred
to in clause (1) or (2) above, as determined in good
faith by an Officer of the Company, the determination of which
shall be evidenced by an Officers Certificate;
(4) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases, contracts and
licenses;
(5) encumbrances or restrictions contained in
(i) agreements governing Liens permitted to be incurred
under the provisions of the Limitation on
Liens covenant above, and (ii) provisions limiting
the disposition or distribution of assets or property in joint
venture agreements, asset sale agreements, stock sale agreements
and other similar agreements, which limitation is in each case
applicable only to the assets or interests that are the subject
of such agreements but which may include customary restrictions
with respect to a Subsidiary pursuant to an agreement that has
been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such
Subsidiary;
(6) any encumbrance or restriction binding on a Foreign
Subsidiary contained in an agreement pursuant to which such
Foreign Subsidiary has Issued Debt permitted under the covenant
Limitation on Debt above;
(7) any encumbrance or restriction relating to a
Non-Recourse Subsidiary;
(8) purchase money obligations for property acquired in the
ordinary course of business and Capital Lease Obligations that
impose restrictions of the nature discussed in clause (iii)
above on the property so acquired;
(9) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business;
(10) restrictions created in connection with any
Receivables Facility; provided that in the case of
Receivables Facilities established after the issue date of the
old notes, such restrictions are necessary or advisable, in the
good faith determination of the Company, to effect such
Receivables Facility;
(11) restrictions or conditions contained in any trading,
netting, operating, construction, service, supply, purchase or
other agreement to which the Company or any of its Subsidiaries
(other than a Non-Recourse Subsidiary) is a party entered into
in the ordinary course of business; provided that such
agreement prohibits the encumbrance of solely the property or
assets of the Company or such Subsidiary that are the subject of
such
77
agreement, the payment rights arising thereunder or the proceeds
thereof and does not extend to any other asset or property of
the Company or such Subsidiary or the assets or property of any
other Subsidiary of the Company (other than a Non-Recourse
Subsidiary);
(12) any instrument governing any Debt or Capital Stock of
a Person that is a Non-Recourse Subsidiary as in effect on the
date that such Person becomes a Subsidiary that is not a
Non-Recourse Subsidiary, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person who became a Subsidiary that is
not a Non-Recourse Subsidiary, or the property or assets of the
Person who became a Subsidiary that is not a Non-Recourse
Subsidiary; provided that, in the case of Debt, the
incurrence of such Debt as a result of such Person becoming a
Subsidiary that is not a Non-Recourse Subsidiary was permitted
by the terms of the Indenture; and
(13) any encumbrances or restrictions of the type referred
to in clauses (i), (ii) and (iii) of the first
paragraph above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (1) through
(12) above; provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith
judgment of the Company, not materially more restrictive, taken
as a whole, with respect to such encumbrance and other
restrictions than those prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding,
replacement or refinancing; provided, further,
that with respect to contracts, instruments or obligations
existing on the issue date of the old notes, any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are in the good faith
judgment of the Company not materially more restrictive, taken
as a whole, with respect to such encumbrances and other
restrictions than those contained in such contracts, instruments
or obligations as in effect on the issue date of the old notes.
Limitation
on Asset Sales
The Company shall not, and shall not permit any Subsidiary of
the Company (other than a Non-Recourse Subsidiary) to consummate
any Asset Sale unless:
(a) the Company or such Subsidiary receives consideration
at the time of such Asset Sale at least equal to the Fair Market
Value of the assets subject to such Asset Sale; and
(b) at least 75% of the consideration paid to the Company
or such Subsidiary in connection with such Asset Sale is in the
form of cash or Cash Equivalents (or the foreign equivalent of
Cash Equivalents) or the assumption by the purchaser of
liabilities (including in the case of the sale of the Capital
Stock of a Subsidiary of the Company, liabilities of the Company
or such Subsidiary) of the Company or any Subsidiary (other than
a Non-Recourse Subsidiary) (other than liabilities that are by
their terms subordinated to the New Notes or any guarantee
related thereto) as a result of which the Company and the
Subsidiaries (other than Non-Recourse Subsidiaries) are no
longer obligated with respect to such liabilities.
For purposes of the foregoing clause (b), each of the following
shall be deemed to be cash:
(1) any securities, notes, other obligations or assets
received by the Company or the Subsidiary of the Company (other
than a Non-Recourse Subsidiary) from a transferee that are
converted by the Company or such Subsidiary into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents
received) within 180 days following the closing of such
Asset Sale;
(2) any Designated Noncash Consideration received by the
Company or the Subsidiary (other than Non-Recourse Subsidiaries)
in such Asset Sale having an aggregate Fair Market Value
(measured at the time received and without giving effect to
subsequent changes in value), taken together with all other
Designated Noncash Consideration received pursuant to this
clause (2) then outstanding, not to exceed the greater of
(i) 5% of Consolidated Total Assets and
(ii) $50.0 million; and
(3) any readily marketable securities which the Company
intends, in good faith, to liquidate promptly after such Asset
Sale.
78
The Net Available Cash (or any portion thereof) from Asset Sales
may be applied by the Company or a Subsidiary (other than a
Non-Recourse Subsidiary), to the extent the Company or such
Subsidiary elects (or is required by the terms of any Debt):
(a) to prepay, repay, purchase or defease Pari Passu Debt
of the Company or a Subsidiary Guarantor or any Debt of any
other Subsidiary (other than a Non-Recourse Subsidiary)
(excluding, in any such case, any Debt owed to the Company or a
Subsidiary of the Company that is not a Non-Recourse
Subsidiary); provided that (A) in connection with
any such prepayment, repayment or purchase of any Debt (other
than the Revolving Credit Facility) Issued pursuant to
clause (1) of paragraph (b) of
Limitation on Debt, the Company or such
Subsidiary shall be required to retire permanently such Debt in
an amount equal to the principal so prepaid, repaid or purchased
and (B) in the case of an Asset Sale of Collateral by the
Company or a Subsidiary Guarantor, the Pari Passu Debt being
prepaid, repaid or purchased shall be Debt that is secured by a
Lien on Collateral; or
(b) to reinvest in Additional Assets (including by means of
an Investment in Additional Assets by a Subsidiary (other than a
Non-Recourse Subsidiary) with Net Available Cash received by the
Company or Subsidiary); provided that (A) in the
case of an Asset Sale of Collateral (other than Capital Stock of
a Subsidiary that is not a Subsidiary Guarantor) by the Company
or a Subsidiary Guarantor, any such Additional Assets (including
the assets of a Person whose Capital Stock is acquired and
becomes a Subsidiary of the Company) shall be held by the
Company or a Subsidiary Guarantor and pledged as Collateral in
accordance with the Security Documents and the Intercreditor
Agreement, to the extent such Additional Assets are not Excluded
Property and (B) in the case of an Asset Sale by the
Company or a Subsidiary Guarantor of Capital Stock of a
Subsidiary that is not a Subsidiary Guarantor, the acquired
Additional Assets may be held in a Subsidiary that is not a
Subsidiary Guarantor, provided that the Capital Stock of
such Subsidiary, to the extent it does not constitute Excluded
Property, is pledged to the extent required by the Security
Documents and the Intercreditor Agreement.
Any Net Available Cash from an Asset Sale not applied in
accordance with the preceding paragraph within 365 days
from the date of the receipt of such Net Available Cash or
reasonably necessary for investment in identified Additional
Assets in respect of a project that shall have been commenced,
and for which binding contractual commitments have been entered
into, prior to the end of such
365-day
period and that shall not have been completed or abandoned shall
constitute Excess Proceeds; provided,
however, that the amount of any Net Available Cash that
becomes reasonably necessary as contemplated above and any Net
Available Cash that had been reasonably necessary in respect of
a project that is abandoned or completed shall also constitute
Excess Proceeds at the time any such Net Available
Cash ceases to be reasonably necessary or at the time the
relevant project is so abandoned or completed, as applicable;
provided, further, however, that the amount
of any Net Available Cash that continues to be reasonably
necessary for investment in identified Additional Assets and
that is not actually so invested within twelve months from the
date such Net Available Cash was determined to be reasonably
necessary for investment in identified Additional Assets in
respect of a project that shall have been commenced shall also
constitute Excess Proceeds. Pending application of
Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Cash Equivalents (or the foreign
equivalent of Cash Equivalents), applied to temporarily reduce
revolving credit indebtedness or used for any other purpose
permitted by the Indenture (other than to make any Restricted
Payments).
When the aggregate amount of Excess Proceeds exceeds
$25.0 million, the Company will be required to make an
offer to repurchase (the Prepayment Offer) the New
Notes, which offer shall be in the amount of the Allocable
Excess Proceeds (rounded to the nearest $1,000), on a pro
rata basis according to principal amount, at a purchase
price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, to the repurchase date (subject to
the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), in
accordance with the procedures (including prorating in the event
of oversubscription) set forth in the Indenture. To the extent
that any portion of the amount of such Excess Proceeds remains
after compliance with the preceding sentence and provided
that all holders of New Notes have been given the
opportunity to tender their New Notes for repurchase in
accordance with the Indenture, the Company or such Subsidiary
may use such
79
remaining amount for any other purpose permitted by the
Indenture, and the amount of Excess Proceeds will be reset to
zero. The term Allocable Excess Proceeds shall mean
the product of:
(a) the Excess Proceeds and
(b) a fraction,
(1) the numerator of which is the aggregate principal
amount of the New Notes outstanding on the date of the
Prepayment Offer, and
(2) the denominator of which is the sum of the aggregate
principal amount of the New Notes outstanding on the date of the
Prepayment Offer and the aggregate principal amount of other
Debt of the Company or a Subsidiary Guarantor outstanding on the
date of the Prepayment Offer that is Pari Passu Debt and subject
to terms and conditions in respect of Asset Sales that require
the Company or such Subsidiary Guarantor to make an offer to
repurchase such Debt out of the proceeds of the Asset Sale which
shall have caused the Company to make the Prepayment Offer.
