REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AVON PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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NEW YORK 2844 13-0544597
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification Number)
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1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105-0196
(212) 282-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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WARD M. MILLER, JR., ESQ.
GENERAL COUNSEL
AVON PRODUCTS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105-0196
(212) 282-5000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copy to:
MICHAEL W. WEIR, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
TITLE OF EACH CLASS OF Amount to Be Offering Price Aggregate Amount of
SECURITIES TO BE REGISTERED Registered Per Unit(1) Offering Price(1) Registration Fee
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6.55% Notes due 2007 $100,000,000 100.1655% $100,165,500 $29,548.83
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(1) Determined pursuant to Rule 457(f), solely for the purpose of calculating
the registration fee, on the basis of the average of the bid and asked
price for the securities on November 26, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION, DATED _______ __, 1997
PROSPECTUS
AVON PRODUCTS, INC.
OFFER TO EXCHANGE 6.55% NOTES DUE 2007, THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, FOR ALL OUTSTANDING 6.55% NOTES DUE 2007 OF AVON PRODUCTS, INC.
THAT WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT
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THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON __________, 1998
UNLESS EXTENDED.
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Avon Products, Inc., a New York corporation ("Avon" or the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
prospectus (the "Prospectus") and the accompanying letter of transmittal (the
"Letter of Transmittal" which, together with the Prospectus, constitutes the
"Exchange Offer"), to exchange its 6.55% Notes due 2007 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for a like principal amount of its
issued and outstanding 6.55% Notes due 2007 (the "Old Notes"), of which
$100,000,000 in aggregate principal amount was issued on August 4, 1997 and is
outstanding as of the date hereof.
The Exchange Offer is being made in compliance with a Registration Rights
Agreement, dated as of August 4, 1997 (the "Registration Rights Agreement"),
between the Company and Morgan Stanley & Co. Incorporated, Chase Securities Inc.
and J.P. Morgan Securities Inc. (the "Initial Purchasers"). The form and terms
of the New Notes will be identical in all material respects to the form and
terms of the Old Notes, except that the New Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, and the New Notes may be issued in minimum denominations of $1,000. The
New Notes will evidence the same indebtedness as the Old Notes (which they
replace) and will be entitled to the benefits of the same Indenture (as defined
herein) which governs the Old Notes. The Old Notes and the New Notes are
sometimes referred to herein collectively as the "Notes." See "The Exchange
Offer" and "Description of the Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on _________, 1998,
unless extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange by the Company. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. It is expected that the Exchange
Offer will be consummated on or shortly after the Expiration Date, and
therefore, none of the Notes will be entitled to the contingent increase in the
interest rate provided for in the Old Notes.
Interest on the New Notes will accrue from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid, from
August 1, 1997. Interest on the New Notes will be payable semi-annually in
arrears on February 1 and August 1 of each year, commencing February 1, 1998.
The New Notes will mature on August 1, 2007, and will not be subject to
redemption prior to maturity. The New Notes will not have the benefit of a
sinking fund. The New Notes will be unsecured general obligations of the Company
and rank pari passu with all other unsecured and unsubordinated indebtedness of
the Company. See "Description of the Notes."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is _________, 1997.
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NOTICE TO INVESTORS
Based on interpretations of the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold, and otherwise
transferred by a holder thereof (other than broker-dealers, as set forth below,
and any holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without further registration under the Securities
Act and without delivery to prospective purchasers of a prospectus pursuant to
the provisions of the Securities Act, provided that the holder is acquiring the
New Notes in the ordinary course of its business, is not participating and has
no arrangement or understanding with any person to participate in the
distribution of the New Notes. Eligible holders wishing to accept the Exchange
Offer must represent to the Company in the Letter of Transmittal that such
conditions have been met. See "The Exchange Offer--Procedures for Tendering."
Each broker-dealer who holds Old Notes acquired for its own account as a result
of market-making or other trading activities and who receives New Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with the resales of New Notes received for such broker-dealer's own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. For a
period of up to 90 days after the Expiration Date, the Company will make this
Prospectus available to any such broker-dealer (who requests such Prospectus in
the Letter of Transmittal) for use in connection with any such resale. See "Plan
of Distribution."
The Old Notes and the New Notes constitute new issues of securities
with no established public trading market. The Company does not intend to apply
for listing of the New Notes on any securities exchange or for inclusion of the
New Notes in any automated quotation system. There can be no assurance that an
active public market for the New Notes will develop or as to the liquidity of
any market that may develop for the New Notes, the ability of holders to sell
the New Notes, or the price at which holders would be able to sell the New
Notes. The Company has been advised by the Initial Purchasers that they intend
to make a market in the New Notes; however, such entities are under no
obligation to do so and any market making activities with respect to the New
Notes may be discontinued at any time. Future trading prices of the New Notes
will depend on many factors, including among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
Any Old Notes not tendered or accepted in the Exchange Offer will
remain outstanding. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered, and tendered but
unaccepted, Old Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions on transfer thereof and the Company will have no further
obligation to such holders, under the Registration Rights Agreement, to provide
for the registration under the Securities Act of the Old Notes. There may be no
trading market for the Old Notes.
The Company will not receive any proceeds from, and has agreed to bear
the expenses of, the Exchange Offer. No underwriter is being used in connection
with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
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TABLE OF CONTENTS
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Page Page
Notice to Investors.........................2 The Exchange Offer........................15
Incorporation of Certain Documents Selected Financial Data...................23
by Reference.............................3 Management's Discussion and Analysis
Available Information.......................4 of Financial Condition and Results of
Cautionary Statement for Purposes of Operations.............................24
the "Safe Harbor" Statement under The Company...............................40
the Private Securities Litigation Description of the Notes..................43
Reform Act of 1995.......................4 Certain United States Income Tax
Summary.....................................5 Considerations.........................49
No Cash Proceeds to the Company............13 Plan of Distribution......................50
Consolidated Ratio of Earnings to Validity of the New Notes.................50
Fixed Charges...........................13 Experts...................................50
Recent Developments........................13
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM WARD M. MILLER, JR., ESQ., AVON PRODUCTS, INC., 1345 AVENUE OF THE
AMERICAS, NEW YORK, NEW YORK 10105-0196, (212) 282-5000. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
The following documents heretofore or hereafter filed by the Company
(File No. 1-4881) with the Commission under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are incorporated by reference in this
Prospectus:
(i) The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996, filed with the Commission on March 31, 1997 (the "Annual
Report");
(ii) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1997, filed with the Commission on May
13, August 13 and November 13, 1997, respectively; and
(iii) The Company's Proxy Statement, dated March 25, 1997, filed with
the Commission on March 25, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, including any holder of Notes, upon written or oral
request of such person to the address or telephone number listed above, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents which are not specifically incorporated therein
by reference).
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As used herein, the terms "Prospectus" and "herein" mean this
Prospectus including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and the rules and regulations thereunder, and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information should be
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at
Seven World Trade Center, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 upon payment of prescribed fees. In
addition, such reports, proxy statements and other information should be
available for inspection at the Commission's Web site, available at
http://www.sec.gov. The common stock of the Company is traded on The New York
Stock Exchange (AVP), and such reports, proxy statements and other information
concerning the Company also can be inspected at the offices of The New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission under the Securities Act and
the rules and regulations thereunder, a Registration Statement on Form S-4 (as
it may be amended, the "Registration Statement"), with respect to the New Notes
issuable pursuant to the Exchange Offer. This Prospectus does not contain all of
the information contained in the Registration Statement, certain portions of
which have been omitted pursuant to the rules and regulations of the Commission
and to which reference is hereby made. Any statements contained herein or in any
document incorporated by reference herein concerning the provisions of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or other document, each such statement
being qualified in its entirety by such reference. The Registration Statement
(and exhibits thereto) should also be available for inspection and copying at
the office of the Commission and in the manner described above.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this Prospectus which are not historical facts or
information are forward-looking statements, including, but not limited to, the
information set forth in "Recent Developments" herein. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, levels of activity, performance or
achievement of the Company, or industry results, to be materially different from
any future results, levels of activity, performance or achievement expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; the ability of the
Company to implement its business strategy; the Company's access to financing
and its management of foreign currency risks; the Company's ability to
successfully identify new business opportunities; the Company's ability to
attract and retain key executives; the Company's ability to achieve anticipated
cost savings and profitability targets; changes in the industry; competition;
the effect of regulatory and legal restrictions imposed by foreign governments;
the effect of regulatory and legal proceedings and other factors discussed in
Item 1 of the Company's Annual Report. As a result of the foregoing and other
factors, no assurance can be given as to the future results and achievements of
the Company. Neither the Company nor any other person assumes responsibility for
the accuracy and completeness of these statements.
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SUMMARY
The following information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus and in the Company's
consolidated financial statements and notes thereto incorporated herein by
reference. Certain capitalized terms used in this Prospectus Summary are defined
elsewhere herein. Unless the context clearly implies otherwise, all references
to the "Company" or "Avon" refer to Avon Products, Inc., a New York corporation.
THE COMPANY
The Company is one of the world's leading manufacturers and marketers
of beauty and related products, which include cosmetics, fragrance and
toiletries ("CFT"); gift and decorative products; apparel; and fashion jewelry
and accessories. The Company commenced operations in 1886 and was incorporated
in the State of New York on January 27, 1916. The Company's business is
comprised of one industry segment, direct selling, with worldwide operations.
THE EXCHANGE OFFER
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Issuer................................... Avon Products, Inc. The principal office of the Company is located
at 1345 Avenue of the Americas, New York, New York 10105, and
its telephone number at that address is (212) 282-5000.
Purpose of the Exchange Offer............ The Old Notes were sold by the Company on August 4, 1997 to
Morgan Stanley & Co. Incorporated, Chase Securities Inc. and J.P.
Morgan Securities Inc., as the Initial Purchasers, which placed the
Old Notes with certain institutional and accredited investors. In
connection therewith, the Company executed and delivered, for the
benefit of the holders of the Old Notes, the Registration Rights
Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, providing for, among
other things, the Exchange Offer, so that, based on interpretations
by the staff of the Commission set forth in no-action letters issued
to third parties, the New Notes may be offered for resale, resold or
otherwise transferred by the holders thereof without further
registration under the Securities Act and without delivery to
prospective purchasers of a prospectus pursuant to the requirements
of the Securities Act, provided that the holder is acquiring New
Notes in the ordinary course of its business, is not participating and
has no arrangement or understanding with any person to participate
in the distribution of the New Notes and is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act.
