FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 1-4881
AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-0544597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 WEST 57TH STREET, NEW YORK, NEW YORK 10019-2683
(Address of principal executive offices)
(212) 546-6015
(telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
The number of shares of Common Stock (par value $.50) outstanding at October
31, 1994 was 69,597,425.
<PAGE>2
Table of Contents
Part I. Financial Information
Page
Numbers
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended September 30, 1994 and
September 30, 1993 3
Nine Months Ended September 30, 1994 and
September 30, 1993 4
Consolidated Balance Sheet
September 30, 1994 and December 31, 1993 5
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1994 and
September 30, 1993 6
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition 12-19
Part II. Other Information
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
<PAGE>3
PART I. FINANCIAL INFORMATION
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
Three months ended
September 30
------------------
1994 1993
---- ----
(unaudited)
Net sales........................................... $1,009.8 $911.3
-------- ------
Costs, expenses and other:
Cost of sales....................................... 392.9 355.5
Marketing, distribution and administrative expenses. 515.2 471.9
Interest expense.................................... 11.2 11.6
Interest income..................................... (2.0) (3.9)
Other expense, net.................................. 11.9 2.6
-------- ------
Total costs, expenses and other................... 929.2 837.7
-------- ------
Income from continuing operations before taxes and
minority interest................................. 80.6 73.6
Income taxes........................................ 28.7 25.8
-------- ------
Income from continuing operations before minority
interest.......................................... 51.9 47.8
Minority interest................................... (.6) (.2)
-------- ------
Income from continuing operations................... 51.3 47.6
Discontinued operations, net........................ -- 6.4
-------- ------
Net income.......................................... $ 51.3 $ 54.0
======== ======
Income per share:
Continuing operations............................. $ .73 $ .66
Discontinued operations, net...................... -- .09
-------- ------
Net income.......................................... $ .73 $ .75
======== ======
Average shares outstanding.......................... 70.17 72.07
======== ======
The accompanying notes are an integral part of this statement.
3
<PAGE>4
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
Nine months ended
September 30
-----------------
1994 1993
---- ----
(unaudited)
Net sales............................................. $2,903.0 $2,639.6
-------- --------
Costs, expenses and other:
Cost of sales......................................... 1,134.4 1,019.3
Marketing, distribution and administrative expenses... 1,473.9 1,356.5
Interest expense...................................... 40.9 33.2
Interest income....................................... (17.0) (19.0)
Other expense, net.................................... 19.1 22.3
-------- --------
Total costs, expenses and other..................... 2,651.3 2,412.3
-------- --------
Income from continuing operations before taxes,
minority interest and cumulative effect of
accounting changes.................................. 251.7 227.3
Income taxes.......................................... 95.4 87.3
-------- --------
Income from continuing operations before minority
interest and cumulative effect of accounting
changes............................................. 156.3 140.0
Minority interest..................................... (1.6) (1.8)
-------- --------
Income from continuing operations before cumulative
effect of accounting changes........................ 154.7 138.2
Discontinued operations
Income, net of taxes................................ 1.2 6.0
(Loss) on sale, net of taxes in 1993................ (25.0) (10.0)
Cumulative effect of accounting changes, net of taxes. (45.2) (107.5)
-------- --------
Net income............................................ $ 85.7 $ 26.7
======== ========
Income (loss) per share:
Continuing operations............................... $ 2.18 $ 1.92
Discontinued operations, net........................ (.34) (.06)
Cumulative effect of accounting changes............. (.63) (1.49)
-------- --------
Net income............................................ $ 1.21 $ .37
======== ========
Average shares outstanding............................ 70.98 72.05
======== ========
The accompanying notes are an integral part of this statement.
4
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AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(In millions)
September 30 December 31
1994 1993
------------ -----------
(unaudited)
ASSETS
Current assets:
Cash and equivalents........................... $ 84.7 $ 223.9
Accounts receivable............................ 367.8 306.0
Inventories.................................... 504.6 360.5
Prepaid expenses and other..................... 165.3 135.9
Net assets of discontinued operations.......... -- 18.8
-------- --------
Total current assets....................... 1,122.4 1,045.1
-------- --------
Property, plant and equipment, at cost......... 1,144.8 1,061.5
Less accumulated depreciation.................. 625.0 585.3
-------- --------
519.8 476.2
-------- --------
Net assets of discontinued operations.......... -- 136.2
Other assets................................... 312.8 261.2
-------- --------
Total assets............................... $1,955.0 $1,918.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year.................. $ 192.4 $ 70.4
Accounts payable............................... 309.6 365.4
Accrued compensation........................... 104.0 62.7
Other accrued liabilities...................... 220.7 203.3
Sales and other taxes.......................... 83.1 94.9
Income taxes................................... 211.4 225.3
-------- --------
Total current liabilities.................. 1,121.2 1,022.0
-------- --------
Long-term debt................................. 121.3 123.7
Employee benefit plans......................... 369.3 295.1
Deferred income taxes.......................... 30.1 30.5
Other liabilities.............................. 135.7 133.4
Shareholders' equity:
Common stock................................... 43.3 43.3
Additional paid-in capital..................... 657.8 652.3
Retained earnings.............................. 137.2 150.6
Translation adjustments........................ (168.0) (175.3)
Treasury stock, at cost........................ (492.9) (356.9)
-------- --------
Total shareholders' equity................. 177.4 314.0
-------- --------
Total liabilities and shareholders' equity. $1,955.0 $1,918.7
======== ========
The accompanying notes are an integral part of this statement.
5
<PAGE>6
AVON PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Nine months ended
September 30
-----------------
1994 1993
---- ----
(unaudited)
Cash flows from operating activities:
Net income............................................ $ 85.7 $ 26.7
Adjustments to reconcile net income to net cash
(used) by operating activities:
Cumulative effect of accounting changes........... 45.2 107.5
Discontinued operations, net...................... 23.8 4.0
Payments for restructuring costs.................. (3.5) (24.7)
Depreciation and amortization..................... 41.3 42.6
Provision for doubtful accounts................... 42.3 34.7
Translation (gains) losses........................ (10.4) 14.0
Deferred income taxes............................. (.4) 3.8
Other............................................. 18.8 4.7
Changes in assets and liabilities:
Accounts receivable............................. (132.1) (117.2)
Inventories..................................... (140.6) (132.0)
Prepaid expenses and other...................... (27.5) (32.8)
Accounts payable and accrued liabilities........ 18.6 26.2
Income and other taxes.......................... (18.1) (15.0)
Noncurrent assets and liabilities............... (39.4) 14.9
------- -------
Net cash (used) by continuing operations.............. (96.3) (42.6)
Net cash (used) by discontinued operations............ (2.0) (31.1)
------- -------
Net cash (used) by operating activities............... (98.3) (73.7)
------- -------
Cash flows from investing activities:
Capital expenditures.................................. (60.8) (39.6)
Disposal of assets.................................... 4.4 16.2
Acquisition of minority interest in subsidiary stock.. -- (5.1)
Proceeds from sale of Giorgio Beverly Hills, Inc...... 150.0 --
------- -------
Net cash provided (used) by investing activities...... 93.6 (28.5)
------- -------
Cash flows from financing activities:
Cash dividends........................................ (106.3) (92.3)
Debt, net (maturities of three months or less)........ 112.8 157.1
Proceeds from short-term debt......................... 23.3 21.2
Retirement of short-term debt......................... (9.7) (10.8)
Retirement of long-term debt.......................... (12.0) (37.7)
Repurchases of common stock........................... (137.2) (.4)
Proceeds from exercise of stock options, net of taxes. .6 .8
------- -------
Net cash (used) provided by financing activities...... (128.5) 37.9
------- -------
Effect of exchange rate changes on cash............... (6.0) (9.3)
------- -------
Net decrease in cash and equivalents.................. (139.2) (73.6)
Cash and equivalents beginning of period.............. 223.9 141.6
------- -------
Cash and equivalents end of period.................... $ 84.7 $ 68.0
======= =======
The accompanying notes are an integral part of this statement.
6
<PAGE>7
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
1. ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
contained in Avon's 1993 Annual Report to Shareholders. The interim
statements are unaudited but include all adjustments, which consisted of
only normal recurring accruals, that management considers necessary to
fairly present the results for the interim periods. Results for interim
periods are not necessarily indicative of results for a full year. The year
end balance sheet data was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
To conform to the 1994 presentation, certain reclassifications to the
1993 balance sheet and cash flow statement were made. See Note 2 below
regarding discontinued operations.
2. DISCONTINUED OPERATIONS
During the third quarter of 1994, the Company completed the sale of
Giorgio Beverly Hills, Inc. ("Giorgio"), its remaining retail business and
received $150.0 in cash. During the second quarter of 1994, the Company
recorded a loss of $25.0 on the sale. Since the Company has excess capital
loss carryforwards, no tax benefits have been recognized on the loss. The
sale is subject to adjustment, if any, for customary closing conditions.
Giorgio's operating results are segregated and reported as income from
discontinued operations through the measurement date of June 30, 1994 in the
accompanying consolidated financial statements. Prior period financial
statements have been reclassified to conform to the current year
presentation.
Amounts included in income from discontinued operations for Giorgio are
summarized below:
Nine months ended
September 30
-----------------
1994 1993
---- ----
Net sales............................................ $58.1 $108.7
Income before taxes.................................. 2.0 10.9
Net income........................................... 1.2 6.0
The nine months ended September 30, 1994 represent the net sales and income
through the measurement date of June 30, 1994.
7
<PAGE>8
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
Assets and liabilities of Giorgio, reported as net assets of discontinued
operations as of December 31, 1993, are summarized below:
December 31
1993
-----------
Current assets............................................ $ 55.5
Goodwill.................................................. 134.4
Other noncurrent assets................................... 4.4
------
Total assets 194.3
------
Current liabilities....................................... 36.7
Long-term liabilities..................................... 2.6
------
Total liabilities..................................... 39.3
------
Net assets of discontinued operations..................... $155.0
======
In March 1993, Avon recorded a provision for discontinued operations of
$10.0 after tax, or $.14 per share, for the final settlement and related
expenses in an arbitration proceeding related to a business previously sold.
3. ACCOUNTING CHANGES
Effective January 1, 1994, Avon adopted Statement of Financial Accounting
Standards Board ("FAS") No. 112, "Employers' Accounting for Postemployment
Benefits" and FAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" for its foreign benefit plans. In addition, effective
January 1, 1994, Avon changed its method of accounting for internal systems
development costs. These development costs are being expensed as incurred,
rather than deferred and amortized over future periods. For further
discussion of these accounting changes, see Note 2 of the Notes to the
Consolidated Financial Statements in the Form 10-Q for the three months
ended March 31, 1994.
The proforma effect for the change in accounting for the deferred
internal systems development costs for the three and nine months ended
September 30, 1993, had the accounting change been adopted effective January
1, 1993, would not have been significant.
Effective January 1, 1993, Avon adopted FAS No. 106 for its U.S. benefit
plans and FAS No. 109, "Accounting for Income Taxes". For further
discussion of these accounting changes, see Note 2 of the Notes to the
Consolidated Financial Statements in the 1993 Annual Report.
8
<PAGE>9
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
4. INFORMATION RELATING TO THE STATEMENT OF CASH FLOWS
"Net cash (used) by continuing operations" includes the following cash
payments for interest and income taxes:
Nine months ended
September 30
-----------------
1994 1993
---- ----
Interest............................................ $ 32.9 $ 19.7
Income taxes, net of refunds received............... 106.1 105.7
5. INCOME PER SHARE
Income per share of common stock is based on the weighted average number
of shares outstanding. Dilution that could result from the exercise of stock
options is not material for the three and nine months ended September 30,
1994 and 1993, and accordingly, income per share assuming full dilution has
not been presented.
6. INVENTORIES
September 30 December 3l
1994 1993
------------ -----------
Raw materials............................ $139.9 $117.8
Finished goods........................... 364.7 242.7
------ ------
$504.6 $360.5
====== ======
7. DIVIDENDS
Cash dividends paid per share of common stock were $.50 and $1.40 for the
three and nine months ended September 30, 1994, respectively, and $.45 and
$1.25 for the corresponding 1993 periods. On August 2, 1994, Avon increased
the regular quarterly dividend on common shares from $.45 to $.50, increasing
the annual rate to $2.00 per share from $1.80 per share. The first quarterly
dividend at the new rate of $.50 was paid on September 1, 1994.
8. CONTINGENCIES
Various lawsuits and claims (asserted and unasserted) arising in the
ordinary course of business are pending or threatened against Avon. The
9
<PAGE>10
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
most significant of these are described below.
In April 1991, Wertheim Schroder & Co. Incorporated, a holder of Avon's
Preferred Equity-Redemption Cumulative Stock (the "PERCS"), filed, on behalf
of certain classes of PERCS holders, a suit against Avon in the United
States District Court for the Southern District of New York alleging various
contract and securities law claims relating to the PERCS. Avon's motion for
summary judgment was denied, except as to one claim, on April 1, 1993. Avon
rejects the assertions in this case, believes it has meritorious defenses to
the claims and is vigorously contesting this lawsuit.
In June 1988, Mallinckrodt, Inc. ("Mallinckrodt") and International
Minerals & Chemical Corporation ("IMC"), now known as Mallinckrodt Group
Inc., filed a lawsuit against Avon in the St. Louis Missouri City Circuit
Court arising from Avon's sale of Mallinckrodt to IMC in 1986. The suit
alleged that a certain patent dispute and a settlement, referred to as the
DuPont patent case, various environmental claims and numerous other lawsuits
and claims are contingent liabilities covered by an indemnification given by
Avon in connection with the sale of Mallinckrodt. In October 1991, the
Missouri Supreme Court affirmed the Circuit Court's decision that Avon has
the obligation to indemnify IMC and Mallinckrodt in connection with the
DuPont patent case, but remanded the matter for a trial on the damages, if
any, suffered by the parties. On July 27, 1992, a jury returned a verdict
in the DuPont patent case for $16.0, and a judgment for that amount plus
approximately $6.5 interest was entered. On August 11, 1992, IMC and
Mallinckrodt filed post-trial motions, including a motion for a judgment
notwithstanding the verdict or, in the alternative, a motion for a new
trial. On November 5, 1992, the St. Louis Missouri City Circuit Court
granted IMC's and Mallinckrodt's motion for a judgment notwithstanding the
verdict and directed a verdict for plaintiffs in the amount of $27.1 plus
interest. As of November 5, 1992, the interest amounted to approximately
$11.7. Avon, IMC and Mallinckrodt have appealed this decision. This issue
was argued before the Missouri Court of Appeals, Eastern District on May 11,
1994. On November 8, 1994, the Court of Appeals overturned the judgment
notwithstanding the verdict and ordered a new trial. Subject to possible
further judicial review, a retrial is expected during 1995. Pre-trial
proceedings and discovery activities are ongoing with respect to the
environmental and general litigation portions of the case.
With respect to the environmental contingencies which constitute a part
of the indemnification litigation, the total cost to Avon cannot be
determined with certainty as a result of such factors as the preliminary
status of information relating to the sites owned by the purchaser, the
preliminary regulatory involvement, the unknown magnitude and timing of
cleanup efforts, if any, to be undertaken by the purchaser or Mallinckrodt,
the possibility of recoveries against other parties, the uncertainty of the
success of Avon's defenses, and unasserted claims, if any. However, these
factors have been assessed and will continue to be assessed by Avon in
estimating reserves to be recorded in its financial statements.
10
<PAGE>11
AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data)
The ultimate outcome and aggregate cost of resolving all of the above
contingencies will be based on a number of factors and will be determined
over a number of years. Accordingly, the total cost to Avon cannot currently
be determined with certainty. The reserves for such contingencies, at
September 30, 1994, which are recorded gross without anticipation of insurance
recoveries or other third party recoveries, if any, have been estimated by
Avon's management based on its review of currently known facts and
circumstances at September 30, 1994. In the opinion of Avon's management,
based on its review of the preliminary information available at this time, the
difference, if any, between the total cost of resolving such contingencies
and reserves recorded by Avon at September 30, 1994 should not have a material
adverse impact on Avon's consolidated financial position or results of
operations, based on the current levels of such amounts. However, this
difference, if any, could have a material effect on results of operations
in a future period when resolved.
11
<PAGE>12
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition
Results of Operations--Three Months Ended September 30, 1994 and 1993.
Consolidated
Avon's net income for the three months ended September 30, 1994 of $51.3
million, or $.73 per share, decreased 5 percent and 3 percent, respectively,
from net income of $54.0 million, or $.75 per share, in the comparable
period of 1993. The 1993 results for the third quarter include net income
of $6.4 million, or $.09 per share, for discontinued operations relating to
Giorgio Beverly Hills, Inc. ("Giorgio").
Continuing Operations
Income from continuing operations for the three months ended September 30,
1994 was $51.3 million, an 8 percent increase over the comparable period of
1993. Income per share from continuing operations increased 11 percent to
$.73 from $.66 in 1993. Pretax income of $80.6 million increased 10 percent
due to higher sales and an improved operating expense ratio. These favorable
results were partially offset by a 1993 gain on the sale of a non-operating
investment and lower interest income. Income from continuing operations was
further reduced by a higher effective tax rate (35.6 percent versus 35.1
percent in 1993). The lower 1993 rate is primarily due to the use of capital
loss carryforwards to offset the gain on the sale of a non-operating
investment in 1993 and a favorable adjustment to net deferred tax benefits
resulting from a change in the U.S. statutory tax rate in 1993.
Net sales for the three months ended September 30, 1994 of $1.0 billion
increased $98.5 million, or 11 percent, over the comparable period of the
prior year. The increase was primarily due to higher international sales as
a result of unit growth and sales of higher-priced products in Brazil and
Argentina; unit growth in most Pacific Rim markets and the favorable exchange
rate impact of most European currencies against the U.S. dollar. The U.S.
also had higher sales reflecting increases in the number of Representative
orders and in average order size. These improvements were partially offset
by lower sales in Japan and Venezuela due to declines in units sold.
Cost of sales as a percentage of sales was 38.9 percent in the third
quarter of 1994 compared to 39.0 percent in the third quarter of 1993. The
small increase in gross margin was primarily due to significant improvement
in Brazil, resulting from significant improvement in the economy, partially
offset by increased sales in the lower margin casual clothing and intimate
apparel ("apparel") line in the U.S. and lower margins in most European
markets.
12
<PAGE>13
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Marketing, distribution and administrative expenses of $515.2 million
increased $43.3 million, or 9 percent, over the comparable period of 1993
but decreased as a percentage of sales to 51.0 percent from 51.8 percent in
1993. The higher expenses are associated with sales increases in Brazil,
the U.S., and Argentina, expansion in China, and an increase in government
mandated benefits as well as higher investments for field and merchandising
programs in Germany. The improved operating expense ratio resulted primarily
from the significant sales increases in Brazil and the U.S. with proportion-
ately lower increases in expenses. This improvement was partially offset by
the increased expenses in Germany.
Interest expense was level with the comparable period of 1993. Interest
income decreased $1.9 million primarily due to lower average cash balances
in Brazil.
Other expense, net, increased $9.3 million from the prior year period
primarily due to the 1993 gain on sale of a non-operating investment.
United States
Net sales increased 7 percent reflecting a 4 percent increase in the
number of Representative orders and a 3 percent increase in average order
size. The sales improvement reflects the success of the apparel line
introduced late in the first quarter of 1994 as well as a strong increase in
sales of color cosmetics. Pretax income increased 32 percent over the prior
year period due to the sales increase and an improved operating expense
ratio. The improved operating expense ratio resulted from lower marketing-
related expenses, primarily advertising, as well as expense savings resulting
from the 1992 restructuring program. These improvements were partially
offset by a lower gross margin due to increased sales of the lower margin
apparel line. As a result of the improved operating results for the first
nine months of 1994, the Company is planning to make additional expenditures
for marketing, customer service and upgrading systems during the fourth
quarter of 1994.
International
Net sales increased 13 percent over the comparable period of 1993 and
pretax income increased 19 percent. The sales increase was primarily due to
strong unit growth and sales of higher-priced products in Brazil and
Argentina, increased units sold in the Pacific Rim markets and the favorable
exchange rate impact of most European currencies against the U.S. dollar.
These improvements were partially offset by unit declines in Japan, which
were partially offset by increased sales of higher-priced products and a
stronger yen. In addition, there were lower sales in Venezuela due to
economic instability that has restrained consumer demand; and unit declines
in the U.K., which were partially offset by increased sales of higher-priced
products. The increase in pretax income reflects sales, gross margin and
13
<PAGE>14
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
operating expense ratio improvements in Brazil resulting from a significant
improvement in the economy and the benefit of a higher number of active
Representatives compared with the prior year, higher sales in Argentina as
well as unit growth in the Pacific Rim markets. The improved economic
environment in Brazil is attributed to the government's new economic program
which became effective in July 1994. This program has had the impact of
significantly lowering the inflation rate and improving consumer purchasing
confidence. The increases were partially offset by higher expenses in
Germany resulting from an increase in government mandated benefits and
increased field and merchandising programs. In addition, pretax income was
unfavorably impacted by unit sales declines in the U.K., lower sales and a
higher expense ratio in Venezuela and higher operating expenses in China,
mainly related to market expansion.
Discontinued Operations
During the third quarter of 1994, Avon completed the sale of Giorgio.
As a result, Giorgio's net income of $6.4 million, or $.09 per share, for the
three months ended September 30, 1993, have been reported as discontinued
operations. Giorgio's results for 1994 have not been included after the June
30, 1994 measurement date. The sale is subject to adjustment, if any, for
customary closing conditions.
Results of Operations--Nine Months Ended September 30, 1994 and 1993.
Consolidated
Avon's net income for the nine months ended September 30, 1994 of $85.7
million, or $1.21 per share, includes a loss for discontinued operations of
$23.8 million, or $.34 per share, and a charge for accounting changes of
$45.2 million, or $.63 per share. The 1994 loss from discontinued operations
relates to the sale of Giorgio. The charge for accounting changes is for the
cumulative effect of changes in accounting principles for the following:
postemployment benefits (FAS No. 112) of $28.9 million; postretirement
benefits (FAS No. 106) for foreign benefit plans of $8.0 million; and costs
related to the development of information systems of $8.3 million. Effective
in the first quarter of 1994, internal information systems development costs
are being expensed as incurred, rather than deferred and amortized over
future periods.
Net income for the first nine months of 1993 was $26.7 million, or $.37
per share, which included a net charge for the cumulative effect of changes
in accounting principles of $107.5 million, or $1.49 per share, for
postretirement benefits (FAS No. 106) for U.S. plans and income taxes
(FAS No. 109) and a net charge for discontinued operations of $4.0 million,
or $.06 per share.
14
<PAGE>15
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
Continuing Operations
Income from continuing operations before cumulative effect of accounting
changes for the nine months ended September 30, 1994 was $154.7 million, a 12
percent increase over the comparable period of 1993. Income per share from
continuing operations increased 14 percent to $2.18 from $1.92 in the
comparable period last year. Pretax income of $251.7 million increased 11
percent due to higher overall sales and an improved operating expense ratio.
These favorable results were partially offset by higher interest expense,
mainly in Brazil, and a lower gross margin. Net income was further improved
by a lower effective tax rate in 1994 (37.9 percent versus 38.4 percent in
1993) resulting primarily from the mix of both international and domestic
income, as well as varying tax rates and income levels of international
subsidiaries.
Net sales for the nine months ended September 30, 1994 were $2.9 billion,
a $263.4 million, or 10 percent, increase over the comparable period of last
year. The sales increase was primarily due to higher sales in the U.S.,
reflecting an increase in average order size; higher sales in all markets in
the Americas except Venezuela; increased units sold in all Pacific Rim
markets; and sales of higher-priced products and the favorable impact of
exchange in Japan. These improvements were partially offset by lower sales
in Venezuela, lower units sold and sales of lower-priced products in Germany
and France as well as the unfavorable impact of exchange rate fluctuations of
most European currencies against the U.S. dollar.
Cost of sales as a percentage of sales was 39.1 percent in 1994 compared
to 38.6 percent in 1993. The decline in gross margin was primarily due to
increased sales of the lower margin apparel line in the U.S. and increased
sales of the lower margin home product category in Mexico. The decline was
partially offset by improved gross margins in Brazil and Japan resulting from
a shift in the sales mix to higher margin items.
Marketing, distribution and administrative expenses of $1.5 billion
increased 9 percent over the comparable period of 1993, but decreased as a
percentage of sales to 50.8 percent from 51.4 percent. The higher expense
level reflects sales-related increases in the U.S., Argentina, Mexico, Brazil
and the Pacific Rim markets; higher expenses for market expansion in the
Pacific Rim, most significantly China; and higher distribution, selling and
marketing expenses in Mexico to strengthen competitive position. The
improvement in the operating expense ratio was primarily due to the sales
increases in the U.S. and Argentina, partially offset by the increased
expenses in Mexico and the Pacific Rim markets and the lower sales in
Venezuela and Germany.
Interest expense increased $7.7 million from the comparable period of
last year primarily due to higher short-term debt levels in Brazil to fund
working capital needs. Interest income was $2.0 million lower than the
comparable period of 1993 due to lower average cash balances in Brazil.
15
<PAGE>16
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
Other expense, net, of $19.1 million decreased $3.2 million from the
comparable period of 1993, primarily due to lower net foreign exchange
losses in Brazil, which were partially offset by the 1993 gain on sale of a
non-operating investment.
United States
Net sales increased 11 percent reflecting an 8 percent increase in
Representative average order size and a 3 percent increase in the number of
Representative orders. The sales improvement reflects the introduction of
the new apparel line in 1994, as well as increases in most major product
categories. Pretax income increased 35 percent, primarily due to the sales
increase and a favorable operating expense ratio due to lower marketing-
related expenses, primarily advertising, and expense savings resulting from
the 1992 restructuring program. These favorable results were partially
offset by a lower gross margin due to the introduction of the lower margin
apparel line.
International
Net sales and pretax income increased 10 percent and 8 percent, respect-
ively, over the comparable period of 1993. The increase in sales reflects
the sale of higher-priced products in Brazil and Argentina and increased
units sold in Mexico, Argentina and all Pacific Rim markets. These favorable
results were partially offset by lower sales throughout most Western European
markets, mainly as a result of the strengthening of the dollar against most
currencies and lower unit volume in Venezuela and Germany. The increase in
pretax income reflects the overall sales growth; higher gross margins in
Brazil and Japan due to shifts in product mix to higher margin products, as
well as the favorable impact of exchange; and an improved operating expense
ratio in Spain primarily due to higher sales, lower marketing expenses and
continued expense savings from the 1992 restructuring program. These
improvements were partially offset by sales-related shortfalls in Germany and
France; lower unit sales and currency fluctuations in Venezuela; and higher
expenses in the Pacific Rim markets primarily for expansion in China as part
of a long-term growth strategy.
Discontinued Operations
As a result of the sale of Giorgio, as previously discussed, the nine
months ended September 30, 1994 included a net loss from discontinued
operations of $23.8 million, or $.34 per share. This reflects a loss of
$25.0 million on the sale, partially offset by Giorgio's net earnings of $1.2
million for the six months to the measurement date.
16
<PAGE>17
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
The nine months ended September 30, 1993 included a net loss from
discontinued operations of $4.0 million after tax, or $.06 per share. This
reflects a loss of $10.0 million for the final settlement and related
expenses in an arbitration proceeding related to a business previously sold,
partially offset by Giorgio's net earnings of $6.0 million for the nine
months.
Liquidity and Capital Resources
Cash Flows
Excluding changes in debt, net cash usage was $253.6 million in the first
nine months of 1994 compared with $203.4 million in the comparable period of
1993. The higher cash usage reflects an increase of $136.8 million for the
repurchase of common stock, $21.2 million of higher capital expenditures,
$14.0 million in higher dividend payments, as well as higher cash used by
operations. These increases were partially offset by $150.0 million of
proceeds from the sale of Giorgio. During the first nine months of 1994, the
Company purchased approximately 2,287,000 shares of common stock for $132.0
million under the stock repurchase program and acquired approximately 88,000
shares issued under the 1991 Long-Term Incentive Plan.
For the first nine months of 1994, cash used by continuing operations was
$96.3 million compared with $42.6 million in 1993. The higher cash usage
resulted mainly from the funding of benefit plans, which is included in the
change in noncurrent assets and liabilities on the Consolidated Statement of
Cash Flows and higher working capital levels. This increase was partially
offset by higher net income, primarily in the U.S. The favorable change in
cash provided by discontinued operations of $29.1 million was primarily due
to the 1993 payment of an arbitration settlement and related expenses.
Capital Resources
Total debt increased $119.6 million to $313.7 million at September 30,
1994 from $194.1 million at December 31, 1993, principally due to normal
seasonal working capital requirements during the first nine months of 1994
and borrowings related to the stock repurchase program. Total debt at
September 30, 1994 was $37.5 million lower than total debt of $351.2 million
at September 30, 1993. This decrease was primarily due to the proceeds
from the sale of Giorgio, partially offset by higher borrowings for working
capital requirements and for the stock repurchase program.
At September 30, 1994, the Company had two revolving credit agreements
totalling $600 million. The credit agreements contained covenants that
included requirements for minimum net worth, as defined, interest coverage
and maximum borrowings. One of the agreements also allowed the Company to
use borrowings for the purchase of Avon stock. These agreements supported
the Company's commercial paper borrowings of $30 million at September 30,
1994.
17
<PAGE>18
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
There were no borrowings under these agreements during the third quarter of
1994.
At September 30, 1994, the Company had bankers' acceptance facilities
available of $171.0 million with various banks. At September 30, 1994, there
were no borrowings under these facilities. In addition, at September 30,
1994, the Company had $47.9 million of borrowings from various banks under
uncommitted lines of credit.
In October 1994, the Company entered into a five year, $600 million
revolving credit and competitive advance facility agreement with various
banks. This facility replaces the two revolving credit facilities totalling
$600 million. Within this facility, the Company is able to borrow, on an
uncommitted basis, up to $200 million in various foreign currencies. The
new $600 million facility is primarily to be used to finance working capital,
to provide support for the issuance of commercial paper and to support the
stock repurchase program. The new facility contains a covenant for interest
coverage, as defined.
Management currently believes that cash from operations and available
financing alternatives are adequate to meet anticipated requirements for
working capital, dividends, capital expenditures, the stock repurchase
program and other cash needs. It is also currently anticipated that existing
debt maturing over the next five years will be paid without refinancing.
Financial Instruments
The Company may use interest rate swaps solely to hedge portions of its
interest expense thereby allowing the Company to establish fixed or variable
interest rates for its outstanding debt. Currently and over the recent past,
the Company has elected to use interest rate swaps to establish fixed rates
on its long-term debt. The Company closely monitors market conditions and,
if in a variable position, may also use interest rate caps whereby it obtains
protection if interest rates rise above a defined level. As of September 30,
1994, the Company's long-term debt has been hedged to a net fixed interest
rate position through the use of interest rate swap contracts and the Company
has interest rate caps on a portion of its short-term debt. The Company
attempts to minimize its credit exposure to counterparties by entering into
contracts only with major international financial institutions with "A" or
higher credit ratings as issued by Standard & Poor's Corporation.
As of September 30, 1994, the Company has three interest rate swap
agreements on the 6-1/8% Deutsche Mark Notes ("Notes"). Each agreement has a
notional principal amount of $100.0 million. The interest rate on the Notes
is fixed at 10.3% through November 7, 1994, and at 1.4 percentage points
above one-month LIBOR from November 8, 1994 to May 6, 1998, the date of
maturity. One of the swap agreements related to these Notes has original
terms of ten years and one month; one of the swap agreements has an original
term of four years and eight months; and the third has an original term of
two years and eleven months. Two of the agreements expire May 6, 1998 and
the third on November 7, 1994.
18
<PAGE>19
AVON PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION--(Continued)
During 1993, Avon received $16.6 million from the sale of interest rate
swap contracts on the Deutsche Mark Notes. This gain was deferred. In 1990,
the gain on certain interest rate swap agreements related to the Swiss Franc
Bonds was also deferred. These deferred gains are being amortized over the
remaining terms of the swap agreements. The unamortized balance as of
September 30, 1994 totalled $12.7 million.
The Company may hedge foreign currency royalties and dividends from its
international subsidiaries and other foreign currency transactions. The
Company may also hedge equity investments in foreign subsidiaries or
contractual foreign currency cash flows or obligations. The Company's hedges
are comprised of over-the-counter forward contracts or options with major
international financial institutions to buy or sell foreign currencies
primarily against the U.S. Dollar. As foreign currency exchange rates
change, the resulting gains or losses on foreign exchange contracts are
offset by gains or losses on the underlying foreign currency exposures. The
Company regularly monitors its foreign currency exposures and ensures that
hedge contract amounts do not exceed the amounts of the underlying exposures.
Non-performance of the counterparties to currency and interest rate swap
agreements in a net receivable position would result in a write-off of $2.1
million at September 30, 1994. In addition, there are other swap agreements
in a net payable position at September 30, 1994 of $5.1 million. Each
agreement provides for the right of offset between counterparties to the
agreement.
Working Capital
As of September 30, 1994, working capital was $1.2 million compared with
$4.3 million at the end of 1993, excluding, net assets of discontinued
operations. The decline from December 1993 reflects a decrease in cash and
equivalents and an increase in debt maturing within one year, partially
offset by higher investments in working assets (current assets excluding cash
and equivalents and net assets of discontinued operations), most significantly
inventory, which reflects the seasonal pattern of Avon's operations. The
increase in inventory is also due to the introduction of new and higher-priced
product lines and higher sales volume in the U.S., continued business
expansion in the Pacific Rim markets, higher sales volume in Argentina and
Brazil and sales shortfalls in most Western European markets, most notably
Germany and the United Kingdom.
Working capital at September 30, 1994 was $109.3 million higher than at
June 30, 1994, when current liabilities exceeded current assets, excluding
net assets of discontinued operations by $108.1 million. The improvement
reflects a decrease in debt maturing within one year primarily as a result of
the use of proceeds from the sale of Giorgio.
19
<PAGE>20
AVON PRODUCTS, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On November 8, 1994, the Missouri Court of Appeals, Eastern District
overturned the judgment notwithstanding the verdict on the DuPont patent case
and ordered a new trial. Subject to possible further judicial review, a
retrial is expected during 1995, see Note 8 - Contingencies.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
4.1 --Revolving Credit and Competitive Advance Facility
Agreement, dated as of October 5, 1994, among
Avon Products, Inc., Avon Capital Corporation and
a group of banks and other lenders.
10.1 --Employment Agreement, dated as of September 1, 1994,
between Avon Products, Inc. and Edward J. Robinson.
10.2 --Form of Employment Agreement, dated as of September
1, 1994, between Avon Products, Inc. and certain
senior officers.
11.1 --Statement re computation of primary income per share.
11.2 --Statement re computation of fully diluted income
per share.
27 --Financial Data Schedule - Included as part of the
electronically filed Form 10-Q only.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the third quarter
of 1994.
20
<PAGE>21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVON PRODUCTS, INC.
(Registrant)
Date: November 11, 1994 By /s/ ROBERT J. CONOLOGUE
------------------------------
Robert J. Conologue
Group Vice President and Controller
Principal Accounting Officer
Signed both on behalf of the registrant
and as principal accounting officer.
21
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended September 30, 1994 Commission file number 1-4881
------------
AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
------------
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
4.1 --Revolving Credit and Competitive Advance Facility Agreement, dated
as of October 5, 1994, among Avon Products, Inc., Avon Capital
Corporation and a group of banks and other lenders.