Within five business days after the Company is obligated to make
a Prepayment Offer as described in the preceding paragraph, the
Company shall send a written notice, by first-class mail, to the
holders of New Notes, accompanied by such information regarding
the Company and its Subsidiaries as the Company in good faith
believes will enable such holders to make an informed decision
with respect to such Prepayment Offer. Such notice shall state,
among other things, the purchase price and the repurchase date,
which shall be, subject to any contrary requirements of
applicable law, a business day no earlier than 30 days nor
later than 60 days from the date such notice is mailed.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the
repurchase of notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this
covenant by virtue thereof.
Limitation
on Transactions with Affiliates
(a) The Company shall not, and shall not permit any of its
Subsidiaries (other than any Non-Recourse Subsidiary) to,
conduct any business or enter into any transaction or series of
similar transactions (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with
any Affiliate of the Company involving aggregate payments or
consideration in excess of $10.0 million, unless:
(i) the terms of such business, transaction or series of
transactions are not materially less favorable when taken as a
whole to the Company or such Subsidiary as terms that would be
obtainable at the time for a comparable transaction or series of
similar transactions in arms-length dealings with an
unrelated third Person and
(ii) to the extent that such business, transaction or
series of transactions (other than Debt Issued by the Company
which is permitted under Limitation on
Debt) is known by the Board of Directors of the Company to
involve an Affiliate of the Company, other than any purchase or
sale of inventory in the ordinary course of business (an
Inventory Transaction), involving aggregate payments
or other consideration in excess of $20.0 million, such
transaction or series of related transactions has been approved
(and the value of any noncash consideration has been determined)
by all of the independent members of the Board of Directors of
the Company and the Company delivers to the Trustee an
Officers Certificate evidencing such approval (provided
that if no member of the Board of Directors of the Company
is independent, the Company may deliver to the Trustee a letter
from a nationally recognized investment banking firm stating
that the financial terms of such transaction are fair to the
Company from a financial point of view or meets the requirements
of clause (a)(i) of this covenant).
80
(b) The provisions of paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to
Limitation on Restricted Payments and
the definition of Permitted Investment;
(ii) any transaction between the Company and any of its
Subsidiaries;
(iii) any transaction between Subsidiaries of the Company;
(iv) any transaction between the Company or a Subsidiary of
the Company and its own employee stock ownership plan and the
issuance or transfer of Capital Stock (other than Redeemable
Stock) of the Company to any Permitted Holder or to any
director, manager, officer, employee or consultant of the
Company, its Subsidiaries or any direct or indirect parent
company thereof (or their estates, spouses or former spouses);
(v) any transaction with an officer, director, manager,
employee or consultant of the Company, of Parent or of any
Subsidiary of the Company (including compensation or employee
benefit arrangements with any such officer, director, manager,
employee or consultant);
(vi) any business or transaction with a Qualified Joint
Venture;
(vii) any transaction which is a Permitted Transaction;
(viii) any transaction pursuant to which a Parent or any
Affiliate of the Company will provide the Company and its
Subsidiaries at their request and at the cost to such Parent or
Affiliate with certain allocated services, including services to
be purchased from third party providers, such as legal and
accounting services, tax, consulting, financial advisory,
corporate governance, insurance coverage and other services;
(ix) payments by the Company or a Subsidiary of the Company
to a Parent or any Affiliate of the Company for any financial
advisory, financing, underwriting or placement services or in
respect of other investment banking activities, including in
connection with acquisitions or divestitures, which payments are
approved by a majority of the members of the Board of Directors
of the Company in good faith;
(x) any merger, consolidation or reorganization of the
Company with an Affiliate of Company solely for the purpose of
(a) reorganizing to facilitate an initial public offering
of securities of Company or a direct or indirect parent of
Company, (b) forming or collapsing a holding company
structure or (c) reincorporating Company in a new
jurisdiction;
(xi) transactions in which the Company or any Subsidiary of
the Company (other than a Non-Recourse Subsidiary), as the case
may be, delivers to the Trustee a letter from a nationally
recognized investment banking firm stating that such transaction
is fair to the Company or such Subsidiary from a financial point
of view or meets the requirements of clause (a)(i) of this
covenant;
(xii) transactions with customers, clients, suppliers, or
purchasers or sellers of goods or services, in each case in the
ordinary course of business and otherwise in compliance with the
terms of the Indenture that are fair to the Company and the
Subsidiaries of the Company (other than Non-Recourse
Subsidiaries), in the good faith determination of the Board of
Directors or the senior management of the Company, or are on
terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party;
(xiii) the Transactions and the payment of all premiums,
fees, expenses and other amounts related to the Transactions;
(xiv) investments by a Parent or any Affiliate of the
Company in securities of the Company or any of its Subsidiaries
(other than Non-Recourse Subsidiaries) so long as (i) the
investment is being offered generally to other investors on the
same or more favorable terms and (ii) the investment to be
held by such Parent or Affiliate constitutes less than 5.0% of
the proposed or outstanding issue amount of such class of
securities;
(xv) sales or repurchases of accounts receivable, payment
intangibles and related assets or participations therein, in
connection with, or any other transactions relating to, any
Receivables Facility;
81
(xvi) any transaction with an Affiliate in which the
consideration paid by the Company or any Subsidiary of the
Company (other than a Non-Recourse Subsidiary) consists only of
Capital Stock of the Company (other than Redeemable Stock or
Exchangeable Stock); and
(xvii) any transaction contemplated by clauses (viii)
or (xiv) of paragraph (b) of the covenant entitled
Limitation on Restricted Payments.
Future
Subsidiary Guarantors; Releases of Subsidiary
Guarantees
The Company will not permit any of its Wholly-Owned Recourse
Subsidiaries that is a Domestic Subsidiary (or Partially-Owned
Recourse Subsidiary if such Partially-Owned Recourse Subsidiary
is a Domestic Subsidiary and guarantees other capital markets
debt securities of the Company or any Subsidiary Guarantor),
other than a Subsidiary Guarantor or an Immaterial Subsidiary,
to guarantee the payment of any Debt of the Company or any other
Subsidiary Guarantor unless:
(1) such Subsidiary within 30 days (or such later date
as the Trustee may agree) executes and delivers a supplemental
indenture to the Indenture providing for a Subsidiary Guarantee
by such Subsidiary, except that with respect to a guarantee of
Debt of the Company or any Subsidiary Guarantor that is by its
express terms subordinated in right of payment to the New Notes
or such Subsidiary Guarantors Subsidiary Guarantee, any
such guarantee by such Subsidiary with respect to such Debt
shall be subordinated in right of payment to such Subsidiary
Guarantee substantially to the same extent as such Debt is
subordinated to the New Notes; and
(2) such Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Subsidiary of the Company
(other than a Non-Recourse Subsidiary) as a result of any
payment by such Subsidiary under its Subsidiary Guarantee prior
to payment in full of the New Notes;
provided that this covenant shall not be applicable to
(x) any guarantee of any Subsidiary of the Company that
existed at the time such Person became a Subsidiary of the
Company and was not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the
Company or (y) any guarantee of any Subsidiary of the
Company that was incurred at the time such Person became a
Subsidiary of the Company in connection with (A) Debt
(other than Debt of the Company or any Subsidiary Guarantor)
that existed at such time or the proceeds of which were used to
make such acquisition or (B) Debt (other than Debt of the
Company or a Subsidiary Guarantor) that is permitted to be
secured by clauses (3) or (4) of the definition of
Permitted Liens or clause (7) of the definition of
Permitted Liens (but only to the extent relating to the
refinancing, refunding, extension, renewal or replacement of the
Liens permitted under any of the foregoing clauses).
Any Subsidiary Guarantee of a Subsidiary Guarantor provided
under the Indenture shall be released:
(1) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, if all of
the Capital Stock or all or substantially all of the assets of
such Subsidiary is sold or otherwise disposed of (including by
way of merger or consolidation) to a Person other than the
Company or a Subsidiary of the Company (other than a
Non-Recourse Subsidiary) and such sale or disposition does not
violate the provisions under Limitation on
Asset Sales;
(2) upon request of the Company without consent unless,
within 20 Business Days after written notice of the proposed
release of such Subsidiary Guarantee is mailed to the Trustee
and the holders, holders of 25% of the outstanding principal
amount of New Notes deliver to the Company a written objection
to such release;
(3) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, if the
Company designates such Subsidiary Guarantor to be a
Non-Recourse Subsidiary in accordance with the applicable
provisions of the Indenture;
(4) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, upon legal
defeasance or satisfaction and discharge of the Indenture as
provided under the captions Defeasance
and Satisfaction and Discharge;
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(5) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, upon a sale
of Capital Stock which causes such Subsidiary Guarantor to cease
to be a Subsidiary if such sale does not violate any of the
provisions of the Indenture;
(6) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, if the
Company has satisfied the conditions to covenant defeasance as
provided under the caption Defeasance;
(7) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, if such
Subsidiary Guarantor no longer has any obligations under any
Debt that would require it to become a guarantor pursuant to
this covenant;
(8) with the consent of holders of a majority in principal
amount of the New Notes then outstanding (provided, that
if such Subsidiary Guarantor is a Significant Subsidiary, the
consent of holders of 66.67% of the aggregate principal amount
of New Notes then outstanding shall be required for such
release); or
(9) automatically and without any action required on the
part of the Trustee or any holder of the New Notes, upon request
of the Company without consent if the Fair Market Value of the
assets of the related Subsidiary Guarantor, together with the
Fair Market Value of the assets of other Subsidiary Guarantors
whose Subsidiary Guarantee was released under this
clause (9) in the same calendar year, do not exceed
$10.0 million (subject to a cumulative carryover for
amounts not used in any prior calendar year).
At the request of the Company, the Trustee shall execute and
deliver an instrument evidencing such release and any other
document or instrument necessary for such release.