Each broker-dealer who holds Old Notes acquired for its own
account as a result of market-making or other trading activities and
who receives New Notes pursuant to the Exchange Offer for its
own account in exchange therefor must acknowledge that it will
deliver a prospectus in connection with any resale of such New
Notes.
This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales
of New Notes received in exchange for Old Notes where such Old
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Notes were acquired as a result of market-making activities or other
trading activities. See "The Exchange Offer--Purpose of the
Exchange Offer" and "Plan of Distribution." The Letter of
Transmittal that accompanies this Prospectus states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Any holder of Old Notes who tenders in the
Exchange Offer with the intention to participate, or for the purpose of
participating, in a distribution of the New Notes should not rely on the
above-referenced position of the staff of the Commission and, in the
absence of an exemption therefrom, would have to comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Failure to comply with
such requirements in such instance could result in such holder's
incurring liability under the Securities Act for which the holder
is not indemnified by the Company. See "The Exchange Offer--Resale of
the New Notes."
The Exchange Offer....................... $1,000 principal amount of New Notes in exchange for each $1,000
principal amount of Old Notes duly tendered and not withdrawn
prior to acceptance thereof. The Company will issue the New Notes
to holders (who have properly tendered and not withdrawn their
Old Notes) as promptly as practicable after the Expiration Date. As
of the date hereof, there is $100 million principal amount of Old
Notes outstanding.
Expiration Date.......................... 5:00 p.m., New York City time, on __________, 1998, unless the
Exchange Offer is extended by the Company in its sole discretion,
in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Procedures for Tendering Old Notes
and Resale......................... Each holder of Old Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof (or an Agent's Message (as defined herein) in
lieu thereof), have its signature guaranteed, if required, in
accordance with the instructions contained herein and therein, and
mail or otherwise deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any other required
documentation to the Exchange Agent (as defined herein) at its
address set forth herein for receipt prior to 5:00 p.m., New York
City time, on the Expiration Date. Certain financial institutions may
also effect tenders of Old Notes by book-entry transfer through the
Exchange Agent's account at DTC (as defined herein), in which
case the procedures for book-entry transfer must be completed prior
to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer--Procedures for Tendering." Questions regarding
how to tender and requests for information should be directed to the
Exchange Agent. NO LETTERS OF TRANSMITTAL, CERTIFICATES
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REPRESENTING OLD NOTES OR ANY OTHER REQUIRED DOCUMENTATION SHOULD BE
SENT TO THE COMPANY. SUCH DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE
AGENT.
By executing the Letter of Transmittal, the holder will
represent to and agree with the Company that, among other things,
(i) the New Notes to be acquired by such holder of Old Notes in
connection with the Exchange Offer are being acquired by such holder in
the ordinary course of its business, (ii) such holder has no arrangement
or understanding with any person to participate in a distribution of the
New Notes, and (iii) such holder is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company. If the holder is a
broker-dealer that will receive New Notes for its own account in
exchange for Old Notes that were acquired as a result of
market-making or other trading activities, such holder will be
required to acknowledge in the Letter of Transmittal that such
holder will deliver a prospectus in connection with any resale of such
New Notes; however, by so acknowledging and by delivering a
prospectus, such holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. See "The
Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners.................. Any beneficial owner whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender should contact such registered
holder promptly and instruct such registered holder to tender on
such beneficial owner's behalf, or if such beneficial owner wishes
to tender on its own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such owner's name or obtain
a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time. See
"The Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures........... Holders of Old Notes who wish to tender their Old Notes and
whose Old Notes are not immediately available or who cannot
deliver their Old Notes (or complete the procedures for book-entry
transfer), the Letter of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights........................ Subject to the conditions set forth herein, tenders of Old Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange Offer--Withdrawal of
Tenders."
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Acceptance of Old Notes and Issuance
of New Notes....................... Subject to the terms and conditions of the Exchange Offer,
including the reservation (or waiver) of certain rights by the
Company, the Company will accept for exchange any and all Old
Notes which are validly tendered in the Exchange Offer, and not
withdrawn, prior to 5:00 p.m., New York City time, on the
Expiration Date. Subject to such terms and conditions, the
Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old
Notes validly tendered and not withdrawn at the earliest practicable
date following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Old Notes initially purchased by "qualified institutional buyers" (as
that term is defined in Rule 144A under the Securities Act) were
initially represented by a single, global Note in registered form,
registered in the name of Cede & Co., a nominee of The
Depository Trust Company, New York, New York ("DTC"), as depository. The
New Notes exchanged for Old Notes represented by the global Note will
be represented by a single, global New Note in registered form,
registered in the name of Cede & Co., as a nominee of DTC. See
"Description of the Notes--Book-Entry; Delivery and
Form."
Exchange Agent........................... The Chase Manhattan Bank is serving as Exchange Agent (the
"Exchange Agent") in connection with the Exchange Offer. The
Exchange Agent's telephone number is (212) 946-3083. The
Exchange Agent also serves as trustee under the Indenture (as
defined herein).
Certain Federal Income Tax
Consequences of the Exchange
Offer.............................. Generally, for Federal income tax purposes, holders of the Old
Notes will not recognize any gain or loss upon the receipt of the
New Notes pursuant to the Exchange Offer. See "The Exchange
Offer--Certain United States Income Tax Consequences."
Effect on Holders of Old Notes........... As a result of the making of the Exchange Offer, and upon
acceptance for exchange of all validly tendered Old Notes pursuant
to the terms of the Exchange Offer, the Company will have fulfilled
a covenant contained in the Registration Rights Agreement and,
accordingly, the holders of the Old Notes will have no further
registration or other rights under the Registration Rights Agree-
ment. Holders of the Old Notes who do not tender their Old Notes
in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and limitations applicable thereto.
All untendered, and tendered but unaccepted, Old Notes will
continue to be subject to the restrictions on transfer provided for in
the Indenture and all registration rights under the Registration
Rights Agreement accorded to the holders thereof will terminate
upon consummation of the Exchange Offer. To the extent that Old
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Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Old Notes could be adversely affected. The
holders of the New Notes will not be entitled to any exchange or
registration rights with respect to the New Notes. See "The Exchange
Offer--Termination of Certain Rights."
Failure to Exchange Old Notes............ The New Notes will be issued in exchange for Old Notes only after
timely receipt by the Exchange Agent of such Old Notes, a properly
completed and duly executed Letter of Transmittal and all other
required documentation or an Agent's Message in lieu thereof.
Therefore, holders of Old Notes desiring to tender such Old Notes in
exchange for New Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty
to give notification of defects or irregularities with respect to
tenders of Old Notes for exchange. Old Notes that are not tendered or
are tendered but not accepted will, following consummation of the
Exchange Offer, continue to be subject to the existing restrictions
upon transfer thereof. In addition, any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a
distribution of the New Notes will be required to comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer who holds
Old Notes acquired for its own account as a result of market-making or
other trading activities and who receives New Notes for its own account
in exchange for such Old Notes pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Old Notes could be adversely affected due to
the limited amount, or "float," of the Old Notes that are expected to
remain outstanding following the Exchange Offer. Generally, a lower
"float" of a security could result in less demand to purchase such
security and could, therefore, result in lower prices for such
security. For the same reason, to the extent that a large amount of Old
Notes are not tendered or are tendered and not accepted in the Exchange
Offer, the trading market for the New Notes could be adversely
affected. See "Plan of Distribution" and "The Exchange Offer."
Holders of Old Notes who do not exchange their Old Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes as set forth in the
legend thereon as a consequence of the issuance of the Old Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Old Notes may not be offered or
sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. Except
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
under certain limited circumstances, the Company does not
intend to register the Old Notes under the Securities Act. See "The
Exchange Offer--Consequences of Failure to Exchange."
Use of Proceeds.......................... The Company will not receive any proceeds from the issuance of
the New Notes and has agreed to bear the expenses of the Exchange
Offer. See "Use of Proceeds."
</TABLE>
TERMS OF THE NOTES
The Exchange Offer applies to the $100,000,000 aggregate principal amount
of Old Notes outstanding as of the date hereof. The form and terms of the New
Notes will be identical in all material respects to the form and terms of the
Old Notes except that the New Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof and holders of the New Notes will not be entitled to any of the
registration rights of holders of the Old Notes under the Registration Rights
Agreement, which rights will terminate upon consummation of the Exchange Offer.
In addition, the New Notes may be issued in minimum denominations of $1,000. The
New Notes will evidence the same indebtedness as the Old Notes (which they
replace) and will be issued under, and will be entitled to the benefits of, the
same Indenture under which the Old Notes were issued. See "Description of the
Notes."
<TABLE>
<S> <C>
Principal Amount Outstanding............. $100,000,000 aggregate principal amount of Old Notes and New
Notes.
Maturity Date............................ August 1, 2007.
Interest Rate............................ 6.55% per annum.
Interest Payment Dates................... February 1 and August 1 of each year, commencing February 1,
1998. Interest on the New Notes will accrue from the most recent
date to which interest has been paid on the Old Notes or, if no
interest has been paid, from August 1, 1997.
Redemption............................... The Notes are not redeemable prior to Maturity.
Ranking.................................. The Notes are unsecured senior obligations of the Company and
rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
Certain Covenants........................ The indenture, dated as of August 1, 1997, between Avon Products,
Inc., as Issuer, and The Chase Manhattan Bank, as Trustee, governing
the Notes (as amended, the "Indenture") contains covenants that,
among other things, limit the ability of the Company to create liens,
engage in certain sale/leaseback transactions and merge, consolidate
or transfer substantially all of its assets.
Absence of Market for
the New Notes...................... The New Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the New
Notes on any securities exchange or for inclusion of the New Notes in
any automated quotation system. The Company has been advised by each
of the Initial Purchasers that, subject to applicable laws and
regulations, it currently intends to make a market in the
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
New Notes. However, there can be no assurance as to the development
or liquidity of any market for the New Notes. If a market for the New
Notes were to develop, the New Notes could trade at prices that may
be higher or lower than their principal amount depending upon many
factors, including prevailing interest rates, the Company's operating
results and the markets for similar securities.