10.1 --Employment Agreement, dated as of September 1, 1994, between
Avon Products, Inc. and Edward J. Robinson.
10.2 --Form of Employment Agreement, dated as of September 1, 1994,
between Avon Products, Inc. and certain senior officers.
11.1 --Statement re computation of primary income per share.
11.2 --Statement re computation of fully diluted income per share.
27 --Financial Data Schedule - Included as part of the electronically
filed Form 10-Q only.
EXHIBIT 4.1
<PAGE>
[CONFORMED COPY]
$600,000,000
REVOLVING CREDIT AND COMPETITIVE
ADVANCE FACILITY AGREEMENT
dated as of
October 5, 1994
among
AVON PRODUCTS, INC.
AVON CAPITAL CORPORATION
THE OFFSHORE BORROWERS, BANKS AND OTHER LENDERS
FROM TIME TO TIME PARTIES HERETO
and
CHEMICAL BANK,
as Administrative Agent
<PAGE>
<PAGE i>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.01. Certain Definitions . . . . . . . . . . . 1
(a) Terms Generally . . . . . . . . . . . 1
(b) Accounting Terms . . . . . . . . . . 2
(c) Certain Other Terms . . . . . . . . . 2
ARTICLE II
The Loans
Section 2.01. The Revolving Credit Loans;
Commitments . . . . . . . . . . . . . . . 23
Section 2.02. Procedure for Revolving Credit
Loans . . . . . . . . . . . . . . . . . . 23
Section 2.03. Evidence for Loans . . . . . . . . . . . . 24
Section 2.04. Reduction of Commitments . . . . . . . . . 26
Section 2.05. Prepayment of Revolving Credit
Loans . . . . . . . . . . . . . . . . . . 26
Section 2.06. Competitive Advance Loans . . . . . . . . 26
Section 2.07. Purpose of Loans; Sublimits . . . . . . . 32
ARTICLE III
Interest, Conversion, Fees, Etc.
Section 3.01. Procedure for Interest Rate
Determination . . . . . . . . . . . . . . 32
Section 3.02. Interest on ABR Loans . . . . . . . . . . 33
Section 3.03. Interest on Eurocurrency Loans and Competitive
Index Rate Loans . . . . . . . . . . . . 33
Section 3.04. Interest on Competitive Absolute
Rate Loans . . . . . . . . . . . . . . . 34
Section 3.05. Continuation and Conversion of
Revolving Credit Loans . . . . . . . . . 34
Section 3.06. Post-Maturity Interest . . . . . . . . . . 35
Section 3.07. Maximum Interest Rate . . . . . . . . . . 35
Section 3.08. Fees . . . . . . . . . . . . . . . . . . . 35
<PAGE>
<PAGE> ii
ARTICLE IV
Disbursement and Payment
Section 4.01. Disbursement of Loans; Pro Rata
Treatment of Banks . . . . . . . . . . . 37
Section 4.02. Method of Payment . . . . . . . . . . . . 37
Section 4.03. Compensation for Losses . . . . . . . . . 39
Section 4.04. Withholding, Reserves and Additional
Costs . . . . . . . . . . . . . . . . . . 40
Section 4.05. Unavailability and Impracticability . . . 44
Section 4.06. Substitution of Banks . . . . . . . . . . 46
ARTICLE V
Representations and Warranties
Section 5.01. Representations and Warranties
of the Borrowers . . . . . . . . . . . . 46
ARTICLE VI
Conditions Precedent
Section 6.01. Conditions to the Availability of the
Commitments. . . . . . . . . . . . . . . . 50
Section 6.02. Conditions to Each Loan . . . . . . . . . 52
Section 6.03. Satisfaction of Conditions Precedent . . . 53
Section 6.04. Offshore Borrowers . . . . . . . . . . . . 53
Section 6.05. Sublimit A Loans . . . . . . . . . . . . . 54
Section 6.06. Sublimit B Loans . . . . . . . . . . . . . 55
ARTICLE VII
Covenants
Section 7.01. Affirmative Covenants . . . . . . . . . . 55
Section 7.02. Negative Covenants . . . . . . . . . . . . 59
ARTICLE VIII
Events of Default
Section 8.01. Events of Default . . . . . . . . . . . . 62
Section 8.02. Notice of Default . . . . . . . . . . . . 64
<PAGE>
<PAGE> iii
ARTICLE IX
The Administrative Agent and the Banks
Section 9.01. The Agency . . . . . . . . . . . . . . . . 64
Section 9.02. The Administrative Agent's Duties . . . . 65
Section 9.03. Sharing of Payments and Expenses . . . . . 65
Section 9.04. The Administrative Agent's
Liabilities . . . . . . . . . . . . . . . 66
Section 9.05. The Administrative Agent as a
Bank . . . . . . . . . . . . . . . . . . 66
Section 9.06. Bank Credit Decision . . . . . . . . . . . 66
Section 9.07. Indemnification . . . . . . . . . . . . . 67
Section 9.08. Successor Administrative Agent . . . . . . 67
ARTICLE X
The Guaranty
Section 10.01. The Guaranty . . . . . . . . . . . . . . 68
Section 10.02. Absolute Guaranty . . . . . . . . . . . . 69
Section 10.03. Consents, Waivers and Renewals . . . . . 69
Section 10.04. Subrogation . . . . . . . . . . . . . . . 69
Section 10.05. Security . . . . . . . . . . . . . . . . 70
Section 10.06. Continuing Guaranty . . . . . . . . . . . 70
Section 10.07. Waiver of Notice . . . . . . . . . . . . 70
ARTICLE XI
Miscellaneous
Section 11.01. APPLICABLE LAW . . . . . . . . . . . . . 70
Section 11.02. Set-off . . . . . . . . . . . . . . . . . 71
Section 11.03. Expenses . . . . . . . . . . . . . . . . 71
Section 11.04. Amendments . . . . . . . . . . . . . . . 71
Section 11.05. Cumulative Rights and No Waiver . . . . . 72
Section 11.06. Notices . . . . . . . . . . . . . . . . . 72
Section 11.07. Severability . . . . . . . . . . . . . . 73
Section 11.08. Parties in Interest . . . . . . . . . . . 73
Section 11.09. WAIVER OF RIGHT TO JURY . . . . . . . . . 76
Section 11.10. Indemnity . . . . . . . . . . . . . . . . 76
Section 11.11. Judgment Currency . . . . . . . . . . . . 77
Section 11.12. Consent to Jurisdiction . . . . . . . . . 78
Section 11.13. Confidentiality . . . . . . . . . . . . . 78
Section 11.14. Execution in Counterparts . . . . . . . . 79
<PAGE>
<PAGE> 1
REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY
AGREEMENT, dated as of October 5, 1994 (as amended, supple-
mented, modified or extended from time to time, this "Agree-
ment"), among Avon Products, Inc., a New York corporation
("API"), Avon Capital Corporation, a Delaware corporation
("ACC"), each of the Offshore Borrowers (as defined below)
from time to time designated as such, each of the banks and
other lenders from time to time parties hereto (each, a "Bank"
and, collectively, the "Banks") and Chemical Bank, as Adminis-
trative Agent (as defined below).
W I T N E S S E T H:
WHEREAS, API has requested the Banks to commit to
lend to the Borrowers (as defined below), on or before the
Termination Date (as defined below), up to $600,000,000 on a
revolving basis for general corporate purposes and for the
other purposes set forth herein; and
WHEREAS, API has requested the Banks to establish a
procedure pursuant to which the Borrowers may invite the Banks
to bid on an uncommitted basis to make loans scheduled to
mature on or before the Termination Date; and
WHEREAS, the Banks have agreed to make such loans
upon the terms and conditions set forth in this Agreement; and
WHEREAS, API has agreed to guarantee the obligations
of each of the Borrowers to repay such loans upon the terms
and conditions set forth herein;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Certain Definitions.
(a) Terms Generally. The definitions ascribed to
terms in this Section 1.01 and elsewhere in this Agreement
shall apply equally to both the singular and plural forms of
the terms defined. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "with-
out limitation". The words "hereby", "herein", "hereof",
"hereunder" and words of similar import refer to this
Agreement as a whole (including any exhibits and schedules
hereto) and not merely to the specific section, paragraph or
clause in which such word appears. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and
<PAGE>
<PAGE> 2
Exhibits and Schedules to, this Agreement unless the context
shall otherwise require.
(b) Accounting Terms. Except as otherwise
expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP,
as in effect from time to time; provided, however, that, for
purposes of determining compliance with the covenant set forth
in Sections 7.02(b) and (d), such terms shall be construed in
accordance with GAAP as in effect on the date of this Agree-
ment applied on a basis consistent with the construction
thereof applied in preparing Parent's audited financial
statements referred to in Section 5.01(d). In the event there
shall occur a change in GAAP which but for the foregoing
proviso would affect the computation used to determine
compliance with such covenant, the Borrowers and the Banks
agree to negotiate in good faith in an effort to agree upon an
amendment to this Agreement that will permit compliance with
such covenant to be determined by reference to GAAP as so
changed while affording the Banks the protection afforded by
such covenant prior to such change (it being understood,
however, that such covenant shall remain in full force and
effect in accordance with its existing terms pending the
execution by the Borrowers and the Banks of any such
amendment).
(c) Certain Other Terms. The following terms shall
have the meanings ascribed to them below or in the Sections of
this Agreement indicated below:
"ABR Lending Office" shall mean, with respect to
each Bank, its office identified in its Administrative
Questionnaire as its domestic lending office or such other
office as such Bank may hereafter designate as its domestic
lending office or ABR lending office by notice to the
Borrowers and the Administrative Agent.
"ABR Loans" shall mean, collectively, Revolving
Credit Loans, or portions thereof, that bear interest by
reference to the Base Rate and in the manner set forth in
Section 3.02.
"ACC" shall have the meaning ascribed to such term
in the Preamble to this Agreement.
"Account" shall have the meaning ascribed to such
term in the Pledge Agreement.
"Additional Amounts" shall have the meaning ascribed
to such term in Section 4.04(a).
<PAGE>
<PAGE> 3
"Additional Costs" shall have the meaning ascribed
to such term in Section 4.04(b).
"Administrative Agent" shall mean Chemical Bank,
together with its affiliates, as the arranger of the Commit-
ments and as the agent for the Banks under this Agreement and
the Credit Documents.
"Administrative Questionnaire" shall mean, with
respect to each Bank, an administrative details reply form in
the form prepared by the Administrative Agent and submitted to
the Administrative Agent duly completed by such Bank.
"Agreement" shall have the meaning ascribed to such
term in the Preamble to this Agreement.
"Alternate Currency" shall mean Australian Dollars,
Canadian Dollars, Deutschemarks, French Francs, Italian Lire,
Japanese Yen, Pounds Sterling or Spanish Pesetas, or any other
currency in which all the Banks agree to make Loans from time
to time, as specified in the relevant Borrowing Request.
"API" shall have the meaning ascribed to such term
in the Preamble to this Agreement.
"Applicable Lending Office" shall mean, with respect
to any Bank, (a) in the case of its ABR Loans, its ABR Lending
Office, (b) in the case of Revolving Eurodollar Loans or
Competitive Eurocurrency Loans, its Eurocurrency Lending
Office and (c) in the case of its Locally Funded Competitive
Alternative Currency Loans, its Local Currency Lending Office.
"Applicable Sublimit Margin" shall mean (a) in the
case of a Sublimit A Loan, 1.0% per annum and (b) in the case
of a Sublimit B Loan, (i) 1.0% per annum with respect to any
amount thereof held in the Account and (ii) 5.0% per annum
with respect to any amount thereof that has been released from
the Account pursuant to Section 14(a) of the Pledge Agreement.
"Applicable Telerate Page" shall mean, with respect
to an Alternate Currency, the display page for interest
settlement rates on the Telerate System Incorporated service
(or such other page as may replace such page on such service)
indicated below for the applicable type of Loan:
<PAGE>
<PAGE> 4
<TABLE>
<CAPTION>
Interest Settlement Rates
Page Number
Euromarket Locally
Currency Funded Loans Funded Loans
<S> <C> <C>
Australian Dollars -- --
Canadian Dollars 3740 3197
Deutschemarks 3750 22000
French Francs 3740 20041
Italian Lire 3740 --
Japanese Yen 3750 --
Pounds Sterling 3750 3750
Spanish Pesetas 3740 --;
</TABLE>
provided that with respect to any Alternate Currency not listed above, the
"Applicable Telerate Page" (if such exists) shall be determined at the time
the Alternate Currency is designated as such; provided further that with
respect to any Alternate Currency and type of Loan for which an Applicable
Telerate Page is not indicated above, the "Applicable Telerate Page" shall
be such display page for interest settlement rates on the Telerate System
Incorporated service as may in the future be designated for the purpose of
displaying the rates at which deposits in such Alternate Currency are
offered by leading banks in the relevant interbank deposit market.
"Assignee" shall have the meaning ascribed to such term in
Section 11.08(c).
"Assignment and Acceptance" shall have the meaning ascribed to
such term in Section 11.08(c).
"Available Facility" shall mean (a) on any date prior to the
Termination Date, an amount equal to the remainder of (i) the Total
Commitment on such date minus (ii) the sum of the aggregate outstanding
principal amount of Loans (or, in the case of Alternate Currency Loans, the
Dollar Equivalent Amount thereof) on such date and (b) on and after the
Termination Date, $0.
"Avon Japan" shall mean Avon Products Company Limited, an
indirect Japanese subsidiary of API.
<PAGE>
<PAGE> 5
"Avon Japan Credit Agreement" shall mean the Credit Agreement,
dated November 27, 1990, between Avon Japan and Industrial Bank of Japan,
as such agreement may be amended, supplemented, modified or extended from
time to time.
"Bank" shall have the meaning ascribed to such term in the
Preamble to this Agreement. In the circumstances as described in
Section 11.08(c)(iii), an Assignee shall also be deemed a "Bank."
"Base Rate" shall mean, for any day, a fluctuating interest
rate per annum in effect from time to time, which rate per annum shall be
equal to the higher of:
(a) the rate of interest publicly announced by the
Administrative Agent in New York City from time to time as its prime
rate in effect on such day; and
(b) the sum of (i) 1/2 of 1% per annum and (ii) the Federal
Funds Rate in effect on such day.
"Benefit Arrangement" shall mean, at any time, an employee
benefit plan within the meaning of Section 3(3) of ERISA which is not a
Plan or a Multiemployer Plan and which is maintained or otherwise
contributed to by any member of the ERISA Group.
"Borrower" shall mean, with respect to any Loan, whichever of
the Borrowers that has borrowed such Loan in accordance with the terms
hereof.
"Borrowers" shall mean, collectively, as of any date, the
Domestic Borrowers and the Offshore Borrowers as of such date. Without in
any way limiting API's obligations as guarantor under Article X, all the
obligations of the Borrowers hereunder and in respect of any Loans shall be
several and not joint.
"Borrowing Date" shall mean, with respect to any Loan, the date
set forth in the relevant Borrowing Request as the date upon which such
Borrower desires to borrow such Loan.
"Borrowing Request" shall mean a Competitive Advance Loan
Request or a Revolving Credit Loan Request.
"Capital Lease" shall mean, with respect to any Person, any
obligation of such Person to pay rent or other amounts under a lease with
respect to any property (whether real, personal or mixed) acquired or
leased by such Person
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<PAGE> 6
that is required to be accounted for as a liability on a balance sheet of
such Person in accordance with GAAP.
"Change of Control" shall mean, with respect to API, (i) any
"person" (as defined in Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d) and 14(d) thereof), excluding API, any Subsidiary and any
Plan (including any trustee of such plan acting as trustee), but including
a "group" as defined in Section 13(d)(3) of the Exchange Act, becomes the
beneficial owner of shares of API having at least 20% of the total number
of votes that may be cast for the election of directors of API, provided
that no Event of Default will occur as a result of an acquisition of stock
by API which increases, proportionately, the stock representing the voting
power of API owned by such person or group above 20% of the voting power of
API and provided further that if such person or group acquires stock repre-
senting more than 20% of the voting power of API by reason of share
purchases by API, and after such share purchases by API acquires any
additional shares representing voting power of API, then an Event of
Default shall occur; or (ii) within any 24-month period beginning on or
after November 30, 1988, the persons who were directors of API immediately
before the beginning of such period (the "Incumbent Directors") shall cease
(for any reason other than death) to constitute at least a majority of the
Board of Directors of API or the board of directors of any successor to
API, provided that any director who was not a director as of December 1,
1988 shall be deemed to be an Incumbent Director if such director was
elected to the Board of Directors by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually or by prior operation of this
clause (ii) and provided further that any director elected to the Board of
Directors of API to avoid or settle a threatened or actual proxy contest
shall in no event be deemed to be an Incumbent Director.
"Change of Control Default" shall mean (a) any event or
condition that constitutes a default under Section 8.01(k), (b) any event
or condition that constitutes both a change of ownership or a change of
control of API and a default under Section 8.01(f) or (c) any event or
condition set forth in clause (a) or (b) of this definition that, with the
giving of notice or the lapse of time or both, would unless cured or
waived, become an Event of Default.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall have the meaning ascribed to such term in
the Pledge Agreement.
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<PAGE> 7
"Collateral Agent" shall mean the Collateral Agent referred to
in the Pledge Agreement, which Collateral Agent may be the Administrative
Agent.
"Commitment" shall mean, with respect to any Bank, the amount
of such Bank's commitment to make Loans reflected in the Register. In the
case of Banks parties hereto on the date hereof, such amount is set forth
opposite such Bank's name under the heading "Commitment" on Schedule 2.01,
as such amount may be reduced from time to time pursuant to Section 2.04 or
4.06.
"Competitive Absolute Rate Loans" shall mean, collectively,
Competitive Advance Loans that bear interest at a fixed percentage rate per
annum (expressed in the form of a decimal to no more than four decimal
places) specified by the Bank making such Loan in its Competitive Advance
Bid.
"Competitive Advance Accept/Reject Deadline" shall mean, with
respect to any Competitive Advance Loan, the time specified as the
Competitive Advance Deadline for such Loan in Exhibit C-1.
"Competitive Advance Accept/Reject Notice" shall have the
meaning ascribed to such term in Section 2.06.
"Competitive Advance Bid" shall mean an offer by a Bank to make
a Competitive Advance Loan pursuant to Section 2.06.
"Competitive Advance Bid Deadline" shall mean, with respect to
any Competitive Advance Loan, the time specified as the Competitive Advance
Bid Deadline for such Loan in Exhibit C-1.
"Competitive Advance Bid Rate" shall mean, with respect to any
Competitive Advance Bid, (a) in the case of a Competitive Index Rate Loan,
the Competitive Advance Margin, and (b) in the case of a Competitive
Absolute Rate Loan, the fixed rate of interest, at which the Bank making
the Competitive Advance Bid offers thereby to make a Competitive Advance
Loan (in either case, for purposes of Section 2.06(d), determined after
giving effect to any waiver, pursuant to Section 2.06(c), of compensation
under Section 3.30(c), 4.04(a) or 4.04(b)).
"Competitive Advance Loan Request" shall mean a telephonic
request by a Borrower (confirmed in writing countersigned by a Responsible
Officer of API by not later than 4:00 P.M., New York time, on the date of
such telephonic notice) to borrow Competitive Advance Loans, which shall
specify, with respect to such requested Competitive
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<PAGE> 8
Advance Loans, (a) the proposed Borrowing Date therefor, (b) the aggregate
amount of Competitive Advance Loans which such Borrower desires to borrow
on such Borrowing Date, (c) the Maturity Date, (d) whether such Competitive
Advance Loans are to bear interest as Competitive Index Rate Loans or
Competitive Absolute Rate Loans, (e) if such Competitive Advance Loans are
Competitive Eurocurrency Loans, the Interest Period therefor, (f) whether
such Loans are to be Euromarket Funded or Locally Funded, (g) the Alternate
Currency (if any) in which such Loan is to be denominated, (h) any other
terms to be applicable to such proposed Competitive Advance Loans, and (i)
confirming that such request has been approved by API.
"Competitive Advance Loans" shall mean, collectively, Loans, or
portions thereof, made pursuant to Section 2.06.
"Competitive Advance Margin" shall mean, with respect to any
Competitive Index Rate Loan for any Interest Period, the margin (expressed
as a percentage rate per annum in the form of a decimal to no more than
four decimal places) to be added to or subtracted from IBOR, in order to
determine the interest rate applicable to such Loan during such Interest
Period, as specified in the Competitive Advance Bid and the Competitive
Advance Accept/Reject Notice relating to such Loan.
"Competitive Advance Notes" shall mean, collectively, any
promissory notes of the Borrower evidencing Competitive Advance Loans.
"Competitive Advance Notice Time" shall mean, with respect to
any Competitive Advance Loan, the time specified as the Competitive Advance
Notice Time for such Loan in Exhibit C-1.
"Competitive Advance Rate" shall mean, with respect to any
Competitive Absolute Rate Loan, the fixed rate of interest (expressed as a
percentage rate per annum in the form of a decimal to no more than four
decimal places) for such Loan, as specified in the Competitive Advance Bid
and Competitive Advance Accept/Reject Notice relating to such Loan.
"Competitive Alternate Currency Loans" shall mean,
collectively, Competitive Advance Loans that are denominated in an
Alternate Currency, whether Euromarket Funded or Locally Funded.
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<PAGE> 9
"Competitive Eurocurrency Loans" shall mean, collectively,
Competitive Eurodollar Loans and Euromarket Funded Competitive Alternate
Currency Loans.
"Competitive Eurodollar Loans" shall mean, collectively,
Competitive Advance Loans that are denominated in Dollars and bear
interest, by reference to Eurodollar LIBOR (as defined in the definition of
"IBOR") and a Competitive Advance Margin, in the manner set forth in
Section 3.03.
"Competitive Index Rate Loans" shall mean, collectively,
Competitive Advance Loans that bear interest by reference to IBOR and a
Competitive Advance Margin, in the manner set forth in Section 3.03.
"Consolidated Subsidiary" shall mean, at any date with respect
to any Person, any Subsidiary or other entity the accounts of which would
be consolidated with those of such Person in the consolidated financial
statements of such Person if such statements were prepared in accordance
with GAAP as of such date.
"Conversion Date" shall mean the date on which a conversion of
interest rates on outstanding Revolving Credit Loans, pursuant to a
Conversion Request, shall take effect.
"Conversion Request" shall mean a telephonic request (confirmed
in writing not later than 4:00 P.M., New York time, on the date of such
telephonic notice) by a Borrower to convert the interest rate on all or
portions of its outstanding Revolving Credit Loans pursuant to the terms
hereof, which shall specify, with respect to such outstanding Revolving
Credit Loans, (i) the requested Conversion Date, which shall be not less
than three Business Days after the date of such Conversion Request, (ii)
the aggregate amount of the Revolving Credit Loans, from and after the
Conversion Date, which are to bear interest as ABR Loans or Revolving
Eurodollar Loans, as the case may be, and (iii) the term of the Interest
Periods therefor, if any.
"Credit Documents" shall mean, collectively, this Agreement,
any Notes and the Pledge Agreement.
"Debt" shall mean, with respect to any Person at any date,
without duplication, (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business, (d) all obligations of
such Person as lessee under Capital Leases, (e) all contingent or non-
contingent
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<PAGE> 10
obligations of such Person to reimburse or prepay any bank or other Person
in respect of amounts paid or payable (currently or in the future, on a
contingent or non-contingent basis) under a letter of credit, bankers'
acceptance or similar instrument, other than (i) contingent obligations
relating to letters of credit issued to support trade payables and (ii)
obligations up to $25,000,000 arising under stand-by letters of credit, (f)
all Debt of others secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person and (g) all Debt of others
Guaranteed by such Person; provided, however, that Debt shall not include
any obligations incurred in connection with the funding of a trust
established under Section 501(c)(9) of the Code.
"Default" shall mean any event or circumstance which, with the
giving of notice or the passage of time, or both, would unless cured or
waived become an Event of Default.
"Dollar Equivalent Amount" shall mean, with respect to a
Competitive Alternate Currency Loan on any date, the product (expressed in
Dollars) of the principal amount of such Loan (expressed in the relevant
Alternate Currency) and the Exchange Rate in effect on such date for such
Alternate Currency.
"Dollars" and the sign "$" shall mean lawful money of the
United States of America.
"Domestic Borrower" shall mean API or ACC.
"Domestic Business Day" shall mean any day except a Saturday,
Sunday or other day on which commercial banks in New York City are
authorized or required by law to close.
"Effective Date" shall have the meaning ascribed to such term
in Section 6.01.
"Environmental Laws" shall mean any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules,
franchises, licenses, agreements or other governmental restrictions
relating to the environment or to emissions, discharges or releases of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, petroleum or petroleum products,
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<PAGE> 11
chemicals or industrial, toxic or hazardous substances or wastes or clean-
up or other remediation thereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Group" shall mean API and all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with API, are treated as
a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Eurocurrency Business Day" shall mean any Domestic Business
Day on which commercial banks are open for international business
(including dealings in Dollar deposits) in London, and, when used in
connection with an Alternate Currency or a Competitive Alternate Currency
Loan, on which commercial banks are open for domestic and international
business (including dealings in deposits in the relevant Alternate
Currency) in both London and the city in which such funds are to be paid or
made available.
"Eurocurrency Lending Office" shall mean, with respect to each
Bank, its office, branch or affiliate identified in its Administrative
Questionnaire as its Eurocurrency lending office or such other office,
branch or affiliate of such Bank as it may hereafter designate as its
Eurocurrency lending office by notice to the Borrowers and the Adminis-
trative Agent.
"Eurocurrency Loans" shall mean, collectively, Competitive
Eurocurrency Loans and Revolving Eurodollar Loans.
"Eurodollar Loans" shall mean, collectively, Competitive
Eurodollar Loans and Revolving Eurodollar Loans.
"Eurodollar Reserve Percentage" shall mean, for any day, the
percentage in effect on such day, as prescribed by the Board of Governors
of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including any marginal, supplemental or
emergency reserve requirements) for a member bank of the Federal Reserve
System in New York City with deposits exceeding one billion dollars in
respect of "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board (or any successor regulation)).
"Euromarket Funded" shall mean, with respect to a Loan, that
such Loan (i) is to bear interest by reference to Eurodollar LIBOR or
London IBOR (as defined in the definition of "IBOR") plus a Competitive
Advance Margin, in the
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<PAGE> 12
manner set forth in Section 3.03 or (ii) is a Competitive Absolute Rate
Loan the Competitive Advance Rate for which has been established by
reference to prevailing interest rates in the Euromarket for the currency
in which such Loan is denominated, and, in either case, that such Loan
shall be made from the Eurocurrency Lending Office of the Bank making such
Loan.
"Event of Default" shall mean any of the events described in
Section 8.01.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Rate" shall mean, for any Alternate Currency on any
date of determination, the exchange rate for conversion of such Alternate
Currency into Dollars as of approximately 11:00 A.M., London time, two
Eurocurrency Business Days before such date set forth on the relevant page
on the Teleratesystem Incorporated service. However, if the Dollar
exchange rate for such Alternate Currency does not appear on any page of
the Teleratesystem Incorporated service, then the "Exchange Rate" shall be
determined by reference to such other publicly available service for
displaying exchange rates as may be agreed between API and the
Administrative Agent, or, in the absence of such agreement, the "Exchange
Rate" shall be the Administrative Agent's spot buying rate for Dollars
against such Alternate Currency in the interbank market where its foreign
currency exchange operations in respect of such Alternate Currency are then
being conducted; provided that if, at the time of determination, no such
spot rate can be determined, then the Administrative Agent may use any
reasonable method available to it to determine the appropriate exchange
rate.
"Excluded Taxes" shall mean all present and future taxes
imposed on or measured by the overall net income of any Bank (or any
office, branch or subsidiary of such Bank) or any franchise taxes, taxes on
doing business or taxes measured by capital or net worth imposed on any
Bank (or any office, branch or subsidiary of such Bank), in each case
imposed by the United States of America or any political subdivision or
taxing authority thereof or therein, or taxes on or measured by the overall
net income of any office, branch or subsidiary of a Bank or any franchise
taxes, taxes imposed on doing business or taxes measured by capital or net
worth imposed on any office, branch or subsidiary of such Bank, in each
case imposed by any foreign country or subdivision thereof in which such
office, branch or subsidiary is doing business.
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<PAGE> 13
"Existing Credit Agreements" shall mean, collectively, (a) the
Multifacility Credit Agreement, dated as of June 17, 1992, among API, ACC,
the banks parties thereto and Bankers Trust Company and Chemical Bank, as
Co-Administrative Agents, and (b) the Revolving Credit Agreement, dated as
of March 11, 1994, among API, ACC, the banks parties thereto and Chemical
Bank, as Administrative Agent, in either case, as such agreement may be
amended, supplemented, modified or extended from time to time.
"Facility Fee" shall have the meaning ascribed to such term in
Section 3.08(a).
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of
1%, to the next higher 1/16 of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published
by the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (a) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (b) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as determined by the
Administrative Agent.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System or any successor agency.
"Fee Payment Date" shall mean the last day of each calendar
quarter, commencing with the first such day after the date hereof, and the
earlier of (a) any other date on which the Total Commitment is cancelled in
full and (b) the Termination Date.
"Fees" shall mean, collectively, the Facility Fee and the
Utilization Fee.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entities as may be approved by a significant
segment of the accounting profession, which
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<PAGE> 14
are applicable to the circumstances as of the date of determination.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guaranteed Obligations" shall have the meaning ascribed to
such term in Section 10.01.
"Guaranty" by any Person shall mean any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt
or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-
pay, or to maintain financial statement conditions or otherwise) or
(b) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment thereof (in whole
or in part); provided that the term Guaranty shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"IBOR" shall mean, with respect to any Interest Period for a
Eurodollar Loan or Competitive Index Rate Loan, the rate per annum
determined by the Administrative Agent as follows:
(a) in the case of a Eurodollar Loan, the offered rate
("Eurodollar LIBOR") for Dollar deposits with a term comparable to
such Interest Period that appears on the Eurodollar Telerate Page (as
defined below) at approximately 11:00 A.M., London time, on the
second full Eurocurrency Business Day preceding the first day of such
Interest Period. However, if such rate does not appear on the
Eurodollar Telerate Page, "IBOR" shall mean the rate per annum
determined by the Administrative Agent to be the arithmetic mean
(rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of
1%, to the next higher 1/16 of 1%) of the respective rates of
interest communicated by the Reference Banks to the Administrative
Agent as the rate at which Dollar deposits are offered to the
Reference Banks by leading banks in the London interbank deposit
market at approximately 11:00 A.M., London time, on the
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<PAGE> 15
second full Eurocurrency Business Day preceding the first day of such
Interest Period in an amount substantially equal to the principal
amount of such Eurodollar Loan (rounded up to the nearest integral
multiple of $1,000,000) for a term equal to such Interest Period.
"Eurodollar Telerate Page" shall mean the display designated as
Page 3750 on the Teleratesystem Incorporated service (or such other
page as may replace such page on such service for the purpose of
displaying the rates at which Dollar deposits are offered by leading
banks in the London interbank deposit market); or
(b) in the case of a Euromarket Funded Competitive Alternate
Currency Loan, the offered rate ("London IBOR") for deposits in the
relevant Alternate Currency with a term comparable to such Interest
Period that appears on the Applicable Telerate Page (as defined
below) at approximately 11:00 A.M., London time, on the second full
Eurocurrency Business Day preceding the first day of such Interest
Period. However, if such rate does not appear on the Applicable
Telerate Page (or if no Applicable Telerate Page then exists), "IBOR"
and "London IBOR" shall mean the rate per annum determined by the
Administrative Agent to be the arithmetic mean (rounded to the
nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next
higher 1/16 of 1%) of the respective rates of interest communicated
by the Reference Banks to the Administrative Agent as the rate at
which deposits in such Alternate Currency are offered to the
Reference Banks by leading banks in the London interbank deposit
market at approximately 11:00 A.M., London time, on the second full
Eurocurrency Business Day preceding the first day of such Interest
Period in an amount substantially equal to the principal amount of
such Eurodollar Loan (rounded up to the nearest integral multiple of
$1,000,000) for a term equal to such Interest Period.
(c) in the case of a Locally Funded Competitive Alternate
Currency Loan, the offered rate ("Local Market IBOR") for deposits in
the relevant Alternate Currency with a term comparable to such
Interest Period that appears on the Applicable Telerate Page at
approximately 11:00 A.M. in the Principal Financial Center for such
Alternate Currency on the second full Eurocurrency Business Day
preceding the first day of such Interest Period. However, if such
rate does not appear on the Applicable Telerate Page (or if no
Applicable Telerate Page then exists), "IBOR" and "Local Market IBOR"
shall mean the Rate per annum determined by the Administrative Agent
to be the arithmetic mean (rounded to the nearest 1/16 of 1% or, if
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<PAGE> 16
there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of
the respective rates of interest communicated by the Reference
Banks to the Administrative Agent as the rate at which deposits
in such Alternate Currency are offered to the Reference Banks by
leading banks in the interbank deposit market in the Principal
Financial Center for such Alternate Currency at approximately
11:00 A.M., local time, on the second full Eurocurrency Business
Day preceding the first day of such Interest Period in an amount
substantially equal to the principal amount of such Loan for a
term equal to such Interest Period.
"Indemnified Tax" shall have the meaning ascribed to such term
in Section 4.04(a).
"Initial Loan" shall mean the first Loan which is made pursuant
to the terms hereof.
"Interest Coverage Ratio" shall mean, as of any date of
determination, the ratio of (a) the consolidated pre-tax income of API and
its Consolidated Subsidiaries before the cumulative effect of accounting
changes and before interest expense (other than (i) hyperinflationary
interest expense in Brazil that is offset by corresponding foreign
exchange-related gains, (ii) interest expense attributable to pension
accruals in Germany and Italy and (iii) interest payable to the Internal
Revenue Service in respect of taxes), to (b) consolidated interest expense
for API and its Consolidated Subsidiaries (other than the interest expense
described in the parenthetical phrase in clause (a) above), in each case
for the period of four fiscal quarters ending on such date.
"Interest Period" shall mean (a) with respect to each Revolving
Eurodollar Loan, the period commencing on the Borrowing Date or on the last
day of the preceding Interest Period and ending one, two, three or six
months thereafter, as the Borrower may elect in the applicable Borrowing
Request or pursuant to Section 3.03(b), and (b) with respect to each
Competitive Index Rate Loan, the period commencing on the Borrowing Date
and ending on the Maturity Date; provided that
(i) any Interest Period that would otherwise end on a day that
is not a Eurocurrency Business Day shall be extended to the next
succeeding Eurocurrency Business Day unless such Eurocurrency
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurocurrency Business
Day,
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<PAGE> 17
(ii) any Interest Period that begins on the last Eurocurrency
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (iii) below, end on
the last Eurocurrency Business Day of a calendar month, and
(iii) any Interest Period that begins before the Termination
Date and would otherwise end after the Termination Date shall end on
the Termination Date.
"Lien" shall mean, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security interest in or
on such asset, (b) the interest of a vendor or lessor under any conditional
sale agreement, capital lease or title retention agreement relating to such
asset, and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loans" shall mean, collectively, Revolving Credit Loans and
Competitive Advance Loans.