Commission
Reports
Whether or not required by the rules and regulations of the
Commission, so long as any New Notes are outstanding, the
Company will furnish to the Trustee within the time periods
specified in the Commissions rules and regulations:
(1) all quarterly and annual reports that would be required
to be filed or furnished with the Commission on
Forms 10-Q
and 10-K if
the Company were required to file or furnish such
reports; and
(2) all current reports that would be required to be filed
with the Commission on Form
8-K if the
Company were required to file such reports.
All such reports will be prepared in all material respects in
accordance with all of the rules and regulations applicable to
such reports. Each annual report on
Form 10-K
will include a report on the Companys consolidated
financial statements by the Companys certified independent
accountants. In addition, following the consummation of the
Registered Exchange Offer, the Company will file or furnish, as
applicable, a copy of each of the reports referred to in
clauses (1) and (2) above with the Commission for
public availability within the time periods specified in the
rules and regulations (including
Rules 12b-25
and 12h-5
under the Exchange Act) applicable to such reports (unless the
Commission will not accept such a filing).
If, at any time after consummation of the Registered Exchange
Offer, the Company is no longer subject to the periodic
reporting requirements of the Exchange Act for any reason, the
Company will nevertheless continue filing the reports specified
in the preceding paragraphs of this covenant with the Commission
within the time periods specified above unless the Commission
will not accept such a filing (in which case the Company shall
post such reports on a publicly available portion of its
website). The Company will not take any action for the purpose
of causing the Commission not to accept any such filings.
In addition, the Company agreed that, for so long as any Notes
remain outstanding, if at any time it is not required to file
with the Commission the reports required by the preceding
paragraphs, it will furnish to the holders of Notes and
prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
If at any time the New Notes are guaranteed by a direct or
indirect parent of the Company, and such company has complied
with the reporting requirements of Section 13 or 15(d) of
the Exchange Act, if applicable, and has
83
filed with the Commission, the reports described herein with
respect to such company, as applicable (including any financial
information required by
Regulation S-X
under the Securities Act), the Company shall be deemed to be in
compliance with the provisions of this covenant. Any information
filed with, or furnished to, the Commission shall be deemed to
have been made available to the Trustee in accordance with this
covenant. The subsequent filing or making available of any
report required by this covenant shall be deemed automatically
to cure any Default or Event of Default resulting from the
failure to file or make available such report within the
required time frame.
Notwithstanding the foregoing, such requirements shall be deemed
satisfied prior to the commencement of the Registered Exchange
Offer or the effectiveness of the shelf registration statement
contemplated by the Registration Agreement by the filing with
the Commission of the registration statement for such Registered
Exchange Offer or the shelf registration statement contemplated
by the Registration Agreement, and any amendments thereto, with
such financial information that satisfies
Regulation S-X
of the Securities Act.
Any subsequent restatement of financial statements shall have no
retroactive effect for purposes of calculations previously made
pursuant to the covenants contained in the Indenture.
Successor
Company
(a) The Company may not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all its
assets to, any Person, unless: (i) the resulting, surviving
or transferee Person (if not the Company) is organized and
existing under the laws of the United States of America, any
State thereof or the District of Columbia and such Person
expressly assumes by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Indenture and the
New Notes; (ii) immediately after giving Pro Forma effect
to such transaction and other related transactions (and treating
any Debt which becomes an obligation of the resulting, surviving
or transferee Person or any of its Subsidiaries as a result of
such transaction as having been issued by such Person or such
Subsidiary at the time of such transaction), no Default has
occurred and is continuing; (iii) immediately after giving
Pro Forma effect to such transaction and other related
transactions, the resulting, surviving or transferee Person
would either (A) be able to incur at least $1.00 of Debt
pursuant to paragraph (a) of the
Limitation on Debt covenant or
(B) have a Consolidated EBITDA Coverage Ratio for the most
recently ended four full fiscal quarters for which financial
statements are available that is greater than or equal to that
of the Company immediately prior to giving effect to such
transaction; and (iv) the Company delivers to the Trustee
an Officers Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture;
provided that, without complying with this clause (a),
(A) a Subsidiary Guarantor may consolidate with or merge
with or into, or convey, transfer or lease all or substantially
all its assets to, the Company or another Subsidiary Guarantor,
and (B) any Subsidiary that is not a Subsidiary Guarantor
or a Non-Recourse Subsidiary may consolidate with or merge with
or into, or convey, transfer or lease all or substantially all
its assets to, the Company or another Subsidiary (other than a
Non-Recourse Subsidiary), and (C) any Non-Recourse
Subsidiary may consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to
any Person.
(b) The resulting, surviving or transferee Person will be
the successor Company and shall succeed to, and be substituted
for, and may exercise every right and power of, the predecessor
Company under the Indenture and thereafter, except in the case
of a lease, the predecessor Company will be discharged from all
obligations and covenants under the Indenture Documents, the
Security Documents and the Intercreditor Agreement.
(c) Unless the Subsidiary Guarantee of a Subsidiary
Guarantor is being released as permitted by
Future Subsidiary Guarantors; Releases of
Subsidiary Guarantees in connection with a merger,
conveyance, transfer or lease, the Company will not permit such
Subsidiary Guarantor to consolidate with or merge with or into,
or convey, transfer or lease all or substantially all of its
assets to, any Person (other than the Company or a Subsidiary
Guarantor) unless either:
(i) (A) the resulting, surviving or transferee Person
(if not such Subsidiary Guarantor) is organized and existing
under the laws of the jurisdiction under which such Subsidiary
Guarantor was organized or under the laws of the United States
of America, any State thereof or the District of Columbia and
such Person expressly assumes by a supplemental guarantee
agreement, executed and delivered to the Trustee, all the
obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee; (B) immediately after giving effect to such
84
transaction (and treating any Debt which becomes an obligation
of the resulting, surviving or transferee Person or any of its
Subsidiaries as a result of such transaction as having been
issued by such Person or such Subsidiary at the time of the
transaction), no Default has occurred and is continuing; and
(C) the Company delivers to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental
guarantee agreement (if any) comply with the Indenture; or
(ii) such transaction is an Asset Sale (and is permitted by
the covenant described under the caption
Limitation on Asset Sales) or is a
transaction that is excluded from the definition thereof.
Defaults
An Event of Default is defined in the Indenture as:
(i) a default in the payment of interest on the New Notes
when due, continued for 30 days;
(ii) a default in the payment of principal of any New Note
when due at its Stated Maturity, upon redemption, upon required
purchase, upon declaration or otherwise;
(iii) the failure by the Company to comply for 60 days
after a Default Notice is given with the other agreements
applicable to it contained in the Indenture or the New Notes
(other than those referred to in clauses (i) and
(ii) of this paragraph) (the Covenant Compliance
Provision);
(iv) the principal amount of Debt of the Company or any
Significant Subsidiary is not paid within any applicable grace
period after final maturity or is accelerated by the holders
thereof because of a default and the total principal amount of
the portion of such Debt that is unpaid or accelerated exceeds
$25.0 million or its foreign currency equivalent and such
default continues for 10 days after a Default Notice is
given (the Cross Acceleration Provision);
(v) certain events of bankruptcy, insolvency or
reorganization of the Company or a Significant Subsidiary (the
Bankruptcy Provisions);
(vi) any judgment or decree that is not covered by
insurance and is for the payment of money in excess of
$25.0 million or its foreign currency equivalent is entered
against the Company or a Significant Subsidiary and is not
discharged and either (A) an enforcement proceeding has
been commenced by any creditor upon such judgment or decree and
is unstayed or (B) there is a period of 60 days
following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or the execution
thereof stayed and, in the case of (B), such default continues
for 10 days after a Default Notice is given (the
Judgment Default Provision);
(vii) a Subsidiary Guarantee of a Significant Subsidiary
ceases to be in full force and effect (other than in accordance
with the terms of the Indenture) and such default continues for
10 days after a Default Notice is given, or a Responsible
Officer of a Subsidiary Guarantor that is a Significant
Subsidiary denies or disaffirms its obligations under its
Subsidiary Guarantee (the Guarantee Provision);
(viii) any security interest purported to be created by any
Security Document with respect to any Collateral, individually
or in the aggregate, having a Fair Market Value in excess of
$25.0 million, shall cease to be, or shall be asserted by
the Company or any Subsidiary Guarantor not to be, for a period
of 60 days after a Default Notice is given a valid,
perfected security interest in the securities, assets or
properties covered thereby, except as otherwise contemplated by
the Security Documents or permitted by the Indenture or the
Intercreditor Agreement and except to the extent that any such
loss of perfection or priority results from the failure of the
Trustee or the Collateral Agent to make any filings, renewals or
continuations (or other equivalent filings) which the Company
has indicated in the perfection certificate or other written
communications to the Trustee are required to be made or the
failure of the Trustee or the Collateral Agent to maintain
possession of certificates, instruments or other documents
actually delivered to it representing securities or other
possessory collateral pledged under the Security Documents (the
Security Provision); or
(ix) the failure by the Company or any Subsidiary Guarantor
to comply for 60 days after a Default Notice is given with
its other agreements contained in the Security Documents or
Intercreditor Agreement except for a
85
failure that would not be material to the holders of the New
Notes and would not materially affect the value of the
Collateral taken as a whole (together with the defaults
described in clauses (vii) and (viii)) (the Security
Document Provision).
However, a default under clauses (iii), (iv), (vi)(B), (vii),
(viii) and (ix) will not constitute an Event of
Default until the Trustee or the holders of at least 30% in
principal amount of the outstanding New Notes notify the Company
of the default (a Default Notice) and the Company
does not cure such default within the time specified after
receipt of such Default Notice.
If an Event of Default occurs and is continuing, the Trustee or
the holders of at least 30% in principal amount of the
outstanding New Notes by notice to the Company and the Trustee
may declare the principal of and accrued but unpaid interest on
all the New Notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and interest
on all the New Notes will by that very fact alone become and be
immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the New Notes.