</TABLE>
11
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth selected financial data relating to the
Company and its consolidated subsidiaries. The summary financial data relating
to each of the years in the five-year period ended December 31, 1996 were
derived from the Company's audited consolidated financial statements for such
years. The summary financial data for the nine-month periods ended September 30,
1997 and 1996 were derived from the Company's unaudited consolidated interim
financial statements for such periods. The Summary Financial Data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Results of Operations--Comparison of the nine months
ended September 30, 1997 with the nine months ended September 30, 1996" and
"--Comparison of the year ended December 31, 1996 with the year ended December
31, 1995."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ ------------ ---------- --------- ------------ --------------- ---------
OPERATING DATA: ($ in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $3,562 $3,322 $4,814 $4,492 $4,267 $3,844 $3,661
Income from continuing
operations before income
taxes, minority interest and
accounting changes......... 321 297 510 465 434 395 290
Net income..................... 205 186 318 257 196 132 175
BALANCE SHEET DATA (AT PERIOD END):
Total assets................... $2,406 $2,215 $2,222 $2,053 $1,978 $1,919 $1,693
Total debt..................... 460 454 202 162 178 194 215
Other financing(1)............. 59 -- -- -- -- -- --
Total stockholders' equity..... 227 143 242 193 186 314 311
OTHER DATA:
EBITDA(2)...................... 403.8 376.3 614.9 564.6 540.3 497.0 486.4
Capital expenditures........... 111.0 62.6 103.6 72.7 99.9 58.1 62.7
Ratio of total debt and other
financing to EBITDA........ 1.3x 1.2x 0.3x 0.3x 0.3x 0.4x 0.4x
Ratio of EBITDA to interest
expense.................... 12.8x 12.2x 15.4x 13.7x 10.6x 11.0x 11.1x
Ratio of earnings to fixed
charges(3)................. 7.0x 6.6x 8.3x 7.9x 6.2x 6.1x 6.2x
<FN>
- ---------------------------
(1) "Other financing" is included in other non-current liabilities on the
Consolidated Balance Sheet of the Company at September 30, 1997.
(2) EBITDA represents income from continuing operations before income
taxes, interest expense, depreciation and amortization. EBITDA is a
widely accepted financial indicator of a company's ability to service
and/or incur debt. However, EBITDA should not be construed as an
alternative to operating income (as determined in accordance with
generally accepted accounting principles) or to cash flows from
operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an
indication of a company's operating performance or as a measure of
liquidity.
(3) The ratio of earnings to fixed charges has been determined by dividing
fixed charges into earnings. Earnings consist of income from continuing
operations before income taxes and extraordinary items, plus minority
interests, plus interest expense and amortization of debt discount,
fees and expenses, plus one-third of rentals. Fixed charges consist of
interest expense and amortization of debt discount, fees and expenses
and one-third of rentals.
</FN>
</TABLE>
12
<PAGE>
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby and has agreed to
pay the expenses of the Exchange Offer. In consideration for issuing the New
Notes as contemplated in this Prospectus, the Company will receive, in exchange,
Old Notes in like principal amount. The form and terms of the New Notes are
identical in all material respects to the form and terms of the Old Notes,
except as otherwise described herein under "The Exchange Offer--Terms of the
Exchange Offer." The Old Notes surrendered in exchange for the New Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the New
Notes will not result in any increase in the outstanding debt of the Company.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the years and periods indicated:
Nine Months
Ended
September 30, Years Ended December 31,
------------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Consolidated Ratio of Earnings
to Fixed Charges: 7.0 6.6 8.3 7.9 6.2 6.1 6.2
For purposes of this computation, earnings consist of income from
continuing operations before income taxes and extraordinary items, plus minority
interests, plus interest expense and amortization of debt discount, fees and
expenses, plus one-third of rentals. Fixed charges consist of interest expense
and amortization of debt discount, fees and expenses and one-third of rentals.
RECENT DEVELOPMENTS
On October 23, 1997, the Company announced that it has raised its
long-term growth targets for sales and earnings and that it expects to record
special charges in connection with a major re-engineering program. Commencing in
1998, the long-term target for sales growth has been raised to 8-10% compounded
annually, and its target for net income-per-share growth has been raised to
16-18% annually. Previously, the Company targeted long-term sales growth of 6-8%
and long-term net income-per-share growth of 13-15%. The higher targets come
largely as a result of initiatives currently underway and others under review
intended to reduce costs by up to $400.0 million a year by 2000, with $200.0
million of the savings being reinvested concurrently in advertising and
marketing programs to boost sales. Avon expects to record special charges
totaling $150.0-$200.0 million pretax to cover one-time costs associated with
the re-engineering program. Approximately half the charges are expected to be
recorded in the first quarter of 1998, with the balance to be recorded in early
1999. Approximately $50.0 million of the charges will be cash related.
On November 17, 1997, Avon announced that it expects its earnings per
share in the fourth quarter of 1997 to be below the current range of Wall Street
analyst estimates of $1.10 to $1.15 per share. The
13
<PAGE>
Company's current estimate for this year's fourth quarter earnings is in the
range of $1.00 to $1.05 per share. Last year, Avon earned $132 million or $.99
per share in the fourth quarter. Avon's 1997 earnings estimate includes the
benefit of a recent favorable settlement of a V.A.T. tax claim equal to
approximately $17 million after taxes or about $.13 per share. For the first
nine months of 1997, Avon earned $1.55 per share, up 12% from the comparable
1996 period. Although the Company expects its sales and earnings to increase in
1997 over 1996 levels, it believes that its fourth quarter profits will be
negatively affected by results in several markets, including Brazil, the U.S.,
China and Japan. The Company remains committed to its 16-18% long-term growth
target for earnings per share, commencing in 1998. In addition to further
weakness in Japan, tighter regulatory requirements on direct selling companies
in China slowed sales growth in the fourth quarter significantly there. In
Brazil, aggressive marketing initiatives are not generating the expected sales
increases in the fourth quarter, due in part to consumer reaction to growing
economic concerns. However, Avon Brazil should show strong year-over-year gains
beginning in the first quarter of 1998. Avon's results in the U.S. for the
fourth quarter will be below earlier expectations. Current sales trends and
other business indicators in the U.S. are positive, but not sufficient to offset
earlier weakness in the quarter.
14
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on August 4, 1997 (the "Issue
Date") to the Initial Purchasers pursuant to a Purchase Agreement, dated July
30, 1997, between the Company and the Initial Purchasers (the "Purchase
Agreement"). The Initial Purchasers subsequently sold the Old Notes to
"qualified institutional buyers", as defined in Rule 144A under the Securities
Act ("Rule 144A"), in reliance on Rule 144A. As a condition to the initial sale
of the Old Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Company agreed that it would (i) use its reasonable best efforts to file
with the Commission within 150 days after the Issue Date a registration
statement under the Securities Act with respect to the New Notes and (ii) use
its reasonable best efforts to cause such Registration Statement to become
effective under the Securities Act within 180 days after the Issue Date. The
Company agreed to issue and exchange New Notes for all Old Notes validly
tendered and not withdrawn before the expiration of the Exchange Offer. A copy
of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Registration
Statement is intended to satisfy certain of the Company's obligations under the
Registration Rights Agreement and the Purchase Agreement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Notes validly tendered and not withdrawn prior to the Expiration Date.
The Company will issue $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of outstanding Old Notes validly tendered
pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date.
Old Notes may be tendered in the principal amount of $100,000 and integral
multiples of $1,000 in excess thereof, provided that if fewer than all of the
Old Notes of a holder are tendered for exchange, the untendered principal amount
of the holder's remaining Old Notes must be $100,000 or any integral multiple of
$1,000 in excess thereof.
The form and terms of the New Notes are the same as the form and terms
of the Old Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the New Notes will not bear legends restricting
the transfer thereof and (ii) holders of the New Notes will not be entitled to
any of the registration rights of holders of Old Notes under the Registration
Rights Agreement, which rights will terminate upon the consummation of the
Exchange Offer. The New Notes will evidence the same indebtedness as the Old
Notes (which they replace) and will be issued under, and be entitled to the
benefits of, the Indenture, which also authorized the issuance of the Old Notes,
such that both series of Notes will be treated as a single class of debt
securities under the Indenture.
As of the date of this Prospectus, $100,000,000 in aggregate principal
amount of the Old Notes is outstanding, all of which is registered in the name
of Cede & Co., as nominee for DTC. Solely for reasons of administration, the
Company has fixed the close of business on _______, ____ as the record date for
the Exchange Offer for purposes of determining the persons to whom this
Prospectus and the Letter of Transmittal will be mailed initially. There will be
no fixed record date for determining holders of the Old Notes entitled to
participate in the Exchange Offer.
Holders of the Old Notes do not have any appraisal or dissenters'
rights under the Business Corporation Law of the State of New York or the
Indenture in connection with the Exchange Offer. The
15
<PAGE>
Company intends to conduct the Exchange Offer in accordance with the provisions
of the Registration Rights Agreement and the applicable requirements of the
Securities Act and the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, and if, the Company has given oral or written notice thereof to The Chase
Manhattan Bank (the "Exchange Agent"). The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving the New Notes
from the Company.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "The Exchange Offer--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on , 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
If the Company determines to extend the Exchange Offer, the Company
will, prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date, (i) notify the Exchange Agent of any
extension by oral or written notice and (ii) issue a press release or other
public announcement which shall include disclosure of the approximate number of
Old Notes deposited to date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer or (iii) if, in the
opinion of counsel for the Company, the consummation of the Exchange Offer would
violate any applicable law, rule or regulation or any applicable interpretation
of the staff of the Commission, to terminate or amend the Exchange Offer by
giving oral or written notice of such delay, extension, termination or amendment
to the Exchange Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a press release or
other public announcement thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Old Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the amendment and the manner of disclosure to the
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will accrue interest at the rate of 6.55% per annum from
the most recent date to which interest has been paid on the Old Notes or, if no
interest has been paid, from August 1, 1997, payable semi-annually in arrears on
February 1 and August 1 of each year, commencing February 1, 1998.
16
<PAGE>
RESALE OF THE NEW NOTES
With respect to the New Notes, based upon interpretations by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder who exchanges Old Notes for New
Notes in the ordinary course of business, who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate in a distribution of the New Notes, and who is not an "affiliate"
of the Company within the meaning of Rule 405 of the Securities Act, will be
allowed to resell New Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the New Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires New Notes in the Exchange Offer for the purpose
of distributing or participating in the distribution of the New Notes, such
holder cannot rely on the position of the staff of the Commission enumerated in
such no-action letters issued to third parties and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes acquired by such broker-dealer as a result of
market-making or other trading activities must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of any New Notes received in exchange for Old Notes acquired by
such broker-dealer as a result of market-making or other trading activities. The
Company will make this Prospectus, as it may be amended or supplemented from
time to time, available to any such broker-dealer that requests copies of such
Prospectus in the Letter of Transmittal for use in connection with any such
resale for a period of up to 90 days after the Expiration Date. See "Plan of
Distribution."