"Local Currency Lending Office" shall mean, with respect to
each Bank and each Alternate Currency, the office, branch or affiliate of
such Bank located in the country of the Principal Financial Center for such
Alternate Currency identified in its Administrative Questionnaire as its
Local Currency Lending Office for such Alternate Currency or such other
office, branch or affiliate of such Bank as it may hereafter designate as
its Local Currency Lending Office for such Alternate Currency by notice to
the Borrowers and the Administrative Agent.
"Locally Funded" shall mean, with respect to a Competitive
Alternate Currency Loan, that such Loan (i) is to bear interest by
reference to Local Market IBOR (as defined in the definition of "IBOR") for
the relevant Alternate Currency plus a Competitive Advance Margin, in the
manner set forth in Section 3.03 or (ii) is a Competitive Absolute Rate
Loan the Competitive Advance Rate for which has been established by
reference to prevailing interest rates in the Principal Financial Center
for the currency in which such Loan is denominated, and, in either case,
that such Loan shall be made from the relevant Local Currency Lending
Office of the Bank making such Loan.
"Material Plan" shall mean a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
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<PAGE> 18
"Material Subsidiary" shall mean, as of any date, a Subsidiary
having assets of at least $50,000,000, as reflected in the most recent
quarterly or annual balance sheet of such Subsidiary dated on or prior to
such date.
"Maturity Date" shall mean, with respect to a Competitive
Advance Loan, the date for repayment of such Competitive Advance Loan,
which date shall be at least 10 days and (a) not more than 180 days after
the Borrowing Date, in the case of a Competitive Absolute Rate Loan, or
(b) not more than six months after the Borrowing Date, in the case of a
Competitive Index Rate Loan, and in any event shall not be later than the
Termination Date.
"Moody's" shall mean Moody's Investors Service and any
successor thereto that is a nationally recognized rating agency.
"Multiemployer Plan" shall mean an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions (including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period) and under which
liability may be imposed on any member of the ERISA Group.
"1970 Stock Plan" shall mean the Avon Products, Inc. 1970 Stock
Incentive Plan, as such plan may be amended, supplemented, modified or
extended from time to time.
"1993 Stock Plan" shall mean the Avon Products, Inc. 1993 Stock
Incentive Plan, as such plan may be amended, supplemented, modified or
extended from time to time.
"Notes" shall mean, collectively, Revolving Credit Notes and
Competitive Advance Notes, if any.
"Offshore Borrower" shall mean, as of any date, a Subsidiary of
API that has on or before such date been designated by API as an Offshore
Borrower in accordance with the terms of this Agreement; provided that such
Subsidiary shall be organized under the laws of any country except the
United States of America or any political subdivision thereof, or shall
conduct the major portion of its business outside the United States of
America.
"Participant" shall have the meaning ascribed to such term in
Section 11.08(b).
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<PAGE> 19
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity
or government (whether Federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean an employee pension benefit plan as defined
in Section 3(2) of ERISA which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Code and is
maintained for employees of API or any other member of the ERISA Group.
"Pledge Agreement" shall mean the Pledge Agreement to be
entered into between API and the Collateral Agent in connection with the
Sublimit B Loans.
"Prescribed Forms" shall mean such duly executed form(s) or
statement(s), and in such number of copies, which may, from time to time,
be prescribed by law and which, pursuant to applicable provisions of (a) an
income tax treaty between the United States and the country of residence of
the Bank providing the form(s) or statement(s), (b) the Code, or (c) any
applicable rule or regulation under the Code, permit the Borrowers to make
payments hereunder for the account of such Bank free of deduction or
withholding for income or similar taxes.
"Principal Financial Center" shall mean, with respect to an
Alternate Currency, the city specified below:
Alternate Currency Principal Financial Center
Australian Dollars Sydney, Australia
Canadian Dollars Toronto, Canada
Deutschemarks Frankfurt, Germany
French Francs Paris, France
Italian Lire Milan, Italy
Japanese Yen Tokyo, Japan
Pounds, Sterling London, England
Spanish Pesetas Madrid, Spain;
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<PAGE> 20
provided that with respect to any currency not listed above, the "Principal
Financial Center" shall be determined by agreement between API and the
Administrative Agent at the time such currency is designated as an
Alternate Currency.
"Pro Rata Share" shall mean, in the case of each Bank, the
proportion of such Bank's Commitment to the Total Commitment of all the
Banks or, if the Total Commitment shall have been cancelled or reduced to
$0 or expired, the proportion of the aggregate amount of such Bank's
Revolving Credit Loans then outstanding to the aggregate amount of
Revolving Credit Loans then outstanding.
"Reference Bank" shall mean each of Chemical Bank, Citibank,
N.A., The Chase Manhattan Bank, N.A. and Morgan Guaranty Trust Company of
New York.
"Register" shall have the meaning ascribed to such term in
Section 2.03.
"Required Banks" shall mean, at any date, Banks having at least
a majority of the Total Commitment or, if the Total Commitment has been
cancelled or terminated, holding at least a majority of the aggregate
outstanding principal amount of the Loans.
"Responsible Officer" shall mean, with respect to a Person, the
chief executive officer, president, chief financial officer, chief
accounting officer, treasurer, deputy treasurer or assistant treasurer,
secretary or assistant secretary or any vice president of such Person.
"Revolving Credit Loan Request" shall mean a telephonic request
(confirmed in writing by not later than 4:00 P.M., New York time, on the
date of such telephonic request) by a Borrower to borrow Revolving Credit
Loans, which shall specify (a) the requested Borrowing Date, (b) the
aggregate amount of Revolving Credit Loans that such Borrower desires to
borrow on such date, (c) whether such requested Revolving Credit Loans are
to bear interest as ABR Loans or Revolving Eurodollar Loans, (d) if the
requested Revolving Credit Loans are to bear interest as Revolving
Eurodollar Loans, the Interest Period therefor, and (e) whether such Loans
are to be sublimit A Loans or Sublimit B Loans.
"Revolving Credit Loans" shall mean, collectively, ABR Loans
and Revolving Eurodollar Loans, in any case denominated in Dollars.
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<PAGE> 21
"Revolving Credit Notes" shall mean, collectively, the
promissory notes of the Borrowers evidencing Revolving Credit Loans, if
any.
"Revolving Eurodollar Loans" shall mean, collectively,
Revolving Credit Loans, or portions thereof, that bear interest at the rate
and in the manner set forth in Section 3.03.
"Revolving Eurodollar Margin" shall mean, at any date and with
respect to each Revolving Eurodollar Loan, the applicable margin set forth
below based upon the ratings applicable on such date to API's senior
unsecured long-term debt:
Revolving Eurodollar
Margin
Level I
Moody's: A3 or above
S&P: A- or above 0.2000%
Level II
Moody's: Baa2 or above
S&P: BBB or above 0.2500%
Level III
Moody's: Baa3 or lower
S&P: BBB-or lower 0.3500%;
For purposes of the foregoing, (a) if no rating for API's senior unsecured
long-term debt shall be available from either rating agency, such rating
agency shall be deemed to have established a Level III rating, (b) if the
ratings established or deemed established by Moody's and S&P shall fall
within different Levels, the Revolving Eurodollar Margin shall be based
upon the Level corresponding to the more favorable of such ratings and (c)
if any rating established or deemed established by Moody's or S&P shall be
changed (other than as a result of a change in the rating system of either
Moody's or S&P), such change shall be given effect on and as of the opening
of business on the date when such change is first announced by the rating
agency making such change. Each such change shall apply to all Revolving
Eurodollar Loans outstanding at any time during the period commencing on
the effective date of such change and ending on the date immediately
preceding the effective date of the next such change. If the rating system
of either Moody's or
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<PAGE> 22
S&P shall change prior to the Termination Date, API and the Banks shall
negotiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system.
"S&P" shall mean Standard & Poor's Ratings Group and any
successor thereto that is a nationally recognized rating agency.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency.
"Sublimit A Loans" shall mean, collectively, Loans, or portions
thereof, described in Section 2.07(b).
"Sublimit B Loans" shall mean, collectively, Loans, or portions
thereof, described in Section 2.07(c).
"Subsidiary" shall mean any corporation or other entity of
which a majority of the securities or other ownership interests having
ordinary voting power to elect directors or other persons performing
similar functions are at the time directly or indirectly owned by API.
"Taxes" shall have the meaning ascribed to such term in Section
4.04(a).
"Termination Date" shall mean the fifth anniversary of the
Effective Date or, if earlier, the date on which all Loans shall have been
fully repaid and all Commitments entirely cancelled.
"Total Commitment" shall mean the aggregate Commitments of all
the Banks, being initially $600,000,000 (subject to cancellation or
reduction pursuant to Section 2.04).
"Unfunded Liabilities" means, with respect to any Plan, any
amount by which (a) the present value of all benefit liabilities under such
Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined
as of the then most recent valuation date for such Plan, but only to the
extent that such excess represents a potential liability of a member of the
ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"Utilization Fee" shall have the meaning ascribed to such term
in Section 3.08(b).
"Wholly owned Subsidiary" shall mean any Subsidiary all the
shares of stock of all classes of which (other
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<PAGE> 23
than directors' qualifying shares) at the time are owned directly or
indirectly by the Borrower and/or one or more Wholly owned Subsidiaries of
API.
ARTICLE II
The Loans
Section 2.01. The Revolving Credit Loans; Commitments. (a)
Prior to the Termination Date and subject to the terms and conditions of
this Agreement, each of the Banks, severally and not jointly with the other
Banks, agrees to make one or more Revolving Credit Loans denominated in
Dollars to the Domestic Borrowers from time to time in an aggregate
principal amount at any one time outstanding not to exceed its Commitment;
provided, however, that the amount of Revolving Credit Loans which may be
borrowed on any Borrowing Date may not exceed the Available Facility (after
giving effect to any Loans being repaid or prepaid on such Borrowing Date
and any other Loans to be made on such Borrowing Date).
(b) Each Bank's Commitment, as of the date of this Agreement,
is set forth opposite its name in Schedule 2.01, and, after such date, each
Bank's Commitment shall be recorded in the Register as provided in
Section 2.03.
Section 2.02. Procedure for Revolving Credit Loans. (a) A
Domestic Borrower may borrow Revolving Credit Loans by giving a Revolving
Credit Loan Request telephonically, to the Administrative Agent not later
than 10:30 A.M., New York time (to be confirmed in writing in substantially
the form of Exhibit A not later than 4:00 P.M. on the same day), (i) on the
Borrowing Date therefor with respect to any ABR Loan and (ii) at least
three Eurocurrency Business Days before the Borrowing Date with respect to
any Revolving Eurodollar Loan. Revolving Credit Loans shall be in an
amount equal to $10,000,000 or an integral multiple of $1,000,000 in excess
thereof (except that such borrowing of ABR Loans may be in the aggregate
amount of the unused portion of the Total Commitment).
(b) Upon receipt of any Revolving Credit Loan Request from a
Domestic Borrower, the Administrative Agent shall forthwith give notice to
each Bank of the substance thereof. Not later than 2:00 P.M., New York
time, on the Borrowing Date specified in such Revolving Credit Loan
Request, each Bank shall make available to the Administrative Agent in
immediately available funds at the Applicable Lending Office of the
Administrative Agent (or, if the Administrative Agent has specified a
different address in
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<PAGE> 24
the notice referred to above, at such address), such Bank's Pro Rata Share
of the Revolving Credit Loans requested.
(c) Upon receipt by the Administrative Agent of all such
funds, the Administrative Agent shall disburse to the relevant Domestic
Borrower on the requested Borrowing Date the Revolving Credit Loans
requested in such Revolving Credit Loan Request. The Administrative Agent
may, but shall not be required to, advance on behalf of any Bank such
Bank's Pro Rata Share of such Revolving Credit Loans on a Borrowing Date
unless such Bank shall have notified the Administrative Agent prior to such
Borrowing Date that it does not intend to make available its Pro Rata Share
of such Revolving Credit Loans on such date. If the Administrative Agent
makes such an advance, the Administrative Agent shall be entitled to
recover such amount on demand from the Bank on whose behalf such advance
was made, and if such Bank does not pay the Administrative Agent the amount
of such advance upon demand, such Domestic Borrower shall promptly repay
such amount to the Administrative Agent, acting for the Banks. Until such
amount is repaid to the Administrative Agent by such Bank or the relevant
Domestic Borrower, such advance shall be deemed for all purposes to be a
Revolving Credit Loan made by the Administrative Agent. The Administrative
Agent shall be entitled to recover from the Bank or such Domestic Borrower,
as the case may be, interest on the amount advanced by it for each day from
the Borrowing Date therefor until repaid to the Administrative Agent at a
rate per annum equal to (i) in the case of an amount recovered from any
Bank, the Federal Funds Rate or (ii) in the case of an amount recovered
from a Borrower, the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 3.01. The failure of any Bank to
make any Loan to be made by it on any Borrowing Date shall not relieve any
other Bank of its obligation, if any, hereunder to make its Loan on such
Borrowing Date, and neither the Administrative Agent nor any other Bank
shall be responsible for the failure by such Bank to make the Loan to be
made by such Bank on such Borrowing Date.
Section 2.03. Evidence for Loans. (a) Each Bank shall
maintain, in accordance with its customary and usual practice, accounts
evidencing the indebtedness of each Borrower to such Bank resulting from
each Loan made by such Bank from time to time, including an indication of
the Applicable Lending Office and the amounts of principal and interest
payable and paid to such Bank in respect of Loans.
(b) The Administrative Agent shall maintain, in accordance
with its customary and usual practice, at its address referred to in
Section 11.06, a copy of each Assignment and Acceptance delivered to it and
a register (the
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<PAGE> 25
"Register") for the recordation of (i) the names of the Borrowers, (ii) the
amount and currency of each Loan, whether such Loan is a Revolving Credit
Loan or a Competitive Advance Loan, the interest rate options, the Interest
Period or Maturity Date (if any) applicable thereto and the Borrower
thereof, (iii) the amount of any principal or interest due and payable or
to become due and payable from each Borrower to each Bank hereunder,
(iv) the amount of any payments received by the Administrative Agent
hereunder from each Borrower and each Bank's share thereof and (v) with
respect to each Assignment and Acceptance delivered to the Administrative
Agent, the name and address of the Assignee and the principal amount of
each Loan owing to such Assignee. The Register shall be available for
inspection during ordinary business hours by the Borrowers or any Bank or
Assignee from time to time upon reasonable prior notice to the
Administrative Agent.
(c) The entries made in the Register and the foregoing
accounts shall, to the extent permitted by applicable law, be prima facie
evidence of the existence and amounts of the indebtedness of each Borrower
therein recorded; provided, however, that the failure of any Bank or the
Administrative Agent to maintain the Register or any such account, as
applicable, or any error therein, shall not in any manner affect the
validity or enforceability of any obligation of a Borrower to repay any
Loan actually made to such Borrower by such Bank in accordance with the
terms of this Agreement. The entries in the Register relating to
assignments shall be conclusive, in the absence of clearly demonstrable
error, and the Borrowers, the Administrative Agent and the Banks may treat
each Person whose name is recorded in the Register as the owner of the Loan
recorded therein for all purposes of this Agreement.
(d) A Borrower's obligation to repay any Revolving Credit Loan
or Competitive Advance Loan that shall be assigned to a Federal Reserve
Bank by a Bank shall, to the extent requested by such Bank in order to
effect such assignment, be evidenced by one or more Notes, in substantially
the form of Exhibit B-1 (a "Revolving Credit Note") or Exhibit B-2 (a
"Competitive Advance Note"), as appropriate. A Revolving Credit Note shall
be (i) in the principal amount and currency of the Loan or Loans so
assigned and (ii) stated to mature on the Termination Date and bear inter-
est from its date until paid in full on the principal balance (from time to
time outstanding thereunder) payable at the rates and in the manner
provided herein. A Competitive Advance Note shall be (i) in the principal
amount and currency of the Competitive Advance Loan made by such Bank and
so assigned, (ii) stated to mature on the Maturity Date for such
Competitive Advance Loan and bear interest from its
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<PAGE> 26
date until paid in full on the principal balance (from time to time
outstanding thereunder) payable at the rates and in the manner provided
herein and (iii) not prepayable by the Borrower.
Section 2.04. Reduction of Commitments. The Domestic
Borrowers shall have the right, upon not less than three Domestic Business
Days' telephonic notice (promptly confirmed in writing) from API to the
Administrative Agent and upon payment of the Fees accrued to (but
excluding) the date of such reduction, to reduce the Total Commitment in
full or in part; provided, however, that the amount of any reduction in the
Total Commitment may not exceed the Available Facility. Partial reductions
of the Total Commitment shall be in the amount of $10,000,000 or in
integral multiples of $1,000,000 in excess thereof (or, if the Available
Facility is less than $10,000,000, then all of such lesser amount). All
reductions of the Total Commitment shall be permanent.
Section 2.05. Prepayment of Revolving Credit Loans. (a) A
Domestic Borrower shall have the right, by giving telephonic notice
(promptly confirmed in writing) to the Administrative Agent by not later
than 10:30 A.M., New York time, (i) on the day of prepayment in the case of
ABR Loans and (ii) on the third Eurocurrency Business Day prior to the day
of prepayment in the case of Revolving Eurodollar Loans, to prepay
Revolving Credit Loans of such Domestic Borrower bearing interest on the
same basis and having the same Interest Period, if any, in whole or in
part, without premium or penalty, in the aggregate principal amount of
$10,000,000 or integral multiples of $1,000,000 in excess thereof (or, if
the outstanding aggregate principal amount of such Revolving Credit Loan is
less than $10,000,000, then all of such lesser amount), together with
accrued interest (except for ABR Loans, as to which such interest shall be
paid on the next date when it otherwise would be payable under 3.02) on the
principal being prepaid to (but excluding) the date of prepayment and, in
the case of Revolving Eurodollar Loans, the amounts required by Section
4.03. Subject to the terms and conditions hereof, Revolving Credit Loans
so prepaid may be reborrowed by any Domestic Borrower.
(b) Prepayments shall first be applied to any outstanding
Sublimit B Loans, then to any outstanding Sublimit A Loans, and then to any
other outstanding Loans.
Section 2.06. Competitive Advance Loans. (a) Prior to the
Termination Date, a Borrower may request that the Banks make offers to make
Competitive Advance Loans on the terms and conditions hereinafter set
forth; provided, however, that (i) the amount of Competitive Advance Loans
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<PAGE> 27
that may be borrowed on any Borrowing Date may not exceed the Available
Facility (after giving effect to any Loans to be repaid or prepaid on such
Borrowing Date and any other Loans to be made on such Borrowing Date), (ii)
the aggregate amount of Competitive Advance Loans which may be outstanding
on any day may not exceed the Total Commitment (after giving effect, with
respect to any day, to any Loans being repaid or prepaid on such day and
any other Loans to be made on such day), and (iii) such Borrower may not
request Competitive Advance Loans before the fifth Domestic Business Day
after the Effective Date. Each Bank may, but shall have no obligation to,
make such offers and a Borrower may, but shall have no obligation to,
accept any such offers, in the manner set forth in this Section 2.06.
Competitive Advance Loans may be requested (i) to be denominated in Dollars
(including as Competitive Eurodollar Loans) by any Borrower or (ii) to be
denominated in an Alternate Currency (as Competitive Alternate Currency
Loans), either Euromarket Funded or Locally Funded, by the applicable
Offshore Borrower, subject to the following conditions:
(A) such Offshore Borrower, in a Competitive Advance Loan
Request, shall have requested that such Competitive Advance Loans be
denominated in the applicable Alternate Currency relating to such
Offshore Borrower specified in such Competitive Advance Loan Request
and shall have specified whether such Competitive Advance Loans are
to be Euromarket Funded or Locally Funded;
(B) the aggregate outstanding Dollar Equivalent Amount of
Competitive Alternate Currency Loans (x) after giving effect to those
then being requested and (y) if any such offers shall have been
accepted, after giving effect to such Loans (in each case calculated
on the basis of the Exchange Rate then in effect), shall not exceed
$200,000,000; provided that (notwithstanding anything to the contrary
in this Section 2.06) a Loan that would otherwise be precluded under
clause (y) of this paragraph may be borrowed in reduced amount so
that such aggregate outstanding Dollar Equivalent Amount shall not
exceed $200,000,000; and
(C) the aggregate outstanding Dollar Equivalent Amount of all
Competitive Alternate Currency Loans denominated in the relevant
Alternate Currency (x) after giving effect to those then being
requested and (y) if any such offers shall have been accepted, after
giving effect to such Loans (in each case calculated on the basis of
the Exchange Rate then in effect), shall not exceed $50,000,000;
provided that
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<PAGE> 28
(notwithstanding anything to the contrary in this Section 2.06)
a Loan that would otherwise be precluded under clause (y) of this
paragraph may be borrowed in reduced amount so that such aggregate
outstanding Dollar Equivalent Amount shall not exceed $50,000,000.
(b) A Borrower may request Competitive Advance Loans under
this Section 2.06 by a Competitive Advance Loan Request, in substantially
the form of Exhibit C-2, given to the Administrative Agent not later than
the Competitive Advance Notice Time therefor. The Competitive Advance Loan
Request shall indicate whether the solicitation of Competitive Advance Bids
shall be conducted by the Administrative Agent in New York or in London.
The Administrative Agent shall promptly notify each Bank, by a letter in
substantially the form of Exhibit C-3, of each Competitive Advance Loan
Request received by it from a Borrower and of the terms contained therein.
(c) Each Bank may, if it elects so to do, irrevocably offer to
make a Competitive Advance Loan of the requested type to the requesting
Borrower at a Competitive Advance Bid Rate or Rates, as specified by such
Bank in accordance with the related Competitive Advance Loan Request, by
submitting to the Administrative Agent (which shall give prompt notice
thereof to such Borrower) a Competitive Advance Bid, in substantially the
form of Exhibit C-4, before the Competitive Advance Bid Deadline, of the
maximum and minimum principal amounts of the Competitive Advance Loan which
such Bank would be willing to make (which amount may, subject to the
proviso to the first sentence of Section 2.06(a), exceed such Bank's
Commitment, but shall be in a principal amount equal to $5,000,000 or an
integral multiple of $1,000,000 in excess thereof (or, in the case of a
Competitive Alternate Currency Loan, in a Dollar Equivalent Amount, equal
to at least $5,000,000 (calculated on the basis of the Exchange Rate in
effect on the date of the Competitive Advance Loan Request)), the rate or
rates of interest therefor or the applicable margin over IBOR for the
relevant Interest Period, as the case may be, and any other terms and
conditions required by such Bank. If any Bank shall fail to submit a
Competitive Advance Bid to the Administrative Agent before the Competitive
Advance Bid Deadline, then such Bank shall be deemed to have elected not to
make an offer to make a Competitive Advance Loan. If a Bank submits a Com-
petitive Advance Bid pursuant to this Section 2.06 specifying that such
Bank is waiving the right to claim compensation under Sec-
tion 3.03(c), 4.04(a) or 4.04(b), such Bank shall be deemed to have waived
the right to claim such compensation under such Section 3.03(c), 4.04(a) or
4.04(b) in connection with any Competitive Advance Loan or Loans thereafter
made by such Bank pursuant
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<PAGE> 29
to such Competitive Advance Bid; and the Borrower shall be entitled to make
a reasonable determination that a Competitive Advance Bid in which a Bank
has waived the right to any such compensation is made at a Competitive
Advance Bid Rate lower than an otherwise identical Competitive Advance Bid
including no such waiver. The Administrative Agent shall (i) disclose the
Competitive Advance Bids received to the relevant Borrower as promptly as
reasonably practicable after the Bid Deadline, (ii) maintain all
Competitive Advance Bids in confidence until each of them has been
disclosed to such Borrower and (iii) provide copies of all Competitive
Advance Bids to the relevant Borrower as soon as practicable after
completion of the bidding process set forth in this Section 2.06.
(d) A Borrower that made a Competitive Advance Loan Request
shall, before the Competitive Advance Accept/ Reject Deadline, either
(i) cancel the Competitive Advance Loan Request by giving the
Administrative Agent notice to that effect, or
(ii) accept one or more Competitive Advance Bids, in its sole
discretion, by giving notice to the Administrative Agent of the
principal amount of each Competitive Advance Loan (which principal
amount shall be equal to or greater than the minimum amount offered
by such Bank and equal to or less than the maximum amount offered by
such Bank for such Competitive Advance Loan pursuant to
Section 2.06(c)), to be made by each Bank, and reject any remaining
Competitive Advance Bids, by giving the Administrative Agent notice
to that effect; provided that the aggregate principal amount of such
offers accepted by the Borrower shall be in a principal amount equal
to $5,000,000 or an integral multiple of $1,000,000 in excess thereof
(or, in the case of a Competitive Alternate Currency Loan, a Dollar
Equivalent Amount equal to at least $5,000,000 (calculated on the
basis of the Exchange Rate in effect on the date of the Competitive
Advance Loan Request)), each such notice to be in substantially the
form of Exhibit C-5 (a "Competitive Advance Accept/Reject Notice");
provided that (A) the failure by such Borrower to give such notice in
a timely fashion shall be deemed to be a rejection of all Competitive
Advance Bids, (B) the Borrower shall not accept a Competitive Advance
Bid made at a Competitive Advance Bid Rate if such Borrower has
rejected a Competitive Advance Bid made at a lower Competitive
Advance Bid Rate, (C) the aggregate principal amount of the Competi-
tive Advance Bids accepted by the Borrower shall not exceed the
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<PAGE> 30
principal amount specified in the Competitive Advance Loan Request,
(D) if the Borrower shall accept a Competitive Advance Bid made at
a particular Competitive Advance Bid Rate but the amount of such
Competitive Advance Bid shall cause the total amount of Competitive
Advance Bids accepted by the Borrower to exceed the amount specified
in the Competitive Advance Loan Request, then such Borrower shall
(notwithstanding the minimum bid acceptance amount required by
clause (F) below) accept a portion of such Competitive Advance Bid in
an amount equal to the amount specified in the Competitive Advance Loan
Request less the amount of all other Competitive Advance Bids accepted
with respect to such Competitive Advance Loan Request, (E) if the
Borrower shall accept Competitive Advance Bids made at a particular
Competitive Advance Bid Rate but shall be restricted by other conditions
hereof from borrowing the principal amount of Competitive Advance Loans
specified in such Competitive Advance Loan Request in respect of which
Competitive Advance Bids at such Competitive Advance Bid Rate have been
made or if the Borrower shall accept Competitive Advance Bids made at
a particular Competitive Advance Bid Rate but the aggregate amount of
Competitive Advance Bids made at such Competitive Advance Bid Rate shall
exceed the amount specified in the Competitive Advance Loan Request,
then the Borrower shall accept a pro rata portion of each Competitive
Advance Bid made at such Competitive Advance Bid Rate aggregating the
portion of Competitive Advance Loans with respect to which Competitive
Advance Bids at such Competitive Advance Bid Rate have been received
(provided further that if the principal amount of Competitive Advance
Loans to be so allocated is not sufficient to enable Competitive
Advance Loans to be so allocated to each such Bank in a principal
amount equal to $5,000,000 or an integral multiple of $1,000,000 in
excess thereof (or, in the case of a Competitive Alternate Currency
Loan, a Dollar Equivalent Amount equal to at least $5,000,000
(calculated on the basis of the Exchange Rate in effect on the date
of the Competitive Advance Loan Request)), the Borrower shall select
the Banks to be allocated such Competitive Advance Loans in a principal
amount (or, in the case of a Competitive Alternate Currency Loan, a
Dollar Equivalent Amount (calculated on the basis of the Exchange Rate
in effect on the date of the Competitive Advance Loan Request)) equal
to not less than $5,000,000 but may round up allocations to the next
higher integral multiple of $1,000,000 if necessary) and (F) except
as provided in clauses (D) and (E) above, no Competitive Advance Bid
shall be accepted for a Competitive Advance Loan unless such Competitive
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<PAGE> 31
Advance Loan is in a principal amount equal to $5,000,000 or an integral
multiple of $1,000,000 in excess thereof (or, in the case of a Competitive
Alternate Currency Loan, a Dollar Equivalent Amount equal to at least
$5,000,000 (calculated on the basis of the Exchange Rate in effect on the
date of the Competitive Advance Loan Request)).
(e) If the Borrower that made a Competitive Advance Loan
Request notifies the Administrative Agent that such Competitive Advance
Loan Request is cancelled in accordance with Section 2.06(d)(i), the
Administrative Agent shall give prompt notice thereof to the Banks.
(f) If the Borrower that made a Competitive Advance Loan
Request accepts one or more Competitive Advance Bids, the Administrative
Agent shall promptly give notice (i) to each Bank that submitted a
Competitive Advance Bid of the date and aggregate amount of such Competi-
tive Advance Loan(s), the Competitive Advance Bid Rate thereon and whether
or not any Competitive Advance Bid made by such Bank has been accepted by
the Borrower, (ii) to each Bank whose Competitive Advance Bid, or any
portion thereof, has been accepted by the Borrower, of the amount of the
Competitive Advance Loan to be made by such Bank and the date for repayment
thereof, together with the Competitive Advance Rate or Competitive Advance
Margin, as applicable, and any other terms applicable to such Competitive
Advance Loan and (iii) to each Bank of the principal amounts and
Competitive Advance Bid Rates specified in each of the Competitive Advance
Bids submitted in response to the related Competitive Advance Loan Request.
(g) Following any acceptance by the Borrower and notification
by the Administrative Agent pursuant to clause (f) above, and upon
satisfaction or waiver of the conditions precedent contained in Article VI
applicable thereto, each such Bank, through its Eurocurrency Lending Office
or relevant Local Currency Lending Office, as applicable, shall disburse to
such Borrower on the specified Borrowing Date, Competitive Advance Loans in
the aggregate amount accepted by such Borrower, in the manner and subject
to the same terms and conditions set forth in Section 2.02(c) with respect
to ABR Loans, mutatis mutandis.
(h) Nothing in this Section 2.06 shall be construed as a right
of first offer in favor of the Banks or to otherwise limit the ability of a
Borrower to request and accept credit facilities from any Person (including
any Bank).
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Section 2.07. Purpose of Loans; Sublimits. (a) Except as set
forth in Sections 2.07(b) and 2.07(c), the proceeds of the Revolving Credit
Loans will be used for general corporate purposes, which shall include the
use thereof, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of funding or making payments on account of the
purchase, redemption and retirement by API of any shares of capital stock
of API or any related option, warrant or similar right.
(b) Subject to the satisfaction or waiver of the condition set
forth in Section 6.05, the proceeds of ABR Loans made to API, or portions
thereof, in an aggregate principal amount not exceeding $60,000,000 at any
one time outstanding ("Sublimit A Loans"), may be applied, directly or
indirectly, toward payments to employees of API or its Subsidiaries under
severance arrangements or may be paid to a trust or otherwise set aside to
assure the ability of API or any such Subsidiary to make such payments.
(c) Subject to the satisfaction or waiver of the condition set
forth in Section 6.06, the proceeds of ABR Loans made to API, or portions
thereof, in an aggregate principal amount not exceeding $105,000,000 at any
one time outstanding ("Sublimit B Loans") shall be placed into the Account
and, in accordance with the terms and conditions set forth in the Pledge
Agreement such proceeds shall be applied, directly or indirectly, toward
payments required pursuant to Section 13(a)(iii) of the 1970 Stock Plan or
Section 3.1(d) of the 1993 Stock Plan or pursuant to any provision of a
Stock Incentive Agreement or Stock Incentive Program thereunder, including
payments for the repurchase of certain stock, stock options or rights or
performance units held by employees upon a change in control.
ARTICLE III
Interest, Conversion, Fees, Etc.
Section 3.01. Procedure for Interest Rate Determination. (a)
Unless a Domestic Borrower shall request in a Revolving Credit Loan Request
or in a Conversion Request that its Revolving Credit Loans, or portions
thereof, bear interest as Revolving Eurodollar Loans, such Borrower's
Revolving Credit Loans shall bear interest as ABR Loans.
(b) Each Competitive Advance Loan shall bear interest on the
basis, or at the rate per annum, determined pursuant to Section 2.06 and
Section 3.03 or 3.04, as appropriate.
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(c) Sublimit A Loans and Sublimit B Loans may only be ABR
Loans.
Section 3.02. Interest on ABR Loans. Each ABR Loan shall bear
interest from the date of such ABR Loan until paid in full, or (if
converted into a Revolving Eurodollar Loan) to (but excluding) the first
day of the relevant Interest Period, payable in arrears on the last day of
each calendar quarter, commencing with the first such date after the date
hereof, and on the date such Loan is repaid, at a rate per annum (on the
basis of (i) a 365-day year (366 days in the case of a leap year) if the
Base Rate is calculated based on the prime rate and (ii) a 360-day year if
the Base Rate is calculated based on the Federal Funds Rate, for the actual
number of days involved) equal to the sum of (x) the Base Rate in effect
from time to time, which rate shall change as and when said Base Rate shall
change and (y) in the case of a Sublimit A Loan or a Sublimit B Loan, the
Applicable Sublimit Margin.
Section 3.03. Interest on Eurocurrency Loans and Competitive
Index Rate Loans. (a) Each Eurocurrency Loan and each Competitive Index
Rate Loan shall bear interest from the date of such Loan to (but excluding)
the last day of the relevant Interest Period, or (if earlier) to (but
excluding) the Termination Date (in the case of a Revolving Eurodollar
Loan) or the Maturity Date (in the case of a Competitive Index Rate Loan),
payable in arrears (A) with respect to Interest Periods of three months or
less, on the last day of such Interest Period, and (B) with respect to
Interest Periods longer than three months, on the date which occurs three
months after the first day of such Interest Period and on the last day of
such Interest Period, at a rate per annum (on the basis of a 360-day year
for the actual number of days involved (or, in the case of a Locally Funded
Competitive Alternate Currency Loan, on the basis of the standard day count
used for loans in the relevant Alternate Currency in the Principal
Financial Center therefor)), with respect to each Interest Period, equal to
the sum of (i) the Revolving Eurodollar Margin, in the case of a Revolving
Eurodollar Loan, or the Competitive Advance Margin, in the case of a
Competitive Index Rate Loan, and (ii) IBOR.
(b) The Interest Period for each Revolving Eurodollar Loan
shall be selected by the relevant Borrower at least three Eurocurrency
Business Days prior to the beginning of such Interest Period. If such
Borrower fails to notify the Administrative Agent of the Interest Period
for a subsequent Revolving Eurodollar Loan at least three Eurocurrency
Business Days prior to the last day of the then current Interest Period of
an outstanding Revolving Eurodollar
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Loan, then such outstanding Revolving Eurodollar Loan shall become an ABR
Loan at the end of such current Interest Period.
(c) For so long as any Bank maintains reserves against
"Eurocurrency Liabilities" pursuant to Regulation D of the Federal Reserve
Board (or any successor regulation), each Borrower shall, subject to the
two next succeeding sentences, contemporaneously with the related interest
payments, pay additional interest on each Eurocurrency Loan of such Bank at
a rate per annum up to but not exceeding the excess of (i) (A) IBOR divided
by (B) one minus the Eurodollar Reserve Percentage over (ii) IBOR. Each
Bank shall promptly notify API, with a copy to the Administrative Agent,
upon becoming aware that any Borrower may be required to make a payment
pursuant to this Section 3.03(c). When requesting payment pursuant to this
Section 3.03(c), each Bank shall provide to API, with a copy to the
Administrative Agent, a certificate, signed by an officer of such Bank
setting forth, in reasonable detail, the basis of such claim, the amount
required to be paid by the Borrower to such Bank and the computations made
by such Bank to determine such amount. Absent demonstrable error, such
certificate shall be binding as to the amounts of additional interest owing
in respect of such Bank's Eurocurrency Loans.