Under certain circumstances, the holders of a majority in
principal amount of the outstanding New Notes may rescind any
such acceleration with respect to the New Notes and its
consequences.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, in case an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise
any of the rights or powers under the Indenture at the request
or direction of any of the holders of the New Notes unless such
holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense which might be
incurred in compliance with such request or direction. Except to
enforce the right to receive payment of principal or interest
when due, no holder of a New Note may pursue any remedy with
respect to the Indenture or the New Notes unless (i) such
holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) holders of at least 30% in
principal amount of the outstanding New Notes have requested the
Trustee to in writing pursue the remedy, (iii) such holders
have offered the Trustee reasonable security or indemnity
against any loss, liability or expense which might be incurred
in compliance with such request, (iv) the Trustee has not
complied with such request within 60 days after the receipt
thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding New
Notes have not given the Trustee a direction inconsistent with
such request within such
60-day
period. Subject to certain restrictions, the holders of a
majority in principal amount of the outstanding New Notes are
given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the
Trustee determines is unduly prejudicial to the rights of any
other holder of a New Note or that would involve the Trustee in
personal liability.
The Indenture provides that if a Default occurs and is
continuing and is known to the Trustee, the Trustee must mail to
each holder of the New Notes notice of the Default within
90 days after it occurs. Except in the case of a Default in
the payment of principal of or interest on any New Note, the
Trustee may withhold notice if and so long as a committee of its
Trust Officers in good faith determines that withholding
notice is in the interests of the holders of the New Notes. In
addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a
certificate (the Annual Certificate) indicating
whether the signers thereof know of any Default that occurred
during the previous year. The Company also is required to
deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute
certain Defaults, their status and what action the Company is
taking or proposes to take in respect thereof.
Amendment
Subject to certain exceptions, the Indenture Documents, the
Security Documents or the Intercreditor Agreement may be amended
or supplemented with the consent of the holders of a majority in
principal amount of the New Notes then outstanding and any past
default or noncompliance with any provisions may be waived with
the consent of the holders of a majority in principal amount of
the New Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the
Indenture Documents, the Security Documents or the Intercreditor
Agreement may be waived with the consent of the holders of a
majority in aggregate principal amount
86
of the then outstanding New Notes. However (a) without the
consent of each holder of an outstanding New Note affected, no
amendment, supplement or waiver may (with respect to any New
Notes held by a non-consenting holder), among other things,
(i) reduce the principal amount of New Notes whose holders
must consent to an amendment, (ii) reduce the rate of or
extend the time for payment of interest on any New Note,
(iii) reduce the principal of or extend the Stated Maturity
of any New Note, (iv) reduce the premium payable upon the
redemption of any New Note or change the time at which any New
Note may be redeemed as described under
Optional Redemption above, (v) make
any New Note payable in money other than that stated in the New
Note, (vi) make any change to the provision which protects
the right of any holder of the New Notes to receive payment of
principal of and interest on such holders New Notes on or
after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such
holders New Notes, or (vii) make any change in the
amendment provisions which require each holders consent or
in the waiver provisions; and (b) with certain exceptions
described under Certain Covenants
Future Subsidiary Guarantors; Releases of Subsidiary
Guarantees without the consent of holders of at least a
majority in principal amount of the New Notes then outstanding,
no amendment may release any Subsidiary Guarantor from its
obligation under its Subsidiary Guarantee or change any
Subsidiary Guarantee in any manner that materially adversely
affects the rights of any holder of New Notes under such
Subsidiary Guarantee.
Without the consent of or notice to any holder of the New Notes,
the Company and the Trustee may amend the Indenture Documents,
and the Company and the Collateral Agent, the Trustee or Bank
Agents, as applicable, may amend the Security Documents or the
Intercreditor Agreement, (i) to cure any ambiguity,
omission, defect or inconsistency, (ii) to provide for the
assumption by a successor Person of the obligations of the
Company under the Indenture or obligations of a Guarantor under
its Guarantee if in compliance with the provisions described
under Certain Covenants Successor
Company above, (iii) to provide for uncertificated
New Notes in addition to or in place of certificated New Notes
(provided that the uncertificated New Notes are issued in
registered form for purposes of Section 163(f) of the Code,
or in a manner such that the uncertificated New Notes are
described in Section 163(f)(2)(B) of the Code),
(iv) to add guarantees or additional obligors with respect
to the New Notes (or to remove such guarantees or additional
obligors, subject, in the case of the Subsidiary Guarantees, to
the provisions of the preceding paragraph), (v) to add
additional assets as Collateral or to release Collateral from
the Lien or any Guarantor from its Guarantee, in each case
pursuant to the Indenture, the Security Documents and the
Intercreditor Agreement when permitted or required by the
Indenture, the Security Documents or the Intercreditor
Agreement, (vi) to add to the covenants of the Company or a
Subsidiary for the benefit of the holders of the New Notes or to
surrender any right or power conferred upon the Company or a
Subsidiary, (vii) to provide for issuance of the New Notes
under the Indenture (including to provide for treatment of the
New Notes and the old notes as a single class of securities) in
connection with the Registered Exchange Offer, (viii) to
comply with any requirement of the Commission in connection with
the qualification of the Indenture under the TIA or to otherwise
comply with the TIA, (ix) to make any change that would
provide any additional rights or benefits to the holders of the
New Notes or that does not adversely affect the rights of any
holder of the New Notes, (x) to conform the text of the
Indenture Documents, the Security Documents or the Intercreditor
Agreement to any provision of this Description of the New Notes
to the extent that such provision in this Description of the New
Notes was intended to be a verbatim recitation of a provision of
the Indenture Documents, the Security Documents or the
Intercreditor Agreement, (xi) to provide for the issuance
of Additional New Notes in accordance with the limitations set
forth in the Indenture as of the issue date of the old notes,
(xii) to make any amendment to the provisions of the
Indenture relating to the transfer and legending of New Notes
provided, however, that (a) compliance with
the Indenture as so amended would not result in Notes being
transferred in violation of the Securities Act or any applicable
securities law and (b) such amendment does not materially
and adversely affect the rights of holders to transfer New
Notes, (xiii) to evidence and provide the acceptance of the
appointment of a successor trustee under the Indenture, or
(xiv) to comply with the rules of any applicable securities
depositary. Without limiting the generality of the foregoing, no
signature, consent or other action of the Trustee or the holders
of the New Notes will be required for any amendment, supplement
or waiver to the Intercreditor Agreement or any Security
Document (i) that is permitted by the preceding provisions
of this paragraph (including without limitation any amendment,
supplement or waiver that does not adversely affect the rights
of any holder of the New Notes) or (ii) that is otherwise
permitted by the Indenture without any such action.
Notwithstanding the foregoing, an amendment, supplement or
waiver may not (with respect to any New Notes held by a
non-consenting holder) make any change in certain specified
provisions of the Intercreditor Agreement or
87
in certain specified portions of certain Security Documents, in
each case, dealing with the application of proceeds of the
Collateral that would adversely affect the holders of the New
Notes without the consent of holders representing at least 75%
of the aggregate principal amount of New Notes affected.
The Indenture or the Intercreditor Agreement will also provide
that, subject to certain exceptions, any amendment, waiver, or
consent to any of the collateral documents securing the
obligations under the Senior Documents, to the extent applicable
to the Collateral, will also apply automatically to the
comparable Security Documents with respect to the holders of the
New Notes interest in the Collateral. In addition, the
Indenture will provide that the Intercreditor Agreement and the
Security Documents may be amended or supplemented from time to
time at the sole request and expense of the Company, and without
the consent or signature of the Trustee or any holder of New
Notes to do any of the following (which shall be deemed to not
adversely affect the holders of the New Notes for any purpose
under the Indenture Documents, the Security Documents or the
Intercreditor Agreement):
(1) (A) to add other parties (or any authorized agent
thereof or trustee therefor) holding Other Pari Passu Lien
Obligations that are incurred in compliance with the Indenture,
(B) to establish that the Liens on any Term Loan Collateral
securing such Other Pari Passu Lien Obligations shall be pari
passu in priority under the Intercreditor Agreement with the
Liens on such Term Loan Collateral securing the Note Obligations
and the Liens on such Term Loan Collateral securing the
Multi-Currency Secured Obligations, and junior and subordinated
to any other Liens on such Term Loan Collateral that are higher
in priority than the Liens securing the Note Obligations, in
each case, on the terms provided for in the Intercreditor
Agreement in effect immediately prior to such amendment,
(C) to establish that the Liens on any Multi-Currency
Collateral securing such Other Pari Passu Lien Obligations shall
be pari passu in priority under the Intercreditor Agreement with
the Liens on such Multi-Currency Collateral securing the Note
Obligations on the terms provided for in the Intercreditor
Agreement, as in effect immediately prior to such amendment, and
junior and subordinated to any other Liens on such
Multi-Currency Collateral that are higher in priority than the
Liens securing the Note Obligations, in each case, on the terms
provided for in the Intercreditor Agreement in effect
immediately prior to such amendment and (D) to establish
the relative priority (other than relative priority with respect
to Liens whose priority is specified in clauses (B) and
(C)) of outstanding Liens (other than Liens whose priority is
specified in clauses (B) and (C)) that are subject to the
Intercreditor Agreement;
(2) to add other parties (or any authorized agent thereof
or trustee therefor) holding Other Senior Lien Obligations that
are incurred in compliance with the Indenture, (B) to
establish that the Liens on any Term Loan Collateral securing
such Other Senior Lien Obligations shall be higher in priority
under the Intercreditor Agreement than the Liens on such Term
Loan Collateral securing the Note Obligations, the Liens on such
Term Loan Collateral securing the Other Pari Passu Lien
Obligations and the Liens on such Term Loan Collateral securing
the Multi-Currency Secured Obligations, in each case, on the
terms provided for in the Intercreditor Agreement in effect
immediately prior to such amendment, (C) to establish that
the Liens on any Multi-Currency Collateral securing such Other
Senior Lien Obligations shall be higher in priority under the
Intercreditor Agreement than the Liens on such Multi-Currency
Collateral securing the Note Obligations and the Liens on such
Multi-Currency Collateral securing the Other Pari Passu Lien
Obligations, in each case, on the terms provided for in the
Intercreditor Agreement in effect immediately prior to such
amendment, and (D) to establish the relative priority
(other than relative priority with respect to Liens whose
priority is specified in clauses (B) and (C)) of
outstanding Liens (other than Liens whose priority is specified
in clauses (B) and (C)) that are subject to the
Intercreditor Agreement;
(3) (A) to add other parties (or any authorized agent
thereof or trustee therefor) holding Other Junior Lien
Obligations that are incurred in compliance with the Indenture,
(B) to establish that the Liens on any Collateral securing
such Other Junior Lien Obligations shall be lower in priority
under the Intercreditor Agreement than the Liens on such
Collateral securing the Note Obligations, the Other Pari Passu
Lien Obligations, Term Loan Secured Obligations and the
Multi-Currency Secured Obligations, and (C) to establish
the relative priority of the Liens on the Collateral securing
the Other Junior Lien Obligations with respect to Liens (other
than those whose priority is specified in clause (B)) that are
subject to the Intercreditor Agreement; and
88
(4) (A) to modify the definition of Controlling
Agent to add references to any authorized agent or trustee
for other parties holding Other Senior Lien Obligations, Other
Pari Passu Obligations and Other Junior Lien Obligations that
are permitted to be added as parties to the Intercreditor
Agreement as described in paragraphs (1), (2) and
(3) above and (B) to permit any such authorized agent
or trustee for other parties holding such Other Senior Lien
Obligations or Other Pari Passu Obligations to be the
Controlling Agent prior to the Trustee;
provided that a single tranche of obligations that is
secured by Liens on the Collateral may have a different relative
priority with respect to the Liens securing the Note Obligations
with regard to the Multi-Currency Collateral, on one hand, and
the Term Loan Collateral, on the other hand.