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder of Old Notes must either (i)
complete, sign and date the Letter of Transmittal or facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent, or (ii) if such Old Notes are tendered pursuant to the
procedures for book-entry transfer set forth below, a holder tendering Old Notes
may transmit an Agent's Message (as defined herein) to the Exchange Agent in
lieu of the Letter of Transmittal, in either case for receipt on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes into the Exchange Agent's account at DTC pursuant to the
procedure for book-entry transfer described below, along with the Letter of
Transmittal or an Agent's Message, as the case may be, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted to the Exchange Agent's account at DTC and received
by the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that such account has received an express acknowledgment from the
tendering participant that such participant has received and agrees to be bound
by the Letter of Transmittal and that the Company may enforce the Letter of
Transmittal against such participant. To be tendered effectively, the Letter of
Transmittal and other required documents, or an Agent's Message in lieu thereof,
must be received by the Exchange Agent at the address set forth below under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
17
<PAGE>
The tender by a holder that is not withdrawn prior to the Expiration
Date will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY OLD NOTES TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner(s) of the Old Notes whose Old Notes are held
through a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such intermediary promptly and instruct such
intermediary to tender on such beneficial owner's behalf. If such beneficial
owner wishes to tender on its own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and delivering such owner's Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal
described below (see "The Exchange Offer--Withdrawal of Tenders"), as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box titled "Special Delivery Instruction" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States, or an "eligible
guarantor institution" (within the meaning of Rule 17Ad-15 under the Exchange
Act) which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder exactly as such registered holder's name appears on such Old
Notes.
In connection with any tender of Old Notes in definitive certified
form, if the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial
institution that is a participant in DTC's system may utilize DTC's Automated
Tender Offer Program to tender Old Notes.
18
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered and any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities in connection with tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived.
While the Company has no present plan to acquire any Old Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Old Notes that are not tendered pursuant to the Exchange Offer,
the Company reserves the right in its sole discretion to purchase or make offers
for any Old Notes that remain outstanding subsequent to the Expiration Date and,
to the extent permitted by applicable law, purchase Old Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
By tendering Old Notes pursuant to the Exchange Offer, each holder of
Old Notes will represent to the Company that, among other things, (i) the New
Notes to be acquired by such holder of Old Notes in connection with the Exchange
Offer are being acquired by such holder in the ordinary course of business of
such holder, (ii) such holder is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the New Notes, (iii) such holder acknowledges and agrees that any person who is
participating in the Exchange Offer for the purpose of distributing the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the New Notes
acquired by such person and cannot rely on the position of the staff of the
Commission set forth in certain no-action letters, (iv) such holder understands
that a secondary resale transaction described in clause (iii) above and any
resales of New Notes obtained by such holder in exchange for Old Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (v) such holder is not an "affiliate", as defined in Rule 405
under the Securities Act, of the Company. If the holder is a broker-dealer that
will receive New Notes for such holder's own account in exchange for Old Notes
that were acquired as a result of market-making activities or other trading
activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a prospectus in connection with any
resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, such holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
19
<PAGE>
RETURN OF OLD NOTES
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Old Notes or a timely Book-Entry Conformation of such
Old Notes into the Exchange Agent's account at DTC, a properly completed and
duly executed Letter of Transmittal and all other required documents, or an
Agent's Message in lieu thereof. If any tendered Old Notes are not accepted for
any reason set forth in the terms and conditions of the Exchange Offer or if Old
Notes are withdrawn or are submitted for a greater principal amount than the
holders desire to exchange, such unaccepted, withdrawn or otherwise
non-exchanged Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at DTC pursuant to the book-entry transfer procedures
described below, such Old Notes will be credited to an account maintained with
DTC) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in DTC's systems may make book-entry delivery of Old Notes
by causing DTC to transfer such Old Notes into the Exchange Agent's account at
DTC in accordance with DTC's procedures for transfer. However, although delivery
of Old Notes may be effected through book-entry transfer at DTC, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and any
other required documents, or an Agent's Message in lieu of a Letter of
Transmittal, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "The Exchange Offer--Exchange Agent"
on or prior to the Expiration Date or pursuant to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes (or
complete the procedures for book-entry transfer) , the Letter of Transmittal or
any other required documents to the Exchange Agent prior to the Expiration Date,
may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (by facsimile transmission, mail or hand delivery) a
properly completed and duly executed Notice of Guaranteed Delivery substantially
in the form provided by the Company setting forth the name and address of the
holder, the certificate number(s) of such Old Notes (if applicable) and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or a facsimile thereof),
or an Agent's Message in lieu thereof, together with the certificate(s)
representing the Old Notes in proper form for transfer or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal, will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), or an Agent's Message in lieu thereof, as well as the certificate(s)
representing all tendered Old Notes in proper form for transfer or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three New York Stock
Exchange trading days after the Expiration Date.
20
<PAGE>
Upon request to the Exchange Agent, a form of Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Old Notes according to
the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Old Notes to be withdrawn, (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers, if applicable, and principal
amount of such Old Notes) and (iii) be signed by the holder in the same manner
as the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees). If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of DTC. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no New Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly re-tendered.
Properly withdrawn Old Notes may be re-tendered by following one of the
procedures described above under "The Exchange Offer--Procedures for Tendering"
at any time prior to the Expiration Date.
TERMINATION OF CERTAIN RIGHTS
All registration rights under the Registration Rights Agreement
accorded to holders of the Old Notes (and all rights to receive additional
interest in the event of a Registration Default as defined therein) will
terminate upon consummation of the Exchange Offer. However, for a period of up
to 90 days after the Registration Statement is declared effective, the Company
will keep the Registration Statement effective and provide copies of the latest
version of the Prospectus to any broker-dealer that requests copies of such
Prospectus in the Letter of Transmittal for use in connection with any resale by
such broker-dealer of New Notes received for its own account pursuant to the
Exchange Offer in exchange for Old Notes acquired for its own account as a
result of market-making or other trading activities.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
By Mail or Hand/Overnight Delivery: By Facsimile:
The Chase Manhattan Bank (212) 946-8161
450 West 33rd Street
New York, NY 10001 Confirm by Telephone:
Attn.: Global Trust Services (212) 946-3083
The Chase Manhattan Bank also serves as Trustee under the Indenture.
21
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The expenses to be incurred in connection with the Exchange Offer,
including registration fees, fees and expenses of the Exchange Agent and the
Trustee, accounting and legal fees, and printing costs, will be paid by the
Company.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of the Old Notes pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Old
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
Old Notes that are not exchanged for the New Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) under the Securities Act. Accordingly, such Old Notes may not be
offered, sold, pledged or otherwise transferred except (i) to a person whom the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A purchasing for its own account or for the account of a
qualified institutional buyer in a transaction meeting the requirements of Rule
144A, (ii) in an offshore transaction complying with Rule 903 or Rule 904 of
Regulation S under the Securities Act, (iii) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 thereunder (if
available), (iv) pursuant to an effective registration statement under the
Securities Act or (v) pursuant to another available exemption from the
registration requirements of the Securities Act, and, in each case, in
accordance with all other applicable securities laws.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as
a result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Notes.
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<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data relating to the
Company and its consolidated subsidiaries. The selected financial data relating
to each of the years in the five-year period ended December 31, 1996 were
derived from the Company's audited consolidated financial statements for such
years. The selected financial data for the nine-month periods ended September
30, 1997 and 1996 were derived from the Company's unaudited consolidated interim
financial statements for such periods. The Selected Financial Data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations--Comparison of the
nine months ended September 30, 1997 with the nine months ended September 30,
1996" and "--Comparison of the year ended December 31, 1996 with the year ended
December 31, 1995."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ ------------ ------------- ---------- ------------ --------------------------
OPERATING DATA: ($ in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $3,562 $3,322 $4,814 $4,492 $4,267 $3,844 $3,661
Income from continuing
operations before income
taxes, minority interest and
accounting changes......... 321 297 510 465 434 395 290
Net income..................... 205 186 318 257 196 132 175
BALANCE SHEET DATA (AT PERIOD
END):
Total assets................... $2,406 $2,215 $2,222 $2,053 $1,978 $1,919 $1,693
Total debt..................... 460 454 202 162 178 194 215
Other financing(1)............. 59 -- -- -- -- -- --
Total stockholders' equity..... 227 143 242 193 186 314 311
OTHER DATA:
EBITDA(2)...................... 403.8 376.3 614.9 564.6 540.3 497.0 486.4
Capital expenditures........... 111.0 62.6 103.6 72.7 99.9 58.1 62.7
Ratio of total debt and other
financing to EBITDA....... 1.3x 1.2x 0.3x 0.3x 0.3x 0.4x 0.4x
Ratio of EBITDA to interest
expense.................... 12.8x 12.2x 15.4x 13.7x 10.6x 11.0x 11.1x
Ratio of earnings to fixed
charges(3)................. 7.0x 6.6x 8.3x 7.9x 6.2x 6.1x 6.2x
<FN>
- ---------------------------
(1) "Other financing" is included in other non-current liabilities on the
Consolidated Balance Sheet of the Company at September 30, 1997.
(2) EBITDA represents income from continuing operations before income
taxes, interest expense, depreciation and amortization. EBITDA is a
widely accepted financial indicator of a company's ability to service
and/or incur debt. However, EBITDA should not be construed as an
alternative to operating income (as determined in accordance with
generally accepted accounting principles) or to cash flows from
operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an
indication of a company's operating performance or as a measure of
liquidity.
(3) The ratio of earnings to fixed charges has been determined by dividing
fixed charges into earnings. Earnings consist of income from continuing
operations before income taxes and extraordinary items, plus minority
interests, plus interest expense and amortization of debt discount,
fees and expenses, plus one-third of rentals. Fixed charges consist of
interest expense and amortization of debt discount, fees and expenses
and one-third of rentals.
</FN>
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 WITH THE THREE MONTHS
ENDED SEPTEMBER 30, 1996
Consolidated
Avon's net income for the three months ended September 30, 1997 of
$68.6 million, or $.52 per share, increased 10% and 11%, respectively, from net
income of $62.5 million, or $.47 per share, in the comparable period of 1996.
Pretax income of $107.9 million increased 9% due to higher sales and an improved
expense ratio. These favorable results were partially offset by a decline in the
gross margin, unfavorable net interest and unfavorable net foreign exchange in
1997. Net income was also affected by favorable minority interest due mainly to
the results in China and a higher effective tax rate. The higher effective tax
rate (37.0% versus 36.5% in 1996) resulted primarily from the mix of earnings
and tax rates of international subsidiaries.