Section 3.04. Interest on Competitive Absolute Rate Loans.
Each Competitive Absolute Rate Loan shall bear interest from the date of
such Competitive Absolute Rate Loan to (but excluding) its Maturity Date,
payable in arrears on the date such Loan is repaid, at a rate per annum (on
the basis of a 360-day year for the actual number of days involved) equal
to the Competitive Advance Rate.
Section 3.05. Continuation and Conversion of Revolving Credit
Loans. (a) A Domestic Borrower may request, by telephonic notice to the
Administrative Agent of a Conversion Request, confirmed in writing in
substantially the form of Exhibit D by no later than 4:00 P.M., New York
time, on the same day, in advance of the requested Conversion Date as
provided in the definition of "Conversion Request", that:
(i) all the outstanding ABR Loans of such Borrower, or a
portion thereof in an aggregate amount equal to $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, be converted into
a Revolving Eurodollar Loan on the requested Conversion Date; or
(ii) all the Revolving Eurodollar Loans of such Borrower having
the same Interest Period, or a portion
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thereof in an aggregate amount equal to $10,000,000 or an integral
multiple of $1,000,000 in excess thereof, be converted into ABR
Loans on the requested Conversion Date.
(b) Upon receipt of any such Conversion Request from a
Domestic Borrower, the Administrative Agent shall forthwith give notice to
each Bank of the substance thereof. Effective on such Conversion Date and
upon payment by such Borrower of the amounts, if any, required by Section
4.03, the Revolving Credit Loans or portions thereof as to which the
Conversion Request was made shall commence to accrue interest as set forth
in this Article III for the interest rate selected by such Borrower.
Section 3.06. Post-Maturity Interest. After maturity (whether
by acceleration or otherwise) of any Loan, such Loan shall bear interest,
payable on demand, at a rate per annum equal to the sum of (i) 2%, (ii) the
Base Rate in effect from time to time, and (iii) the Applicable Sublimit
Margin, if any.
Section 3.07. Maximum Interest Rate. (a) Nothing in this
Agreement or any other Credit Document shall require a Borrower to pay
interest at a rate exceeding the maximum rate permitted by applicable law.
Neither this Section nor Section 11.01 is intended to limit the rate of
interest payable for the account of any Bank to the maximum rate permitted
by the laws of the State of New York (or any other applicable law) if a
higher rate is permitted with respect to such Bank by supervening provi-
sions of U.S. federal law.
(b) If the amount of interest payable by a Borrower for the
account of any Bank on any interest payment date in respect of the
immediately preceding interest computation period, computed pursuant to
this Article III, would exceed the maximum amount permitted by applicable
law to be charged by such Bank, the amount of interest payable for its
account on such interest payment date shall automatically be reduced to
such maximum permissible amount.
Section 3.08. Fees. (a) The Borrowers, jointly and
severally, agree to pay, in arrears on each Fee Payment Date, to the
Administrative Agent for the account of the Banks, a fee (the "Facility
Fee") computed by applying the applicable percentages per annum set forth
below based on the ratings on each day of API's senior unsecured long-term
debt (each range of ratings listed under any Level being inclusive of the
ratings so listed) to the average daily amount of the Total Commitment
during the quarterly period (or shorter period commencing with the
Effective Date)
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ending on the Business Day immediately preceding such Fee Payment Date:
Facility Fee
Percentage Per
Annum
Level I
Moody's: A3 or above
S&P: A- or above 0.1000%
Level II
Moody's: Baa2 or above
S&P: BBB or above 0.1500%
Level III
Moody's: Baa3 or lower
S&P: BBB- or lower 0.2000%
For purposes of the foregoing, (a) if no rating for API's senior unsecured
long-term debt shall be available from either rating agency, such rating
agency shall be deemed to have established a Level III rating, (b) if the
ratings established or deemed established by Moody's and S&P shall fall
within different Levels, the Facility Fee shall be based upon the Level
corresponding to the more favorable of such ratings and (c) if any rating
established or deemed established by Moody's or S&P shall be changed (other
than as a result of a change in the rating system of either Moody's or
S&P), such change shall be given effect on and as of the opening of
business on the date when such change is first announced by the rating
agency making such change. If the rating system of either Moody's or S&P
shall change prior to the Termination Date, API and the Banks shall nego-
tiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system.
(b) Each Borrower agrees to pay on each Loan made to such
Borrower by a Bank, in arrears on each Fee Payment Date, to the Adminis-
trative Agent for the account of such Bank, a fee (the "Utilization Fee")
computed by applying (i) the rate of 0.0500% per annum to (ii) the amount
on each date during the quarterly period (or shorter period commencing with
the Effective Date or ending with the Termination Date) ending on the
Business Day immediately preceding such Fee Payment Date equal to the
outstanding principal amount
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(or, in the case of Alternate Currency Loans, the Dollar Equivalent Amount
(calculated for purposes of this Section 3.08(b) based upon the Exchange
Rate in effect on the Borrowing Date(s) for such Alternate Currency Loans))
of the Loans; provided, however, that no Utilization Fee shall accrue or be
payable in respect of any Loan on any day on which the Available Facility
equals or exceeds one-half the Total Commitment in effect on such day.
(c) All Fees shall be computed based on a 365-day year (366
days in the case of a leap year), for the actual number of days involved.
ARTICLE IV
Disbursement and Payment
Section 4.01. Disbursement of Loans; Pro Rata Treatment of
Banks. (a) ABR Loans shall be made by each Bank from its ABR Lending
Office.
(b) Eurodollar Loans and other Euromarket Funded Loans shall be
made by each Bank from its Eurocurrency Lending Office.
(c) Locally Funded Loans shall be made by each Bank from its
Local Currency Lending Office for the relevant Alternate Currency.
(d) Each payment of a Fee, each reduction of the Total Commit-
ment and, except as expressly provided otherwise in this Agreement, each
payment of principal of or interest on Revolving Credit Loans shall be
apportioned among the Banks in proportion to each Bank's Pro Rata Share.
Section 4.02. Method of Payment. (a) All payments of
principal of or interest on Revolving Credit Loans or Competitive Advance
Loans (other than Competitive Alternate Currency Loans) shall be payable in
Dollars. All Fees also shall be payable in Dollars. All payments of
principal of or interest on a Competitive Alternate Currency Loan shall be
payable in the relevant Alternate Currency.
(b) All payments to be made by the Borrowers hereunder in
Dollars shall be made not later than 2:00 P.M., New York time, on the date
when due, in Federal or other funds immediately available in New York City,
(i) in the case of payments of principal of, and interest on, Revolving
Credit Loans and payments of Fees, to the Administrative Agent at its ABR
Lending Office, (ii) in the case of payments of principal and interest on
Competitive Advance
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Loans, to the Eurocurrency Lending Office or relevant Local Currency
Lending Office for such Loan, as applicable.
(c) All payments to be made by a Borrower hereunder in an
Alternate Currency shall be made not later than 2:00 P.M., local time in
the relevant city, on the date when due, in such Alternate Currency in such
funds as may then be customary for the settlement of international transac-
tions in such Alternate Currency in London (in respect of Euromarket Funded
Loans) or the Principal Financial Center for such Alternate Currency (in
respect of Locally Funded Loans).
(d) Whenever any payment of principal of, or interest or
Utilization Fees on, ABR Loans or Competitive Advance Loans denominated in
Dollars shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest or
Utilization Fees on, Eurocurrency Loans or Competitive Index Rate Loans
shall be due on a day which is not a Eurocurrency Business Day, the date
for payment thereof shall be extended to the next succeeding Eurocurrency
Business Day unless such Eurocurrency Business Day falls in another
calendar month, in which case the date for payment thereof shall be the
next preceding Eurocurrency Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(e) Unless the Administrative Agent shall have received notice
from the relevant Borrower prior to the date on which any payment is due to
the Banks hereunder that such Borrower will not make such payment in full,
the Administrative Agent may assume that such Borrower has made such pay-
ment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, but shall not
be obligated to, cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent that
such Borrower shall not have so made such payment, each Bank shall repay to
the Administrative Agent forthwith on demand such amount distributed to
such Bank together with interest thereon, for each day from the date such
amount is distributed to such Bank until the date such Bank repays such
amount to the Administrative Agent, at the Federal Funds Rate.
(f) Any and all payments made by a Borrower to the
Administrative Agent or the Banks hereunder shall be made without right of
set-off, counterclaim or other defenses.
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(g) The Administrative Agent will promptly cause any payments
received by it to be distributed to each Bank for whose account payment has
been made in like funds.
Section 4.03. Compensation for Losses. (a) Compensation. If
(i) a Domestic Borrower makes a prepayment of a Revolving Eurodollar Loan
under Section 2.05 (other than a prepayment to a Bank to which Additional
Costs or Additional Amounts may be due that has not complied with its
obligations under Section 4.04(c)), or a Conversion Date selected by a
Domestic Borrower pursuant to Section 3.05 falls on a day other than the
last day of the Interest Period for the amount so converted or as to which
a conversion of Eurocurrency Loans, or portions thereof, is made, (ii) a
Borrower revokes any Borrowing Request for a Eurocurrency Loan (other than
in accordance with Section 4.05(b)) or any Eurocurrency Loan or Competitive
Advance Loan requested is not made because of the failure of the applicable
conditions precedent specified in Section 6.02 to be satisfied, (iii) an
outstanding Eurocurrency Loan, or any portion thereof, is converted into an
ABR Loan pursuant to Section 4.05(a) or (iv) a Eurocurrency Loan or Com-
petitive Advance Loan shall be declared to be due and payable prior to the
scheduled maturity thereof pursuant to Section 8.01, then, subject to
Section 4.03(b) and without duplication of any amounts described in Section
3.03(d) or 4.04, the relevant Borrower shall be obligated to pay to the
relevant Bank an amount that will compensate such Bank for any loss or
premium, penalty or expense incurred by such Bank as a result of such
prepayment, conversion, failure to borrow, declaration or revocation of
notice in respect of funds obtained for the purpose of making or
maintaining such Eurocurrency Loan or Competitive Advance Loan, or any
portion thereof. Such compensation may include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on
the amount so paid or prepaid, or not borrowed or converted, for the period
from the date of such payment or prepayment or conversion or failure to
borrow to the last day of such Interest Period (or, in the case of a
failure to borrow, the Interest Period that would have commenced on the
date of such failure to borrow) in each case at the applicable rate of
interest for such Loan provided for herein (excluding, however, any margin
included therein) over (ii) the amount of interest (as determined in good
faith by such Bank) that would have accrued to such Bank on such amount by
placing such amount (in the relevant currency) on deposit for a comparable
period with leading banks in the relevant interbank market.
(b) Certificate, Etc. Each Bank shall promptly notify API,
with a copy to the Administrative Agent, upon becoming aware that the
Borrowers may be required to make
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any payment pursuant to this Section 4.03. When requesting payment
pursuant to this Section 4.03, such Bank shall provide to API, with a copy
to the Administrative Agent, a certificate, signed by an officer of such
Bank, setting forth in reasonable detail the amount required to be paid by
the Borrowers to such Bank and the computations made by such Bank to
determine such amount. Such Borrower shall have a 30-day period following
the receipt of such certificate (if such Borrower in good faith disagrees
with the assertion that any payment under this Section 4.03 is due or with
the amount shown as due on such certificate and so notifies such Bank of
such disagreement within five Business Days following receipt of such
certificate) to negotiate with such Bank, which negotiations shall be con-
ducted by the respective parties in good faith, and to agree upon another
amount that will adequately compensate such Bank, it being expressly
understood that if such Borrower does not provide the required notice of
its disagreement as provided above, then such Borrower shall pay the amount
shown as due on the certificate on the tenth Business Day following receipt
thereof and further if such Borrower does provide such required notice, and
negotiations are entered into in good faith but do not result in agreement
by such Borrower and such Bank within the 30-day period, then such Borrower
shall pay the amount shown as due on the certificate on the last day of
such period.
Section 4.04. Withholding, Reserves and Additional Costs.
(a) Withholding. (i) All payments payable under this Agreement to a Bank
(including payments of principal and interest on Loans) shall be made to
such Bank free and clear of any and all present and future taxes, levies,
imposts, duties, deductions, withholdings, fees, liabilities and similar
charges other than Excluded Taxes ("Taxes"). If any Taxes are required to
be withheld or deducted from any amount payable by a Borrower under this
Agreement, then the amount so payable under this Agreement shall be
increased to the amount which, after deduction from such increased amount
of all Taxes required to be withheld or deducted therefrom (the amount of
such increase, an "Additional Amount"), will yield to such Bank the amount
stated to be payable under this Agreement. The relevant Borrower shall
execute and deliver to any Bank upon its request such further instruments
as may be necessary or desirable to give full force and effect to any such
increase. The relevant Borrower shall also hold each Bank harmless and
indemnify it for any stamp or other taxes with respect to the preparation,
execution, delivery, recording, performance or enforcement of the Credit
Documents (all of which shall be included within "Taxes"). If any of the
Taxes specified in this Section 4.04(a) are paid by a Bank, the relevant
Borrower shall, upon demand of such Bank,
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promptly reimburse such Bank for such payments, together with any interest,
penalties and expenses incurred in connection herewith. Each Borrower
shall deliver to the Administrative Agent certificates or other valid
vouchers for all Taxes or other charges deducted from or paid with respect
to payments made by such Borrower hereunder. Notwithstanding the fore-
going, the Borrowers shall be entitled, to the extent required to do so by
law, to deduct or withhold (and shall not be required to make payments as
otherwise required by this Section 4.04 on account of such deductions or
withholdings) income or other similar taxes imposed by the United States of
America from interest, fees or other amounts payable hereunder for the
account of any Bank other than a Bank (i) that is a U.S. Person for U.S.
federal income tax purposes or (ii) that has the Prescribed Forms on file
with the Borrowers for the applicable year to the extent deduction or
withholding of such taxes is not required as a result of such filing of
such Prescribed Forms (unless the failure to leave such forms on file
results from a change in law or regulation or in the interpretation thereof
by any court or administrative or Governmental Authority charged with the
administration thereof subsequent to the date hereof); provided that if the
Borrowers shall so deduct or withhold any such taxes, the relevant Borrower
shall provide a statement to the Administrative Agent and such Bank,
setting forth the amount of such taxes so deducted or withheld, the
applicable rate and any other information or documentation which such Bank
may reasonably request for assisting such Bank to obtain any allowable
credits or deductions for the taxes so deducted or withheld in the
jurisdiction or jurisdictions in which such Bank is subject to tax.
(ii) If any Bank has received or been granted a credit against
or relief or remission for, or refund or repayment of, any Tax paid or
payable by it in respect of or which takes account of any Tax with respect
to which an Additional Amount was paid by a Borrower (an "Indemnified Tax")
or other matter giving rise to such payment, such Bank shall, to the extent
it determines in good faith that it can do so without prejudice to the
retention of the amount of such credit, relief, remission, refund or
repayment, pay to such Borrower such amount as such Bank shall determine in
good faith to be attributable to such Indemnified Tax or other matter and
which will leave such Bank (after such payment to the Borrower) in a
position no better or worse than it would have been in had such Borrower
not been required to deduct or withhold such Indemnified Tax or such other
matter had not arisen; provided that such Borrower upon the written request
of such Bank, shall return to such Bank the amount of any such refund,
repayment or benefit of
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credit in the event that such Bank is required to repay such amount to the
relevant Governmental Authority.
(b) Additional Costs. (i) Without duplication of any
amounts payable described in Section 3.03(c), 4.04(a) or 4.04(b)(ii), if
after the date hereof there shall have occurred any change in any law or
regulation or in the interpretation thereof by any court or administrative
or Governmental Authority charged with the administration thereof or the
enactment of any law or regulation shall either (A) impose, modify or deem
applicable any reserve, special deposit or similar requirement with respect
to any Bank's Commitment or its Eurocurrency Loans or (subject to Sec-
tion 2.06(c)) Competitive Advance Loans or (B), subject such Bank to any
tax, duty or other charge with respect to any of its Eurocurrency Loans or
(subject to Section 2.06(c)) Competitive Advance Loans or its obligations
to make Eurocurrency Loans or shall change the basis of taxation of
payments to such Bank of the principal of or interest on any of its Euro-
currency Loans (except for any increase or other change in or with respect
to Excluded Taxes), or (C) impose on such Bank any other condition
regarding this Agreement, its Commitment or the Loans and the result of any
event referred to in clause (A), (B) or (C) shall be to increase the cost
("Additional Costs") to such Bank of maintaining its Commitment or making
or maintaining its Eurocurrency Loans or (subject to Section 2.06(c))
Competitive Advance Loans or shall reduce the amounts received or
receivable hereunder (which Additional Costs shall be calculated by such
Bank in good faith in accordance with each Bank's internal policies,
including any reasonable averaging and attribution methods) by an amount
which such Bank in good faith shall determine to be material, then, subject
to Sections 4.04(c) and (d), the relevant Borrower shall pay to such Bank
an amount equal to such Additional Costs.
(ii) Without duplication of any amounts described in
Section 3.03(c), 4.04(a) or 4.04(b)(i), if after the date hereof the
adoption of any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency or instrumentality charged with the
interpretation or administration thereof, or compliance by such Bank with
any request or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, central bank or
comparable agency or instrumentality, has or would have the effect of
reducing the rate of return on capital for such Bank or any corporation
controlling such Bank as a consequence of its obligations under this
Agreement to a level below that which
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such Bank shall determine in good faith that reasonably could have been
achieved but for such adoption, change or compliance (taking into
consideration such Bank's or such corporation's policies with respect to
capital adequacy), then from time to time, subject to Sections 4.04(c) and
(d), the relevant Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction.
(c) Mitigation. If, with respect to a Bank, a condition
arises or an event occurs after the date hereof that would, or would upon
the giving of notice, result in the payment of any Additional Costs or
Additional Amounts pursuant to this Section 4.04 or the delivery by such
Bank of any notice described in the first sentence of Section 4.05, then
such Bank, promptly upon becoming aware of the same, shall notify API (with
a copy to the Administrative Agent) thereof and at API's request shall take
such steps as may be available to it and acceptable to the Borrowers to
mitigate the effects of such condition or event (which shall include
efforts to book the Loans held by such Bank hereunder at another lending
office of such Bank); provided that such Bank shall be under no obligation
to take any step that, in its good faith judgment, would result in its
incurring any Additional Costs, additional Taxes or other additional costs
in performing its obligations hereunder (unless the Borrower has agreed to
reimburse it for the same) or would, in the good faith judgment of such
Bank, be materially disadvantageous to such Bank.
(d) Certificate, Etc. Each Bank shall promptly notify API,
with a copy to the Administrative Agent, upon becoming aware that the
Borrowers may be required to make any payment pursuant to this
Section 4.04. When requesting payment pursuant to this Section 4.04, such
Bank shall provide to API, with a copy to the Administrative Agent, a
certificate, signed by an officer of such Bank specifying the event giving
rise to such claim and setting forth, in reasonable detail, the basis of
such claim, the amount required to be paid by the Borrowers to such Bank
and the computations made by such Bank to determine such amount. Anything
herein notwithstanding, no Bank shall have the right to demand payment of
Additional Amounts or compensation for Additional Costs or a reduced rate
of return under this Section 4.04 (i) with respect to any period more than
180 days prior to the date it has made a demand pursuant to this Section
4.04, (ii) to the extent that such Bank determines in good faith that the
interest rate or margin on the relevant Loans appropriately accounts for
any Additional Costs, (iii) pursuant to Section 4.04(b), unless demand
thereunder is made in accordance with a policy of the Bank being applied in
good faith to all borrowers similarly situated and (iv) pursuant to Sec-
tion 4.04(b) with respect
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to any Competitive Eurocurrency Loan if it shall have obtained actual
knowledge of the change giving rise to such request at the time of
submission of such Bank's Competitive Advance Bid pursuant to which such
Competitive Eurocurrency Loan shall have been made, unless notice of such
Bank's entitlement to such compensation shall have been furnished to the
relevant Borrower at or prior to such time.
(e) Prescribed Forms. Each Bank that is not incorporated
under the laws of the United States of America or a state thereof agrees
that it will, to the extent it has not previously done so, deliver to API
or the Administrative Agent (and if to the latter, the Administrative Agent
agrees that it will deliver to API) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, certifying that such Bank or Administrative Agent
is entitled to receive payments under this Agreement and under the Notes
without deduction or withholding of any United States federal income taxes.
Each Bank further undertakes to deliver to API or the Administrative Agent
(and if to the latter, the Administrative Agent agrees that it will deliver
to API) (i) two further duly completed copies of the said Form 1001 or
4224, or successor applicable forms, as the case may be, on or before the
date that any such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form previously
delivered by it, and such extensions or renewals thereof as may reasonably
be requested by a Borrower, certifying that such Bank or Administrative
Agent is entitled to receive payments under this Agreement and under any
Notes without deduction or withholding of any United States federal income
taxes, unless in any such cases an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent a Bank from duly completing and
delivering any such form with respect to it and such Bank advises API or
the Administrative Agent (and the Administrative Agent agrees that it will
advise API) that it is not capable of receiving payments without any deduc-
tion or withholding of United States federal income tax and (ii) two duly
completed copies of any other form or certification that may become
applicable to such Bank certifying that such Bank or Administrative Agent
is entitled to receive payments under this Agreement and under any Notes
without deduction or withholding of any United States federal income taxes.
Section 4.05. Unavailability and Impracticability. (a) If,
after the date hereof, a Bank shall have determined in good faith that the
making or maintenance of all or any part of such Bank's Eurodollar Loans or
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<PAGE> 45
Competitive Alternate Currency Loans (in any such case the currency in
which any such Loan is denominated is herein referred to as, an "Affected
Currency") (i) has been made unlawful because of compliance by such Bank
with any law or guideline or interpretation or administration thereof by
any official body charged with the interpretation or administration thereof
or with any request or directive of such body (whether or not having the
effect of law) or (ii) impracticable because deposits in the Affected
Currency in the amounts and requested maturities of such Loans are not
available to the Bank in the applicable interbank market, then the
Administrative Agent, upon receipt of written notice of such determination
by such Bank, shall forthwith advise the other Banks and API thereof.
After the date specified in such notice and until such time as the Adminis-
trative Agent, upon receipt of written notice to it by such Bank, shall
notify API and the other Banks that the circumstances specified by it in
such notice no longer apply, then notwithstanding any other provision of
this Agreement:
(i) the foregoing Loans of such Bank denominated in the
Affected Currency shall automatically be converted to ABR Loans
without any requirement of compliance by the Borrowers with Sec-
tion 3.05, 4.03 or 4.04;
(ii) the obligation of such Bank to allow borrowing,
conversion and renewals of such Loans denominated in the Affected
Currency shall be suspended, and, if the Borrower shall request in a
Revolving Credit Loan Request or Conversion Request that such Bank
make such a Loan denominated in the Affected Currency, the Loan
requested to be made by such Bank shall instead be made as an ABR
Loan; and
(iii) such Bank shall not submit any Competitive Advance Bid
with respect to Competitive Advance Loans denominated in the Affected
Currency.
Such Bank shall promptly notify the Administrative Agent, which thereupon
shall promptly notify API, when such specified circumstances no longer
apply.
(b) With respect to any Competitive Alternate Currency Loan,
if there shall occur after the Effective Date and on or prior to the
Borrowing Date any change in national or international financial, political
or economic conditions or currency exchange rates or exchange controls
which the Administrative Agent shall have determined in good faith would
make it impracticable for such Loan to be denominated in the Alternate
Currency requested by the Borrower, the Administrative Agent shall
forthwith (but not later than two Domestic Business Days before the date of
such Loan if such
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<PAGE> 46
change occurred at least three Domestic Business Days before the date of
such Loan) give notice thereof to such Borrower and the Bank, and such
Loans shall not be denominated in such Alternate Currency but shall be made
on the Borrowing Date as ABR Loans unless the Borrower shall notify the
Administrative Agent at least two Domestic Business Days before the
Borrowing Date that it elects not to borrow on such date.
Section 4.06. Substitution of Banks. If any Bank (a) shall
request any compensation or indemnity under Section 4.03 or 4.04 or (b)
shall give any notice described in the first sentence of Section 4.05, the
Borrowers shall have the right to require such Bank to assign all its
interests, rights and obligations under this Agreement to another Bank or
financial institution identified by the Borrowers with the assistance of
the Administrative Agent (and the Administrative Agent agrees to use its
reasonable efforts so to assist the Borrowers); provided, however, that
(i) such assignment shall not conflict with any applicable statute, law,
rule, regulation, order or decree of any Governmental Authority and
(ii) the assigning Bank shall have received from the Borrowers and/or such
assignee full payment of the principal of all then-outstanding Loans made
by such Bank hereunder, together with accrued and unpaid interest thereon,
and (provided that such Bank has complied with its obligations under
Section 4.04(c)) all other amounts owed to it hereunder.
ARTICLE V
Representations and Warranties
Section 5.01. Representations and Warranties of the Borrowers.
The Borrowers severally represent and warrant that:
(a) Corporate Existence and Power. Each Borrower has been
duly organized and is validly existing and in good standing under the
laws of its jurisdiction of organization, and has all corporate
powers and all material governmental licenses, authorizations, con-
sents and approvals required to carry on its business as presently
conducted.
(b) Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each
Borrower of each of the Credit Documents to which such Borrower is a
party are within the corporate powers of such Borrower and have been
duly authorized by all necessary corporate action of such Borrower,
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<PAGE> 47
require no action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene in any material respect,
or constitute a material default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws (or
similar constitutive instruments) of such Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon such
Borrower or result in the creation or imposition of any material Lien on
any asset of any Borrower or any Material Subsidiary.
(c) Binding Effect. Each of the Credit Documents constitutes
a valid and binding agreement of each Borrower party thereto,
respectively, and any Notes will constitute valid and binding
agreements of the Borrower party thereto when executed and delivered
in accordance with this Agreement, in each case enforceable in accor-
dance with their respective terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws
relating to or affecting creditors' rights generally, and to general
equity principles, regardless of whether considered in a proceeding
in equity or at law.
(d) Financial Information. (i) The consolidated balance
sheet of API and its Consolidated Subsidiaries as of December 31,
1993 and the related consolidated statements of operations and cash
flows for the fiscal year then ended, reported on by Coopers &
Lybrand and filed with the SEC in API's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, copies of which have
been delivered to each of the Banks, fairly present, in conformity
with GAAP, the consolidated financial position of API and its Con-
solidated Subsidiaries as of such date and its consolidated results
of operations and cash flows for such fiscal year.
(ii) The unaudited balance sheet of API and its Consolidated
Subsidiaries as of June 30, 1994 and the related unaudited
consolidated statements of income and cash flows for the three-month
period then ended, as filed with the SEC in API's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994, copies of which have
been delivered to each of the Banks, fairly present, in conformity
with GAAP applied on a basis consistent with the financial statements
of API referred to in Section 5.01(d)(i), the consolidated financial
position of API and its Consolidated Subsidiaries as of such date and
its consolidated results of operations and cash flows for such three-
month period (subject to normal year-end adjustments).
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<PAGE> 48
(iii) As of the date hereof, there has been no material
adverse change since December 31, 1993 in the business, consolidated
financial position or consolidated results of operations of API and
its Consolidated Subsidiaries, considered as a whole.
(e) Litigation. Except as disclosed in the reports or
financial statements referred to in Section 5.01(d), or in Schedule
5.01(e), as of the date hereof, there is no action, suit or
proceeding pending, or to the knowledge of API or ACC threatened,
against API or any Subsidiary in which there is a reasonable
possibility of an adverse decision which would be reasonably likely
to materially and adversely affect the business, consolidated
financial position or consolidated results of operations of API and
its Consolidated Subsidiaries, considered as a whole, or in any
manner seeks to avoid the obligations of any Borrower to repay Loans
or of API under the guaranty set forth in Article X.
(f) Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of
ERISA and the Code with respect to each Plan and is in compliance
with the presently applicable provisions of ERISA and the Code with
respect to each Plan, except to the extent that any failure so to be
in compliance would not, individually or in the aggregate, materially
and adversely affect the business, consolidated financial position or
consolidated results of operations of API and its Consolidated
Subsidiaries, considered as a whole. As of the date hereof, no
member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made
any amendment to any Plan or Benefit Arrangement, which has resulted
or could result in the imposition of a Lien or the posting of a bond
or other security under ERISA or the Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC
for premiums under Section 4007 of ERISA.
(g) Taxes. United States federal income tax returns of API
and its domestic Subsidiaries have been examined and closed through
the fiscal year ended December 31, 1984. API and its Subsidiaries
have filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by them and have
paid all material taxes due
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<PAGE> 49
pursuant to such returns or pursuant to any assessment received by API
or any Subsidiary, except for assessments being contested in good faith
by appropriate proceedings and as to which API or such Subsidiary has set
aside adequate reserves on its books. The charges, accruals and reserves
on the books of API and its Consolidated Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of API, adequate in all
material respects.
(h) Material Subsidiaries. Each Material Subsidiary has been
duly organized and is validly existing and in good standing under the
laws of its jurisdiction of organization, and has all corporate
powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except
to the extent that the failure of any of the foregoing would not,
individually or in the aggregate, materially and adversely affect the
business, consolidated financial position or consolidated results of
operations of API and its Consolidated Subsidiaries, considered as a
whole.
(i) Investment Company Act. No Borrower is an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(j) Disclosure. All information heretofore furnished by the
Borrowers to the Administrative Agent or any Bank in writing for
purposes of or in connection with this Agreement or any transaction
contemplated hereby was true and accurate in all material respects or
based on reasonable estimates on the date as of which such informa-
tion is stated or certified. API has disclosed to the Banks in
writing any and all facts known to API which it reasonably believes
materially and adversely affect or may materially and adversely
affect (to the extent API can now reasonably foresee) the business,
consolidated financial position or consolidated results of operations
of API and its Consolidated Subsidiaries, considered as a whole.
(k) Environmental Matters. In the ordinary course of its
business, API conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of API
and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without
limitation, any capital or operating expenditures required for clean-
up or closure of properties presently or previously owned, any
capital or operating expenditures required to achieve or maintain
compliance
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<PAGE> 50
with environmental protection standards imposed by law or as a condition
of any license, permit or contract, any related constraints on operating
activities, including any periodic or permanent shutdown of any facility
or reduction in the level of or change in the nature of operations
conducted thereat and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On
the basis of this review, API has reasonably concluded that, as of the
date hereof, Environmental Laws are unlikely to have a material adverse
effect on the business, consolidated financial condition, or consolidated
results of operations of API and its Consolidated Subsidiaries, considered
as a whole.
(l) Federal Reserve Regulations. After giving effect to the
application of the proceeds of each Loan, not more than 25% of the
value of the consolidated assets of API (based on book value or
another reasonable measure) will consist of or be represented by
"margin stock" within the meaning of Regulation U of the Federal
Reserve Board.
ARTICLE VI
Conditions Precedent
Section 6.01. Conditions to the Availability of the
Commitments. The Banks' Commitments shall not become available for
borrowing until the earliest date (the "Effective Date") on which each of
the following conditions precedent shall have been satisfied, or waived in
writing by the Banks (provided that in no event may the Commitments so
become available if the Effective Date does not occur on or before October
31, 1994):
(a) Agreements. The Administrative Agent shall have received
(i) this Agreement, duly executed and delivered by each of the Banks
and the Borrowers and (ii) the Pledge Agreement, in substantially the
form of Exhibit E, duly executed and delivered by API and (if the
Collateral Agent is a Person other than the Administrative Agent) the
Collateral Agent.
(b) Evidence of Corporate Action. The Administrative Agent
shall have received the following:
(i) API. (A) a copy of the Restated Certificate of
Incorporation, as amended, of API, certified as of a recent
date not later than the Effective Date by the Secretary of
State of the
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<PAGE> 51
State of New York, and a certificate as to the good standing
of API as of a date not earlier than four Business Days prior
to the Effective Date, from such Secretary of State;
(B) a certificate of the Secretary or Assistant
Secretary of API, dated the Effective Date, and certifying (1)
that attached thereto is a true and complete copy of the by-
laws of API as in effect on such date and at all times since
the date of the resolutions described in clause (2) below, (2)
that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of API
authorizing the execution, delivery and performance of this
Agreement, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (3) that
the certificate of incorporation of API has not been amended
since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to
clause (i)(A) above, and (4) as to the incumbency and signature
of each officer executing this Agreement or any document
delivered in connection herewith on behalf of the API;
(C) a certificate of a Responsible Officer of API as to
the incumbency and specimen signature of the Secretary or
Assistant Secretary of API executing the certificate described
in clause (i)(B) above;
(ii) ACC. (A) a copy of the Certificate of
Incorporation, as amended, of ACC, certified as of a recent
date not later than the Effective Date by the Secretary of
State of the State of Delaware, and a certificate as to the
good standing of ACC as of a date not earlier than four
Business Days prior to the Effective Date, from such Secretary
of State;
(B) a certificate of the Secretary or Assistant
Secretary of ACC, dated the Effective Date, and certifying (1)
that attached thereto is a true and complete copy of the by-
laws of ACC as in effect on such date and at all times since
the date of the resolutions described in clause (2) below, (2)
that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of ACC
authorizing the execution, delivery and performance of this
Agreement, and that such resolutions have not been modified,
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<PAGE> 52
rescinded or amended and are in full force and effect, (3) that
the certificate of incorporation of ACC has not been amended
since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to clause (ii)(A)
above, and (4) as to the incumbency and signature of each officer
executing this Agreement or any document delivered in connection
herewith on behalf of ACC; and
(C) a certificate or certificates of a Responsible
Officer of ACC as to the incumbency and specimen signature of
the Secretary or Assistant Secretary of ACC executing the
certificate described in clause (ii)(B) above.
(c) Opinions of Counsel for the Domestic Borrowers. The
Administrative Agent shall have received written opinions, dated on
or prior to the Effective Date, of Ward M. Miller, Jr., acting
General Counsel of API, and Sullivan & Cromwell, special counsel for
the Domestic Borrowers, in substantially the forms of Exhibit F-1 and
Exhibit F-2, respectively.
(d) Insurance Certificate. The Administrative Agent shall
have received the certificate, dated the Effective Date, referred to
in Section 7.01(b)(ii).
(e) Existing Credit Agreements. Each of the Existing Credit
Agreements, and any outstanding commitments thereunder, shall be
terminated and cancelled, API and ACC shall have given irrevocable
written notice of such termination and cancellation and the Admini-
strative Agent shall have received evidence, in form and substance
satisfactory to it, that all amounts due and payable thereunder shall
have been paid in full.
Section 6.02. Conditions to Each Loan. The obligations of
each Bank to make any Loan (including the initial Loans) are subject to the
conditions that the Effective Date shall have occurred and that, on the
Borrowing Date of each such Loan and after giving effect thereto, each of
the following conditions precedent shall have been satisfied, or waived in
writing by the Required Banks, and upon such satisfaction or waiver each
such Bank will give a written confirmation of the same to the relevant
Borrower upon request:
(a) Borrowing Request. The Administrative Agent shall have
received from such Borrower a Borrowing Request, in the appropriate
form and in the manner contemplated hereby.
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(b) Absence of Defaults. No Default or Event of Default
shall have occurred and be continuing; provided, however, that in the
case of (i) a Sublimit A Loan the proceeds of which are to be used to
make payments to employees under severance arrangements or to be paid
to a trust or otherwise set aside to assure the ability of API or a
Subsidiary to make such payments or (ii) a Sublimit B Loan, a Change
of Control Default shall not constitute a Default or an Event of
Default for purposes of this Section 6.02(b).