Notwithstanding the foregoing, the terms and provisions of the
Intercreditor Agreement applicable to the Liens securing Other
Pari Passu Lien Obligations, Other Senior Lien Obligations and
Other Junior Lien Obligations contained in any such amendment,
modification or waiver other than relative Lien priority
(including rights as to enforcement, procedural provisions and
other similar provisions under the Intercreditor Agreement) may
differ from those applicable to the Liens securing the New
Notes, the Multi-Currency Secured Obligations and the Term Loan
Secured Obligations; provided that any such terms and
provisions applicable to the Liens securing Other Pari Passu
Obligations and Other Senior Lien Obligations shall be deemed to
not adversely affect the holders of the New Notes for any
purpose under the Indenture Documents, the Security Documents or
the Intercreditor Agreement to the extent that such terms and
provisions are no more favorable to the holders of the
obligations secured by such Liens relative to the Liens securing
the Note Obligations than those terms and provisions applicable
to the Multi-Currency Secured Obligations or the Term Loan
Secured Obligations, as applicable (except to the extent
otherwise provided above with respect to the definition of
Controlling Agent).
Any such additional party or parties, the Multi-Currency
Administrative Agent, the Term Loan Administrative Agent, the
Trustee and the Collateral Agent shall be entitled to rely upon
a certificate delivered by a Responsible Officer certifying that
such Debt was Issued, and any such amendment, modification or
waiver to the Intercreditor Agreement or Security Documents was
entered into, in compliance with the Indenture. Any amendment of
the Intercreditor Agreement that is proposed to be effected
without the consent of the Trustee or the Collateral Agent will
be submitted to such Person for its review at least five
Business Days (or such shorter period as such Person may agree)
prior to the proposed effectiveness of such amendment.
The consent of the holders of the New Notes is not necessary
under the Indenture to approve the particular form of any
proposed amendment. It is sufficient if such consent approves
the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the
Company is required to mail to holders of the New Notes a notice
briefly describing such amendment. However, the failure to give
such notice to all holders of the New Notes, or any defect
therein, will not impair or affect the validity of the amendment.
A consent to any amendment or waiver under the Indenture by any
holder of New Notes given in connection with a tender of such
holders New Notes will not be rendered invalid by such
tender.
Transfer
The New Notes will be issued in registered form and will be
transferable only upon the surrender of the New Notes being
transferred for registration of transfer. The Company may
require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain
transfers and exchanges. See Book-Entry,
Delivery and Form.
89
Satisfaction
and Discharge
The Indenture Documents and the Security Documents will be
discharged and will cease to be of further effect, when:
(1) either:
(a) all New Notes that have been authenticated, except
lost, stolen or destroyed New Notes that have been replaced or
paid and New Notes for whose payment money has been deposited in
trust and thereafter repaid to the Company, have been delivered
to the Trustee for cancellation; or
(b) all New Notes that have not been delivered to the
Trustee for cancellation (i) have become due and payable by
reason of the mailing of a notice of redemption or otherwise or
(ii) will become due and payable within one year, and the
Company or any Subsidiary Guarantor have irrevocably deposited
or caused to be deposited with the Trustee as trust funds in
trust solely for the benefit of such holders, cash in
U.S. dollars, non-callable U.S. Government
Obligations, or a combination of cash in U.S. dollars and
non-callable U.S. Government Obligations, in amounts as
will be sufficient, without consideration of any reinvestment of
interest, to pay and discharge the entire Debt on such New Notes
not delivered to the Trustee for cancellation, including
principal, premium and accrued interest to the date of maturity
or redemption;
(2) no Default or Event of Default with respect to such New
Notes has occurred and is continuing on the date of the deposit
(other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) and the
deposit will not result in a breach or violation of, or
constitute a default under, any other instrument (other than the
Indenture) to which the Company or any Subsidiary Guarantor is a
party or by which the Company or any Subsidiary Guarantor is
bound;
(3) The Company has paid or caused to be paid all sums
payable by the Company under the Indenture with respect to the
New Notes; and
(4) The Company has delivered irrevocable instructions to
the Trustee under the Indenture to apply the deposited money
toward the payment of such New Notes at maturity or on the
redemption date, as the case may be.
In addition, the Company must deliver an Officers
Certificate and an opinion of counsel to the Trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
Defeasance
The Company at any time may terminate all of its and the
Guarantors obligations under the New Notes, the Indenture
Documents and the Security Documents (legal
defeasance), except for certain obligations, including
those respecting the defeasance trust and obligations to
register the transfer or exchange of the New Notes, to replace
mutilated, destroyed, lost or stolen New Notes and to maintain a
registrar and paying agent in respect of the New Notes. The
Company at any time may terminate certain of its obligations
under the covenants described under Certain
Covenants, Defaults,
Change of Control and
Security for the New Notes above, the
operation of the Cross Acceleration Provision, the Bankruptcy
Provisions with respect to Significant Subsidiaries, or the
Judgment Default Provision, the Guarantee Provision, the
Covenant Compliance Provision (other than with respect to
compliance with clause (a)(i) under Certain
Covenants Successor Company), the Security
Provision and the Security Document Provision described under
Defaults above and clauses (a)(ii),
(iii) and (iv) and (c) under
Certain Covenants Successor
Company (covenant defeasance).
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance
option. If the Company exercises its legal defeasance option or
covenant defeasance option, any Guarantee of a Guarantor
provided under the Indenture or any other guarantee, if any,
shall be released. If the Company exercises its legal defeasance
option, payment of the New Notes may not be accelerated because
of an Event of Default with respect thereto. If the Company
exercises its covenant defeasance option, payment of the New
Notes may not be accelerated because of an Event of Default
specified in the Events of Default that were subject to the
covenant defeasance.
90
In order to exercise either legal defeasance or covenant
defeasance:
(1) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the holders of the series of New
Notes being defeased, cash in U.S. dollars, non-callable
U.S. Government Obligations, or a combination of cash in
U.S. dollars and non-callable U.S. Government
Obligations (Funds in Trust), in amounts as will be
sufficient to pay the principal of, or interest and premium on,
the outstanding New Notes of such series on the stated date for
payment thereof or on the applicable redemption date, as the
case may be, and the Company must specify whether such New Notes
are being defeased to such stated date for payment or to a
particular redemption date;
(2) in the case of legal defeasance, the Company must
deliver to the Trustee an opinion of counsel reasonably
acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the issue date of the
old notes, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based
thereon such opinion of counsel will confirm that, the holders
of the outstanding New Notes being defeased will not recognize
income, gain or loss for federal income tax purposes as a result
of such legal defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had
not occurred;
(3) in the case of covenant defeasance, the Company must
deliver to the Trustee an opinion of counsel reasonably
acceptable to the Trustee confirming that the holders of the
outstanding New Notes being defeased will not recognize income,
gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not
occurred;
(4) no Default or Event of Default has occurred and is
continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to the Funds in Trust);
(5) such legal defeasance or covenant defeasance will not
result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries
(other than Non-Recourse Subsidiaries) is a party or by which
Company or any of its Subsidiaries (other than Non-Recourse
Subsidiaries) is bound;
(6) the Company must deliver to the Trustee an
Officers Certificate stating that the deposit was not made
by the Company with the intent of preferring the holders of the
New Notes being defeased over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding
any creditors of the Company or others; and
(7) the Company must deliver to the Trustee an
Officers Certificate and an opinion of counsel, each
stating that all conditions precedent relating to the legal
defeasance or the covenant defeasance, as applicable, have been
satisfied.
Concerning
the Trustee
U.S. Bank National Association is the Trustee under the
Indenture and has been appointed by the Company as Registrar and
Paying Agent with regard to the New Notes.
Governing
Law
The Indenture provides that it and the New Notes and the
Guarantees will be governed by, and construed in accordance
with, the laws of the State of New York.
Certain
Definitions
The following are certain definitions used in the Indenture and
applicable to the description of the Indenture and the New Notes
set forth herein.