Consolidated net sales for the three months ended September 30, 1997 of
$1,249.4 million increased $72.1 million, or 6%, over the comparable period of
the prior year. The increase in sales was due to an 8% increase in international
and a 3% increase in U.S. sales which includes the results of Discovery Toys,
Inc. The international sales improvement resulted from strong growth in the
Americas, most significantly in Mexico and Argentina. Sales continued to grow
significantly in the United Kingdom, Russia and Taiwan. These improvements were
partially offset by sales declines in Germany and Brazil. Excluding the effect
of foreign currency exchange, consolidated net sales rose 10% over the
comparable period of the prior year.
Cost of sales as a percentage of sales was 41.4% in the third quarter
of 1997 compared to 40.3% in the third quarter of 1996. The decline in the gross
margin resulted from lower margins in Japan due to an aggressive pricing
strategy and in Brazil reflecting a continued consumer shift towards
lower-priced products as well as actions taken to reduce inventory levels. In
addition, the gross margin in the U.S. declined due to investments in strategic
pricing initiatives to drive customer sales. These declines were partially
offset by a margin improvement in the United Kingdom due to a shift in sales mix
to higher-margin items.
Marketing, distribution and administrative expenses of $614.7 million
increased $17.1 million, or 3%, over the comparable period of 1996, but
decreased as a percentage of sales to 49.2% from 50.8% in 1996. The increase in
operating expenses was primarily in markets which have experienced strong sales
growth, including Mexico, Taiwan, Russia, Argentina and the United Kingdom.
These increases were partially offset by lower expenses in Brazil reflecting
reduced advertising expenses and in Germany and Japan due to the impact of a
stronger U.S. dollar in 1997. The decrease in the expense ratio was due to
improvements throughout Europe due to continued fixed expense reduction efforts,
in Mexico resulting from dramatic sales growth and in Japan due to reduced
distribution expenses and more efficient order entry processes. These
improvements were partially offset by higher expense ratios in Germany
reflecting the sales decline and in Venezuela due to increased marketing and
distribution expenses.
Interest expense of $11.2 million increased $.3 million over the
comparable period of last year primarily due to increased average working
capital borrowings in 1997.
Interest income decreased $.9 million versus the comparable period of
last year primarily due to lower interest rates in Brazil.
24
<PAGE>
Other (income) expense, net, was $2.4 million unfavorable, representing
an expense of $.8 million in 1997 compared to income of $1.6 million in 1996,
primarily due to unfavorable net foreign exchange.
U.S.
Net sales increased 3% while pretax income declined 8% in the third
quarter of 1997 compared with the third quarter of 1996. Excluding the results
of Discovery Toys, which was acquired in early 1997, sales were up 1% and pretax
income decreased 3%. The 1% sales increase reflected a 4% increase in the
average order size partially offset by a 3% decline in the number of
Representative orders. The sales improvement resulted primarily from growth in
the cosmetics, fragrance and toiletries category ("CFT"), with a significant
increase in personal care products resulting from the introduction of Avon
Techniques, a hair care line, and continued success of the specialty bath
segment. In the non-CFT categories, apparel sales grew due to the success of
children's back to school, novelty apparel and casual clothing lines. These
improvements were almost completely offset by a decline in the gift and
decorative category attributable to the phenomenal success of the 1996 Winter
Velvet Barbie. Pretax income decreased 3%, excluding the results of Discovery
Toys, due primarily to a decline in the gross margin. The gross margin decline
resulted from strategic price investments in CFT products aimed at energizing
customer sales.
International
Net sales increased 8%, or 14% excluding the effect of foreign currency
exchange, over the comparable period of 1996 and pretax income increased 21%.
The sales increase reflects improvements in all regions, primarily in the
Americas. Sales growth in the Americas was driven by significant improvements in
Mexico, strong unit growth in Argentina, and to a lesser extent, in Chile and
Central America and an increased average order size in Venezuela. Mexico's
continued sales growth reflected double-digit increases in the number of orders,
average order size and active Representatives primarily due to customer growth
initiatives. These initiatives included incentive programs focused on retention,
sampling concentrated on breakthrough products, advertising and an emphasis on
market penetration in metropolitan areas. Sales in the Pacific region were up
due to strong unit growth in Taiwan, Australia, and the Philippines. Taiwan's
sales performance was the strongest in the region driven by a higher number of
active Representatives and the successful launch of Lighten Up Undereye
Treatment. The sales improvement in Europe reflected strong growth in the United
Kingdom driven by increases in the average order size and number of orders as
well as a favorable exchange rate impact. In addition, the sales growth in the
United Kingdom is attributable to an ongoing focus on improving market share
through brand and image enhancement. Sales grew in Russia due to exceptional
growth in the number of units and Representatives.
These higher sales were partially offset by declines in Germany and
Brazil and, to a lesser extent in Thailand. The sales decline in Germany
resulted from an unfavorable exchange impact of a stronger U.S. dollar in 1997
and a continued weak economic environment which resulted in lower consumer
spending and higher unemployment. Consumers in Brazil continued to experience a
tightening of credit which has limited their purchasing ability. The sales
decrease in Thailand resulted from unit declines primarily due to a weakening
economic condition. To grow sales, new achievement programs in Brazil and the
party plan concept in Germany were implemented.
The 21% increase in pretax income reflected improvements in Argentina,
Mexico, the United Kingdom, and to a lesser extent, the Philippines. The
increase in Argentina was primarily due to the sales growth and an improvement
in the operating expense ratio resulting from lower distribution costs per order
as well as reduced incentive programs in 1997. Higher pretax results in Mexico,
the United Kingdom and Philippines were primarily driven by increased sales.
These favorable results were partially offset by lower
25
<PAGE>
pretax income in Japan due to a significant gross margin decline resulting from
strategic pricing programs as well as a shift in sales mix to lower margin
non-CFT items. The competitive environment remains intense in Japan with the
continued relaxation of import restrictions and the resulting accelerated growth
in discount outlets. As a result, prices were adjusted earlier this year to make
products more competitive in the marketplace. Several new programs were
introduced in 1997 including the multiple order system which allows
Representatives to place orders more frequently. Efforts have also been focused
on improving access, and innovative recruiting programs have been launched to
increase market penetration. Consequently, customers served in Japan grew 58%
and active Representatives grew 46% over the comparable period of the prior
year. Pretax results were also lower in Germany primarily due to lower sales and
in China due to a current government licensing revalidation process of all
direct selling companies, which has delayed the Company's branch expansion in
China.
Several currencies in the Pacific Rim devalued significantly since the
end of the second quarter of 1997. The Thailand baht devalued by 28%, the
Philippine peso by 22% and the Malaysian ringgit and Indonesian rupiah each
devalued by 19%. These devaluations lowered pretax income by approximately $4.0
million in the third quarter of 1997. In response to this situation, several
actions have been taken by local management including cost negotiations with
vendors, identification of expense reductions and a focus on growing the
Representative base. In terms of size, these markets represented approximately
5% of Avon's consolidated net sales in 1996.
Brazil, previously designated as a country with a highly inflationary
economy, was converted to non-hyperinflationary status, effective July 1, 1997,
due to the reduced cumulative inflation rate over the past three years. The
effect of the change is not considered significant to the Company's consolidated
financial statements.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
Consolidated
Avon's net income for the nine months ended September 30, 1997 of
$205.1 million, or $1.55 per share, increased 10% and 12%, respectively,
compared to net income of $185.9 million, or $1.39 per share, in the comparable
period of 1996. Pretax income of $321.4 million increased 8% due to higher
sales, an improved expense ratio and favorable net foreign exchange in 1997.
These increases were partially offset by a decline in the gross margin and
unfavorable net interest in 1997. Net income of $205.1 million was impacted by a
lower effective tax rate (37.0% versus 37.5% in 1996) due primarily to the mix
of earnings and tax rates of international subsidiaries. In addition, the
increase in net income reflects a favorable minority interest impact due mainly
to the results in Japan and China. Income per share of $1.55 was favorably
impacted by the lower average shares outstanding in 1997 compared to 1996 due to
continued stock repurchases.
Consolidated net sales for the nine months ended September 30, 1997 of
$3,562.0 million increased $239.9 million, or 7%, over the comparable period of
the prior year. The higher sales was due to a 10% increase in international and
a 2% increase in U.S. sales which includes the results of Discovery Toys. The
international sales improvement resulted from strong growth in most markets,
most significantly in Mexico, the United Kingdom, Argentina, the Pacific Rim and
Russia. Sales growth in Chile, Venezuela, Central America and Poland also
contributed to the improvement. These improvements were partially offset by
sales declines in Brazil and Germany. Excluding the impact of foreign currency
exchange, consolidated net sales rose 11% over the comparable period of the
prior year.
26
<PAGE>
Cost of sales as a percentage of sales was 40.3% compared to 39.5% in
1996. The higher cost ratio was primarily due to gross margin declines in Brazil
reflecting actions taken to reduce inventory levels and in Japan due to sales of
lower priced items and price reductions taken in the CFT category. These
declines were partially offset by margin improvements in Venezuela and the
United Kingdom due to a shift in sales mix to higher-margin items.
Marketing, distribution and administrative expenses of $1,779.5 million
increased $94.9 million, or 6%, over the comparable period of 1996, but
decreased as a percentage of sales to 50.0% from 50.7% in 1996. The increase in
operating expenses was primarily in markets which have experienced strong sales
growth, including Mexico, the Pacific Rim, the United Kingdom, Venezuela and
Russia. These increases were partially offset by lower expenses in Germany due
to the impact of a stronger U.S. dollar in 1997 as well as a continued focus on
fixed expense reductions. The decrease in the expense ratio was due to
improvements throughout Europe due to ongoing fixed expense reduction efforts
and in Mexico due to dramatic sales growth. These improvements were partially
offset by higher expense ratios in Brazil and Germany due to the sales decline
despite lower expenses discussed above.
Interest expense increased $.7 million versus the comparable period of
1996 primarily due to higher overall debt levels partially offset by lower
interest rates in Brazil.
Interest income decreased $3.1 million from the comparable period of
1996 primarily due to lower interest rates in Brazil.
Other expense, net, of $2.4 million was $4.2 million favorable to the
comparable period of last year primarily due to net foreign exchange.
U.S.