(c) Representations and Warranties. The representations and
warranties contained in Section 5.01 shall have been true when made
and (other than the representations and warranties contained in Sec-
tions 5.01(d)(iii) and 5.01(e) or any other representations or
warranties that expressly relate to a date certain) shall be true and
correct with the same effect as though such representations and
warranties had been made at the time of such Loan; and each Borrower
shall have complied with all of its respective covenants and
agreements contained in this Agreement; provided that, in the case of
a Sublimit A Loan or a Sublimit B Loan, any event or condition
arising directly as a result of a Change of Control Default shall be
disregarded for purposes of determining the truth or correctness of
representations and warranties and compliance with covenants and
agreements solely for purposes of this Section 6.02(c).
Section 6.03. Satisfaction of Conditions Precedent.
Acceptance by a Borrower of the proceeds of any Loan shall be deemed to
constitute a certification of such Borrower that, as of the relevant
Borrowing Date, each of the applicable conditions precedent in Section 6.02
has been satisfied or waived in writing.
Section 6.04. Offshore Borrowers. In the case of the first
Loans to be made to an Offshore Borrower, in addition to the conditions set
forth in Section 6.02, the obligations of each Bank to make such Loans are
subject to the condition that, on the Borrowing Date of each such Loan,
each of the following conditions precedent shall have been satisfied, or
waived in writing by the Required Banks, and upon such satisfaction or
waiver each Bank will give written confirmation of the same to the relevant
Offshore Borrower:
(a) Designation and Confirmation. The Administrative Agent
shall have received an Offshore Borrower Designation and an Offshore
Borrower Confirmation, in substantially the forms of Exhibits G-1 and
G-2,
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<PAGE> 54
respectively, duly executed and delivered by API and such Offshore
Borrower, respectively;
(b) Bank Consent. In the case of an Offshore Borrower not
listed on Schedule 6.04, all the Banks shall have consented to the
designation of that Offshore Borrower as such; and
(c) Evidence of Corporate Action. The Administrative Agent
shall have received:
(i) a certificate of the Secretary or Assistant Secretary
(or similar official) of such Offshore Borrower, dated the
Borrowing Date, and certifying (A) that attached thereto is a
true and complete copy of the constitutive instruments of such
Offshore Borrower as in effect on such date and at all times
since the date of the resolutions described in clause (B)
below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of such Off-
shore Borrower authorizing the execution, delivery and
performance of this Agreement, and that such resolutions have
not been modified, rescinded or amended and are in full force
and effect, and (C) as to the incumbency and signature of each
officer executing this Agreement or any document delivered in
connection herewith on behalf of such Offshore Borrower; and
(ii) a certificate or certificates of a Responsible
Officer of such Offshore Borrower as to the incumbency and
specimen signature of the Secretary of Assistant Secretary (or
similar official) of such Offshore Borrower executing the
certificate described in clause (i) above.
Section 6.05. Sublimit A Loans. With respect to any Sub-
limit A Loan the proceeds of which are to be used to make payments to
employees of API or its Subsidiaries under severance arrangements or to be
paid to a trust or otherwise set aside to assure the ability of API or any
such Subsidiary to make such payments, the obligation of each Bank to make
such Loan is subject (in addition to the conditions in Section 6.02) to the
condition that prior to such application of proceeds there shall have been
delivered to the Banks an opinion of counsel for API (which counsel shall
be reasonably acceptable to the Administrative Agent) substantially to the
effect set forth in Exhibit F-3 with respect to such severance
arrangements.
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<PAGE> 55
Section 6.06. Sublimit B Loans. With respect to any
Sublimit B Loan, the obligation of each Bank to make such Loan is subject
(in addition to the conditions in Section 6.02) to the condition that a
Person or group of Persons (other than a group including the senior
management of API) shall have (a) commenced a tender or exchange offer
after which such person or group would, if successful, have beneficial
ownership of at least 20% of the voting stock of API, (b) commenced a proxy
solicitation for the election of directors, or a proxy solicitation for the
approval of any transaction that, if approved by the shareholders of API,
would result in API's being obligated to make payments pursuant to Sec-
tion 13(a)(iii) of the 1970 Stock Plan or Section 3.1(d) of the 1993 Stock
Plan or pursuant to any provision of a Stock Incentive Agreement or Stock
Incentive Program thereunder, including payments for the repurchase of
certain stock, stock options or rights or performance units held by
employees, or (c) made a publicly announced offer to acquire API at a
specified price, in cash or otherwise, whether or not such offer is
binding.
ARTICLE VII
Covenants
Section 7.01. Affirmative Covenants. API (and, in the case of
Section 7.01(f), each Borrower (on and after the date on which it shall
become a Borrower)) agrees that, so long as any Bank has in effect any
Commitment hereunder or any amount payable on any Loan remains unpaid:
(a) Financial Information. API will deliver to each of the
Banks:
(i) as soon as available and in any event within 95 days
after the end of each fiscal year of API, a consolidated
balance sheet of API and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated
statements of income and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on in a manner
acceptable to the SEC by Coopers & Lybrand or other independent
public accountants of nationally recognized standing;
(ii) as soon as available and in any event within 50 days
after the end of each of the first three quarters of each
fiscal year of API, a
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<PAGE> 56
consolidated balance sheet of API and its Consolidated Subsidiaries
as of the end of such quarter and the related consolidated state-
ments of income and cash flows for such quarter and for the portion
of API's fiscal year ended at the end of such quarter, setting forth
in each case in comparative form the figures for the corresponding
quarter and the corresponding portion of API's previous fiscal
year, all certified (subject to normal year-end adjustments) as to
fairness of presentation, GAAP and consistency by a Responsible
Officer of API;
(iii) simultaneously with the delivery of each set of
financial statements referred to in clauses (i) and (ii) above,
a certificate of a Responsible Officer of API (A) setting forth
in reasonable detail the calculations required to establish
whether API was in compliance with the requirements of Section
7.02(d), on the date of such financial statements and
(B) stating whether any Default or Event of Default exists on
the date of such certificate and, if any Default or Event of
Default then exists, setting forth the details thereof and the
action which API is taking or proposes to take with respect
thereto;
(iv) simultaneously with the delivery of each set of
financial statements referred to in clause (A) above, a
statement of the firm of independent public accountants which
reported on such statements (A) whether anything has come to
their attention to cause them to believe that any Default or
Event of Default existed on the date of such statements and
(B) confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith pursuant to
clause (iii) above;
(v) within five days of any Responsible Officer of the
Borrower or API obtaining knowledge of any Default or Event of
Default, if such Default or Event of Default is then
continuing, a certificate of a Responsible Officer of API
stating that such certificate is a "Notice of Default" and
setting forth the details thereof and the action which API is
taking or proposes to take with respect thereto;
(vi) promptly upon the mailing thereof to the shareholders
of API generally, copies of all financial statements, reports
and proxy statements so mailed;
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<PAGE> 57
(vii) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and
any registration statements on Form S-8 or its equivalent) and
reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which API or the Borrower shall have filed with the SEC;
(viii) if and when any member of the ERISA Group (A) gives
or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of
such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the
PBGC, (B) receives notice of complete or partial withdrawal
liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has
been terminated, a copy of such notice, (C) receives notice
from the PBGC under Title IV of ERISA of an intent to termi-
nate, impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice, (D) applies for a
waiver of the minimum funding standard under Section 412 of the
Code, a copy of such application, (E) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC, (F)
gives notice of withdrawal from any Plan pursuant to Section
4063 of ERISA, a copy of such notice, or (G) fails to make any
payment or contribution to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement or makes any amendment to
any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or
other security, a certificate of the Treasurer or chief
financial officer of API setting forth details as to such
occurrence and action, if any, which API or applicable member
of the ERISA Group is required or proposes to take; and
(ix) From time to time, such additional information
regarding the financial position or business of the Borrowers
(including notification of any change in the ratings assigned
to API by S&P
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or Moody's) as the Administrative Agent, at the request of any
Bank, may reasonably request.
(b) Maintenance of Property; Insurance. (i) API will keep,
and will cause each Material Subsidiary to keep, all property useful
and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(ii) API will maintain, and will cause each Subsidiary to
maintain, (A) physical damage insurance on all real and personal
property on an all risks basis (including the perils of flood and
quake), covering the repair and replacement cost of all such property
and consequential loss coverage for business interruption and extra
expense, (B) public liability insurance (including products/completed
operations liability coverage) in an amount not less than
$100,000,000 and (C) such other insurance coverage in such amounts
and with respect to such risks (including without limitation risks
relating to assets or businesses sold by API and its Subsidiaries) as
the Required Banks may reasonably request. All such insurance shall
be provided by insurers having an A.M. Best policyholders rating of
not less than B+ or insurers listed in Schedule 7.01(b) or otherwise
approved in writing by the Required Banks. API will deliver to the
Administrative Agent (A) on the date hereof, a certificate dated such
date showing the amount of coverage as of such date, (B) upon request
of any Bank through the Administrative Agent from time to time full
information as to the insurance carried, (C) within five days of
receipt of notice by API (but not later than 15 days after receipt by
any Subsidiary of any such notice) from any insurer a copy of any
notice of cancellation or material change in coverage from that
existing on the date of this Agreement and (D) forthwith, notice of
any cancellation or nonrenewal of coverage by API.
(c) Continuation of Business. API and its Subsidiaries will
continue to engage in business of the same general type as conducted
by API and its Subsidiaries on the date hereof, considered as a
whole. Except as permitted in Section 7.02(a), API will preserve,
renew and keep in full force and effect, and will cause each Material
Subsidiary to preserve, renew and keep in full force and effect their
respective corporate existence and their respective rights, privi-
leges and franchises necessary or desirable in the normal conduct of
business.
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(d) Compliance with Law. API will comply, and cause each
Subsidiary to comply, with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including,
without limitation, Environmental Laws, ERISA and the rules and
regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or
where failure so to comply would not have a material adverse effect
on the business, consolidated financial position or consolidated
results of operations of API and its Consolidated Subsidiaries,
considered as a whole.
(e) Books, Records and Inspection. API will keep, and will
cause each Subsidiary to keep, proper books of record and account in
which full, true and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to
permit, representatives of any Bank at such Bank's expense to visit
and inspect any of its properties, to examine and make abstracts from
any of its books and records and to discuss its affairs, finances and
accounts with its officers, employees and independent public
accountants, all at such reasonable times and as often as may
reasonably be desired.
(f) Use of Proceeds. The proceeds of each Loan (i) will be
used by the relevant Borrower for the purposes described in
Section 2.07 and (ii) will not be used by such Borrower in violation
of any applicable law or regulation, including Regulation U and
Regulation X of the Federal Reserve Board.
Section 7.02. Negative Covenants. API agrees that, so long as
any Bank has any Commitment hereunder or any Loan remains unpaid:
(a) Mergers, Consolidations and Sales of Assets. API will
not, and will not permit ACC to, consolidate with or merge with or
into any other person or sell, convey or otherwise transfer its
properties or assets substantially as an entirety to any Person or
Persons, except that (i) API may merge with a person that is a U.S.
corporation, so long as API is the corporation surviving such merger
and no Default or Event of Default shall have occurred or be
continuing immediately after such merger, and (ii) ACC may
consolidate with or merge with or into API or any Wholly owned
Subsidiary.
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(b) Negative Pledge. API will not and will not permit any
Subsidiary to create, assume or suffer to exist any Lien on any asset
(including, without limitation, any stock of any Material Subsidiary)
now owned or hereafter acquired by it, except:
(i) Liens existing on the date hereof securing
obligations not exceeding $26,000,000 in aggregate amount;
(ii) Liens arising in the ordinary course of its business
which (A) do not secure Debt and (B) do not in the aggregate
materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(iii) any Lien on any assets securing Debt incurred or
assumed for the purpose of financing all or any part of the
cost of acquiring such asset, provided that such Lien attaches
to such asset concurrently with or within 90 days after the
acquisition thereof;
(iv) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted
by any of the foregoing clauses of this Section 7.02(b),
provided that such Debt is not increased and is not secured by
any additional assets;
(v) any Lien existing on any asset prior to the
acquisition thereof by API or a Consolidated Subsidiary and not
created in contemplation of such acquisition;
(vi) Liens for taxes or assessments and similar charges
either (A) not delinquent or (B) being contested in good faith
by appropriate proceedings and as to which adequate reserves
have been set aside on the books of API and its Subsidiaries;
(vii) Liens arising out of judgments or awards against API
or any Consolidated Subsidiary with respect to which API or
such Consolidated Subsidiary shall in good faith be prosecuting
an appeal or proceedings for review, provided that (A) API or
such Consolidated Subsidiary, as the case may be, shall have
secured, within 60 days after the creation thereof, an
effective stay of execution pending such appeal or review, and
(B) the aggregate amount of such judgments and awards shall not
exceed $200,000,000;
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(viii) Liens for minor survey exceptions, or minor
encumbrances, easements or reservations of, or rights of others
for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties, which
encumbrances, easements, reservations, rights and restrictions
do not in the aggregate materially detract from the value of
the real properties of API and the Consolidated Subsidiaries,
considered as a whole, or materially impair their use in the
operation of the business of API or the Consolidated Subsidiary
owning the same;
(ix) Liens of Consolidated Subsidiaries securing Debt of
such Consolidated Subsidiaries to API;
(x) Liens securing Debt of up to an aggregate principal
amount of Y12,500,000,000 owing by Avon Japan, without recourse
to API or any Subsidiary (other than Avon Japan), pursuant to
the Avon Japan Credit Agreement, provided, that the tenor of
such Debt and the security, if any, provided therefor shall be
as set forth in such Credit Agreement as in effect on the date
hereof;
(xi) Liens in favor of the Administrative Agent, the
Collateral Agent or any Bank and any Liens arising under the
Pledge Agreement; and
(xii) any other Liens incurred in the ordinary course of
business, provided that the aggregate amount of all such other
Liens incurred in the ordinary course of business shall not
exceed $30,000,000 at any time outstanding.
(c) Ownership of ACC. API will at no time own less than 100%
of each outstanding class of capital stock of ACC.
(d) Interest Coverage Ratio. As of the last day of each
fiscal quarter of API, the Interest Coverage Ratio will not be less
than 4:1.
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ARTICLE VIII
Events of Default
Section 8.01. Events of Default. If one or more of the
following events (each, an "Event of Default") shall have occurred and be
continuing:
(a) A Borrower shall fail to pay when due any principal of any
Loan or shall fail to pay within five Business Days after the date
when due any interest, Fee or other amount payable hereunder;
(b) API shall fail to observe or perform any of its covenants
contained in Section 7.02;
(c) A Borrower shall fail to observe or perform any of its
covenants or agreements contained in this Agreement (other than those
covered by clause (a) or (b) above) for 30 days after written notice
thereof has been given to API by the Administrative Agent at the
request of any Bank;
(d) Any representation, warranty, certification or statement
made by a Borrower in this Agreement, the Pledge Agreement or in any
certificate, financial statement or other document delivered pursuant
hereto shall prove to have been incorrect in any material respect
when made or deemed made (it being understood that good faith pro-
jections that are reasonable when made shall not be considered
representations, warranties, certifications or statements for
purposes of this Section 8.01(d));
(e) API, ACC, or any Material Subsidiary shall fail to make
any payment in respect of Debt, other than Debt under this Agreement
or any Notes, having an aggregate principal or face amount of
$25,000,000 or more when due or within any applicable grace period;
(f) Any event or condition (other than those covered by
clause (e) above) shall occur which (i) results in the acceleration
of the maturity of Debt (other than Debt under any Credit Document)
of API or any Material Subsidiary having an aggregate principal
amount of $25,000,000 or more or (ii) would presently cause or allow
the maturity of any Debt (other than Debt under any Credit Document)
of API or any Material Subsidiary having an aggregate principal
amount of $25,000,000 or more to be accelerated;
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(g) API, ACC, or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or here-
after in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due (or admit
such failure in writing), or shall take any corporate action to
authorize any of the foregoing;
(h) An involuntary case or other proceeding shall be commenced
against API or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against API or any Material Subsidiary
under the Federal bankruptcy laws as now or hereafter in effect;
(i) Any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $25,000,000 which it
shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a
condition specified in Section 4042(a)(1) of ERISA, shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default,
within the meaning of Section 4219(c)(5) of ERISA, with respect to,
one or more Multiemployer Plans which could cause one or more members
of the ERISA Group to incur a current payment obligation in excess of
$25,000,000;
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(j) Judgments or orders for the payment of money in excess of
$25,000,000 in the aggregate shall be rendered against API or any
Material Subsidiary and such judgments or orders shall continue
unsatisfied and unstayed for a period of more than 30 days; or
(k) A Change of Control of API;
then, and in every such event, the Administrative Agent shall (i) if
requested by the Required Banks, by notice to the Borrowers, terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by
the Required Banks, by notice to the Borrowers, declare the Loans and any
Notes (together with accrued interest thereon) to be, and such Notes shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrowers; provided that in the case of any of the Events of Default
specified in clause (g) or (h) above, without any notice to the Borrowers
or any other act by the Administrative Agent or the Banks, the Commitments
shall thereupon terminate and the Loans and any Notes (together with
accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers.
Section 8.02. Notice of Default. The Administrative Agent
shall give written notice to the Borrowers of the occurrence of any Event
of Default under Section 8.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE IX
The Administrative Agent and the Banks
Section 9.01. The Agency. Each Bank appoints Chemical Bank as
its Administrative Agent hereunder and irrevocably authorizes Chemical Bank
to take such action on its behalf and to exercise such powers hereunder and
thereunder as are specifically delegated to the Administrative Agent by the
terms hereof and thereof, together with such powers as are reasonably
incidental hereto and thereto, including the exercise by the Administrative
Agent of powers delegated to the Administrative Agent and the Banks
thereby, and Chemical Bank hereby accepts such appointment subject to the
terms hereof. The relationship between the Administrative Agent and the
Banks shall be that of agent and principal only and nothing herein or
therein shall be construed to constitute the Administrative Agent a trustee
for any Bank
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nor to impose on the Administrative Agent duties or obligations other than
those expressly provided for herein.
Section 9.02. The Administrative Agent's Duties. The
Administrative Agent shall promptly forward to each Bank copies, or notify
each Bank as to the contents, of all notices and other communications
received from a Borrower pursuant to the Credit Documents. As to any other
matter not expressly provided for herein or therein, the Administrative
Agent shall have no duty to act or refrain from acting with respect to a
Borrower, except upon the written instructions of the Required Banks. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof until it shall have received from the payee
of such Note written notice of the transfer of the transfer thereof. The
Administrative Agent shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by
the Required Banks and, except as otherwise specifically provided for
herein, such instructions and any action or inaction pursuant thereto shall
be binding upon all the Banks and each subsequent holder of any Loan. The
Administrative Agent shall not be bound by any waiver, amendment, supple-
ment, or modification of any Credit Document which affects its duties as
Administrative Agent, unless it shall have given its prior written consent
thereto. The Administrative Agent shall have no duty to ascertain or
inquire as to the performance or observance of any of the terms, condi-
tions, covenants or agreements binding upon a Borrower pursuant to any
Credit Document nor shall it be deemed to have knowledge of the occurrence
of any Default or Event of Default, unless it shall have received written
notice from a Borrower or a Bank specifying such Default or Event of
Default and stating that such notice is a "Notice of Default".
Section 9.03. Sharing of Payments and Expenses. All funds for
the account of the Banks received by the Administrative Agent in respect of
payments made by a Borrower pursuant to, or from any Person on account of,
any Credit Document shall be distributed forthwith by the Administrative
Agent among the Banks, in like currency and funds as received, ratably in
proportion to their respective interests therein. In the event that any
Bank shall receive from a Borrower or any other source any payment of, on
account of, or for or under any Credit Document (whether received pursuant
to the exercise of any right of set-off, banker's lien, realization upon
any security held for or appropriated to such obligation or otherwise as
permitted by law) other than in proportion to its Pro Rata Share, then such
Bank shall purchase at par from each other Bank so much of its interest in
obligations of the Borrowers as shall be
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necessary in order that each Bank shall share such payment with each of the
other Banks in proportion to each Bank's Pro Rata Share. In the event that
any purchasing Bank shall be required to return any excess payment received
by it, the purchase shall be rescinded and the purchase price restored to
the extent of such return, but without interest.
Section 9.04. The Administrative Agent's Liabilities. Each of
the Banks and the Borrowers agrees that (a) neither the Administrative
Agent in such capacity nor any of its officers or employees shall be liable
for any action taken or omitted to be taken by any of them hereunder except
for its or their own gross negligence or wilful misconduct, (b) neither the
Administrative Agent in such capacity nor any of its officers or employees
shall be liable for any action taken or omitted to be taken by any of them
in good faith in reliance upon the advice of counsel, independent public
accountants or other experts selected by the Administrative Agent and (c)
the Administrative Agent in such capacity shall be entitled to rely upon
any notice (telephonic or written), consent, certificate, statement or
other document (including any telegram, cable, telex, facsimile or
telephone transmission) believed by it to be genuine and correct and to
have been given, signed and/or sent by the proper Persons.
Section 9.05. The Administrative Agent as a Bank. The
Administrative Agent shall have the same rights and powers hereunder as any
other Bank and may exercise the same as though it were not an
Administrative Agent, and the terms "Bank" or "Banks", unless the context
otherwise indicated, include the Administrative Agent in its individual
capacity. The Administrative Agent may maintain deposits or credit
balances for, invest in, lend money to and generally engage in any kind of
banking business with API or any Subsidiary or affiliate of API as if it
were any other Bank and without any duty to account therefor to the other
Banks.
Section 9.06. Bank Credit Decision. Neither the
Administrative Agent nor any of its officers or employees has any respons-
ibility for, gives any guaranty in respect of, nor makes any representation
to the Banks as to, (a) the condition, financial or otherwise, of API or
any Subsidiary thereof or the truth of any representation or warranty given
or made in, or in connection with, any Credit Document or (b) the validity,
execution, sufficiency, effectiveness, construction, adequacy, enforce-
ability or value of any Credit Document or any related document or
instrument. Except as specifically provided herein and in the other Credit
Documents to which the Administrative Agent is a party, the Administrative
Agent shall have no duty or responsibility, either initially or on a
continuing basis,
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to provide any Bank with any credit or other information with respect to
the operations, business, property, condition or creditworthiness of the
Borrowers, whether such information comes into the Administrative Agent's
possession on or before the date hereof or at any time thereafter. Each
Bank acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Bank, and based upon such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Credit Documents to
which it may become a party. Each Bank also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any
other Bank, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under any Credit Document.
Section 9.07. Indemnification. Each Bank agrees (which
agreement shall survive repayment of the Loans) to indemnify the
Administrative Agent, to the extent not reimbursed by the Borrowers,
ratably in accordance with its respective Commitment in effect on the date
on which indemnification is sought (or, if indemnification is sought after
the date upon which the Commitment shall have terminated and the Loans
shall have been paid in full, ratably in accordance with its respective
Commitment immediately prior to such date), from and against any and all
liabilities, obligations, losses, claims, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of any Credit
Document, or any action taken or omitted to be taken by the Administrative
Agent under any Credit Document; provided that no Bank shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
the gross negligence or wilful misconduct of the Administrative Agent or
any of its officers or employees. Without limiting the foregoing, each
Bank agrees to reimburse the Administrative Agent promptly upon demand for
its Pro Rata Share of any out-of-pocket expenses (including counsel fees)
incurred by the Administrative Agent in such capacity in connection with
the enforcement of, or legal advice in respect of rights or
responsibilities under, any Credit Document or any amendments or
supplements hereto or thereto, to the extent that the Administrative Agent
is not reimbursed for such expenses by the Borrowers.
Section 9.08. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving
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written notice thereof to the Banks and API, and the Administrative Agent
may be removed at any time by the Required Banks by giving written notice
thereof to the Administrative Agent, the other Banks and API at least
10 Business Days prior to the effective date of such removal. Upon any
such resignation or removal, the Required Banks, with the prior written
consent of API (which consent shall not be unreasonably withheld), shall
have the right to appoint a successor Administrative Agent which shall be a
commercial bank organized under the laws of the United States of America or
any State thereof and having a capital and surplus of at least $250,000,000
(a "Qualified Administrative Agent"). If no such successor Administrative
Agent shall have been so appointed and shall have accepted such appointment
within 30 days after the resigning Administrative Agent's giving of notice
of resignation, or the Required Banks' giving notice of removal, as the
case may be, the resigning or removed Administrative Agent may, on behalf
of the Banks, appoint a successor Administrative Agent, which shall be a
Qualified Administrative Agent as set forth in this Section 9.08. Upon the
acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigned or removed Administrative Agent, and
the resigned or removed Administrative Agent shall be discharged from its
duties and obligations in such capacity under this Agreement and any other
Credit Documents. After any Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Article IX shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
ARTICLE X
The Guaranty
Section 10.01. The Guaranty. API unconditionally and
irrevocably guarantees the prompt payment when due of all present and
future obligations and liabilities of all kinds (including post-petition
interest, whether or not such interest constitutes an allowed claim in the
related bankruptcy or insolvency proceeding) of each other Borrower to the
Banks under any Credit Document, whether incurred by such Borrower as
maker, endorser, drawer, acceptor, guarantor, accommodation party or other-
wise, and whether due or to become due, secured or unsecured, absolute or
contingent, joint or several, and howsoever or whenever incurred by such
Borrower (the "Guaranteed Obligations").
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Section 10.02. Absolute Guaranty. API's obligations hereunder
shall not be affected by the genuineness, validity, regularity or
enforceability of the Guaranteed Obligations or any instrument evidencing
the Guaranteed Obligations or by the existence, legality, validity, enforce-
ability (including as a result of a bankruptcy, reorganization or similar
proceeding), perfection, or extent of any collateral therefor or by any
other circumstance relating to the Guaranteed Obligations or the Borrowers
(other than API) which might otherwise constitute a defense available to
any surety or guarantor or to this Guaranty. The Banks make no
representation or warranty in respect of any such circumstance and have no
duty or responsibility whatsoever to API with respect to the management or
maintenance of the Guaranteed Obligations or any collateral therefor. The
Banks shall not be obligated to file any claim relating to the Guaranteed
Obligations in the event that a Borrower becomes subject to a bankruptcy,
reorganization or similar proceeding, and the failure of the Banks so to
file shall not affect API's obligations hereunder. In the event that any
payment to the Banks in respect of any Guaranteed Obligation is rescinded
or must otherwise be returned for any reason whatsoever, API shall remain
liable hereunder in respect of such Guaranteed Obligation as if such
payment had not been made.
Section 10.03. Consents, Waivers and Renewals. API agrees
that the Banks may at any time and from time to time, either before or
after the maturity thereof, without notice to or further consent of API,
extend the time of payment of, exchange or surrender any collateral for, or
renew any Guaranteed Obligations, and may also make any agreement with ACC,
an Offshore Borrower or with any other party to or person liable on any
Guaranteed Obligations, or interested therein, for the extension, renewal,
payment, compromise, discharge or release thereof, in whole or in part, or
for any modification of the terms thereof or of any agreement between the
Banks, ACC, an Offshore Borrower or any such other party or person, without
in any way impairing or affecting this Guaranty. API agrees that the Banks
may resort to API for payment of any Guaranteed Obligations, whether or not
the Banks shall have resorted to any collateral security, or shall have
proceeded against any Borrower or other obligor principally or secondarily
obligated with respect to any of the Guaranteed Obligations.
Section 10.04. Subrogation. API will not exercise any rights
which it may acquire by way of subrogation or by any indemnity,
reimbursement or other agreement, and shall not exercise any right of
recourse to any assets or property of any other Borrower held for the
payment and performance of the Guaranteed Obligations. If any amount
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shall be paid to API in violation of the preceding sentence, such amount
shall be held in trust for the benefit of the Banks and shall forthwith be
paid to the Administrative Agent to be credited and applied to the
Guaranteed Obligations, whether matured or unmatured.
Section 10.05. Security. Without limiting any other right of
each Bank, upon the occurrence of an Event of Default that is continuing,
to the fullest extent permitted by law, whenever any of the Guaranteed
Obligations shall become due (whether by acceleration or otherwise), such
Bank at its sole election may set off against the Guaranteed Obligations
owing to such Bank all moneys then standing to the credit of API on the
books of such Bank. Any Bank exercising its rights under this Section
10.05 shall give notice thereof to API, the relevant Borrower and the
Administrative Agent concurrently with or prior to the exercise of such
rights, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
Section 10.06. Continuing Guaranty. API's obligations
hereunder shall remain in full force and effect until the principal of and
interest on the Loans and all other amounts payable by any other Borrower
under this Agreement shall have been paid in full. If at any time any
payment of the principal of or interest on the Loans or any other amount
payable by any such Borrower under this Agreement is rescinded or must
otherwise be restored or returned upon the insolvency, bankruptcy or
reorganization of such Borrower or otherwise, API's obligations hereunder
with respect to such payment shall be reinstated as though such payment had
been due but not made at such time.
Section 10.07. Waiver of Notice. API waives notice of the
acceptance of this Guaranty and of the making of any loans or extensions of
credit to any other Borrower, presentment to or demand or payment from
anyone whomsoever liable upon any of the Guaranteed Obligations,
presentment, demand, notice of dishonor, protest, notice of any sale of
collateral security and all other notices whatsoever.
ARTICLE XI
Miscellaneous
Section 11.01. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
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Section 11.02. Set-off. Each Bank is hereby authorized at any
time and from time to time upon the occurrence of an Event of Default that
is continuing, to the fullest extent permitted by law, to set-off and apply
any and all deposits (general or special, time or demand, provisional or
final) at any time held and other Debt at any time owing by such Bank
(other than the Account and any obligations in respect of Collateral) to or
for the credit or the account of a Borrower against any and all payment
obligations of such Borrower under this Agreement then owing to such Bank,
irrespective of whether such Bank shall have made any demand under this
Agreement. The rights of each Bank under this Section 11.02 are in
addition to any other rights and remedies (including other rights of
set-off) which such Bank may have. Any Bank exercising its rights under
this Section 11.02 shall give notice thereof to API, the relevant Borrower
and the Administrative Agent concurrently with or prior to the exercise of
such rights provided that the failure to give such notice shall not affect
the validity of such set-off and application.
Section 11.03. Expenses. API agrees to pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent and any Banks,
including the reasonable fees and disbursements of one firm of counsel
(plus one firm of local counsel in any relevant jurisdiction to the extent
necessary or appropriate in connection with any proceeding relating to
enforcement) chosen from time to time to represent the Banks as a group in
connection with the negotiation and execution of the Credit Documents and,
if necessary, in connection with the administration and enforcement of any
provisions of the Credit Documents.
Section 11.04. Amendments. Any provision of this Agreement
may be amended, modified, supplemented or waived if, but only if, such
amendment, modification, supplement or waiver is in writing and is signed
by each of the Borrowers and the Required Banks (and, if the rights or
duties of the Administrative Agent are affected thereby, by the Administra-
tive Agent); provided that no such amendment, modification, supplement or
waiver shall, unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank or subject any Bank to any additional obligation,
(ii) reduce the principal of or rate of interest on any Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for any reduction or termina-
tion of any Commitment, (iv) release API from any obligations under
Article X or (v) amend or waive the provisions of this Section 11.04 or the
definition of "Required Banks".
<PAGE>
<PAGE> 72
Section 11.05. Cumulative Rights and No Waiver. Each and
every right granted to the Administrative Agent and the Banks under any
Credit Document, or allowed them by law or equity, shall be cumulative and
may be exercised from time to time. No failure on the part of the
Administrative Agent or any Bank to exercise, and no delay in exercising,
any right will operate as a waiver thereof, nor will any single or partial
exercise by the Administrative Agent or any Bank of any right preclude any
other or future exercise thereof or the exercise of any other right.
Section 11.06. Notices. Except as specified in Articles I, II
or III, any communication, demand or notice to be given hereunder will be
duly given when delivered in writing or by telecopy to a party at its
address as indicated below.
A communication, demand or notice given pursuant to this
Section 11.06 shall be addressed:
If to any Borrower, to such Borrower at (or in care of):
Avon Products, Inc.
9 West 57th Street
New York, New York 10019
Telex: 423899 or 23560
Answerback: AVON UR
Telephone: (212) 546-6491
Telecopy: (212) 546-6166
Attention: Mr. Dennis Ling
Vice President - Deputy Treasurer
If to the Administrative Agent, to it at:
Chemical Bank
270 Park Avenue
New York, New York 10017
Telephone: (212) 270-2952
Telecopy: (212) 972-0009
Attention: Ms. Suzanne K. Kjorlien
Vice President;
provided, that notices to be given pursuant to Articles II, III
or IV (other than notices pursuant to Section 2.06, which shall
be directed as set forth in Exhibit C-1) hereunder shall be
given to the Administrative Agent at;
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<PAGE> 73
Chemical Bank Agency Services
140 East 45th Street
29th Floor
New York, New York 10017
Telephone: (212) 622-0688
Telecopy: (212) 622-0002
Attention: Mr. James Halka
If to any Bank, to it at the address designated as its address
for notices on Schedule 2.01.
Unless otherwise provided herein, any notice which is required
to be given in writing or by telephone pursuant to the terms of this
Agreement may be given by telex, telecopy or facsimile transmission. Any
party from time to time may change its address for notices by notice to the
other Lenders, the Agent and the Borrower in the manner provided in this
subsection.
Each notice delivered in writing to API hereunder shall be
deemed delivered to all the Borrowers.
Section 11.07. Severability. If any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby.
Section 11.08. Parties in Interest. (a) Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
each of the Borrowers and the Banks and their respective successors.
Except as permitted in Section 11.08(c), no interest in the Commitment of
any Bank or any Loan, nor any right of a Bank under the Credit Documents,
may be assigned to any Person that was not, prior to such assignment, a
Bank hereunder. No Borrower shall assign or delegate any of its respective
rights or obligations hereunder, without the prior written consent of all
the Banks. Any purported assignment in contravention of this Section 11.08
shall be null and void.
(b) Participations. Any Bank, in the ordinary course of its
business and in accordance with applicable law, may at any time grant to
one or more banks or other financial institutions (each, a "Participant")
participating interests in its Commitment or any or all of its Revolving
Credit Loans; provided that such Bank gives written notice of the granting
of such participation to API. In the event of any such grant by a Bank of
a participating interest to a Participant, whether or not upon notice to
either Borrower
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<PAGE> 74
and the Administrative Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, the Borrowers and the
Administrative Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole
right and responsibility to enforce the obligations of the Borrowers under
the Credit Documents including the right to approve any amendment,
modification, supplement or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Bank will
not agree to any modification, amendment or waiver of this Agreement
described in Sections 11.04 (i) through (v), inclusive, without the consent
of the Participant. Each Borrower agrees that each Participant shall be
entitled to the benefits of Sections 4.03 and 4.04 with respect to its
participating interest; provided that (i) all amounts payable to a Bank for
the account of a Participant under Sections 4.03 and 4.04 shall be
determined as if such Bank had not granted such participation to the
Participant and (ii) no Participant shall be entitled to receive any
greater payment under Section 4.03 or 4.04 than such Bank would have been
entitled to receive with respect to the rights participated, unless such
transfer is made with API's prior written consent or by reason of the
provisions of Section 4.04 requiring such Bank to designate a different
lending office under certain circumstances or at a time when the circum-
stances giving rise to such payment did not exist.