91
Additional Assets means: (a) any one or
more businesses primarily engaged in a Permitted Business;
provided that the investment in any such business is in
the form of (x) a merger with the Company or a Subsidiary
of the Company (other than a Non-Recourse Subsidiary),
(y) the acquisition of Capital Stock of a Person that is a
Subsidiary or becomes a Subsidiary of the Company (other than a
Non-Recourse Subsidiary) as a result of the acquisition of such
Capital Stock by the Company or a Subsidiary of the Company
(other than a Non-Recourse Subsidiary) or (z) the
acquisition of all or substantially all the assets of such
business, (b) properties, (c) capital expenditures or
(d) acquisitions of other assets, that in each of (a), (b),
(c) and (d), are used or useful in a Permitted Business or
replace the businesses, properties and assets that are the
subject of an Asset Sale.
Affiliate of any specified Person means
(i) any other Person which, directly or indirectly, is in
control of, is controlled by or is under common control with
such specified Person or (ii) any other Person who is a
director or officer (A) of such specified Person,
(B) of any Subsidiary of such specified Person or
(C) of any Person described in clause (i) above. For
purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by contract
or otherwise; and the terms controlling and
controlled have meanings correlative to the
foregoing.
After-Acquired Property means any property of
the Company or any Subsidiary Guarantor acquired after the issue
date of the old notes (other than Excluded Property) that
secures the obligations under the Indenture, the New Notes, the
Security Documents and Other Pari Passu Lien Obligations.
Agent means each of the Controlling Agent,
the Multi-Currency Administrative Agent, the Term Loan
Administrative Agent, the Trustee and the Collateral Agent.
Asset Sale means any sale, lease, transfer,
issuance or other disposition (or series of related sales,
leases, transfers, issuances or dispositions) by the Company or
any Subsidiary of the Company (other than a Non-Recourse
Subsidiary), including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the
purposes of this definition as a disposition), of
(a) any shares of Capital Stock of a Subsidiary of the
Company (other than a Non-Recourse Subsidiary) (other than
directors qualifying shares or employee stock options), or
(b) any other property of the Company or any Subsidiary of
the Company (other than a Non-Recourse Subsidiary) outside of
the ordinary course of business of the Company or such
Subsidiary, other than, in the case of clause (a) or
(b) above,
(1) (A) any disposition by the Company or a Subsidiary
Guarantor to the Company or another Subsidiary Guarantor or
(B) any disposition by a Subsidiary (other than a
Non-Recourse Subsidiary) that is not a Subsidiary Guarantor to
another Subsidiary (other than a Non-Recourse Subsidiary) or the
Company;
(2) any disposition (A) that constitutes a Restricted
Payment permitted by the covenant described under
Certain Covenants Limitation on
Restricted Payments (or is not a Restricted Payment by
virtue of the definition thereof) or (B) of all or
substantially all the assets of the Company or a Subsidiary
Guarantor in accordance with the provisions described under
Certain Covenants Successor
Company;
(3) any disposition in any single transaction or any series
of related transactions of Capital Stock or other property for
aggregate consideration of less than $7.5 million;
(4) the disposition of cash, Cash Equivalents, the foreign
equivalent of Cash Equivalents or Investment Grade Securities;
(5) any foreclosure upon any assets of the Company or any
Subsidiary of the Company (other than a Non-Recourse Subsidiary)
in connection with the exercise of remedies by a secured lender
pursuant to the terms of Debt otherwise permitted to be incurred
under the Indenture;
(6) the sale of the Capital Stock, Debt or other securities
of a Non-Recourse Subsidiary;
(7) the disposition of obsolete, worn-out or otherwise
unsuitable assets, properties or plants or excess equipment in
an amount not to exceed $10.0 million or of other assets no
longer used or useful or necessary in the conduct of business of
the Company its Subsidiaries (other than Non-Recourse
Subsidiaries);
(8) sales of accounts receivable, payment intangibles and
related assets or participations therein, in connection with any
Receivables Facility;
92
(9) the unwinding of any Hedging Obligations;
(10) creation or realization of Liens that are permitted to
be incurred by the Indenture;
(11) any transfer of property or assets that represents a
surrender or waiver of a contract right or a settlement,
surrender or release of a contract or tort claim;
(12) dispositions of Investments in joint ventures to the
extent required by, or made pursuant to customary buy/sell
arrangements between, the joint venture parties set forth in
joint venture agreements and similar binding agreements
(provided that the proceeds of such a disposition, to the
extent they would constitute Net Available Cash if such
disposition were an Asset Sale, are applied in accordance with
the covenant described under Certain
Covenants Limitation on Asset Sales as if such
disposition were an Asset Sale);
(13) the lease, assignment or
sub-lease of
any real or personal property in the ordinary course of
business; and
(14) the sale or grant of licenses or
sub-licenses
of intellectual property entered into in the ordinary course of
business.
Bank Agents means the Multi-Currency
Administrative Agent and the Term Loan Administrative Agent.
Bank Debt means any and all amounts
payable by the Company or any of its Subsidiaries under or in
respect of a Credit Agreement or any Refinancing thereof, or any
other agreements with lenders party to the foregoing, including
principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or
for reorganization relating to the Company), fees, charges,
expenses, reimbursement obligations, guarantees and all other
amounts payable thereunder or in respect thereof;
provided, however, that nothing in this definition
shall permit the Company or any of its Subsidiaries to Issue any
Debt that is not permitted pursuant to Certain
Covenants Limitation on Debt above.
Bankruptcy Code means title 11, United
States Code.
Bankruptcy Law means the Bankruptcy Code, or
any similar federal, state or foreign Requirement of Law for the
relief of debtors or any arrangement, reorganization,
insolvency, moratorium, assignment for the benefit of creditors,
any other marshalling of the assets and liabilities of the
Company or any other Loan Party or any similar law relating to
or affecting the enforcement of creditors rights generally.
Board of Directors means:
(1) with respect to a corporation, the board of directors
of the corporation or any committee thereof;
(2) with respect to a partnership the general partner of
which is a corporation, the board of directors of the general
partner of the partnership or any committee thereof;
(3) with respect to a limited liability company, any
managing member thereof or, if managed by managers, the board of
managers or any committee thereof; and
(4) with respect to any other Person, the board or
committee of such Person (or such Persons general partner,
manager or equivalent) serving a similar function;
provided, that committees of any of the bodies described
in clauses (1) through (4) above shall not constitute
the Board of Directors for purposes of the definition of
Change of Control.
Business Day means each day which is not a
Legal Holiday.
Capital Lease Obligations of a Person means
any obligation which is required to be classified and accounted
for as a capital lease on the face of a balance sheet of such
Person prepared in accordance with GAAP; the amount of such
obligation shall be the capitalized principal amount thereof,
determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment
of a penalty.
93
Capital Stock of any Person means any and all
shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however
designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
Cash Equivalents means (a) securities
issued or fully guaranteed or insured by the United States
federal government or any agency thereof, (b) certificates
of deposit and time deposits with maturities of one year or less
from the date of acquisition and overnight bank deposits of any
commercial bank or any other financial institution having
capital and surplus in excess of $500,000,000,
(c) repurchase obligations of any commercial bank or any
other financial institution satisfying the requirements of
clause (b) of this definition, having a term of not more
than 30 days with respect to securities issued or fully
guaranteed or insured by the United States federal government or
any agency thereof, (d) commercial paper of a domestic
issuer rated (on the date of acquisition thereof) at least
A-2
by S&P or
P-2
by Moodys, (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States or
by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government,
the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government
(as the case may be) are rated (on the date of acquisition
thereof) at least A by S&P or A by
Moodys, (f) securities with maturities of one year or
less from the date of acquisition backed by standby letters of
credit issued by any commercial bank or any other financial
institution satisfying the requirements of clause (b) of
this definition, (g) shares of money market mutual or
similar funds having an investment policy that requires
substantially all of the invested assets of such fund to be
invested in assets satisfying the requirements of
clause (a) of this definition, (h) shares of money
market mutual or similar funds having assets in excess of
$500,000,000 and having an investment policy that requires
substantially all of the invested assets of such fund to be
invested in assets satisfying the requirements of any clause of
this definition, (i) guaranteed investment contracts of any
financial institution having long-term unsecured debt securities
rated (on the date of acquisition thereof) at least
A or A2 or the equivalent by any Rating
Agency and maturing one year or less from the date of
acquisition thereof, (j) any other debt instruments of any
Person (other than an Affiliate of the Company) which
instruments are rated (on the date of acquisition thereof) at
least A, A2,
A-1
or
P-1
or the equivalent by any Rating Agency and maturing one year or
less from the date of acquisition thereof, (k) periodic
auction reset securities which have final maturities between one
and 30 years from the date of issuance and are repriced
through a Dutch auction or other similar method every
35 days or (1) auction preferred shares which are
senior securities of leveraged closed and municipal bond funds
and are repriced pursuant to a variety of rate reset periods, in
each case having a rating (on the date of acquisition thereof)
of at least A or A2 or the equivalent by
any Rating Agency.
Cash Management Obligations means any
obligations of the Company or any of its Subsidiaries (other
than Non-Recourse Subsidiaries) in respect of any arrangement
for treasury, depository, overdraft or cash management services
provided to the Company or any of its Subsidiaries (other than
Non-Recourse Subsidiaries).
Code means the Internal Revenue Code of 1986,
as amended.
Collateral means, collectively, the
Multi-Currency Collateral and the Term Loan Collateral.
Collateral Agent means Citicorp USA, Inc. and
any successors and assigns thereto permitted under the
Intercreditor Agreement.
Commission means the United States Securities
and Exchange Commission.