Net sales increased 2% while pretax income decreased 4% in the first
nine months of 1997. Excluding the results of Discovery Toys, sales were up 1%
and pretax income was level with the prior year. A 4% increase in the average
order size partially offset by a 3% decrease in the number of Representative
orders resulted in the sales increase. Units sold increased 5%. The sales
improvement resulted from increases in the CFT category partially offset by
declines in apparel and fashion jewelry and accessory categories. The launch of
Anew Retinol Recovery Complex and Avon Techniques hair care line and the first
quarter 1997 product introductions in the specialty bath segment drove the
growth in the CFT category. In addition, the launch of the renovated Anew line
earlier this year contributed to higher CFT sales in 1997. The decrease in
apparel sales was due to the success of the Olympic games collection in 1996 and
lower sales of demonstration products in the first two quarters of 1997. Sales
of fashion jewelry and accessories decreased primarily due to lower first
quarter sales which were impacted by the demonstration product pricing policy
change made earlier this year.
Pretax income was level with the comparable period of the prior year
excluding the results of Discovery Toys. The increase in sales was completely
offset by higher expenses and a slight decline in the gross margin. The higher
expense level was primarily driven by strategic investments including
advertising and promotional support for new products, costs associated with the
centralization of the returned goods and call center operations and increased
field incentives designed to drive sales. Discovery Toys had a negative impact
on pretax income due to the seasonal nature of the business.
27
<PAGE>
International
Net sales increased 10% over the comparable period of 1996 and pretax
income increased 14%. The sales increase reflects improvements in all regions.
Sales growth in the Americas was highlighted by significant growth in Mexico and
strong unit increases in Argentina, Chile and Central America. Sales grew in
Venezuela due to a higher average order size in 1997. The sales increase in the
Pacific region was due to strong unit growth in almost every market in the
Pacific Rim, primarily in Taiwan, the Philippines, and China. An increased
average order size and unit growth in the United Kingdom and a dramatic increase
in the number of units and active Representatives in Russia and Poland
contributed to the increase in Europe. These improvements were partially offset
by significant declines in Germany due to ongoing economic weakness and a
negative currency impact and in Brazil resulting from a weak consumer economy.
Excluding the impact of foreign currency exchange, international sales rose 16%
over the comparable period of 1996.
The 14% increase in pretax income reflected increases in the Americas
and Europe regions. The most significant contributor in the Americas was Mexico
due to the strong sales improvement. The increase in Europe reflected the sales
increase and improved expense ratios throughout the region due to the continued
effect of fixed expense reduction efforts. Pretax income was higher in the
Philippines due to the sales increase. These favorable results were partially
offset by decreases in Brazil, and, to a lesser extent, in Japan. Pretax income
in Brazil was affected by a continued tightening in consumer spending and margin
investments relating to inventory reduction programs. The decline in Japan was
due to lower sales and a deterioration in the gross margin resulting from an
aggressive pricing strategy.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Excluding changes in debt, there was a net decrease in cash of $360.7
million in the first nine months of 1997 compared with $376.0 million in the
comparable period of 1996. The Company received net proceeds of approximately
$58.6 million under a securities lending transaction which was used to repay
commercial paper borrowings and is included in the cash flows as other financing
activities, see "--Capital Resources." Excluding debt and the other financing
activities, there was a net increase in cash usage of $43.3 million. This
variance primarily reflects increased capital expenditures including the
relocation of the global and U.S. office facilities, conclusion of the
three-year long-term incentive plan which resulted in a cash payment during the
first quarter of 1997, as well as a higher working capital usage level
principally due to accounts payable and accrued expenses. These items were
partially offset by the impact of discontinued operations reflected in 1996,
lower repurchases of common stock and higher net income in 1997.
For the first nine months of 1997, the Company purchased approximately
1.5 million shares of common stock for $90.0 million compared with $124.4
million spent for the repurchase of approximately 2.9 million shares during the
comparable period in 1996.
Capital Resources
Total debt increased $258.8 million to $460.4 million at September 30,
1997 from total debt of $201.6 million at December 31, 1996, principally due to
the working capital requirements mentioned above as well as the seasonality of
the business. Total debt at September 30, 1997 of $460.4 million remained
relatively level with total debt of $454.3 million at September 30, 1996. In
addition, at September 30, 1997, other non-current liabilities include
approximately $58.6 million related to securities lending activities. In late
September, the Company entered into a securities lending transaction resulting
in the borrowing of securities which were subsequently sold for net proceeds
approximating $58.6 million which were used to
28
<PAGE>
repay commercial paper borrowings. The borrowed securities are due to the lender
no later than December 29, 2000, but at the Company's option can be returned at
any time. The obligation is included in other non-current liabilities on the
balance sheet. The effective interest rate on this transaction is expected to be
6.5%.
At September 30, 1997, there were borrowings of $29.2 million under the
amended and restated revolving credit and competitive advance facility
agreement. This agreement is also used to support the Company's commercial paper
borrowings of which $181.0 million was outstanding at September 30, 1997.
At September 30, 1997, there were $10.0 million of borrowings
outstanding under uncommitted lines of credit and there were no borrowings under
the Company's bankers' acceptance facilities.
At September 30, 1997, the 170 million 6-1/8% deutsche mark notes ("DM
Notes") due May 1998 and the related currency exchange contract were classified
as short term. The DM Notes have been effectively converted into U.S. dollar
debt of $100.0 million through the use of a currency exchange swap contract
which includes both principal and interest. During the third quarter of 1997,
the Company issued the Old Notes and the net proceeds were used to pay down
commercial paper borrowings.
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.
Working Capital
As of September 30, 1997 and December 31, 1996, current liabilities
exceeded current assets by $90.7 million and $41.7 million, respectively. The
increase of current liabilities over current assets of $49.0 million was mainly
due to the increase in short-term debt and decrease in cash and equivalents,
partially offset by the increase in inventories, reflecting the seasonal pattern
of Avon's operations, and a decrease in accounts payable.
Although current liabilities exceeded current assets at September 30,
1997, management believes this is due to the Company's direct selling business
format which results in lower receivable and working capital levels as well as
the Company's practice of repurchasing shares with available cash. Avon's
liquidity results from its ability to generate significant cash flows from
operations and its ample unused borrowing capacity. Actions that would eliminate
the working capital deficit are not anticipated at this time. Avon's credit
agreements do not contain any provisions or requirements with respect to working
capital.
Financial Instruments and Risk Management Strategies
The Company operates globally, with manufacturing and distribution
facilities in various locations around the world. The Company may reduce its
exposure to fluctuations in interest rates and foreign exchange rates by
creating offsetting positions through the use of derivative financial
instruments. The Company currently does not use derivative financial instruments
for trading or speculative purposes, nor is the Company a party to leveraged
derivatives. The Company periodically uses interest rate swaps to hedge portions
of interest payable on its debt. In addition, the Company may periodically
employ interest rate caps to reduce exposure, if any, to increases in variable
interest rates.
At September 30, 1997, the Company had three interest rate swap
agreements on its DM Notes. Each agreement has a notional principal amount of
$100.0 million. During 1995, the Company entered into an interest rate swap
agreement, which effectively converted the interest payable on the DM Notes from
a floating to a fixed interest rate basis of approximately 7.2% through
maturity.
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The Company has one interest rate cap contract with a notional
principal amount of $100.0 million, used to economically hedge the Company's
short-term variable interest rate working capital debt. This cap contract
expires in May 1998 and has been marked-to-market yielding an insignificant
income statement adjustment.
The Company may periodically hedge foreign currency royalties, net
investments in foreign subsidiaries, firm purchase commitments and contractual
foreign currency cash flows or obligations, including third-party or
intercompany foreign currency transactions. The Company regularly monitors its
foreign currency exposures and ensures that hedge contract amounts do not exceed
the amounts of the underlying exposures.
At September 30, 1997, the Company held foreign currency forward
contracts with notional amounts totaling $181.1 million and option contracts
with notional amounts totaling $71.9 million to hedge foreign currency items.
These contracts have various maturities through December 1998. The Company also
entered into certain foreign currency forward contracts with notional amounts
totaling $81.9 million and option contracts with notional amounts of $63.4
million to economically hedge certain foreign currency exposures, which do not
qualify as hedging transactions under the current accounting definitions and,
accordingly, have been marked-to-market. The mark-to-market adjustment on these
contracts at September 30, 1997 was insignificant. The Company's risk of loss on
the options in the future is limited to premiums paid, which are insignificant.
The Company attempts to minimize its credit exposure to counterparties
by entering into interest rate swap and cap contracts only with major
international financial institutions with "A" or higher credit ratings as issued
by Standard & Poor's Corporation. The Company's foreign currency and interest
rate derivatives are comprised of over-the-counter forward contracts or options
with major international financial institutions. Although the Company's
theoretical credit risk is the replacement cost at the then estimated fair value
of these instruments, management believes that the risk of incurring losses is
remote and that such losses, if any, would not be material.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 WITH THE YEAR ENDED DECEMBER 31,
1995
Continuing Operations
Income from continuing operations for 1996 was $317.9 million, or 11%
over 1995. Income per share from continuing operations increased 13% to $2.38
from $2.10 in the prior year. This 13% increase in income per share exceeded the
11% increase in income from continuing operations reflecting the impact of lower
average shares outstanding in 1996 compared with the prior year due to the stock
repurchase program begun in 1994. Pretax income for 1996 was $510.4 million, a
10%, or $45.4 million, increase over the prior year. The increase was due to
higher sales, an improved operating expense ratio, lower non-operating expenses
and lower net foreign exchange losses in 1996. These favorable results were
partially offset by a decline in the gross margin and lower interest income in
1996.
On a consolidated basis, Avon's net sales of $4.81 billion in 1996
increased 7% from $4.49 billion in 1995. International sales increased 8% to
$3.14 billion from $2.91 billion in 1995 due to strong growth in most markets in
the Americas, the Pacific Rim, Russia, the United Kingdom and the Central
European markets. These improvements were partially offset by sales declines in
Japan and, to a lesser extent, Venezuela and Germany. Sales in the U.S.
increased 6% to $1.67 billion due to an increase in both average order size and
number of Representative orders. Excluding the impact of foreign currency
exchange, consolidated net sales rose 14% over the prior year.
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Cost of sales as a percentage of sales was 39.9% in 1996, compared with
39.4% in 1995. The decline in gross margin was primarily due to an unfavorable
cost ratio in Venezuela reflecting the impact of the bolivar devaluations, a
shift to sales of lower-priced products in Japan and investments made to reduce
excess inventory in Brazil. These declines were partially offset by margin
improvements in Mexico, Argentina and the United Kingdom.