(c) Assignments. (i) Any Bank, in accordance with
applicable law, may assign all or a portion of its interests, rights and
obligations under this Agreement (including a portion or all of its
Commitment or of the Loans at the time owing to it) to one or more banks or
other financial institutions (each, an "Assignee"); provided, however, that
(A) each of API and the Administrative Agent must give its prior written
consent (which consent shall not be unreasonably withheld) to any such
assignment (other than an assignment by a Bank to an affiliate of such Bank
or to a Federal Reserve Bank), (B) the amount of the Commitment of the
assigning Bank (determined as of the date of such assignment) subject to
such assignment (other than in the case of an assignment to an Affiliate of
the Bank or a Federal Reserve Bank) shall not be less than $10,000,000,
unless API otherwise consents (which consent shall not be unreasonably
withheld), (C) the parties to each such assignment (other than an
assignment to a Federal Reserve Bank) shall execute and deliver to the
Administrative Agent for recording in the Register an instrument evidencing
such assignment, in substantially the form of Exhibit H (an
<PAGE>
<PAGE> 75
"Assignment and Acceptance"), and the assigning Bank or the Assignee shall
pay to the Administrative Agent an assignment fee in cash equal to $1,000
(if the Assignee is already a Bank) or $2,000 (otherwise), and (D) as of
the date of such assignment, except with the prior written consent of API
and the Administrative Agent, (1) the Assignee shall not have any right,
and shall have no knowledge that such assignment would result in its having
the right, to request compensation pursuant to Section 4.04 after giving
effect to such assignment and (2) the parties to such assignment shall have
no knowledge that such assignment (a) would cause it to be unlawful for any
party thereto to make or maintain any Eurocurrency Loan or to give effect
to its obligations as contemplated hereby with respect to any Eurocurrency
Loan or (b) would cause any Borrower to incur any liability under
Section 4.03 or 4.04. Upon acceptance and recording in the Register, from
and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least two Domestic Business Days after the
execution thereof, (A) the Assignee thereunder shall be a party hereto and,
to the extent of the Commitment assigned by such Assignment and Acceptance,
shall have the rights and obligations of, and shall for all purposes be, a
Bank under this Agreement and (B) the assigning Bank thereunder shall, to
the extent of the Commitment assigned by such Assignment and Acceptance, be
released from such Commitment (and, in the case of an Assignment and Ac-
ceptance covering all or the remaining portion of an assigning Bank's
Commitment under this Agreement and in the case of an assignment pursuant
to Section 4.06, such Bank shall cease to be a party hereto).
Notwithstanding the foregoing, (A) any Bank assigning any portion of its
rights and obligations under this Agreement may retain any Competitive
Advance Loans made by it outstanding at such time and, in such case, shall
retain its rights hereunder in respect of any Loans so retained until such
Loans have been repaid and (B) any Bank may at any time assign or grant a
security interest in its Loans and its rights (but not its obligations)
under this Agreement to a Federal Reserve Bank; provided that no such
assignment or grant pursuant to this clause (B) shall release a Bank from
any of its obligations hereunder.
(ii) By executing and delivering an Assignment and Acceptance,
the Assignee thereunder shall be deemed to confirm to and agree with the
other parties hereto as follows: (A) such Assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 7.01 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(B) such Assignee will independently and without reliance
<PAGE>
<PAGE> 76
upon the Administrative Agent, the assigning Bank or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (C) such Assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Adminis-
trative Agent by the terms hereof; and (D) such Assignee agrees that it
will perform in accordance with their terms all the obligations which by
the terms of this Agreement are required to be performed by it as a Bank
with the Loans and Commitment assigned to it.
(iii) Notwithstanding the foregoing, an Assignee shall not, by
virtue of an Assignment and Acceptance, become a party to this Agreement or
a "Bank", or have any rights to consent to or refrain from consenting to
any amendment, waiver or other modification of any provision of any Credit
Document unless such Assignee shall thereby have accepted a Commitment
hereunder; provided that no such amendment, waiver or modification may
reduce or postpone any payment of principal or interest in respect of any
Loan assigned to such Assignee thereby without the written consent of such
Assignee.
(d) Federal Reserve Regulations. Notwithstanding any other
provision of any Credit Document, no Bank may sell, assign or participate
all or any portion of its Commitment or Loans hereunder to any "broker" or
"dealer" (as defined in Sections 3(a)(4) and 3(a)(5) of the Securities
Exchange Act of 1934) or any other Person that is a "creditor" (as defined
in Regulation T of the Federal Reserve Board). By executing and delivering
this Agreement, each Bank hereby confirms that it is not such a "broker",
"dealer" or "creditor".
Section 11.09. WAIVER OF RIGHT TO JURY. EACH OF THE
BORROWERS, THE ADMINISTRATIVE AGENT AND EACH OF THE BANKS WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THE CREDIT DOCUMENTS OR THE
RELATIONSHIPS ESTABLISHED UNDER THE CREDIT DOCUMENTS.
Section 11.10. Indemnity. The Borrowers, jointly and
severally, agree to indemnify the Administrative Agent and each of the
Banks and their respective directors, officers, employees, agents and
controlling persons (each such Person, an "Indemnitee") against, and to
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against
<PAGE>
<PAGE> 77
any Indemnitee arising out of, in any way connected with, or as a result of
(i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties thereto of
their respective obligations hereunder or the consummation of the transac-
tions contemplated hereby, (ii) the use of the proceeds of the Loans or
(iii) any claim, litigation, investigation or proceeding relating to any of
the foregoing, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of any Indemnitee.
The provisions of this Section 11.10 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Revolving Credit Loans or the Competitive Advance
Loans, the reduction or cancellation of the Total Commitment, the
invalidity or unenforceability of any term or provision of this Agreement
or any Note, or any investigation made by or on behalf of the Banks. All
amounts due under this Section 11.10 shall be payable in immediately
available funds upon written demand therefor.
Section 11.11. Judgment Currency. (a) If for purposes of
obtaining judgment in any court in any country it becomes necessary to
convert into a currency (the "judgment currency") an amount due under or in
respect of any Credit Document in any other currency (the "primary cur-
rency"), then the conversion shall be made at the rate of exchange
prevailing at the close of business on the Domestic Business Day or
Eurocurrency Business Day, as appropriate, before the day on which the
judgment is given. The Borrowers agree that for purposes of this Section
11.11, to the fullest extent permitted by law, that the term "rate of
exchange" shall mean the spot rate at which the Administrative Agent in
accordance with its normal practice is able on the relevant date to
purchase the primary currency with the judgment currency, in the interbank
market in which its lending and foreign exchange and currency operations
with respect to the primary currency are then conducted, and includes any
premium and costs of exchange payable.
(b) If there is a change in the rate of exchange prevailing
between the Domestic Business Day or Eurocurrency Business Day, as the case
may be, before the day on which the judgment is given and the date of
payment of the amount due, then the relevant Borrower shall pay any
additional amounts as may be necessary to ensure that the amount paid
<PAGE>
<PAGE> 78
in the judgment currency when converted at the rate of exchange prevailing
on the date of payment will produce the amount then due under the Credit
Documents in the primary currency.
(c) Any amount due from a Borrower under this Section 11.11
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of the Credit
Documents.
Section 11.12. Consent to Jurisdiction. Any judicial
proceeding brought against any Borrower with respect to any Credit Document
may be brought in any court of competent jurisdiction in the City of New
York, and, by its execution and delivery of this Agreement or an Offshore
Borrower Confirmation pursuant to Section 6.04, each Borrower shall be
deemed, to the fullest extent permitted by law, to (a) accept, generally
and unconditionally, the jurisdiction of such courts, (b) irrevocably waive
any objection they may now or hereafter have as to the venue of any suit,
action or proceeding brought in such a court or that such court is an
inconvenient forum and (c) consent that service of process upon any of them
may be made by certified or registered mail, return receipt requested, at
their address specified or determined in accordance with the provisions of
Section 11.06 and service so made shall be deemed completed when received.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of the Bank to bring proceedings
against any Borrower in the courts of any other jurisdiction.
Section 11.13. Confidentiality. Except as may be required to
enforce the rights and duties established hereunder (including establishing
and maintaining the Collateral Agent's perfected security interest in the
Collateral), the parties hereto shall preserve in a confidential manner all
information received from any other party pursuant to this Agreement, any
Notes and the transactions contemplated hereunder and thereunder, and shall
not disclose such information except (i) to employees of such Bank or its
Affiliates involved in the administration of this Agreement (including
assignments and participations) and their respective directors, attorneys
and accountants (each of which shall be acting in a capacity with respect
to which a confidential relationship is established and recognized),
(ii) to any Participant or Assignee or any potential Participant or
Assignee (provided, that such Person shall agree to keep confidential all
information provided thereto, in accordance with this Section 11.13) and
(iii) as required by applicable law, including responses to requests for
information by appropriate bank regulatory agencies.
<PAGE>
<PAGE> 79
Section 11.14. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all the counterparts shall together
constitute one and the same instrument. Delivery of an executed counter-
part of a signature page to this Agreement by telecopier shall be effective
as delivery of a manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
AVON PRODUCTS, INC.
By:/s/ ROBERT J. CORTI
Name: Robert J. Corti
Title: Group Vice President
- Tax and Treasurer
AVON CAPITAL CORPORATION
By:/s/ ROBERT J. CORTI
Name: Robert J. Corti
Title: Vice President and
Treasurer
CHEMICAL BANK, as
Administrative Agent
By:/s/ SUZANNE K. KJORLIEN
Name: Suzanne K. Kjorlien
Title: Vice President
BANKERS TRUST COMPANY
By:/s/ KATHERINE A. JUDGE
Name: Katherine A. Judge
Title: Vice President
<PAGE>
<PAGE> 80
BANK OF AMERICA ILLINOIS
By:/s/ GEORGE POON
Name: George Poon
Title: Vice President
BANCO SANTANDER, NEW YORK
BRANCH
By:/s/ G.K. GREATHOUSE
Name: Greta K. Greathouse
Title: Vice President
By:/s/ MARK VOLTMAN
Name: Mark Voltman
Title: Vice President
BANQUE NATIONALE DE PARIS- BANQUE NATIONALE DE PARIS-
NEW YORK BRANCH GEORGETOWN, CAYMAN ISLANDS
BRANCH
By:/s/ S. KAUFMAN By:/s/ S. KAUFMAN
Name: Sophie Revillard Name: Sophie Revillard
Kaufman Kaufman
Title: Vice President Title: Vice President
By:/s/ ERIC VIGNE By:/s/ ERIC VIGNE
Name: Eric Vigne Name: Eric Vigne
Title: Senior Vice Title: Senior Vice
President President
THE BANK OF NOVA SCOTIA
By:/s/ J. ALAN EDWARDS
Name: J. Alan Edwards
Title: Authorized Signatory
<PAGE>
<PAGE> 81
THE BANK OF TOKYO TRUST
COMPANY
By:/s/ JEFFREY D. MILLAR
Name: Jeffrey D. Millar
Title: Vice President
CHEMICAL BANK, as a Bank
By:/s/ SUZANNE K. KJORLIEN
Name: Suzanne K. Kjorlien
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By:/s/ RICHARD A. BONOMO
Name: Richard A. Bonomo
Title: Vice President
CITIBANK, N.A.
By:/s/ W. DWIGHT RAIFORD
Name: W. Dwight Raiford
Title: Vice President
CREDIT LYONNAIS NEW YORK CREDIT LYONNAIS CAYMAN
BRANCH ISLANDS BRANCH
By:/s/ MARK A. CAMPELLONE By:/s/ MARK A. CAMPELLONE
Name: Mark A. Campellone Name: Mark A. Campellone
Title: Vice President Title: Vice President
<PAGE>
<PAGE> 82
DEUTSCHE BANK AG - NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By:/s/ GREGORY M. HILL
Name: Gregory M. Hill
Title: Vice President
By:/s/ JEFFREY N. WIESER
Name: Jeffrey N. Wieser
Title: Director
DRESDNER BANK AG - NEW YORK
BRANCH
By:/s/ ROBERT GRELLA
Name: Robert Grella
Title: Vice President
By:/s/ A.R. MORRIS
Name: A.R. Morris
Title: Vice President
THE FIRST NATIONAL BANK OF
BOSTON
By:/s/ CINDY CHEN
Name: Cindy Chen
Title: Director
MIDLAND BANK PLC, NEW YORK
BRANCH
By:/s/ JONATHAN MORRIS
Name: Jonathan Morris
Title: Vice President
<PAGE>
<PAGE> 83
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:/s/ SANDRA J.S. KUREK
Name: Sandra J.S. Kurek
Title: Associate
NATIONSBANK OF NORTH CAROLINA,
N.A.
By:/s/ MICHAEL J. CERMINARO
Name: Michael J. Cerminaro
Title: Senior Vice
President
THE NORTHERN TRUST COMPANY
By:/s/ DEBORAH D. THOMAS
Name: Deborah D. Thomas
Title: Vice President
THE SUMITOMO BANK, LIMITED-
NEW YORK BRANCH
By:/s/ Y. KAWAMURA
Name: Yoshinori Kawamura
Title: Joint General
Manager
SWISS BANK CORPORATION-
NEW YORK BRANCH
By:/s/ N.T. ERNI
Name: Nicholas T. Erni
Title: Associate Director
Credit Risk
Management
By:/s/ STEPHANIE W. KIM
Name: Stephanie W. Kim
Title: Associate Director
Merchant Banking
<PAGE>
<PAGE> 84
THE TORONTO-DOMINION BANK
By:/s/ W. M. MACNEE
Name: W.M. MacNee
Title: Vice President
EXHIBIT 10.1
<PAGE>
EXHIBIT 10.1
CONFORMED COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT, by and between AVON PRODUCTS, INC., a New York
corporation (the "Corporation"), and EDWARD J. ROBINSON (the
"Executive"), dated as of this 1st day of September, 1994.
W I T N E S S E T H:
WHEREAS, the Corporation desires to recognize the Executive's
commitment to the Corporation and to confirm the right of the
Executive to certain employment, compensation and severance
benefits; and
WHEREAS, to attain that end the Corporation and the Executive
wish to enter into this Employment Agreement which shall replace
the prior Employment Agreement between the parties dated as of
November 5, 1992; and
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and other good and valuable
consideration, the Corporation and the Executive do hereby agree as
follows:
<PAGE>
TABLE OF CONTENTS
Page
Section 1.
Employment. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.
Term. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3.
Position and Duties . . . . . . . . . . . . . . . . . . . 1
Section 4.
Compensation. . . . . . . . . . . . . . . . . . . . . . . 1
Section 5.
Termination . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6.
Obligations of the Corporation Upon Termination . . . . . 5
Section 7.
Cash-Out of Stock Options and Restricted Stock. . . . . 11
Section 8.
Certain Further Payments by the Corporation . . . . . . . 13
Section 9.
Non-exclusivity of Rights . . . . . . . . . . . . . . . . 15
Section 10.
Full Settlement . . . . . . . . . . . . . . . . . . . . . 15
Section 11.
Legal Fees and Expenses . . . . . . . . . . . . . . . . . 16
Section 12.
Confidential Information and Noncompetition . . . . . . . 16
Section 13.
Successors. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 14.
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 17
Section 15.
Definitions . . . . . . . . . . . . . . . . . . . . . . . 18
i
<PAGE>
1. Employment. The Corporation shall employ the Executive
and the Executive agrees to serve as an executive of the Corporation, in
such capacities and upon such conditions as are hereinafter set forth.
2. Term. The Executive shall be considered an at-will
employee and his employment may be terminated by either party
subject to the obligations of the parties upon such termination as
may be set forth hereinafter.
3. Position and Duties.
(a) Position. The Executive shall serve as President
and Chief Operating Officer of the Corporation or as an officer of
the Corporation with equivalent or greater responsibility as may be
determined by the Board.
(b) Business Time. The Executive agrees to devote his
full business time during normal business hours to the business and
affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him
hereunder, to the extent necessary to discharge such
responsibilities, except for
(i) time spent in managing his personal, financial
and legal affairs and serving on corporate, civic or
charitable boards or committees, in each case only if and to
the extent not substantially interfering with the performance
of such responsibilities, and
(ii) periods of vacation to which he is entitled.
It is expressly understood and agreed that the Executive's
continuing to serve on any boards and committees on which he is
serving or with which he is otherwise associated immediately
preceding the date hereof, or his service on any other boards and
committees of which the Corporation has knowledge and does not
object, in writing, within thirty (30) days after first becoming
aware of such service, shall not be deemed to interfere with the
performance of the Executive's services to the Corporation.
4. Compensation. The Executive shall be entitled to the
following compensation for as long as the Executive remains an
employee of the Corporation;
(a) Base Salary. The Executive shall receive a base
salary (the "Base Salary") payable in equal bi-weekly installments
at an annual rate of $500,000. The Corporation shall review the
Base Salary periodically and in light of such review may increase (but
not decrease) the Base Salary taking into account any change in the
Executive's responsibilities, increases in compensation of other
executives with comparable responsibilities, performance of the
Executive and other pertinent factors, and such adjusted Base
Salary shall then constitute the "Base Salary" for purposes of this
Agreement. Neither the Base Salary nor any increase in Base Salary
after the date hereof shall serve to limit or reduce any other
obligation of the Corporation hereunder.
(b) Annual Bonus.
-1-
<PAGE>
(i) In General. For each fiscal year of the
Corporation during which he is employed by the Corporation the
Executive shall be eligible to receive an annual bonus
("Annual Bonus") under the Corporation's Management Incentive
Plan or successor annual incentive award plan. Such Annual
Bonus shall be determined on the basis of an annual target
bonus opportunity of at least seventy percent (70%) of the
Base Salary paid the Executive with respect to such fiscal
year, which annual target bonus opportunity may be increased
but not decreased except for annual reductions of up to ten
percent (10%) that apply to all officers of the Corporation.
Each Annual Bonus (or portion thereof) shall be paid in cash
in February of the year next following the year for which the
Annual Bonus (or prorated portion) is earned or awarded,
unless electively deferred by the Executive pursuant to any
deferral programs or arrangements that the Corporation may
make available to the Executive.
(ii) Change of Control. Notwithstanding the
foregoing, the Annual Bonus awarded to the Executive for each
fiscal year of the Corporation ending during the period
commencing on the Change of Control Date and ending on the
third anniversary thereof or during the pendency of a
Potential Change of Control, shall not be less than the
largest bonus earned by or awarded to the Executive for any
the of three fiscal years of the Corporation ending before
such Potential Change of Control or Change of Control Date, as
applicable, or for the fiscal year in which such Potential
Change of Control or Change of Control Date occurs. For a
fiscal year of the Corporation that commences but does not end
before the third anniversary of a Change of Control Date, the
Annual Bonus earned by or awarded to the Executive for that
portion of such fiscal year shall not be less than a ratable
portion (based on the total days elapsed in that fiscal year)
of the Annual Bonus that would have been payable to the
Executive had that entire fiscal year ended before the third
anniversary of a Change of Control Date.
(c) Incentive and Savings Plans; Retirement and Death
Benefit Programs. The Executive shall be entitled to participate
in all incentive and savings plans and programs, including stock
option plans and other equity-based compensation plans, and in all
employee retirement, executive retirement and executive death
benefit plans (including the SERP and SLIP) on a basis no less
favorable than that basis generally available to executives of the
Corporation holding comparable positions or having comparable
responsibilities who become an elected or appointed officer of the
Corporation on or after the date on which the Executive first
became an elected or appointed officer of the Corporation. As of
September 1, 1994, the Executive is entitled to a death benefit
under the SLIP of $2,000,000 which benefit shall be governed by the
terms of the SLIP applicable to individuals who became participants
in such plan before January 1, 1990. As of December 1, 1994, the
Executive shall be deemed to have accumulated 21 years of
Creditable Service under the SERP in accordance with Section 4(g)
of this Agreement.
(d) Other Benefit Plans. The Executive, his spouse and
-2-
their eligible dependents (as defined in, and to the extent
permitted by, the applicable plan), as the case may be, shall be
entitled to participate in or be covered under all medical, dental,
disability, group life, severance, accidental death and travel
accident insurance plans and programs of the Corporation and any
Affiliated Companies at the most favorable level of participation
and providing the highest levels of benefits available to him and
his dependents.
(e) Other Perquisites. The Executive shall also be
entitled to:
(i) prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the
policies and procedures of the Corporation providing the
highest level of reimbursement on the least restrictive basis
available;
(ii) paid vacation and fringe benefits as currently
provided or in accordance with the most favorable policies of
the Corporation; and
(iii) an office or offices of a size and with
furnishings and other appointments, and to secretarial and
other assistance, on a basis no less favorable than that basis
generally available to executives of the Corporation holding
comparable positions or having comparable responsibilities.
(f) Effect of Change of Control on Benefit Plans and
Other Perquisites. Without limiting the generality of Sections
4(c), 4(d) and 4(e) hereof, during the pendency of a Potential
Change of Control or during the period commencing on a Change of
Control Date and ending on the third anniversary thereof, the
benefits provided for in such Sections may not be diminished from
the highest level previously provided or available to the Executive
immediately prior to the Potential Change of Control or within the
ninety-day period prior to the Change of Control Date, as
applicable.
(g) Enhanced SERP Benefits. The provisions of this
subsection (g) apply notwithstanding anything to the contrary in
the SERP. For purposes of determining eligibility for retirement
benefits under the SERP and for post-retirement death benefits
under the SLIP, the Executive's Creditable Service shall be the
amount of Creditable Service the Executive would have if the
Executive began employment with the Corporation on January 1, 1973.
The Executive's benefit under the SERP shall be the greatest of:
(i) the amount the Executive would be entitled to
under the SERP using only his actual
Creditable Service with the Corporation;
(ii) the amount the Executive would be entitled to
under the SERP if he was credited with
Creditable Service under the SERP as if he
began employment with the Corporation January
1, 1973 reduced by the amount of the benefit
to which he is entitled under any defined
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benefit pension plan of RJR Nabisco, Inc.,
whether or not meeting the requirements of
Section 401(a) of the Code, to the extent the
benefits to which he is entitled under such
plans of RJR Nabisco, Inc. are attributable to
the Executive's employment with RJR Nabisco,
Inc. during the period beginning January 1,
1973 and ending with his date of hire with the
Corporation; and
(iii) the alternative benefit amount described
in Section 4(1)(c) or 4(2)(c), whichever
is applicable, of the SERP; provided,
however, that if service prior to the
Executive's date of hire with the
Corporation must be credited as
Creditable Service in order for the
Executive to be entitled to the benefit
under this subsection (iii), then such
benefit shall be reduced by the amount of
the benefit to which he is entitled under
any defined benefit pension plan of RJR
Nabisco, Inc., whether or not meeting the
requirements of Section 401(a) of the
Code.
Upon a termination of employment following a Change of Control,
other than a voluntary termination, Section 11(3) of the SERP
provides that the Executive shall be entitled to the minimum
benefit amount described in Section 4(1)(c) upon attainment of age
65 or, alternatively, any other benefit under the SERP to which the
Executive is, or could be, entitled. In accordance with Section
11(3) of the SERP, the Corporation shall pay any such minimum
benefit amount immediately after the date of such a termination of
employment in the form of a lump sum of Actuarial Equivalent (as
defined in the SERP) value determined as of such date.
The Executive's benefits under the SERP will not be reduced on
account of the Executive's early retirement between the ages of 55
and 59 if either the Corporation consents to the Executive's early
retirement or, prior to the Executive's retirement or other
termination of employment, the CEO of the Corporation as of the
date of this Agreement is no longer the CEO of the Corporation.
5. Termination.
(a) Disability. The Corporation may terminate the
Executive's employment upon the Executive's Disability, by giving
to the Executive written notice of its intention to terminate his
employment, and his employment with the Corporation shall terminate
effective on the 90th day after receipt of such notice if the
Executive shall fail to return to full-time performance of his
duties within ninety (90) days after such receipt.
(b) Voluntary Termination by Executive. Notwithstanding
anything in this Agreement to the contrary, the Executive may, upon
not less than thirty (30) days' written notice to the Corporation,
voluntarily terminate employment for any reason (including
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retirement under the terms of the Corporation's retirement plan as
in effect from time to time), provided that any termination by the
Executive pursuant to Section 5(d) on account of Constructive
Termination shall not be treated as a voluntary termination under
this Section 5(b).
(c) Termination by the Corporation. The Corporation at
any time may terminate the Executive's employment for Cause or
without Cause.
(d) Constructive Termination. The Executive at any time
may terminate his employment for Constructive Termination.
(e) Notice of Termination. Any termination by the
Corporation for Cause or by the Executive for Constructive
Termination shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 14(c). For
purposes of this Agreement, a "Notice of Termination" means a
written notice given, in the case of a termination for Cause,
within ten (10) business days of the Corporation's having actual
knowledge of the events giving rise to such termination, and in the
case of a termination for Constructive Termination, within 180 days
of the Executive's having actual knowledge of the events giving
rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) if the termination date is
other than the date of receipt of such notice, specifies the
termination date of this Agreement (which date shall be not more
than fifteen (15) days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of
Constructive Termination shall not waive any right of the Executive
hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the case of
a termination for which a Notice of Termination is required, the
date of receipt of such Notice of Termination or, if later, the
date specified therein, as the case may be and (ii) in all other
cases, the actual date on which the Executive's employment
terminates.
6. Obligations of the Corporation Upon Termination. Upon
termination of the Executive's employment with the Corporation, the
Corporation shall have the following obligations (including the
obligation to pay the cost of all benefits provided by the
applicable benefit plan to the Executive and the Executive's family
under this Section 6 except normal employee contributions required
by the applicable benefit plan of other participating executives
with comparable responsibilities), provided, however, that any item
paid or payable under this Agreement shall be reduced by any amount
paid or payable to the Executive and the Executive's family with
respect to the same type of payment under the Severance Plan. For
this purpose, any payment under this Agreement or the Severance
Plan made over time shall be discounted to present value at the
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Interest Rate before reducing any payment under this Agreement by
any amount paid or payable to the Executive under the Severance
Plan.
(a) Death and Retirement. If the Executive's employment
is terminated by reason of the Executive's death or on or after the
attainment of age sixty-five (65), this Agreement shall terminate
without further obligations to the Executive's legal
representatives under this Agreement other than payment of the
Accrued Obligations. Unless otherwise directed by the Executive
(or, in the case of a Qualified Plan, as may be required by such
plan) all Accrued Obligations shall be paid to the Executive, his
beneficiaries or his estate, as applicable, in a lump sum in cash
within thirty (30) days of the Date of Termination. In the event
of the retirement of the Executive, he and his family shall be
entitled to benefits generally available upon retirement to
executives with comparable responsibilities or positions and their
families. In the event of the Executive's death, his family shall
be entitled to receive benefits generally available to the
surviving families of executives with comparable responsibilities
or positions.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, the Executive,
the Executive's spouse and their eligible dependents (as defined
in, and to the extent permitted by, the applicable plan) shall be
entitled for a period of three years after the Date of Termination
(or, if the Date of Termination occurs within three years after a
Change of Control Date, until the earlier to occur of the
Executive's 65th birthday or the third anniversary of the Change of
Control Date, if later) to continue to participate in or be covered
under the benefit plans and programs referred to in Section 4(d)
or, at the Corporation's option, to receive equivalent benefits by
alternate means, at least equal to those described in Section 4(d).
Unless otherwise directed by the Executive (or, in the case of any
Qualified Plan, as may be required by such plan), the Executive
shall also be paid all Accrued Obligations in a lump sum in cash
within thirty (30) days of the Date of Termination. In addition,
the Executive and the Executive's family shall be entitled to
receive disability and other benefits generally available to
executives with comparable responsibilities or positions.
Notwithstanding the foregoing, in the event that the Date of
Termination occurs during the pendency of a Potential Change of
Control or during the three year period commencing on a Change of
Control, the benefits provided to the Executive and his family
shall not be less than the benefits generally available to
executives with comparable responsibilities or positions
immediately prior to the Potential Change of Control or within the
ninety-day period prior to the Change of Control Date, as
applicable.
(c) Termination by the Corporation for Cause and
Voluntary Termination by Executive. If the Executive's employment
shall be terminated for Cause or voluntarily terminated by the
Executive (other than on account of Constructive Termination), the
Corporation shall pay the Executive the Accrued Obligations. The
Executive shall be paid all such Accrued Obligations in a lump sum
in cash within thirty (30) days of the Date of Termination and the
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Corporation shall have no further obligations to the Executive
under this Agreement, unless otherwise required by a Qualified Plan
or specified pursuant to a valid election to defer the receipt of
all or a portion of such payments made in accordance with any plan
of deferred compensation sponsored by the Corporation.
(d) Other Termination of Employment If Not Related to
Change of Control or Potential Change of Control. If the
Corporation (i) terminates the Executive's employment other than
for Cause or Disability, or the Executive terminates his employment
for Constructive Termination, and (ii) the Date of Termination
occurs during a period which is not during the pendency of a
Potential Change of Control or the three year period commencing on
a Change of Control Date, the Corporation shall pay or provide to
the Executive the following:
(A) Cash Payment. The Corporation shall pay to the
Executive in a lump sum in cash within fifteen (15) days after
the Date of Termination the aggregate of the following amounts
(other than amounts payable from Qualified Plans, non-
qualified retirement plans and deferred compensation plans,
which amounts shall be paid in accordance with the terms of
such plans):
(1) all Accrued Obligations plus, in the case
of termination without Cause, two weeks of Base Salary in
lieu of notice;
(2) the present value, discounted at the
Interest Rate as if paid monthly from the Date of
Termination in arrears of the lesser of (I) thirty-six
(36) months of the Executive's Base Salary at the rate in
effect on the Date of Termination, and (II) the
Executive's Base Salary (at the same rate) through the
end of the month in which the Executive attains age
sixty-five (65);
(3) a bonus equal to the lesser of: (I) the
Executive's target annual bonus for the year of
termination and (II) the product of the Executive's
annual rate of Base Salary on the Date of Termination and
a fraction, the denominator of which is the sum of the
Executive's Base Salary for the preceding three fiscal
years and the numerator of which is the sum of the
Executive's annual bonus awards for such years adjusted
to the aggregate amount which would have been payable for
such years if the target opportunity percentage for the
Executive's year of termination had then been applicable;
and
(4) if the Date of Termination is on or after
August 1st of the year of termination, a prorated bonus
based on earned salary for that year (not to exceed the
Executive's target bonus award for such year and, if the
Executive's bonus is subject to the discretion of the
Board, in the discretion of the Board).
(B) Benefit Continuation. The Corporation shall
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provide for the continued participation of the Executive, his
spouse and their eligible dependents (as defined in the
applicable plan), as the case may be, for a period of three
years after the Date of Termination, in the plans described in
Section 4(d) on the same terms as described in Section 4(d)
and in the SERP and SLIP on the same terms described in
Section 4(c), and the Executive shall receive Creditable
Service (as defined in the SERP) for that period (with Average
Final Compensation, as defined in the SERP, to be determined
as of the Date of Termination) for purposes of the SERP and
SLIP.
(e) Other Termination of Employment Occurring Within
Three Years Following Change of Control. If the Corporation (i)
terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates his employment for
Constructive Termination and (ii) the Date of Termination occurs
during the three (3) year period commencing on the Change of
Control Date, the Corporation shall pay or provide the Executive
the following:
(A) Cash Payment. The Corporation shall pay to the
Executive in a lump sum in cash within fifteen (15) days after
the Date of Termination the aggregate of the following amounts
(other than amounts payable from Qualified Plans, non-
qualified retirement plans and deferred compensation plans,
which amounts shall be paid in accordance with the terms of
such plans):
(1) all Accrued Obligations;
(2) a cash amount equal to three (3) times the
sum of
(I) the Executive's annual Base Salary
at the greater of the rate in effect as of the date
when the Notice of Termination was given or the
Change of Control Date;
(II) the greater of the (x) Annual Bonus
earned by or awarded to the Executive for the last
fiscal year of the Corporation ending prior to the
Change of Control Date or (y) the Annual Bonus
earned by or awarded to the Executive for the
fiscal year of the Corporation which includes the
Change of Control Date; and
(III) the present value, calculated
using the Interest Rate, of (without duplication)
the annualized value of the fringe benefits
described under Section 4(e) of this Agreement,
provided, however, that in no event shall the Executive
be entitled to receive under this clause (2) more than
the greater of (I) the product obtained by multiplying
the amount determined as hereinabove provided in this
clause by a fraction, the numerator of which shall be the
number of months (including fractions of a month) which
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at the Date of Termination remain until the Executive
attains age sixty-five (65) or if earlier, the third
anniversary of the Change of Control Date and the
denominator of which shall be thirty-six (36) and (II) an
amount equal to the cash payment that would have been
payable under Section 6(d)(A) hereof had the Change of
Control not occurred.
(3) a cash amount equal to the difference
between (I) the sum of the maximum payments the Executive
would have received for all awards (or other similar
rights) outstanding at the Date of Termination and
granted to the Executive under any long-term incentive
compensation or performance plan of the Corporation if he
had continued in the employ of the Corporation through
the earlier to occur of the third anniversary of the
Change of Control Date or the Executive's 65th birthday
and the Corporation had met its maximum performance goals
under each such award and the maximum amount payable
under each such award was paid and (II) any amounts
actually paid under any such plan with respect to such
awards. The cash amount payable pursuant to this
paragraph shall include the maximum payment value of all
outstanding Performance Units awarded the Executive under
the Corporation's 1994 Long-Term Incentive Plan reduced
by any amounts actually paid or payable under such plan
with respect to such units;
(4) a cash amount equal to the present value,
calculated using the Interest Rate, of the difference
between
(I) the lump sum value of the retirement
benefits (including, without limitation, any
pension, retiree life, or retiree medical benefits)
that would have been payable or available to the
Executive under any Qualified Plan, under the SERP,
and under any other supplemental retirement, life
(other than the SLIP) or medical plan or
arrangement, whether or not qualified, maintained
by the Corporation or an Affiliated Company based
on the age and service the Executive would have
attained or completed had the Executive continued
in the Corporation's employ until the earlier of
the expiration of the third anniversary of the
Change of Control Date or the Executive's 65th
birthday, determined using, where compensation is a
relevant factor, his pensionable compensation at
the Date of Termination (or, if greater, at the
rate in effect on the date on which occurred an
event giving rise to a Constructive Termination),
with such lump sum value being calculated using,
where applicable, assumptions contained in the
respective plans; and
(II) the lump sum value of the retirement
benefits (including, without limitation, any
pension, retiree life, or retiree medical benefits)
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that are payable or available to the Executive
under any Qualified Plan, under the SERP, and under
any other supplemental retirement, life (other than
the SLIP) or medical plan or arrangement, whether
or not qualified, maintained by the Corporation or
an Affiliated Company based on the age and service
the Executive has attained or completed as of the
Executive's Date of Termination determined using,
where compensation is a relevant factor, his
pensionable compensation at the Date of Termination
(or, if greater, at the rate in effect on the date
on which occurred an event giving rise to a
Constructive Termination), with such lump sum value
being calculated using, where applicable,
assumptions contained in the respective plans.