Consolidated EBITDA Coverage Ratio means, for
any period, the ratio of (i) the aggregate amount of EBITDA
for such period to (ii) Consolidated Interest Expense for
such period; provided, however, that (1) if
the Company or any Subsidiary of the Company has Issued any Debt
since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio is an Issuance of Debt, an
issuance of equity or the receipt of a cash capital contribution
which is used to reduce Debt or the receipt of a capital
contribution in the form of Debt of the Company or any
Subsidiary, or any of them, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect
on a Pro Forma basis to such Debt as if such Debt had been
Issued on the first day of such period and the discharge of any
other Debt Refinanced or otherwise discharged with the proceeds
of such new Debt, equity or capital contribution as if such
discharge had occurred on the first day of such period,
(2) if since the beginning of such period the Company or
any
94
Subsidiary of the Company shall have made any Asset Sale, EBITDA
for such period shall be reduced by an amount equal to the
EBITDA (if positive) directly attributable to the assets which
are the subject of such Asset Sale for such period, or increased
by an amount equal to the EBITDA (if negative), directly
attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to
the Consolidated Interest Expense directly attributable to any
Debt of the Company or any Subsidiary of the Company Refinanced
or otherwise discharged with respect to the Company and its
continuing Subsidiaries in connection with such Asset Sales for
such period (or if the Capital Stock of any Subsidiary of the
Company is sold, the Consolidated Interest Expense for such
period directly attributable to the Debt of such Subsidiary to
the extent the Company and its continuing Subsidiaries are no
longer liable for such Debt after such sale) or (3) if
since the beginning of such period the Company or any Subsidiary
of the Company (by merger or otherwise) shall have made an
Investment in any Subsidiary of the Company (or any Person which
becomes a Subsidiary of the Company) or an acquisition of
assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made
hereunder, which constitutes all of an operating unit of a
business, or shall have Issued Debt, the net proceeds of which
are intended to be used to make such an Investment or
acquisition and prior thereto, such proceeds are placed in
escrow for such purpose, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving Pro
Forma effect thereto (including the Issuance of any Debt), as if
such Investment or acquisition occurred on the first day of such
period. If any Debt bears a floating rate of interest and is
being given Pro Forma effect, the interest on such Debt shall be
calculated as if the rate in effect on the date of determination
had been the applicable rate for the entire period (taking into
account any Hedging Obligations applicable to such Debt).
For purposes of making the computation referred to above,
Investments, acquisitions, dispositions, mergers,
consolidations, disposed or discontinued operations (as
determined in accordance with GAAP), reductions in force and
furloughs that have been made by the Company or any Subsidiary
of the Company (other than a Non-Recourse Subsidiary) since the
beginning of such period shall be given Pro Forma effect
assuming that all such actions (and the change in any associated
Consolidated Interest Expense and the change in EBITDA resulting
therefrom) had occurred on the first day of such period;
provided that no such Pro Forma adjustment shall be
required (but, for the avoidance of doubt, may be made, at the
Companys option) in respect of any such transaction to the
extent the aggregate consideration in connection therewith was
less than $10.0 million for such period. If since the
beginning of such period any Person (that subsequently became a
Subsidiary of the Company (other than a Non-Recourse Subsidiary)
or was merged with or into the Company or any Subsidiary of the
Company (other than a Non-Recourse Subsidiary) since the
beginning of such period) shall have made any Investment,
acquisition, disposition, merger, consolidation, disposed or
discontinued operation, reduction in force or furlough that
would have required adjustment pursuant to this definition, then
the Consolidated EBITDA Coverage Ratio shall be calculated
giving Pro Forma effect thereto for such period as if such
actions had occurred at the beginning of such period (subject to
the threshold specified in the previous sentence).
Consolidated Interest Expense means, for any
period, the sum of (a) the interest expense, of the Company
and its consolidated Subsidiaries (other than Non-Recourse
Subsidiaries) for such period as determined in accordance with
GAAP consistently applied, plus (b) Preferred Stock
dividends in respect of Redeemable Stock or Exchangeable Stock
of the Company or Preferred Stock of any Subsidiary of the
Company (other than a Non-Recourse Subsidiary) in each case held
by Persons other than the Company or a Wholly Owned Recourse
Subsidiary, plus (c) the cash contributions to an employee
stock ownership plan of the Company and its Subsidiaries (other
than Non-Recourse Subsidiaries) to the extent such contributions
are used by an employee stock ownership plan to pay interest,
minus (d) interest income of the Company and its
consolidated Subsidiaries (other than Non-Recourse
Subsidiaries), and minus (e) net receipts, if any, of the
Company and its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) pursuant to interest rate Hedging
Obligations with respect to Debt. Notwithstanding the foregoing,
Consolidated Interest Expense shall not include (1) amounts
expensed, written off or amortized in respect of deferred
financing and debt incurrence costs or (2) amounts recorded
as interest expense with respect to dividends on Designated
Preferred Stock or Preferred Stock of the Company that is not
Redeemable Stock or Exchangeable Stock.
95
Consolidated Net Income means with respect to
any Person, for any period, the consolidated net income (or
loss) of such Person and its consolidated Subsidiaries for such
period as determined in accordance with GAAP, adjusted to the
extent included in calculating such net income (or loss), by
excluding:
(i) net after tax extraordinary or non-recurring gains or
losses (less all fees and expenses relating thereto) and any
restructuring charges or expenses (including any severance
expenses);
(ii) the portion of net income (or loss) of such Person and
its consolidated Subsidiaries attributable to minority interests
in unconsolidated Persons except to the extent that, in the case
of net income, cash dividends or distributions have actually
been received by such Person or one of its consolidated
Subsidiaries (subject, in the case of a dividend or distribution
received by a Subsidiary of such Person, to the limitations
contained in clause (v) below) and, in the case of net
loss, such Person or any Subsidiary of such Person has actually
contributed, lent or transferred cash to such unconsolidated
Person;
(iii) net income (or loss) of any other Person attributable
to any period prior to the date of combination of such other
Person with such Person or any of its Subsidiaries on a
pooling of interests basis;
(iv) net gains or losses in respect of dispositions of
assets of such Person or any of its Subsidiaries (including
pursuant to a
sale-and-leaseback
arrangement) other than in the ordinary course of business;
(v) the net income of any Subsidiary of such Person to the
extent that the declaration of dividends or distributions by
that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulations applicable to that Subsidiary
or its shareholders, unless such restriction with respect to the
payment of dividends or similar distributions has been legally
waived; provided that (A) Consolidated Net Income
will be increased by the amount of dividends or other
distributions or other payments actually paid in cash (or to the
extent converted into cash) to such Person or a Subsidiary
thereof in respect of such period, to the extent not already
included therein, and (B) the exclusion in this
clause (v) shall not apply to the net income of a
Subsidiary Guarantor except in the determination the amount
available for Restricted Payments under clause (3)(a) of the
first paragraph of Certain
Covenants Limitation on Restricted Payments;
(vi) net income or loss of any Non-Recourse Subsidiary,
except that such Persons equity in the net income of any
such Non-Recourse Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Non-Recourse Subsidiary during
such period to such Person as a dividend or other distribution;
(vii) the net after-tax cumulative effect of any change in
accounting principles or change in accounting rules;
(viii) net after-tax gains and losses from Hedging
Obligations, Cash Management Obligations or other derivative
instruments or from early extinguishment of Debt;
(ix) any net after-tax impairment charge or asset
write-off, in each case pursuant to GAAP;
(x) any net after-tax noncash compensation expense recorded
from grants of stock appreciation or similar rights, stock
options, restricted stock or other rights to officers,
directors, employees, managers or consultants;
(xi) increase in amortization or depreciation or other
noncash charges (including, without limitation, any non-cash
fair value adjustment of inventory) resulting from the
application of purchase accounting in relation to any
acquisition that is consummated at or after the issue date of
the old notes;
(xii) non-cash cost related to the termination of any
employee pension benefit plan, together with any related
provision for taxes on any such termination (or the tax effect
of any such termination);
(xiii) deferred financing costs amortized or written off,
and premiums and prepayment penalties paid in connection with
Transactions, any expenses (including professional fees) to the
extent not deferred and paid in connection with the Transactions
or any other acquisition or disposition that is consummated
after the issue date of the old notes;
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(xiv) net after-tax gain or loss resulting in such period
from currency transaction gains or losses related to currency
remeasurements of Debt;
(xv) non-cash gains, losses, income and expenses resulting
from fair value accounting required by the applicable standard
under GAAP and related interpretations, together with the tax
effects of such items; and
(xvi) charges resulting from the application of
ASC 805 Business Combinations or ASC 480
Distinguishing Liability from Equity together with
the tax effects of such charges.
Consolidated Net Worth of any Person means,
at any date, all amounts which would, in conformity with GAAP,
be included under shareholders equity on a consolidated
balance sheet of such Person as at such date, less (x) any
amounts attributable to Redeemable Stock and (y) any
amounts attributable to Exchangeable Stock.
Consolidated Secured Debt Ratio as of any
date of determination means the ratio of (x) the excess of
(i) Consolidated Total Debt of the Company and its
Subsidiaries (other than Non-Recourse Subsidiaries) that is
secured by a Lien as of the end of the most recent fiscal
quarter for which financial statements are available immediately
preceding the date on which such event for which such
calculation is being made shall occur over (ii) an amount
equal to the amount of cash and Cash Equivalents of Company and
its Subsidiaries (other than Non-Recourse Subsidiaries) on such
date that are free and clear of any Lien (other than
non-consensual Liens and Liens described under clauses (17)
through (19) of the definition of Permitted Liens) to
(y) the aggregate amount of EBITDA of the Company and its
Subsidiaries (other than Non-Recourse Subsidiaries) for the
period of the most recently ended consecutive four full fiscal
quarters for which financial statements are available
immediately preceding the date on which such event for which
such calculation is being made, in each case of clauses (x)
and (y), calculated on a Pro Forma basis, giving effect, without
duplication and where applicable, to the events and transactions
for which Pro Forma adjustments are to be made in the
calculation of the Consolidated EBITDA Coverage Ratio.
Consolidated Total Assets means the total
consolidated assets of the Company and its Subsidiaries, as
shown on the most recently consolidated balance sheet (excluding
the footnotes thereto) of the Company.
Consolidated Total Debt means, as at any date
of determination, an amount equal to the sum, without
duplication, of the aggregate amount of all outstanding Debt of
the Company and its Subsidiaries (other than Non-Recourse
Subsidiaries) (and excluding (1) any undrawn letters of
credit issued in the ordinary course of business and
(2) all obligations relating to any Receivables Facility).