Marketing, distribution and administrative expenses of $2.35 billion in
1996 represented a $132.6 million, or 6%, increase over 1995 and decreased as a
percentage of sales to 48.8% from 49.3% in 1995. The increase in operating
expenses reflects sales volume-related increases in most markets in the
Americas, the Pacific Rim and in the U.S. and higher marketing and distribution
expenses in Brazil. These increases were partially offset by lower expenses in
Japan reflecting the sales decline and the impact of a stronger U.S. dollar in
1996. In addition, expense levels were lower in Germany due to a continued
active focus on expense reduction and in Venezuela due to the impact of the
bolivar devaluations. The decrease in the operating expense ratio reflects
improvements in most European markets due to continued fixed expense reduction
efforts, in Venezuela due to the impact of the bolivar devaluations and in
Mexico and China due primarily to the significant sales growth. These
improvements were partially offset by an unfavorable expense ratio in Japan due
to the sales decline.
Interest expense in 1996 of $40.0 million decreased $1.3 million
compared to the prior year as a result of lower interest rates partially offset
by slightly higher debt levels. Interest income in 1996 of $14.5 million
decreased $4.9 million compared to 1995 due to lower interest rates in Brazil
and Mexico and lower cash investment levels in Brazil and in the U.S.
Inflation in the United States has remained at a relatively low level
during the last three years, and has not had a major effect on Avon's results of
operations. Many countries in which Avon has operations have experienced higher
rates of inflation than the United States. Among the countries in which Avon has
significant operations, extremely high rates of inflation have been experienced
in Brazil for a number of years. The annual inflation rate in Brazil, however,
has decreased significantly in 1995 and 1996 as the economic environment has
improved as a result of the government's economic stabilization program
implemented in mid-1994. While it is not possible to forecast with certainty, it
is currently expected that Brazil's inflation rate will continue to remain
relatively stable throughout 1997. Venezuela and Mexico experienced high rates
of inflation in 1996.
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Below is an analysis of the key factors affecting net sales and pretax
income from continuing operations by geographic area for each of the years in
the three-year period ended December 31, 1996:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------
1996 1995 1994
---------------------- ------------------- ---------------------
NET PRETAX NET PRETAX NET PRETAX
SALES INCOME SALES INCOME SALES INCOME
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
United States . . . . . . . . . . . . . . . . . . . $1,672.5 $227.3 $1,584.8 $211.6 $1,535.1 $201.2
International
Americas . . . . . . . . . . . . . . . . . . . . 1,609.9 291.9 1,466.9 265.8 1,415.3 273.9
Pacific . . . . . . . . . . . . . . . . . . . . 751.1 73.6 712.0 67.5 664.3 89.7
Europe . . . . . . . . . . . . . . . . . . . . . 780.7 54.4 728.4 41.7 651.8 15.3
---------- ------- --------- -------- --------- --------
Total International . . . . . . . . . . . 3,141.7 419.9 2,907.3 375.0 2,731.4 378.9
--------- ------ --------- ------- --------- -------
Total from operations . . . . . . . . . . $4,814.2 647.2 $4,492.1 586.6 $4,266.5 580.1
======== ======== ========
Corporate expenses . . . . . . . . . . . . . . . . (95.4) (74.6) (84.9)
Interest expense . . . . . . . . . . . . . . . . . (40.0) (41.3) (50.8)
Other expense, net . . . . . . . . . . . . . . . . (1.4) (5.7) (10.6)
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $510.4 $465.0 $433.8
====== ====== ======
</TABLE>
U.S.
In 1996, U.S. sales increased 6% to $1.67 billion and pretax income
increased 7% to $227.3 million. The sales growth reflects a 4% increase in
average order size and a 2% increase in the number of Representative orders. The
sales improvement was driven by significant increases in the gift and
decorative, apparel and CFT categories. These improvements were partially offset
by a decline in sales of the fashion jewelry and accessories category. The
growth in the gift and decorative category resulted mainly from the success of
both the Spring Blossom and Winter Velvet Barbie dolls introduced in 1996. The
Winter Velvet Barbie doll was the most successful new product introduction in
Avon's history. The success of the Diane Von Furstenberg spring and summer
collections, novelty and children's lines and the launch of Legwear in 1996
contributed to the increase in apparel sales. The growth in the CFT category
consisted primarily of increases in sales of personal care and fragrance
products. The growth of personal care products was driven by the specialty bath
segment which in 1996 reflected an aggressive new products program and a
heightened promotional focus.
International
International sales in 1996 increased 8% to $3.14 billion and pretax
income increased 12% over 1995 to $419.9 million. The sales increase reflects
strong unit growth in most markets in the Americas Region, the Pacific Rim, the
United Kingdom, Russia and Central Europe. These improvements were partially
offset by sales declines in Japan attributable to both operational and economic
factors, discussed below, and to a lesser extent in Venezuela due to the impact
of the bolivar devaluations and in Germany due to both operational declines as
well as a negative foreign currency impact in 1996. Excluding the impact of
foreign currency exchange, international sales were up 18% over 1995.
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<PAGE>
In the Americas Region, sales increased 10% to $1.61 billion and pretax
income increased 10%, or $26.1 million, to $291.9 million from $265.8 million in
1995. The sales increase was driven by growth in almost every market in the
region, most significantly in Mexico and Brazil. Higher sales in Mexico reflect
increases in prices at a rate below the inflation level, as well as increases in
average order size and unit growth. The number of active Representatives in
Mexico in 1996 continued to grow from the prior year due to the implementation
of incentive programs focused on retention and increasing the number of orders.
Brazil's sales growth was due to double-digit increases in unit volume and
customers. The growth in Brazil's number of customers resulted from a revision
of pricing strategies and new product launches aimed at increasing customer
orders in response to an increasingly intense competitive environment in 1996.
The sales increase in the region also reflects strong unit growth in Chile,
Argentina and Central America. These improvements were partially offset by the
decline in Venezuela resulting mainly from the negative impact of two
maxi-devaluations of the bolivar. Venezuela did, however, have double-digit
increases in both local currency sales and in active Representatives in 1996
attributable to a focus on building market share and Representative growth. The
increase in the region's pretax income was primarily due to favorable results in
Mexico reflecting the strong sales increase combined with a lower rate of
increase in operating expenses, an improved gross margin and foreign exchange
gains in 1996 compared to losses in 1995. The operating expense ratio in Mexico
improved significantly as a result of an expense control program implemented in
1996. In addition, pretax profit was higher in Chile due mainly to sales growth.
These improvements were partially offset by a lower pretax profit in Venezuela,
as a result of the bolivar devaluations, and in Brazil reflecting a lower gross
margin and an unfavorable operating expense ratio.
In the Pacific Region, sales in 1996 increased 6% to $751.1 million.
The increase in sales was driven by strong operational improvements in the
Philippines and China, and, to a lesser extent, in Taiwan, Malaysia and
Australia. Sales growth in virtually all of these markets was accompanied by
strong increases in units sold, customers served and active Representatives.
These improvements were partially offset by a significant sales decline in Japan
resulting from the unfavorable exchange impact of a stronger U.S. dollar in
1996, a shift in pricing strategy to sales of lower-priced products and a
decrease in average order size.
In the Europe Region, sales in 1996 increased 7% to $780.7 million. The
sales increase was due to unit growth in Russia, the United Kingdom and Central
Europe. The Representative base in Russia and Central Europe grew significantly
in 1996 due to a continuous focus on expansion of operations in these markets.
Sales also rose in Italy mainly due to a favorable impact of a weaker U.S.
dollar in 1996. These improvements were partially offset by sales shortfalls in
Germany reflecting a shift to lower-priced items and weak economic conditions,
including increased unemployment, which resulted in a general decline in
consumer confidence and spending in 1996.
Corporate Expenses
Corporate expenses were $95.4 million in 1996 compared with $74.6
million in 1995. The $20.8 million increase is primarily due to a favorable
lease settlement in 1995, which reduced expenses, and higher expenses in 1996
for information systems upgrades and enhancements.
Accounting Changes
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that
33
<PAGE>
the carrying amount of assets may not be recoverable. There was no impact on the
Company's results of operations or financial position.
Also, effective January 1, 1996, the Company adopted the fair value
disclosure requirements of FAS No. 123, "Accounting for Stock-Based
Compensation." As permitted by the statement, the Company did not change the
method of accounting for its employee stock compensation plans.
Discontinued Operations
In December 1995, the Company entered into an agreement with
Mallinckrodt Group, Inc. ("Mallinckrodt"), which fully settled the litigation
initiated by Mallinckrodt. The settlement covers all indemnity obligations
related to Avon's sale of Mallinckrodt, including environmental clean-up claims
and litigation concerning Mallinckrodt's settlement of a DuPont patent claim.
The settlement payments made by Avon to Mallinckrodt, and related
costs, resulted in an after-tax charge to discontinued operations in the fourth
quarter of 1995, net of existing reserves, of $29.6 million, or $.22 per share.
Contingencies
Although Avon has completed its divestiture of all discontinued
operations, various lawsuits and claims (asserted and unasserted) are pending or
threatened against Avon. The Company is also involved in a number of proceedings
arising out of the federal Superfund law and similar state laws. In some
instances, Avon, along with other companies, has been designated as a
potentially responsible party which may be liable for costs associated with
these various hazardous waste sites. In the opinion of Avon's management, based
on its review of the information available at this time, the difference, if any,
between the total cost of resolving such contingencies and reserves recorded by
Avon at December 31, 1996 should not have a material adverse impact on Avon's
consolidated financial position, results of operations, or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash provided by continuing operations was $425.1 million in 1996
compared to $328.6 million in 1995. The 1996 increase in net cash provided by
continuing operations principally reflects, among other things, an increase in
net income of $61.4 million and a lower funding of working capital. The lower
funding of working capital reflects improvements in both prepaid expenses and
accounts payable and accrued liabilities. A more detailed analysis of the
individual items contributing to the 1996 and 1995 amounts is included in the
Consolidated Statement of Cash Flows in the Company's Annual Report on Form 10-K
for its fiscal year ended December 31, 1996, incorporated herein by reference.
Cash used by discontinued operations was $38.2 million in 1996,
compared to $49.6 million in 1995. The $38.2 million cash used in 1996 primarily
reflects final payment of the Mallinckrodt settlement in January 1996.
Excluding changes in debt, net cash usage of $6.6 million in 1996 was
$38.1 million favorable compared to net cash usage of $44.7 million in 1995.
This improvement reflects higher cash provided by continuing operations,
described above, as well as lower cash used in 1996 for discontinued operations,
partially offset by higher capital expenditures, higher cash used for the
repurchase of common stock, an unfavorable exchange rate impact on cash and
higher dividend payments in 1996. As of December 31, 1996,
34
<PAGE>
12.6 million shares of common stock have been purchased for $422.9 million under
the stock repurchase program begun in 1994.