The retirement benefits which would have become
payable under such plans include, without limitation, the
additional benefits attributable to such additional
service which would have been rendered during such period
and the benefits which would have vested under such plans
as a result of such service, but which were otherwise
forfeited. Notwithstanding the foregoing, in lieu of any
cash payment in respect of retiree life or retiree
medical coverage for which the Executive would have
qualified by remaining in the Corporation's employ until
the earlier of the third anniversary of the Change of
Control Date or the Executive's 65th birthday, the
Corporation may arrange at its option or shall arrange at
the election of the Executive for such coverage to
continue for the Executive (or may secure equivalent
conversion coverage) and shall pay the cost of such
coverage. Any election by the Executive pursuant to the
immediately preceding sentence shall be made in writing
and delivered to the Corporation prior to the Date of
Termination.
(B) SLIP Coverage. The Executive shall continue to
be covered under the SLIP and his beneficiaries shall continue
to be eligible to receive such supplemental life allowance as
if he had continued in the employ of the Corporation until the
later of the third anniversary of the Change of Control Date
or two years following his Date of Termination reduced by the
face amount of any fully paid whole life insurance policy the
Executive receives pursuant to the SLIP.
(C) Other Benefit Continuation. The Corporation
shall provide for the continued participation of the Execu-
tive, his spouse and their eligible dependents (as defined in
the applicable plan), as the case may be, for a period equal
to the greater of two years after the Date of Termination or
until the third anniversary of the Change of Control Date, in
the plans described in Section 4(d) on the same terms as
described in Section 4(d). In lieu of continued participation
in medical and life insurance programs referred to the
foregoing, the Executive may elect by written notice delivered
to the Corporation prior to the Date of Termination, to
receive an amount equal to three (3) times the annual cost to
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the Corporation (based on premium rates) of providing such
coverage.
(f) Other Termination of Employment Occurring During
Pendency of Potential Change of Control. If the Corporation (i)
terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates his employment for
Constructive Termination and (ii) the Date of Termination occurs
during the pendency of a Potential Change of Control, the Executive
shall be entitled to the payments and benefits set forth in Section
6(d) hereof. In the event that a Change of Control occurs before
the expiration of the pendency of the Potential Change of Control
during which the Date of Termination occurred, the Executive shall
also be entitled to such additional cash payments as would have
been made under Section 6(e) hereof as if the Date of Termination
had occurred immediately on the Change of Control Date, in excess
of the amount of the cash payment made to the Executive under
Section 6(d) hereof. In addition, in the event that a Change of
Control occurs during the pendency of the Potential Change of
Control during which the Date of Termination occurred, the
Executive shall also be entitled to benefit continuation provided
for under Section 6(e) in excess of the benefit continuation to
which he was entitled under Section 6(d) hereunder. The Executive
shall have an additional thirty (30) days after the Change of
Control Date to provide a written election to the Corporation for
a cash payment in lieu of those benefits for which the Executive
has the choice under Section 6(e) between continued coverage and a
cash payment. The cost (based on premium rates) of the period of
coverage previously provided to the Executive before such election
shall be subtracted from any such cash payment.
(g) Discharge of Corporation's Obligations. Subject to
the performance of its obligations under Sections 6, 7, 8 and 11,
the Corporation shall have no further obligations to the Executive
under this Agreement in respect of any termination by the Executive
for Constructive Termination or by the Corporation other than for
Cause or Disability.
7. Cash-Out of Stock Options and Restricted Stock.
(a) In General. The Executive shall be entitled to
receive a cash out of all of his outstanding restricted stock,
stock option and other equity based awards upon a Change of Control
in accordance with the terms of the Corporation's plans under which
such awards were granted. To the extent that such awards are not
cashed out pursuant to the terms of such plans, they shall become
fully vested as of the Change of Control Date.
(b) Restricted Stock Awards under the 1970 Plan Prior to
May 1991. The Corporation shall pay to the Executive, upon a
Change of Control, with respect to each share of restricted common
stock granted to him prior to May 1991 under the 1970 Stock Option
Incentive Plan and held by him at the Change of Control Date an
amount equal to the greater of:
(i) the highest price offered for a share of common
stock of the Corporation in conjunction with any tender offer
or during the 60-day period immediately preceding the Change
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of Control Date, if the Change of Control occurs other than
pursuant to a tender offer, or
(ii) the then fair market value of such a share of
common stock.
Notwithstanding the foregoing, if the Executive otherwise
receives the value of any such shares of restricted common stock
under the general provisions of the award or the generally
applicable provisions of any plan under which restricted common
stock was issued, the number of shares of restricted common stock
taken into account in determining the amount payable under this
Section 7(b) shall be appropriately reduced.
(c) Stock Option Awards under the 1970 Plan After April
1991. If the Change of Control (as defined in this Agreement) does
not also constitute a "Change of Control" as defined in the 1970
Stock Option Incentive Plan, the Corporation shall pay to the
Executive, upon the earlier of (A) the merger of the Corporation
with or into another corporation following a Change of Control, or
(B) the date which is six months after the Date of Termination, an
amount equal to the value of the rights described in this
Subsection (c). The Executive is hereby granted a right to receive
with respect to each share of common stock subject to a stock
option granted to him after April 1991 and prior to May 1993 under
the 1970 Stock Option Incentive Plan, an amount equal to the
excess, if any of:
(i) the highest price offered for a share of common
stock of the Corporation in conjunction with any tender offer
or during the 60-day period immediately preceding the Change
of Control Date, if the Change of Control occurs other than
pursuant to a tender offer, over
(ii) the fair market value of a share of common
stock of the Corporation on the later of the Date of
Termination or the first date following the Date of
Termination on which the Executive could sell shares of common
stock of the Corporation without liability under Section 16 of
the Securities Exchange Act of 1934.
The rights granted hereunder with a grant of stock
options shall expire on the same date as the stock options would
vest or be forfeited (disregarding any vesting which occurs by
reason of Section 6(f) hereof or any forfeiture which would
otherwise have occurred by reason of the termination of the
Executive's employment which results in the Executive being
entitled to a benefit under Section 6(d)).
(d) Effect of Termination During Pendency of a Potential
Change of Control. If (i) the Executive is terminated during the
pendency of a Potential Change of Control under circumstances
giving rise to payments pursuant to Section 6(f) hereof, (ii) such
termination results in a forfeiture of any of the Executive's
restricted stock, options or other equity based awards under any of
the Corporation's plans, and (iii) prior to the expiration of the
pendency of that Potential Change of Control, a Change of Control
occurs, the Executive shall thereupon be entitled to a cash payment
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equal to the amount the Executive would had received under such
plans with respect to such restricted stock, options and other
equity based awards as if he had remained in the Corporation's
employ until the Change of Control Date. Such cash payment be made
at the same time and in the same manner as payment would have been
made under the applicable plans had the Executive remained in the
Corporation's employ until the Change of Control Date.
8. Certain Further Payments by the Corporation.
(a) Tax Reimbursement Payment. In the event that any
amount or benefit paid or distributed to the Executive by the
Corporation or any Affiliated Company, whether pursuant to this
Agreement or otherwise (collectively, the "Covered Payments"), is
or becomes subject to the tax (the "Excise Tax") imposed under
Section 4999 of the Code or any similar tax that may hereafter be
imposed, the Corporation shall either pay to the Executive or
contribute for the benefit of the Executive to a "rabbi" trust
established by the Corporation prior to the Change of Control Date,
at the time specified in Section 8(e) below, the Tax Reimbursement
Payment (as defined below). The Tax Reimbursement Payment is
defined as an amount, which when added to the Covered Payments and
reduced by any Excise Tax on the Covered Payments and any federal,
state and local income tax and Excise Tax on the Tax Reimbursement
Payment provided for by this Agreement (but without reduction for
any federal, state or local income or employment tax on such
Covered Payments), shall be equal to the sum of (i) the amount of
the Covered Payments, and (ii) an amount equal to the product of
any deductions disallowed for federal, state or local income tax
purposes because of the inclusion of the Tax Reimbursement Payment
in the Executive's adjusted gross income and the highest applicable
marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement
Payment is to be made.
(b) Determining Excise Tax. For purposes of determining
whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(i) such Covered Payments will be treated as
"parachute payments" within the meaning of Section 280G of the
Code, and all "parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless, and
except to the extent that, in the opinion of the Corporation's
independent certified public accountants, which, in the case
of Covered Payments made after the Change of Control Date,
shall be the Corporation's independent certified public
accountants appointed prior to the Change of Control Date, or
tax counsel selected by such accountants (the "Accountants"),
such Covered Payments (in whole or in part) either do not
constitute "parachute payments" or represent reasonable
compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the
"base amount", or such "parachute payments" are otherwise not
subject to such Excise Tax, and
(ii) the value of any non-cash benefits or any
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deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(c) Applicable Tax Rates and Deductions. For purposes
of determining the amount of the Tax Reimbursement Payment, the
Executive shall be deemed:
(i) to pay federal income taxes at the highest
applicable marginal rate of federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made,
(ii) to pay any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of the
Executive's adjusted gross income), and
(iii) to have otherwise allowable deductions for
federal, state and local income tax purposes at least equal to
those disallowed because of the inclusion of the Tax
Reimbursement Payment in the Executive's adjusted gross
income.
(d) Subsequent Events. In the event that the Excise Tax
is subsequently determined by the Accountants to be less than the
amount taken into account hereunder in calculating the Tax
Reimbursement Payment made, the Executive shall repay to the
Corporation, at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that has been paid to the Executive or to
federal, state or local tax authorities on the Executive's behalf
and that would not have been paid if such Excise Tax had been
applied in initially calculating such Tax Reimbursement Payment,
plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Tax Reimbursement
Payment to be refunded to the Corporation has been paid to any
federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been
made to the Executive, and interest payable to the Corporation
shall not exceed interest received or credited to the Executive by
such tax authority for the period it held such portion. The
Executive and the Corporation shall mutually agree upon the course
of action to be pursued (and the method of allocating the expenses
thereof) if the Executive's good faith claim for refund or credit
is denied.
In the event that the Excise Tax is later determined by
the Accountants to exceed the amount taken into account hereunder
at the time the Tax Reimbursement Payment is made (including, but
not limited to, by reason of any payment the existence or amount of
which cannot be determined at the time of the Tax Reimbursement
Payment), the Corporation shall make an additional Tax
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Reimbursement Payment in respect of such excess (which Tax
Reimbursement Payment shall include any interest or penalty payable
with respect to such excess) at the time that the amount of such
excess is finally determined.
(e) Date of Payment. The portion of the Tax
Reimbursement Payment attributable to a Covered Payment shall be
paid to the Executive or to a "rabbi" trust established by the
Corporation prior to the Change of Control Date within ten (10)
business days following the payment of the Covered Payment. If the
amount of such Tax Reimbursement Payment (or portion thereof)
cannot be finally determined on or before the date on which payment
is due, the Corporation shall either pay to the Executive or
contribute for the benefit of the Executive to a "rabbi" trust
established by the Corporation prior to the Change of Control Date,
an amount estimated in good faith by the Accountants to be the
minimum amount of such Tax Reimbursement Payment and shall pay the
remainder of such Tax Reimbursement Payment (which Tax
Reimbursement Payment shall include interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined, but in no event later than forty-five (45)
calendar days after payment of the related Covered Payment. In the
event that the amount of the estimated Tax Reimbursement Payment
exceeds the amount subsequently determined to have been due, such
excess shall be repaid or refunded pursuant to the provisions of
Section 8(d) above.
9. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Corporation or any of its Affiliated
Companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as the
Executive may have under any other agreements with the Corporation
or any Affiliated Companies, including, but not limited to stock
option or restricted stock agreements. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Corporation or any Affiliated
Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
10. Full Settlement. Except as provided in Section 12(b),
the Corporation's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other
right which the Corporation may have against the Executive or
others whether by reason of the subsequent employment of the
Executive or otherwise. In no event shall the Executive be
obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement. In the event that the Executive shall give a
Notice of Termination for Constructive Termination and it shall
thereafter be determined that Constructive Termination did not take
place, the employment of the Executive shall, unless the
Corporation and the Executive shall otherwise mutually agree, be
deemed to have terminated, at the date of giving such purported
Notice of Termination, by mutual consent of the Corporation and the
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Executive and, except as provided in the last preceding sentence,
the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date
had he terminated his employment voluntarily at such date under
this Agreement.
11. Legal Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the
Corporation shall pay all reasonable attorney fees and expenses
incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim
by reason of litigation, arbitration or settlement.
12. Confidential Information and Noncompetition.
(a) The Executive shall hold in a fiduciary capacity for
the benefit of the Corporation all secret or confidential
information, knowledge or data, including without limitation all
trade secrets, relating to the Corporation or any Affiliated
Companies, and their respective businesses, (i) obtained by the
Executive during his employment by the Corporation or any of its
Affiliated Companies and (ii) which is not otherwise publicly known
(other than by reason of an unauthorized act by the Executive).
After termination of the Executive's employment with the
Corporation, the Executive shall not without the prior written
consent of the Corporation, unless compelled pursuant to an order
of a court or other body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data to
anyone other than the Corporation and those designated by it. In
no event shall an asserted violation of the provisions of this
Section 12(a) constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
(b) Upon termination of the Executive's employment for
any reason whatsoever prior to a Change of Control, the Executive
shall not, without the prior written consent of the Corporation,
during the three-year period following the Date of Termination
(i) accept employment or enter into a consulting or advisory
arrangement with Amway Corporation, Sara Lee Corporation, Premark
International, Inc., Mary Kay Cosmetics, Inc., or any of their
affiliates; or (ii) directly solicit or aid in the direct
solicitation of any employees of the Corporation or an Affiliated
Company to leave their employment. In the event the Executive
violates the terms of this Section 12(b), all benefit continuation
coverage that the Executive and/or his family members are then
receiving pursuant to the terms of Section 6(d) shall cease. Also,
in the event that this Section 12(b) is determined to be
unenforceable in part, it shall be construed to be enforceable to
the maximum extent permitted by law.
13. Successors.
(a) This Agreement is personal to the Executive and,
without the prior written consent of the Corporation, shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
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(b) This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors. The Corporation
shall require any successor to all or substantially all of the
business and/or assets of the Corporation, whether direct or
indirect, by purchase, merger, consolidation, acquisition of stock,
or otherwise, by an agreement in form and substance satisfactory to
the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the
Corporation would be required to perform if no such succession had
taken place.
14. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: at the address listed on the last
page hereof or such other address as provided to the Corporation in
writing by the Executive.
If to the Corporation: Avon Products, Inc.
9 West 57th Street
New York, New York 10019
Attention: Secretary
(with a copy to the attention of the General Counsel or to such
other address as either party shall have furnished to the other in
writing in accordance herewith). Notice and communications shall be
effective when actually received by the addressee.
(d) Tax Withholding. The Corporation may withhold from
any amounts payable under this Agreement such federal, state or
local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(f) Captions. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect.
(g) Entire Agreement. This Agreement expresses the
entire understanding and agreement of the parties regarding the
terms and conditions governing the Executive's employment with the
Corporation, and all prior agreements governing the Executive's
employment with the Corporation shall have no further effect;
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<PAGE>
provided, however, that except as specifically provided herein, the
terms of this Agreement do not supersede the terms of any grant or
award to the Executive under the 1970 Stock Option Plan, the 1993
Stock Incentive Plan, any Long Term Incentive Plan, Management
Incentive Plan and any other similar or successor plan or program.
15. Definitions.
(a) "Accountants" shall have the meaning set forth in
Section 8(b).
(b) "Accrued Obligations" shall mean (i) the Executive's
full Base Salary through the Date of Termination, (ii) in the case
of death or retirement, the product of the Annual Bonus paid to the
Executive for the last full fiscal year of the Corporation and a
fraction, the numerator of which is the number of days in the
current fiscal year of the Corporation through the Date of
Termination, and the denominator of which is 365, (iii) any
compensation previously deferred by the Executive (together with
any accrued earnings thereon) and not yet paid by the Corporation
and any accrued vacation pay for the current year not yet paid by
the Corporation, (iv) any amounts or benefits owing to the
Executive or to the Executive's beneficiaries under the then
applicable employee benefit plans or policies of the Corporation
and (v) any amounts owing to the Executive for reimbursement of
expenses properly incurred by the Executive prior to the Date of
Termination and which are reimbursable in accordance with the
reimbursement policy of the Corporation described in Section 4(e).
(c) "Affiliated Company" shall mean any company
controlling, controlled by or under common control with the
Corporation.
(d) "Annual Bonus" shall have the meaning set forth in
Section 4(b).
(e) "Base Salary" shall have the meaning set forth in
Section 4(a).
(f) "Board" shall mean the Board of Directors of the
Corporation.
(g) "Cause" shall mean (i) an act or acts of dishonesty
or gross misconduct on the Executive's part which result or are
intended to result in material damage to the Corporation's business
or reputation or (ii) repeated material violations by the Executive
of his obligations under Section 3 of this Agreement which
violations are demonstrably willful and deliberate on the
Executive's part and which result in material damage to the
Corporation's business or reputation and as to which material
violations the Board has notified the Executive in writing.
(h) "Change of Control" means:
(A) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
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meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the corporation where such acquisition
causes such person to own 20% or more of the combined voting
power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this Subsection (A),
the following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or (iv) any
acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of Subsection (C)
below; and provided, further, that if any Person's beneficial
ownership of the Outstanding Corporation Voting Securities
reaches or exceeds 20% as a result of a transaction described
in clause (i) or (ii) above, and such Person subsequently
acquires beneficial ownership of additional voting securities
of the Corporation, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20%
or more of the Outstanding Corporation Voting Securities; or
(B) individuals who as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved
by a vote of at least two-thirds of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(C) the approval by the shareholders of the
Corporation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Corporation ("Business Combination") or, if
consummation of such Business Combination is subject, at the
time of such approval by shareholders, to the consent of any
government or governmental agency, the obtaining of such
consent (either explicitly or implicitly by consummation);
excluding, however, such a Business Combination pursuant to
which (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding
Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
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(including, without limitation, a corporation that as a result
of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Corporation Voting
Securities, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Corporation or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(D) approval by the shareholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, no Change of Control shall be deemed
to have occurred for purposes of this Agreement (i) by reason of
any actions or events in which the Executive participates in a
capacity other than in his capacity as Executive (or as a director
of the Corporation or a Subsidiary, where applicable) or (ii) if
prior to what otherwise would have been a Change of Control Date,
the Executive is demoted below the position described in Section
3(a) hereof and the Board provides written notification to the
Executive, no later than thirty (30) days thereafter, that a Change
of Control will not be deemed to occur with respect to the
Executive.
(i) "Change of Control Date" shall mean the date on
which a Change of Control shall be deemed to have occurred.
(j) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(k) "Constructive Termination" shall mean any of the
following:
(A) Reduction in Base Salary.
(B) Reduction in annual target bonus opportunity
(excluding annual reductions of up to 10% that apply to all
officers of the Corporation).
(C) A change of more than twenty-five (25) miles in
the office or location where the Executive is based, provided
that a change in the Executive's office location prior to a
Change of Control which is directly caused by the relocation
of the Corporation's headquarters office from its present
address of 9 West 57th Street, New York City, must be more
than fifty (50) miles from that address, in order to
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<PAGE>
constitute an event of Constructive Termination.
(D) (1) In General. With respect to any period
not within the three year period following a Change of
Control Date and not during the pendency of a Potential
Change of Control, a demotion to a position below that of
President and Chief Operating Officer of the Corporation.
(2) Change of Control. With respect to
any period during the pendency of a Potential Change of
Control and the three year period following a Change of
Control Date, unless with the express written consent of
the Executive, (I) the assignment to the Executive of any
duties inconsistent in any substantial respect with the
Executive's position, authority or responsibilities as
contemplated by Section 3(a) of this Agreement, or (II)
any other substantial change in such position, including
titles, authority or responsibilities from those
previously held by the Executive prior to the Potential
Change of Control or Change of Control Date, as
applicable. The Executive's position, authority and
responsibilities shall not be regarded as not
commensurate with previous position, authority and
responsibilities merely by virtue of the fact that a
successor shall have acquired all or substantially all of
the business and/or assets of the Corporation.
(E) (1) In General. With respect to any period
not within the three year period following a Change of
Control Date and not during the pendency of a Potential
Change of Control, any material reduction in any of the
benefits described in Sections 4(c) through 4(e) hereof
(excluding, in each case, reductions that apply to all
officers of the Corporation).
(2) Change of Control. With respect to any
period during the pendency of a Potential Change of
Control and the three year period following a Change of
Control Date, any failure by the Corporation to comply
with any of the provisions of Section 4 of this
Agreement, other than an insubstantial or inadvertent
failure remedied by the Corporation promptly after
receipt of notice thereof given by the Executive.
(F) Any failure of the Corporation to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 13(b), provided that the
successor has had actual written notice of the existence of
this Agreement and its terms and an opportunity to assume the
Corporation's responsibilities under this Agreement during a
period of ten (10) business days after receipt of such notice.
(l) "Covered Payments" shall have the meaning set forth
in Section 8(a).
(m) "Date of Termination" shall have the meaning set
forth in Section 5(f).
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(n) "Disability" shall mean disability which would
entitle the Executive to receive full long-term disability benefits
under the Corporation's long-term disability plan on terms
substantially similar to those of the long-term disability plan as
in on the date of this Agreement.
(o) "Excise Tax" shall have the meaning as set forth in
Section 8(a).
(p) "Interest Rate" shall mean the interest rate payable
on one year Treasury Bills in effect on the day that is 30 business
days (days other than Saturday, Sunday or legal holidays in the
City of New York) prior to the Date of Termination.
(q) "Notice of Termination" shall have the meaning as
set forth in Section 5(f).
(r) "Potential Change of Control" shall be deemed to
have occurred if:
(A) the commencement of a tender or exchange offer
by any third person (other than a tender or exchange
offer which, if consummated, would not result in a Change
of Control) for 20% or more of the then outstanding
shares of common stock or combined voting power of the
Corporation's then outstanding voting securities;
(B) the execution of an agreement by the
Corporation, the consummation of which would result in the
occurrence of a Change of Control;
(C) the public announcement by any person
(including the Corporation) of an intention to take or to
consider taking actions which if consummated would constitute
a Change of Control other than through a contested election
for directors of the Corporation; or
(D) the adoption by the Board, as a result of other
circumstances, including circumstances similar or related to
the foregoing, or a resolution to the effect that, for
purposes of this Agreement, a Potential Change of Control has
occurred.
A Potential Change of Control will be deemed to be pending from the
occurrence of the event giving rise to the Potential Change of
Control until the earlier of the first anniversary thereof or the
date the Board determines in good faith that such events will not
result in the occurrence of a Change of Control. Notwithstanding
the foregoing, no Potential Change of Control shall be deemed to
have occurred for purposes of this Agreement (i) by reason of any
actions or events in which the Executive participates in a capacity
other than in his capacity as Executive (or as a director of the
Corporation or a Subsidiary, as applicable) or (ii) if prior to
occurrence of an event that would have given rise to a Potential
Change of Control, the Executive is demoted below the position
described in Section 3(a) hereof and the Board provides written
notification to the Executive, no later than thirty (30) days
thereafter, that a Potential Change of Control will not be deemed
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to occur with respect to the Executive.
(s) "Qualified Plan" shall mean an employee benefit plan
qualified (or which is intended to be qualified) under
Section 401(a) of the Code.
(t) "SERP" shall mean the Supplemental Executive
Retirement Plan of Avon Products, Inc.
(u) "Severance Plan" shall mean Avon Products, Inc.
Severance Plan, or any successor thereof.
(v) "SLIP" shall mean the Supplemental Life Plan of Avon
Products, Inc.
(w) "Subsidiary" shall mean any majority owned
subsidiary of the Corporation.
(x) "Tax Reimbursement Payment" shall have the meaning
set forth in Section 8(a).
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Corporation has caused this Agreement to be executed in its
name on its behalf, and its corporate seal to be hereunto affixed
and attested by its Secretary, all effective as of the day and year
first above written.
AVON PRODUCTS, INC.
By: /s/ Marcia L. Worthing
Marcia L. Worthing, Senior Vice
President, Human Resources
ATTEST:
/S/Ward M. Miller
Ward M. Miller, Vice President,
Law and Assistant Secretary
(CORPORATE SEAL)
EXECUTIVE: /s/ Edward J. Robinson
Address:
730 The Parkway
Mamaroneck, NY 10543
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EXHIBIT 10.2
<PAGE>
Exhibit 10.2
Form of Employment Agreement, dated as of September 1, 1994
between Avon Products, Inc. and certain senior officers
Avon has an employment agreement, in the form of the attached Employment
Agreement, with each of the following senior officers:
Christina Gold
John Novosad
Edwina Woodbury
<PAGE>
EXHIBIT 10.2
CONFORMED COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT, by and between AVON PRODUCTS, INC., a New York
corporation (the "Corporation"), and
(the "Executive"), dated as of this day of _________, 1994.
W I T N E S S E T H:
WHEREAS, the Corporation desires to recognize the Executive's
commitment to the Corporation and to confirm the right of the
Executive to certain employment, compensation and severance
benefits; and
WHEREAS, to attain that end the Corporation and the Executive
wish to enter into this Employment Agreement which shall replace
the prior Employment Agreement between the parties dated as of
_____________________, 199___; and
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and other good and valuable
consideration, the Corporation and the Executive do hereby agree as
follows:
<PAGE>
TABLE OF CONTENTS
Page
Section 1.
Employment 1
Section 2.
Term 1
Section 3.
Position and Duties 1
Section 4.
Compensation 1
Section 5.
Termination 3
Section 6.
Obligations of the Corporation Upon Termination 4
Section 7.
Cash-Out of Stock Options and Restricted Stock 10
Section 8.
Certain Further Payments by the Corporation 11
Section 9.
Non-exclusivity of Rights 13
Section 10.
Full Settlement 14
Section 11.
Legal Fees and Expenses 14
Section 12.
Confidential Information and Noncompetition 14
Section 13.
Successors 15
Section 14.
Miscellaneous 15
Section 15.
Definitions 16
i
<PAGE>
1. Employment. The Corporation shall employ the Executive
and the Executive agrees to serve as an executive of the
Corporation, in such capacities and upon such conditions as are
hereinafter set forth.
2. Term. The Executive shall be considered an at-will
employee and his employment may be terminated by either party
subject to the obligations of the parties upon such termination as
may be set forth hereinafter.
3. Position and Duties.
(a) Position. The Executive shall serve as an officer
of the Corporation or in such executive and managerial capacities
as determined by the Board.
(b) Business Time. The Executive agrees to devote his
full business time during normal business hours to the business and
affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him
hereunder, to the extent necessary to discharge such
responsibilities, except for
(i) time spent in managing his personal, financial
and legal affairs and serving on corporate, civic or
charitable boards or committees, in each case only if and to
the extent not substantially interfering with the performance
of such responsibilities, and
(ii) periods of vacation to which he is entitled.
It is expressly understood and agreed that the Executive's
continuing to serve on any boards and committees on which he is
serving or with which he is otherwise associated immediately
preceding the date hereof, or his service on any other boards and
committees of which the Corporation has knowledge and does not
object, in writing, within thirty (30) days after first becoming
aware of such service, shall not be deemed to interfere with the
performance of the Executive's services to the Corporation.
4. Compensation. The Executive shall be entitled to the
following compensation for as long as the Executive remains an
employee of the Corporation;
(a) Base Salary. The Executive shall receive a base
salary (the "Base Salary") payable in equal bi-weekly installments
at an annual rate of $ . The Corporation shall review
the Base Salary periodically and in light of such review may
increase (but not decrease) the Base Salary taking into account any
change in the Executive's responsibilities, increases in compensa-
tion of other executives with comparable responsibilities,
performance of the Executive and other pertinent factors, and such
adjusted Base Salary shall then constitute the "Base Salary" for
purposes of this Agreement. Neither the Base Salary nor any
increase in Base Salary after the date hereof shall serve to limit
or reduce any other obligation of the Corporation hereunder.
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(b) Annual Bonus.
(i) In General. For each fiscal year of the
Corporation during which he is employed by the Corporation the
Executive shall be eligible to receive an annual bonus
("Annual Bonus") under the Corporation's Management Incentive
Plan or successor annual incentive award plan. Such Annual
Bonus shall be determined on the basis of an annual target
bonus opportunity of at least _________ percent (_____%) of
the Base Salary paid the Executive with respect to such fiscal
year, which annual target bonus opportunity may be increased
but not decreased except for annual reductions of up to ten
percent (10%) that apply to all officers of the Corporation.
Each Annual Bonus (or portion thereof) shall be paid in cash
in February of the year next following the year for which the
Annual Bonus (or prorated portion) is earned or awarded,
unless electively deferred by the Executive pursuant to any
deferral programs or arrangements that the Corporation may
make available to the Executive.
(ii) Change of Control. Notwithstanding the
foregoing, the Annual Bonus awarded to the Executive for each
fiscal year of the Corporation ending during the period
commencing on the Change of Control Date and ending on the
third anniversary thereof or during the pendency of a
Potential Change of Control, shall not be less than the
largest bonus earned by or awarded to the Executive for any
the of three fiscal years of the Corporation ending before
such Potential Change of Control or Change of Control Date, as
applicable, or for the fiscal year in which such Potential
Change of Control or Change of Control Date occurs. For a
fiscal year of the Corporation that commences but does not end
before the third anniversary of a Change of Control Date, the
Annual Bonus earned by or awarded to the Executive for that
portion of such fiscal year shall not be less than a ratable
portion (based on the total days elapsed in that fiscal year)
of the Annual Bonus that would have been payable to the
Executive had that entire fiscal year ended before the third
anniversary of a Change of Control Date.
(c) Incentive and Savings Plans; Retirement and Death
Benefit Programs. The Executive shall be entitled to participate
in all incentive and savings plans and programs, including stock
option plans and other equity-based compensation plans, and in all
employee retirement, executive retirement and executive death
benefit plans (including the SERP and SLIP) on a basis no less
favorable than that basis generally available to executives of the
Corporation holding comparable positions or having comparable
responsibilities who become an elected or appointed officer of the
Corporation on or after the date on which the Executive first
became an elected or appointed officer of the Corporation. As of
September 1, 1994, the Executive is entitled to a death benefit
under the SLIP of $____________, which benefit shall be provided to
his designated beneficiary net of all applicable income taxes and
shall be governed by the terms of the SLIP applicable to
participants [after December 31, 1989/before January 1, 1990]. As
of December 1, 1994, the Executive will have accumulated ____ years
of Creditable Service under the SERP.
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(d) Other Benefit Plans. The Executive, his spouse and
their eligible dependents (as defined in, and to the extent permitted
by, the applicable plan), as the case may be, shall be entitled to
participate in or be covered under all medical, dental, disability,
group life, severance, accidental death and travel accident insurance
plans and programs of the Corporation and any Affiliated Companies at
the most favorable level of participation and providing the highest
levels of benefits available to him and his dependents.
(e) Other Perquisites. The Executive shall also be
entitled to:
(i) prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the
policies and procedures of the Corporation providing the
highest level of reimbursement on the least restrictive basis
available;
(ii) paid vacation and fringe benefits in accordance with
the most favorable policies of the Corporation; and
(iii) an office or offices of a size and with
furnishings and other appointments, and to secretarial and
other assistance, on a basis no less favorable than that basis
generally available to executives of the Corporation holding
comparable positions or having comparable responsibilities.
(f) Effect of Change of Control on Benefit Plans and
Other Perquisites. Without limiting the generality of Sections
4(c), 4(d) and 4(e) hereof, during the pendency of a Potential
Change of Control or during the period commencing on a Change of
Control Date and ending on the third anniversary thereof, the
benefits provided for in such Sections may not be diminished from
the highest level previously provided or available to the Executive
immediately prior to the Potential Change of Control or within the
ninety-day period prior to the Change of Control Date, as
applicable.
5. Termination.
(a) Disability. The Corporation may terminate the
Executive's employment after having established the Executive's
Disability, by giving to the Executive written notice of its
intention to terminate his employment, and his employment with the
Corporation shall terminate effective on the 90th day after receipt
of such notice if the Executive shall fail to return to full-time
performance of his duties within ninety (90) days after such
receipt.
(b) Voluntary Termination by Executive. Notwithstanding
anything in this Agreement to the contrary, the Executive may, upon
not less than thirty (30) days' written notice to the Corporation,
voluntarily terminate employment for any reason (including
retirement under the terms of the Corporation's retirement plan as
in effect from time to time), provided that any termination by the
Executive pursuant to Section 5(d) on account of Constructive
Termination shall not be treated as a voluntary termination under
this Section 5(b).
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(c) Termination by the Corporation. The Corporation at
any time may terminate the Executive's employment for Cause or
without Cause.
(d) Constructive Termination. The Executive at any time
may terminate his employment for Constructive Termination.
(e) Notice of Termination. Any termination by the
Corporation for Cause or by the Executive for Constructive
Termination shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 14(c). For
purposes of this Agreement, a "Notice of Termination" means a
written notice given, in the case of a termination for Cause,
within ten (10) business days of the Corporation's having actual
knowledge of the events giving rise to such termination, and in the
case of a termination for Constructive Termination, within 180 days
of the Executive's having actual knowledge of the events giving
rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) if the termination date is
other than the date of receipt of such notice, specifies the
termination date of this Agreement (which date shall be not more
than fifteen (15) days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of
Constructive Termination shall not waive any right of the Executive
hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the case of
a termination for which a Notice of Termination is required, the
date of receipt of such Notice of Termination or, if later, the
date specified therein, as the case may be and (ii) in all other
cases, the actual date on which the Executive's employment
terminates.
6. Obligations of the Corporation Upon Termination. Upon
termination of the Executive's employment with the Corporation, the
Corporation shall have the following obligations (including the
obligation to pay the cost of all benefits provided by the applicable
benefit plan to the Executive and the Executive's family under this
Section 6 except normal employee contributions required by the
applicable benefit plan of other participating executives with
comparable responsibilities), provided, however, that any item paid or
payable under this Agreement shall be reduced by any amount paid or
payable to the Executive and the Executive's family with respect to the
same type of payment under the Severance Plan. For this purpose, any
payment under this Agreement or the Severance Plan made over time shall
be discounted to present value at the Interest Rate before reducing any
payment under this Agreement by any amount paid or payable to the
Executive under the Severance Plan.
(a) Death and Retirement. If the Executive's employment
is terminated by reason of the Executive's death or on or after the
attainment of age sixty-five (65), this Agreement shall terminate
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without further obligations to the Executive's legal
representatives under this Agreement other than payment of the
Accrued Obligations. Unless otherwise directed by the Executive
(or, in the case of a Qualified Plan, as may be required by such
plan) all Accrued Obligations shall be paid to the Executive, his
beneficiaries or his estate, as applicable, in a lump sum in cash
within thirty (30) days of the Date of Termination. In the event
of the retirement of the Executive, he and his family shall be
entitled to benefits generally available upon retirement to
executives with comparable responsibilities or positions and their
families. In the event of the Executive's death, his family shall
be entitled to receive benefits generally available to the
surviving families of executives with comparable responsibilities
or positions.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, the Executive,
the Executive's spouse and their eligible dependents (as defined
in, and to the extent permitted by, the applicable plan) shall be
entitled for a period of two years after the Date of Termination
(or, if the Date of Termination occurs within three years after a
Change of Control Date, until the earlier to occur of the
Executive's 65th birthday or the third anniversary of the Change of
Control Date, if later) to continue to participate in or be covered
under the benefit plans and programs referred to in Section 4(d)
or, at the Corporation's option, to receive equivalent benefits by
alternate means, at least equal to those described in Section 4(d).