Contributed Existing Subordinated Loan means
the portion of the Debt under the Existing Subordinated Loan
that is as of the issue date of the old notes owed to and held
by Revlon, Inc. or a Subsidiary thereof, including any
Refinancing Debt Issued in respect thereof.
Controlling Agent means:
(a) in the case of any Multi-Currency Collateral,
(i) prior to the payment in full of all Multi-Currency
Claims, the Multi-Currency Administrative Agent, (ii) after
the payment in full of all Multi-Currency Claims and prior to
the payment in full of all Term Loan Claims, the Term Loan
Administrative Agent and (iii) after the payment in full of
all Multi-Currency Claims and all Term Loan Claims, the
Trustee; and
(b) in the case of any Term Loan Collateral, (i) prior
to the payment in full of all Term Loan Claims, the Term Loan
Administrative Agent, (ii) after the payment in full of all
Term Loan Claims and prior to the payment in full of all
Multi-Currency Claims, the Multi-Currency Administrative Agent
and (iii) after the payment in full of all Term Loan Claims
and all Multi-Currency Claims, the Trustee.
Credit Agreements means each of (i) the
Multi-Currency Credit Agreement and (ii) the Term Loan
Agreement, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection
therewith, in each case as such Credit Agreements, in whole or
in part, in one or more instances, may be amended, renewed,
extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including,
without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements,
supplementations or other modifications of the foregoing and
including, without limitation, any amendment increasing the
amount of Debt incurred or available to be borrowed thereunder,
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extending the maturity of any Debt incurred thereunder or
contemplated thereby or deleting, adding or substituting one or
more parties thereto (whether or not such added or substituted
parties are banks or other institutional lenders)), including
into one or more debt facilities, commercial paper facilities or
other debt instruments, indentures or agreements (including by
means of sales of debt securities (including Additional Notes)
to institutional investors), providing for revolving credit
loans, term loans, letters of credit or other debt obligations,
whether any such extension, replacement or refinancing
(1) occurs simultaneously or not with the termination or
repayment of a prior Credit Agreements or (2) occurs on one
or more separate occasions.
Debt of any Person means, without duplication,
(i) the principal of and premium (if any) in respect of
(A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person
is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as
the deferred purchase price of property (but excluding trade
accounts payable and other accrued current liabilities arising
in the ordinary course of business);
if and to the extent that any of the foregoing Debt under
clauses (i), (ii) and (iii) would appear as a
liability upon a balance sheet (excluding the footnotes thereto)
of such Person prepared in accordance with GAAP;
(iv) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, bankers acceptance
or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such
Person of a demand for reimbursement following payment on the
letter of credit);
(v) the amount of all obligations of such Person with
respect to the redemption, repayment (including liquidation
preference) or other repurchase of, in the case of a Subsidiary
of the Company that is not a Non-Recourse Subsidiary, any
Preferred Stock and, in the case of any the Company, any
Redeemable Stock (but excluding in each case any accrued
dividends);
(vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which such Person,
in either case, is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including
guarantees of such obligations and dividends, other than by
endorsement of negotiable instruments for collection in the
ordinary course of business; and
(vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by
any Lien on any property or asset of such Person (whether or not
such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured.
Notwithstanding the foregoing, Debt will be deemed not to
include contingent obligations incurred in the ordinary course
of business or obligations under or in respect of Receivables
Facilities.
Default means any event which is, or after
notice or passage of time or both would be, an Event of Default.
Defaulting Subsidiary means any Subsidiary of
the Company (other than a Non-Recourse Subsidiary) with respect
to which an event described under clauses (iv), (v) or
(vi) in Defaults above has occurred
and is continuing.
Designated Eligible Obligations means, at any
time, those additional obligations which the Credit Agreements
permit the Company to designate to be secured by the Collateral
to the extent that such obligations have been so designated
(which designation shall not have been revoked by the Company on
or prior to such time).
Designated Noncash Consideration means any
non-cash consideration received by the Company or one of its
Subsidiaries (other than its Non-Recourse Subsidiaries) in
connection with an Asset Sale that is designated as
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Designated Noncash Consideration pursuant to an
Officers Certificate executed by the Chief Financial
Officer of the Company or a resolution of the Board of Directors
of the Company, as applicable. Such Officers Certificate
or resolution shall state the Fair Market Value of such non-cash
consideration and the basis of such valuation. A particular item
of Designated Noncash Consideration shall no longer be
considered to be outstanding to the extent it has been sold or
liquidated for cash (but only to the extent of the cash
received).
Designated Preferred Stock means preferred
stock of the Company or any direct or indirect parent thereof
(in each case other than Redeemable Stock) that is issued for
cash (other than to a Subsidiary (other than a Non-Recourse
Subsidiary)) and is so designated as Designated Preferred Stock
pursuant to an Officers Certificate, as the case may be,
on the issuance date thereof.
Domestic Subsidiary means, with respect to
any Person, any Subsidiary (other than a Non-Recourse
Subsidiary) of such Person other than (x) a Foreign
Subsidiary or (y) any Domestic Subsidiary of a Foreign
Subsidiary.
EBITDA means, for any period, the
Consolidated Net Income of the Company for such period, plus the
following, without duplication, to the extent included in
calculating such Consolidated Net Income: (i) income tax
expense, plus franchise or similar taxes, (ii) Consolidated
Interest Expense, (iii) depreciation expense,
(iv) amortization expense, (v) all other write offs,
write downs and noncash charges (excluding any noncash charge to
the extent that it requires an accrual of or a reserve for cash
disbursements for any future period), (vi) restructuring
charges that appear in the Companys financial statements
for such period, including any redemption premium, prepayment
penalty, premium and other related fee or reserve deducted in
such period in computing Consolidated Net Income, including any
one-time costs incurred in connection with (A) acquisitions
after the issue date of the old notes or (B) the closing or
consolidation of production or other operating facilities,
(vii) any expenses or charges related to any equity
offering, permitted acquisition or other Investment, permitted
disposition, recapitalization or the incurrence of Debt
permitted to be incurred under the Indenture including a
refinancing thereof (in each case, whether or not successful)
and any amendment or modification to the terms of any such
transactions, including such fees, expenses or charges related
to the execution and delivery of the Indenture and the
transactions contemplated thereby, (viii) the amount of
management, monitoring, consulting and advisory fees and related
expenses paid (or any accruals related to such fees or related
expenses) (including by means of a dividend) to the Parent to
the extent permitted under Certain
Covenants Limitation on Transactions with
Affiliates, and (ix) other non-recurring one-time
charges and miscellaneous expenses taken in such period to the
extent that such other charges and expenses are associated with
the Companys growth plan and operating margin improvement
initiatives, as determined in good faith by the Companys
principal financial officer or principal accounting officer in
consultation with the Companys certified independent
auditors.
Equity Offering means any public or private
offer and sale of Capital Stock (other than Redeemable Stock or
Exchangeable Stock) other than:
(1) public offerings with respect to the Companys or
any direct or indirect parent companys common stock
registered on
Form S-4
or
Form S-8;
(2) any such public or private sale that constitutes an
Restricted Contribution; and
(3) any such issuance to any Subsidiary of the Company.
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Exchangeable Stock means any Capital Stock of
a Person which by its terms or by the terms of any security for
which it is exchangeable at the option of the holder (other than
Capital Stock of such Person which is neither Exchangeable Stock
nor Redeemable Stock) or otherwise is convertible or
exchangeable at the option of the holder thereof for Debt,
Exchangeable Stock or Redeemable Stock on or prior to the date
that is one year after the Stated Maturity of the New Notes;
provided, however, that only the portion of the
Capital Stock which so matures or is so convertible or
exchangeable prior to such date, shall be deemed to be
Exchangeable Stock; provided, further,
however, that any Capital Stock that would constitute
Exchangeable Stock solely because the holders thereof have the
right to require the Company or a Subsidiary of the Company
(other than a Non-Recourse Subsidiary) to exchange such Capital
Stock upon the occurrence of a change of control or asset sale
(each defined in a substantially
99
similar manner to the corresponding definitions in the
indenture) shall not constitute Exchangeable Stock if the terms
of such Capital Stock (and all such securities into which it is
convertible or for which it is exchangeable) provide that the
Company and the Subsidiaries (other than Non-Recourse
Subsidiaries) may not exchange any such Capital Stock (and all
such securities into which it is convertible or for which it is
exchangeable) pursuant to such provision prior to compliance by
the Company with the provisions of the Indenture described under
the captions Change of Control and
Certain Covenants Limitation on
Asset Sales and such repurchase or redemption complies
with the covenant described under Certain
Covenants Limitation on Restricted Payments.
Excluded Equity means, as more fully
described in the Security Documents, any Voting Stock in excess
of 66% of the total outstanding Voting Stock of any direct
Subsidiary of the Company or any Guarantor if such Subsidiary is
not a United States person under and as defined in
Section 7701(a)(30) of the Code. For the purposes of this
definition, Voting Stock means, as to any issuer,
the issued and outstanding shares of each class of capital stock
or other ownership interests of such issuer entitled to vote
(within the meaning of Treasury Regulations
§ 1.956-2(c)(2)).
Excluded Property means, as more fully
described in the Security Documents, collectively,
(i) Excluded Equity;
(ii) any permit, lease, license, contract, instrument or
other agreement held by the Company or any Guarantor that
prohibits or requires the consent of any Person other than the
Company and its Affiliates as a condition to the creation by the
Company or such Guarantor of a Lien thereon, or any permit,
lease, license, contract, instrument or other agreement held by
the Company or such Guarantor to the extent that any requirement
of law applicable thereto prohibits the creation of a Lien
thereon, but only, in each case, to the extent, and for so long
as, such prohibition is not terminated or rendered unenforceable
or otherwise deemed ineffective by the Uniform Commercial Code
or any other requirement of law;
(iii) equipment or fixtures owned by the Company or any
Guarantor that is subject to a purchase money Lien or a capital
lease if the contract or other agreement in which such Lien is
granted (or in the documentation providing for such capital
lease) prohib