Unless otherwise directed by the Executive (or, in the case of any
Qualified Plan, as may be required by such plan), the Executive
shall also be paid all Accrued Obligations in a lump sum in cash
within thirty (30) days of the Date of Termination. In addition,
the Executive and the Executive's family shall be entitled to receive
disability and other benefits generally available to executives with
comparable responsibilities or positions. Notwithstanding the
foregoing, in the event that the Date of Termination occurs during the
pendency of a Potential Change of Control or during the three year
period commencing on a Change of Control, the benefits provided to the
Executive and his family shall not be less than the benefits generally
available to executives with comparable responsibilities or positions
immediately prior to the Potential Change of Control or within the
ninety-day period prior to the Change of Control Date, as
applicable.
(c) Termination by the Corporation for Cause and
Voluntary Termination by Executive. If the Executive's employment shall
be terminated for Cause or voluntarily terminated by the Executive
(other than on account of Constructive Termination), the Corporation
shall pay the Executive the Accrued Obligations. The Executive shall be
paid all such Accrued Obligations in a lump sum in cash within thirty
(30) days of the Date of Termination and the Corporation shall have no
further obligations to the Executive under this Agreement, unless
otherwise required by a Qualified Plan or specified pursuant to a valid
election to defer the receipt of all or a portion of such payments made
in accordance with any plan of deferred compensation sponsored by the
Corporation.
(d) Other Termination of Employment If Not Related to
Change of Control or Potential Change of Control. If the Corporation
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(i) terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates his employment for Constructive
Termination, and (ii) the Date of Termination occurs during a period
which is not during the pendency of a Potential Change of Control or
the three year period commencing on a Change of Control Date, the
Corporation shall pay or provide to the Executive the following:
(A) Cash Payment. The Corporation shall pay to
the Executive in a lump sum in cash within fifteen (15) days after
the Date of Termination the aggregate of the following amounts
(other than amounts payable from Qualified Plans, non-
qualified retirement plans and deferred compensation plans,
which amounts shall be paid in accordance with the terms of
such plans):
(1) all Accrued Obligations plus, in the
case of termination without Cause, two weeks of Base Salary in
lieu of notice;
(2) the present value, discounted at the
Interest Rate as if paid monthly from the Date of
Termination in arrears of the lesser of (I) twenty-four
(24) months of the Executive's Base Salary at the rate in
effect on the Date of Termination, and (II) the
Executive's Base Salary (at the same rate) through the
end of the month in which the Executive attains age
sixty-five (65);
(3) a bonus equal to the lesser of: (I) the
Executive's target annual bonus for the year of
termination and (II) the product of the Executive's
annual rate of Base Salary on the Date of Termination and
a fraction, the denominator of which is the sum of the
Executive's Base Salary for the preceding three fiscal
years and the numerator of which is the sum of the
Executive's annual bonus awards for such years adjusted
to the aggregate amount which would have been payable for
such years if the target opportunity percentage for the
Executive's year of termination had then been applicable;
and
(4) if the Date of Termination is on or
after August 1st of the year of termination, a prorated
bonus based on earned salary for that year (not to exceed
the Executive's target bonus award for such year and, if
the Executive's bonus is subject to the discretion of the
Board, in the discretion of the Board).
(B) Benefit Continuation. The Corporation shall
provide for the continued participation of the Executive, his
spouse and their eligible dependents (as defined in the
applicable plan), as the case may be, for a period of two
years after the Date of Termination, in the plans described in
Section 4(d) on the same terms as described in Section 4(d)
and in the SERP and SLIP on the same terms described in
Section 4(c), and the Executive shall receive Creditable
Service (as defined in the SERP) for that period (with Average
Final Compensation, as defined in the SERP, to be determined
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as of the Date of Termination) for purposes of the SERP and
SLIP.
(e) Other Termination of Employment Occurring Within
Three Years Following Change of Control. If the Corporation (i)
terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates his employment for
Constructive Termination and (ii) the Date of Termination occurs
during the three (3) year period commencing on the Change of
Control Date, the Corporation shall pay or provide the Executive
the following:
(A) Cash Payment. The Corporation shall pay to
the Executive in a lump sum in cash within fifteen (15) days after
the Date of Termination the aggregate of the following amounts
(other than amounts payable from Qualified Plans, non-
qualified retirement plans and deferred compensation plans,
which amounts shall be paid in accordance with the terms of
such plans):
(1) all Accrued Obligations;
(2) a cash amount equal to three (3) times
the sum of
(I) the Executive's annual Base
Salary at the greater of the rate in effect as of the
date when the Notice of Termination was given or the
Change of Control Date;
(II) the greater of the (x) Annual
Bonus earned by or awarded to the Executive for the
last fiscal year of the Corporation ending prior to
the Change of Control Date or (y) the Annual Bonus
earned by or awarded to the Executive for the
fiscal year of the Corporation which includes the
Change of Control Date; and
(III) the present value, calculated
using the Interest Rate, of (without duplication)
the annualized value of the fringe benefits
described under Section 4(e) of this Agreement,
provided, however, that in no event shall the Executive
be entitled to receive under this clause (2) more than
the greater of (I) product obtained by multiplying the
amount determined as hereinabove provided in this clause
by a fraction, the numerator of which shall be the number
of months (including fractions of a month) which at the
Date of Termination remain until the Executive attains
age sixty-five (65) or if earlier, the third anniversary
of the Change of Control Date and the denominator of
which shall be thirty-six (36) and (II) an amount equal
to the cash payment that would have been payable under
Section 6(d)(A) hereof had the Change of Control not
occurred.
(3) a cash amount equal to the difference
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between (I) the sum of the maximum payments the Executive
would have received for all awards (or other similarrights)
outstanding at the Date of Termination and granted to the
Executive under any long-term incentive compensation or
performance plan of the Corporation if he had continued in
the employ of the Corporation through the earlier to occur
of the third anniversary of the Change of Control Date or
the Executive's 65th birthday and the Corporation had met
its maximum performance goals under each such award and the
maximum amount payable under each such award was paid and
(II) any amounts actually paid under any such plan with
respect to such awards. The cash amount payable pursuant
to this paragraph shall include the maximum payment value
of all outstanding Performance Units awarded the Executive
under the Corporation's 1994 Long-Term Incentive Plan
reduced by any amounts actually paid or payable under such
plan with respect to such units;
(4) a cash amount equal to the present
value, calculated using the Interest Rate, of the
difference between
(I) the lump sum value of the
retirement benefits (including, without limitation,
any pension, retiree life, or retiree medical
benefits) that would have been payable or available
to the Executive under any Qualified Plan, under the
SERP, and under any other supplemental retirement,
life (other than the SLIP) or medical plan or
arrangement, whether or not qualified, maintained
by the Corporation or an Affiliated Company based
on the age and service the Executive would have
attained or completed had the Executive continued
in the Corporation's employ until the earlier of
the expiration of the third anniversary of the
Change of Control Date or the Executive's 65th
birthday, determined using, where compensation is a
relevant factor, his pensionable compensation at
the Date of Termination (or, if greater, at the
rate in effect on the date on which occurred an
event giving rise to a Constructive Termination),
with such lump sum value being calculated using,
where applicable, assumptions contained in the
respective plans or, where such assumptions are not
applicable, the Interest Rate; and
(II) the present value of the
retirement benefits (including, without limitation,
any pension, retiree life, or retiree medical
benefits) that are payable or available to the
Executive under any Qualified Plan, under the SERP,
and under any other supplemental retirement, life
(other than the SLIP) or medical plan or arrangement,
whether or not qualified, maintained by the
Corporation or an Affiliated Company based on the age
and service the Executive has attained or completed
as of the Executive's Date of Termination determined
using, where compensation is a relevant factor, his
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pensionable compensation at the Date of Termination
(or, if greater, at the rate in effect on the date
on which occurred an event giving rise to a
Constructive Termination), with such present value
being calculated using, where applicable,
assumptions contained in the respective plans or,
where such assumptions are not applicable, the
Interest Rate.
The incremental retirement benefits which
would have become payable under such plans include, without
limitation, the additional benefits attributable to such
additional service which would have been rendered during
such period and the benefits which would have vested
under such plans as a result of such service, but which
were otherwise forfeited. Notwithstanding the foregoing,
in lieu of any cash payment in respect of retiree life or
retiree medical coverage for which the Executive would
have qualified by remaining in the Corporation's employ
until the earlier of the third anniversary of the Change
of Control Date or the Executive's 65th birthday, the
Corporation may arrange at its option or shall arrange at
the election of the Executive for such coverage to
continue for the Executive (or may secure equivalent
conversion coverage) and shall pay the cost of such
coverage. Any election by the Executive pursuant to the
immediately preceding sentence shall be made in writing
and delivered to the Corporation prior to the Date of
Termination.
(B) Other Benefit Continuation. The Corporation shall
provide for the continued participation of the Executive, his
spouse and their eligible dependents (as defined in the
applicable plan), as the case may be, for a period equal to
the greater of two years after the Date of Termination or
until the third anniversary of the Change of Control Date, in
the plans described in Section 4(d) on the same terms as
described in Section 4(d). In lieu of continued participation
in medical and life insurance programs referred to the
foregoing, the Executive may elect by written notice delivered
to the Corporation prior to the Date of Termination, to
receive an amount equal to three (3) times the annual cost to
the Corporation (based on premium rates) of providing such
coverage.
(f) Other Termination of Employment Occurring During
Pendency of Potential Change of Control. If the Corporation (i)
terminates the Executive's employment other than for Cause or
Disability, or the Executive terminates his employment for
Constructive Termination and (ii) the Date of Termination occurs
during the pendency of a Potential Change of Control, the Executive
shall be entitled to the payments and benefits set forth in Section
6(d) hereof. In the event that a Change of Control occurs before
the expiration of the pendency of the Potential Change of Control
during which the Date of Termination occurred, the Executive shall
also be entitled to such additional cash payments as would have
been made under Section 6(e) hereof as if the Date of Termination
had occurred immediately on the Change of Control Date, in excess
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of the amount of the cash payment made to the Executive under
Section 6(d) hereof. In addition, in the event that a Change of
Control occurs during the pendency of the Potential Change of
Control during which the Date of Termination occurred, the
Executive shall also be entitled to benefit continuation provided
for under Section 6(e) in excess of the benefit continuation to
which he was entitled under Section 6(d) hereunder. The Executive
shall have an additional thirty (30) days after the Change of
Control Date to provide a written election to the Corporation for
a cash payment in lieu of those benefits for which the Executive
has the choice under Section 6(e) between continued coverage and a
cash payment. The cost (based on premium rates) of the period of
coverage previously provided to the Executive before such election
shall be subtracted from any such cash payment.
(g) Discharge of Corporation's Obligations. Subject to
the performance of its obligations under Sections 6, 7, 8 and 11,
the Corporation shall have no further obligations to the Executive
under this Agreement in respect of any termination by the Executive
for Constructive Termination or by the Corporation other than for
Cause or Disability.
7. Cash-Out of Stock Options and Restricted Stock.
(a) 1970 Plan Awards. If the Change of Control (as
defined in this Agreement) does not also constitute a "Change of
Control" as defined in the 1970 Stock Option Incentive Plan, the
Corporation shall pay to the Executive, upon the earlier of (i) the
merger of the Corporation with or into another corporation
following a Change of Control, or (ii) the date which is six months
after the Date of Termination, the value of the rights described in
Subsection (b) hereof.
(b) The Executive is hereby granted a right to receive
with respect to each share of restricted stock granted to him prior
to May 1993 under the 1970 Stock Option Incentive Plan, an amount
equal to the excess, if any of:
(i) the highest price offered for a share of
common stock of the Corporation in conjunction with any tender
offer or during the 60-day period immediately preceding the
Change of Control Date, if the Change of Control occurs other
than pursuant to a tender offer, over
(ii) the fair market value of a share of common
stock of the Corporation on the later of the Date of
Termination or the first date following the Date of
Termination on which the Executive could sell shares of common
stock of the Corporation without liability under Section 16 of
the Securities Exchange Act of 1934.
The rights granted hereunder with a grant of restricted
stock shall expire on the same date as the restricted stock would
vest or be forfeited (disregarding any vesting which occurs by
reason of Section 6(f) hereof or any forfeiture which would
otherwise have occurred by reason of the termination of the
Executive's employment which results in the Executive being
entitled to a benefit under Section 6(d)).
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(c) Other Plan Awards. The Executive shall be entitled
to receive a cash out of all of his outstanding restricted stock,
stock option and other equity based awards upon a Change of Control
in accordance with the terms of the Corporation's plans under which
such awards were granted. To the extent that such awards are not
cashed out pursuant to the terms of such plans, they shall become
fully vested as of the Change of Control Date.
(d) Effect of Termination During Pendency of a Potential
Change of Control. If (i) the Executive is terminated during the
pendency of a Potential Change of Control under circumstances
giving rise to payments pursuant to Section 6(f) hereof, (ii) such
termination results in a forfeiture of any of the Executive's
restricted stock, options or other equity based awards under any of
the Corporation's plans, and (iii) prior to the expiration of the
pendency of that Potential Change of Control, a Change of Control
occurs, the Executive shall thereupon be entitled to a cash payment
equal to the amount the Executive would had received under such
plans with respect to such restricted stock, options and other
equity based awards as if he had remained in the Corporation's
employ until the Change of Control Date. Such cash payment be made
at the same time and in the same manner as payment would have been
made under the applicable plans had the Executive remained in the
Corporation's employ until the Change of Control Date.
8. Certain Further Payments by the Corporation.
(a) Tax Reimbursement Payment. In the event that any
amount or benefit paid or distributed to the Executive by the
Corporation or any Affiliated Company, whether pursuant to this
Agreement or otherwise (collectively, the "Covered Payments"), is or
becomes subject to the tax (the "Excise Tax") imposed under Section 4999
of the Code or any similar tax that may hereafter be imposed, the
Corporation shall either pay to the Executive or contribute for the
benefit of the Executive to a "rabbi" trust established by the
Corporation prior to the Change of Control Date, at the time specified
in Section 8(e) below, the Tax Reimbursement Payment (as defined below).
The Tax Reimbursement Payment is defined as an amount, which when added
to the Covered Payments and reduced by any Excise Tax on the Covered
Payments and any federal, state and local income tax and Excise Tax on
the Tax Reimbursement Agreement (but without reduction for
any federal, state or local income or employment tax on such
Covered Payments), shall be equal to the sum of (i) the amount of
the Covered Payments, and (ii) an amount equal to the product of
any deductions disallowed for federal, state or local income tax
purposes because of the inclusion of the Tax Reimbursement Payment
in the Executive's adjusted gross income and the highest applicable
marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement
Payment is to be made.
(b) Determining Excise Tax. For purposes of determining
whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(i) such Covered Payments will be treated as
"parachute payments" within the meaning of Section 280G of the
Code, and all "parachute payments" in excess of the "base
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amount" (as defined under Section 280G(b)(3) of the Code) shall be
treated as subject to the Excise Tax, unless, and
except to the extent that, in the opinion of the Corporation's
independent certified public accountants, which, in the case
of Covered Payments made after the Change of Control Date,
shall be the Corporation's independent certified public
accountants appointed prior to the Change of Control Date, or
tax counsel selected by such accountants (the "Accountants"),
such Covered Payments (in whole or in part) either do not
constitute "parachute payments" or represent reasonable
compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the
"base amount", or such "parachute payments" are otherwise not
subject to such Excise Tax, and
(ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(c) Applicable Tax Rates and Deductions. For purposes
of determining the amount of the Tax Reimbursement Payment, the
Executive shall be deemed:
(i) to pay federal income taxes at the highest
applicable marginal rate of federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made,
(ii) to pay any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of the
Executive's adjusted gross income), and
(iii) to have otherwise allowable deductions
for federal, state and local income tax purposes at least equal to
those disallowed because of the inclusion of the Tax Reimbursement
Payment in the Executive's adjusted gross income.
(d) Subsequent Events. In the event that the Excise Tax
is subsequently determined by the Accountants to be less than the
amount taken into account hereunder in calculating the Tax
Reimbursement Payment made, the Executive shall repay to the
Corporation, at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that has been paid to the Executive or to
federal, state or local tax authorities on the Executive's behalf
and that would not have been paid if such Excise Tax had been
applied in initially calculating such Tax Reimbursement Payment,
plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Tax Reimbursement
Payment to be refunded to the Corporation has been paid to any
federal, state or local tax authority, repayment thereof shall not
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be required until actual refund or credit of such portion has been
made to the Executive, and interest payable to the Corporation
shall not exceed interest received or credited to the Executive by
such tax authority for the period it held such portion. The
Executive and the Corporation shall mutually agree upon the course
of action to be pursued (and the method of allocating the expenses
thereof) if the Executive's good faith claim for refund or credit
is denied.
In the event that the Excise Tax is later determined by
the Accountants to exceed the amount taken into account hereunder
at the time the Tax Reimbursement Payment is made (including, but
not limited to, by reason of any payment the existence or amount of
which cannot be determined at the time of the Tax Reimbursement
Payment), the Corporation shall make an additional Tax Reimbursement
Payment in respect of such excess (which Tax Reimbursement Payment shall
include any interest or penalty payable with respect to such excess) at
the time that the amount of such excess is finally determined.
(e) Date of Payment. The portion of the Tax
Reimbursement Payment attributable to a Covered Payment shall be
paid to the Executive or to a "rabbi" trust established by the
Corporation prior to the Change of Control Date within ten (10)
business days following the payment of the Covered Payment. If the
amount of such Tax Reimbursement Payment (or portion thereof)
cannot be finally determined on or before the date on which payment
is due, the Corporation shall either pay to the Executive or
contribute for the benefit of the Executive to a "rabbi" trust
established by the Corporation prior to the Change of Control Date,
an amount estimated in good faith by the Accountants to be the
minimum amount of such Tax Reimbursement Payment and shall pay the
remainder of such Tax Reimbursement Payment (which Tax Reimbursement
Payment shall include interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than forty-five (45) calendar days
after payment of the related Covered Payment. In the event that the
amount of the estimated Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess shall be repaid or
refunded pursuant to the provisions of Section 8(d) above.
9. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Corporation or any of its Affiliated
Companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as the
Executive may have under any other agreements with the Corporation
or any Affiliated Companies, including, but not limited to stock
option or restricted stock agreements. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Corporation or any Affiliated
Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
10. Full Settlement. Except as provided in Section 12(b),
the Corporation's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without
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limitation, any set-off, counterclaim, recoupment, defense or other
right which the Corporation may have against the Executive or
others whether by reason of the subsequent employment of the
Executive or otherwise. In no event shall the Executive be
obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement. In the event that the Executive shall in good
faith give a Notice of Termination for Constructive Termination and
it shall thereafter be determined that Constructive Termination did
not take place, the employment of the Executive shall, unless the
Corporation and the Executive shall otherwise mutually agree, be
deemed to have terminated, at the date of giving such purported
Notice of Termination, by mutual consent of the Corporation and the
Executive and, except as provided in the last preceding sentence,
the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date
had he terminated his employment voluntarily at such date under
this Agreement.
11. Legal Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the
Corporation shall pay all reasonable attorney fees and expenses
incurred by the Executive in pursuing such claim, provided that the
Executive is successful as to at least part of the disputed claim
by reason of litigation, arbitration or settlement.
12. Confidential Information and Noncompetition.
(a) The Executive shall hold in a fiduciary capacity for
the benefit of the Corporation all secret or confidential
information, knowledge or data, including without limitation all
trade secrets, relating to the Corporation or any Affiliated
Companies, and their respective businesses, (i) obtained by the
Executive during his employment by the Corporation or any of its
Affiliated Companies and (ii) which is not otherwise publicly known
(other than by reason of an unauthorized act by the Executive).
After termination of the Executive's employment with the
Corporation, the Executive shall not without the prior written
consent of the Corporation, unless compelled pursuant to an order
of a court or other body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data to
anyone other than the Corporation and those designated by it. In
no event shall an asserted violation of the provisions of this
Section 12(a) constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
(b) Upon termination of the Executive's employment for
any reason whatsoever prior to a Change of Control, the Executive
shall not, without the prior written consent of the Corporation,
during the two-year period following the Date of Termination
(i) accept employment or enter into a consulting or advisory
arrangement with Amway Corporation, Sara Lee Corporation, Premark
International, Inc., Mary Kay Cosmetics, Inc., or any of their
affiliates; or (ii) directly solicit or aid in the direct
solicitation of any employees of the Corporation or an Affiliated
Company to leave their employment. In the event the Executive
violates the terms of this Section 12(b), all benefit continuation
coverage that the Executive and/or his family members are then
-14-
<PAGE>
receiving pursuant to the terms of Section 6(d) shall cease. Also,
in the event that this Section 12(b) is determined to be unenforceable
in part, it shall be construed to be enforceable to the maximum extent
permitted by law.
13. Successors.
(a) This Agreement is personal to the Executive and,
without the prior written consent of the Corporation, shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors. The Corporation
shall require any successor to all or substantially all of the
business and/or assets of the Corporation, whether direct or indirect,
by purchase, merger, consolidation, acquisition of stock, or otherwise,
by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Corporation would be required to
perform if no such succession had taken place.
14. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
applied without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand-delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: at the address listed on the last page
hereof
If to the Corporation: Avon Products, Inc.
9 West 57th Street
New York, New York 10019
Attention: Secretary
(with a copy to the attention of the General Counsel or to such
other address as either party shall have furnished to the other in
writing in accordance herewith). Notice and communications shall be
effective when actually received by the addressee.
(d) Tax Withholding. The Corporation may withhold from
any amounts payable under this Agreement such federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) Severability. The invalidity or unenforceability of
-15-
<PAGE>
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(f) Captions. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect.
(g) Entire Agreement. This Agreement expresses the
entire understanding and agreement of the parties regarding the
terms and conditions governing the Executive's employment with the
Corporation, and all prior agreements governing the Executive's
employment with the Corporation shall have no further effect;
provided, however, that except as specifically provided herein, the
terms of this Agreement do not supersede the terms of any grant or
award to the Executive under the 1970 Stock Option Plan, the 1993
Stock Incentive Plan, any Long Term Incentive Plan, Management
Incentive Plan and any other similar or successor plan or program.
15. Definitions.
(a) "Accountants" shall have the meaning set forth in
Section 8(b).
(b) "Accrued Obligations" shall mean (i) the Executive's
full Base Salary through the Date of Termination, (ii) in the case
of death or retirement, the product of the Annual Bonus paid to the
Executive for the last full fiscal year of the Corporation and a
fraction, the numerator of which is the number of days in the
current fiscal year of the Corporation through the Date of
Termination, and the denominator of which is 365, (iii) any
compensation previously deferred by the Executive (together with
any accrued earnings thereon) and not yet paid by the Corporation
and any accrued vacation pay for the current year not yet paid by
the Corporation, (iv) any amounts or benefits owing to the
Executive or to the Executive's beneficiaries under the then
applicable employee benefit plans or policies of the Corporation
and (v) any amounts owing to the Executive for reimbursement of
expenses properly incurred by the Executive prior to the Date of
Termination and which are reimbursable in accordance with the
reimbursement policy of the Corporation described in Section 4(e).
(c) "Affiliated Company" shall mean any company
controlling, controlled by or under common control with the
Corporation.
(d) "Annual Bonus" shall have the meaning set forth in
Section 4(b).
(e) "Base Salary" shall have the meaning set forth in
Section 4(a).
(f) "Board" shall mean the Board of Directors of the
Corporation.
(g) "Cause" shall mean (i) an act or acts of dishonesty
or gross misconduct on the Executive's part which result or are intended
to result in material damage to the Corporation's business or reputation
or (ii) repeated material violations by the Executive of his obligations
under Section 3 of this Agreement which violations are demonstrably
-16-
<PAGE>
willful and deliberate on the Executive's part and which result in
material damage to the Corporation's business or reputation and as to
which material violations the Board has notified the Executive in
writing.
(h) A "Change of Control" means:
(A) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the corporation where such acquisition
causes such person to own 20% or more of the combined voting
power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this Subsection (A),
the following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or (iv) any
acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of Subsection (C)
below; and provided, further, that if any Person's beneficial
ownership of the Outstanding Corporation Voting Securities
reaches or exceeds 20% as a result of a transaction described
in clause (i) or (ii) above, and such Person subsequently
acquires beneficial ownership of additional voting securities
of the Corporation, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20%
or more of the Outstanding Corporation Voting Securities; or
(B) individuals who as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved
by a vote of at least two-thirds of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(C) the approval by the shareholders of the
Corporation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Corporation ("Business Combination") or, if
consummation of such Business Combination is subject, at the
time of such approval by shareholders, to the consent of any
government or governmental agency, the obtaining of such
-17-
<PAGE>
consent (either explicitly or implicitly by consummation);
excluding, however, such a Business Combination pursuant to
which (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding
Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Corporation Voting Securities, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Corporation or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(D) approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, no Change of Control shall be deemed
to have occurred for purposes of this Agreement (i) by reason of
any actions or events in which the Executive participates in a
capacity other than in his capacity as Executive (or as a director
of the Corporation or a Subsidiary, where applicable) or (ii) if
prior to what otherwise would have been a Change of Control Date,
the Executive is demoted below the position described in Section
3(a) hereof and the Board provides written notification to the
Executive, no later than thirty (30) days thereafter, that a Change
of Control will not be deemed to occur with respect to the
Executive.
(i) "Change of Control Date" shall mean the date on
which a Change of Control shall be deemed to have occurred.
(j) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(k) "Constructive Termination" shall mean any of the
following:
(A) Reduction in Base Salary.
(B) Reduction in annual target bonus opportunity
-18-
<PAGE>
(excluding annual reductions of up to 10% that apply to all
officers of the Corporation).
(C) A change of more than twenty-five (25) miles
in the office or location where the Executive is based.
(D) (1) In General. With respect to any period
not within the three year period following a Change of
Control Date and not during the pendency of a Potential
Change of Control, a demotion to a position below
Corporate Officer level.
(2) Change of Control. With respect
to any period during the pendency of a Potential Change of
Control and the three year period following a Change of
Control Date, unless with the express written consent of
the Executive, (I) the assignment to the Executive of any
duties inconsistent in any substantial respect with the
Executive's position, authority or responsibilities as
contemplated by Section 3(b) of this Agreement, or (II)
any other substantial change in such position, including
titles, authority or responsibilities from those
previously held by the Executive prior to the Potential
Change of Control or Change of Control Date, as
applicable. The Executive's position, authority and
responsibilities shall not be regard as not commensurate
with previous position, authority and responsibilities
merely by virtue of the fact that a successor shall have
acquired all or substantially all of the business and/or
assets of the Corporation.
(E) (1) In General. With respect to any period
not within the three year period following a Change of
Control Date and not during the pendency of a Potential
Change of Control, any material reduction in any of the
benefits described in Sections 4(c) through 4(e) hereof
(excluding, in each case, reductions that apply to all
officers of the Corporation).
(2) Change of Control. With respect to any
period during the pendency of a Potential Change of
Control and the three year period following a Change of
Control Date, any failure by the Corporation to comply
with any of the provisions of Section 4 of this
Agreement, other than an insubstantial or inadvertent
failure remedied by the Corporation promptly after
receipt of notice thereof given by the Executive.
(F) Any failure of the Corporation to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 13(b), provided that the
successor has had actual written notice of the existence of
this Agreement and its terms and an opportunity to assume the
Corporation's responsibilities under this Agreement during a
period of ten (10) business days after receipt of such notice.
(l) "Covered Payments" shall have the meaning set forth
in Section 8(a).
-19-
<PAGE>
(m) "Date of Termination" shall have the meaning set
forth in Section 5(f).
(n) "Disability" shall mean disability which would
entitle the Executive to receive full long-term disability benefits
under the Corporation's long-term disability plan on terms
substantially similar to those of the long-term disability plan as
in on the date of this Agreement.
(o) "Excise Tax" shall have the meaning as set forth in
Section 8(a).
(p) "Interest Rate" shall mean the interest rate payable
on one year Treasury Bills in effect on the day that is 30 business
days (days other than Saturday, Sunday or legal holidays in the
City of New York) prior to the Date of Termination.
(q) "Notice of Termination" shall have the meaning as
set forth in Section 5(f).
(r) "Potential Change of Control" shall be deemed to
have occurred if:
(A) the commencement of a tender or exchange offer
by any third person (other than a tender or exchange
offer which, if consummated, would not result in a Change
of Control) for 20% or more of the then outstanding
shares of common stock or combined voting power of the
Corporation's then outstanding voting securities;
(B) the execution of an agreement by the
Corporation, the consummation of which would result in the
occurrence of a Change of Control;
(C) the public announcement by any person
(including the Corporation) of an intention to take or to
consider taking actions which if consummated would constitute
a Change of Control other than through a contested election
for directors of the Corporation; or
(D) the adoption by the Board, as a result of
other circumstances, including circumstances similar or related to
the foregoing, or a resolution to the effect that, for
purposes of this Agreement, a Potential Change of Control has
occurred.
A Potential Change of Control will be deemed to be pending from the
occurrence of the event giving rise to the Potential Change of
Control until the earlier of the first anniversary thereof or the
date the Board determines in good faith that such events will not
result in the occurrence of a Change of Control. Notwithstanding
the foregoing, no Potential Change of Control shall be deemed to
have occurred for purposes of this Agreement (i) by reason of any
actions or events in which the Executive participates in a capacity
other than in his capacity as Executive (or as a director of the
Corporation or a Subsidiary, as applicable) or (ii) if prior to
occurrence of an event that would have given rise to a Potential
Change of Control, the Executive is demoted below the position
-20-
<PAGE>
described in Section 3(a) hereof and the Board provides written
notification to the Executive, no later than thirty (30) days
thereafter, that a Potential Change of Control will not be deemed
to occur with respect to the Executive.
(s) "Qualified Plan" shall mean an employee benefit plan
qualified (or which is intended to be qualified) under Section 401(a) of
the Code.
(t) "SERP" shall mean the Supplemental Executive
Retirement Plan of Avon Products, Inc.
(u) "Severance Plan" shall mean Avon Products, Inc.
Severance Plan, or any successor thereof.
(v) "SLIP" shall mean the Supplemental Life Plan of Avon
Products, Inc.
(w) "Subsidiary" shall mean any majority owned
subsidiary of the Corporation.
(x) "Tax Reimbursement Payment" shall have the meaning
set forth in Section 8(a).
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Corporation has caused this Agreement to be executed in its
name on its behalf, and its corporate seal to be hereunto affixed
and attested by its Secretary, all effective as of the day and year
first above written.
AVON PRODUCTS, INC.
By:
Title:
ATTEST:
____________________________________
Title: _____________________________
(CORPORATE SEAL)
EXECUTIVE:
Address:
-21-
EXHIBIT 11.1
<PAGE>
EXHIBIT 11.1
AVON PRODUCTS, INC.
COMPUTATION OF PRIMARY INCOME PER SHARE
(In millions, except per share data)
Three months ended
September 30
------------------
1994 1993
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during the period. 70.17 72.07
Common stock equivalents*............................. -- --
------ ------
Weighted average shares for primary income per share
computation......................................... 70.17 72.07
====== ======
Income from continuing operations..................... $ 51.3 $ 47.6
Discontinued operations
Income, net of taxes................................ -- 6.4
------ ------
Net income............................................ $ 51.3 $ 54.0
====== ======
Primary income per share
Continuing operations................................. $ .73 $ .66
Discontinued operations, net.......................... -- .09
------ ------
Net income............................................ $ .73 $ .75
====== ======
- ----------
*Common stock equivalents are not reported because they result in less than
three percent dilution.
<PAGE>
EXHIBIT 11.1
AVON PRODUCTS, INC.
COMPUTATION OF PRIMARY INCOME PER SHARE
(In millions, except per share data)
Nine months ended
September 30
-----------------
1994 1993
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during the period. 70.98 72.05
Common stock equivalents*............................. -- --
------- -------
Weighted average shares for primary income per share
computation......................................... 70.98 72.05
======= =======
Income from continuing operations before
cumulative effect of accounting changes............. $ 154.7 $ 138.2
Discontinued operations
Income, net of taxes................................ 1.2 6.0
(Loss) on sale, net of taxes in 1993................ (25.0) (10.0)
Cumulative effect of accounting changes, net of taxes. (45.2) (107.5)
------- -------
Net income............................................ $ 85.7 $ 26.7
======= =======
Primary income (loss) per share of common stock:
Continuing operations................................. $ 2.18 $ 1.92
Discontinued operations, net.......................... (.34) (.06)
Cumulative effect of accounting changes............... (.63) (1.49)
------- -------
Net income............................................ $ 1.21 $ .37
======= =======
- ----------
*Common stock equivalents are not reported because they result in less than
three percent dilution.
EXHIBIT 11.2
<PAGE>
EXHIBIT 11.2
AVON PRODUCTS, INC.
COMPUTATION OF FULLY DILUTED INCOME PER SHARE
(In millions, except per share data)
Three months ended
September 30
------------------
1994 1993
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during the
period............................................ 70.17 72.07
Common stock equivalents............................ .18 .07
------ -------
Weighted average shares for fully diluted income
per share computation............................. 70.35 72.14
====== =======
Income from continuing operations................... $ 51.3 $ 47.6
Discontinued operations
Income, net of taxes.............................. -- 6.4
------ -------
Net income.......................................... $ 51.3 $ 54.0
====== =======
Fully diluted income per share
Continuing operations............................... $ .73 $ .66
Discontinued operations, net........................ -- .09
------ -------
Net income.......................................... $ .73 $ .75
====== =======
<PAGE>
EXHIBIT 11.2
AVON PRODUCTS, INC.
COMPUTATION OF FULLY DILUTED INCOME PER SHARE
(In millions, except per share data)
Nine months ended
September 30
-----------------
1994 1993
---- ----
Weighted average shares of common stock:
Weighted average shares outstanding during the
period.............................................. 70.98 72.05
Common stock equivalents.............................. .19 .09
------- -------
Weighted average shares for fully diluted income
per share computation............................... 71.17 72.14
======= =======
Income from continuing operations before
cumulative effect of accounting changes............. $ 154.7 $ 138.2
Discontinued operations
Income, net of taxes................................ 1.2 6.0
(Loss) on sale, net of taxes in 1993................ (25.0) (10.0)
Cumulative effect of accounting changes, net of taxes. (45.2) (107.5)
------- -------
Net income............................................ $ 85.7 $ 26.7
======= =======
Fully diluted income (loss) per share
Continuing operations................................. $ 2.17 $ 1.92
Discontinued operations, net.......................... (.33) (.06)
Cumulative effect of accounting changes............... (.64) (1.49)
------- -------
Net income............................................ $ 1.20 $ .37
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<PERIOD-TYPE> 9-MOS
<CASH> 85
<SECURITIES> 0
<RECEIVABLES> 400
<ALLOWANCES> 32
<INVENTORY> 505
<CURRENT-ASSETS> 1122
<PP&E> 1145
<DEPRECIATION> 625
<TOTAL-ASSETS> 1955
<CURRENT-LIABILITIES> 1121
<BONDS> 121
0
0
<COMMON> 43
<OTHER-SE> 134
<TOTAL-LIABILITY-AND-EQUITY> 1955
<SALES> 2903
<TOTAL-REVENUES> 2920
<CGS> 1134
<TOTAL-COSTS> 2566
<OTHER-EXPENSES> 19
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 41
<INCOME-PRETAX> 252
<INCOME-TAX> 95
<INCOME-CONTINUING> 155
<DISCONTINUED> (24)
<EXTRAORDINARY> 0
<CHANGES> (45)
<NET-INCOME> 86
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.20
</TABLE>