Working Capital
As of December 31, 1996, current liabilities exceeded current assets by
$41.7 million compared with $30.3 million at the end of 1995. The variance was
primarily due to an increase in accounts payable and net debt (debt less cash
and equivalents) partially offset by higher inventory levels (see
"--Inventories") and accounts receivable, due to a higher 1996 sales level. The
increase in net debt is primarily due to the final payment of the Mallinckrodt
litigation settlement and the ongoing share repurchase program, and the increase
in accounts payable resulted from higher inventory levels.
Avon's liquidity results from its ability to generate significant cash
flows from operations and its ample unused borrowing capacity. Management does
not presently plan any actions that would eliminate the working capital deficit
at this time. Avon's credit agreements do not contain any provisions or
requirements with respect to working capital.
Capital Resources
Total debt of $201.6 million at December 31, 1996 increased $40.1
million from $161.5 million at December 31, 1995. During 1996, cash flows from
continuing operations and higher debt levels, partially offset by higher cash
and equivalents, were used for dividends, the stock repurchase program, capital
expenditures, a payment made related to discontinued operations and the purchase
of a company in South Africa. During 1995, cash flows from continuing operations
as well as cash on hand were used for dividends, the stock repurchase program,
capital expenditures, a payment made related to discontinued operations and the
reduction of debt.
Debt maturing within one year consists of borrowings from banks of
$94.0 million and the current maturities of long-term debt of $3.1 million.
Management believes that cash from operations and available sources of financing
are adequate to meet anticipated requirements for working capital, dividends,
capital expenditures, the stock repurchase program and other cash needs.
During 1996, the Company entered into an agreement, which expires in
2001, with various banks to amend and restate the five-year, $600.0 million
revolving credit and competitive advance facility agreement, which was entered
into in 1994. Within this facility, the Company is able to borrow, on an
uncommitted basis, various foreign currencies. The new agreement and the prior
agreement are referred to, collectively, as the credit facility.
The credit facility is primarily to be used to finance working capital,
provide support for the issuance of commercial paper and support the stock
repurchase program. At the Company's option, the interest rate on borrowings
under the credit facility is based on LIBOR, prime, or federal fund rates. The
credit facility has an annual facility fee of $.4 million. The credit facility
contains a covenant for interest coverage, as defined. The Company is in
compliance with this covenant. At December 31, 1996, borrowings of $29.7 million
were outstanding under the credit facility. There were no borrowings outstanding
at December 31, 1995.
At December 31, 1996, Avon had $34.1 million outstanding under a $500.0
million commercial paper program supported by the credit facility. There were no
borrowings outstanding as of December 31, 1995. In addition, the Company has
bankers' acceptance facilities and uncommitted lines of credit available of
$230.0 million with various banks which have no compensating balances or fees.
As of December 31, 1996 and 1995, there were no borrowings under these
facilities. In addition, as of December 31,
35
<PAGE>
1996 and 1995, there were international lines of credit totaling $357.0 million
and $320.0 million, respectively, ofwhich $30.2 million and $42.3 million,
respectively, were outstanding. There are no compensating balances or fees under
these facilities.
Inventories
Avon's products are marketed during twelve to twenty-six individual
sales campaigns each year. Each campaign is conducted using a brochure offering
a wide assortment of products, many of which change from campaign to campaign.
It is necessary for Avon to maintain relatively high inventory levels as a
result of the nature of its business, including the number of campaigns
conducted annually and the large number of products marketed. Avon's operations
have a seasonal pattern characteristic of many companies selling CFT, fashion
jewelry and accessories, gift and decorative items and apparel. Christmas sales
cause a peak in the fourth quarter which results in the build-up of inventory at
the end of the third quarter. Inventory levels are then sharply reduced by the
end of the fourth quarter. Inventories of $530.0 million at December 31, 1996
were $63.7 million higher than 1995 due to higher CFT levels in the U.S. to
support the launch of new skin care products in the first quarter of 1997 and
business growth and continued expansion into Central Europe, Russia and the
Pacific Rim markets. It is Avon's objective to continue to manage purchases and
inventory levels maintaining the focus of operating the business at efficient
inventory levels. However, the addition or expansion of product lines such as
apparel, jewelry and impulse gift items, products that are subject to changing
fashion trends and consumer tastes, as well as planned expansion in high growth
markets, may cause the inventory levels to grow periodically.
Capital Expenditures
Capital expenditures during 1996 were $103.6 million (1995--$72.7
million). These expenditures were made for capacity expansion in high growth
markets and for facility modernization, information systems upgrades and
enhancements, equipment replacement projects and leasehold improvements related
to office facilities for U.S. and global operations. Numerous construction and
information systems projects were in progress at December 31, 1996 with an
estimated cost to complete of approximately $74.9 million. Capital expenditures
in 1997 are expected to be in the range of $150.0-$175.0 million. These
expenditures will include continued investments for capacity expansion in high
growth markets, most significantly in the Pacific Rim, to maintain worldwide
facilities, for contemporization and replacement of information systems and for
expenditures related to the relocation of office facilities for the U.S. and
global operations.
Foreign Operations
The Company derived approximately 65% of both its 1996 consolidated net
sales and consolidated pretax income from operations from its international
subsidiaries. In addition, as of December 31, 1996, international subsidiaries
comprised approximately 59% of the Company's consolidated total assets.
Avon's operations in many countries utilize numerous currencies. Avon
has significant net assets in Japan, Argentina, Mexico, the United Kingdom,
Germany and the Philippines. Changes in the value of these countries' currencies
relative to the U.S. dollar result in direct charges or credits to equity. Avon
also has substantial operations in Brazil, a country with an economy designated
as highly inflationary, whose functional currency is the U.S. dollar, whereby
changes in exchange rates result in charges or credits to income and may
significantly impact the results of operations. Effective January 1, 1997,
Mexico was designated as a country with a highly inflationary economy due to the
cumulative inflation rates over the past three years.
36
<PAGE>
The Venezuelan bolivar devalued significantly in December 1995.
However, because the devaluation occurred late in the year, there was no
material impact on the 1995 results of operations. Following the December 1995
devaluation, another devaluation occurred in late April 1996. As previously
mentioned, these devaluations negatively affected Venezuela's U.S. dollar
results in 1996. Venezuela's 1996 and 1995 sales represent approximately 2% of
Avon's consolidated net sales. Efforts have been focused on building market
share and Representative growth in Venezuela. It is expected that a continued
weak bolivar will have some impact on 1997 results; however, management cannot
at this time project what this impact will be. Avon's well diversified global
portfolio of businesses has demonstrated that the effects of weak economies and
currency fluctuations in certain countries may be offset by strong results in
others.
Fluctuations in the value of foreign currencies cause U.S.
dollar-translated amounts to change in comparison with previous periods.
Accordingly, Avon cannot project in any meaningful way the possible effect of
such fluctuations upon translated amounts or future earnings. This is due to the
large number of currencies involved, the constantly changing exposure in these
currencies, the complexity of inter-company relationships, the hedging activity
entered into in an attempt to minimize certain of the effects of exchange rate
changes where economically feasible and the fact that all foreign currencies do
not react in the same manner against the U.S. dollar.
Certain of the Company's financial instruments are used to hedge
various amounts relating to certain international subsidiaries. However, the
Company's foreign currency hedging activities are not significant when compared
to the Company's international financial position or result of operations.
Some foreign subsidiaries rely primarily on short-term borrowings from
local commercial banks to fund working capital needs created by their highly
seasonal sales pattern. From time to time, when tax and other considerations
dictate, Avon will finance subsidiary working capital needs or borrow foreign
currencies. At December 31, 1996, the total indebtedness of foreign subsidiaries
was $37.4 million. In addition, Avon borrowed $29.7 million which represented a
3.45 billion yen loan, due November 1997, used to hedge the Company's net
investment in Japan.
It is Avon's policy to remit all the available cash (cash in excess of
working capital requirements, having no legal restrictions and not considered
permanently reinvested) of foreign subsidiaries as rapidly as is practical.
During 1996, these subsidiaries remitted, net of taxes, $251.1 million in
dividends and royalties. This sum is a substantial portion of the 1996
consolidated net earnings of Avon's foreign subsidiaries.
Risk Management Strategies
The Company operates globally, with manufacturing and distribution
facilities in various locations around the world. The Company may reduce its
exposure to fluctuations in interest rates and foreign exchange rates by
creating offsetting positions through the use of derivative financial
instruments. The Company currently does not use derivative financial instruments
for trading or speculative purposes, nor is the Company a party to leveraged
derivatives.
The Company periodically uses interest rate swaps to hedge portions of
interest payable on its debt. In addition, the Company may periodically employ
interest rate caps to reduce exposure, if any, to increases in variable interest
rates.
During a substantial portion of the three-year period ended December
31, 1996, the Company utilized interest rate swaps to effectively convert
variable interest on its long-term debt to a fixed interest rate. From November
1994 through July 10, 1995, due to the expiration of an interest rate swap, the
interest payable on the DM Notes became variable at a rate of one-month LIBOR
plus 1.4%. During this period, the Company
37
<PAGE>
had an interest rate cap in place to reduce its exposure to increases in that
variable interest rate above a specified level. On July 11, 1995, the Company
entered into a new interest rate swap agreement, which effectively reconverted
the interest payable on the DM Notes to a fixed rate basis of approximately 7.2%
through maturity.
Avon had three interest rate swap agreements on the DM Notes at
December 31, 1996 and 1995, each such agreement having a notional amount of
$100.0 million, yielding an aggregate notional amount at December 31, 1996 and
1995 of $300.0 million. Effective January 1995, the Company had two interest
rate caps on the DM Notes, each with a notional amount of $100.0 million, one of
which expired in 1996 and the other expires when the notes mature. Subsequent to
the interest rate on the DM Notes becoming fixed, these caps have been marked to
market with an insignificant mark-to-market adjustment.
In December 1995, the Company entered into an interest rate cap
contract with a notional amount of $100.0 million, which expired early 1997, in
order to hedge a portion of the Company's anticipated short-term variable
interest rate working capital debt. This cap has been marked to market with an
insignificant mark-to-market adjustment.
The interest rate on the DM Notes was fixed at approximately 10% for
most of 1994 through the use of a currency exchange swap contract and several
interest rate swaps. With the expiration of one interest rate swap in November
1994, the Company's interest rate on this $100.0 million debt was converted from
a fixed to a floating rate determined at one-month LIBOR plus 1.4%. The
effective rate of interest paid for the DM Notes in 1996 and 1995 was
approximately 7.2% and 7.5%, respectively.
The Company may periodically hedge foreign currency royalties, net
investments in foreign subsidiaries, firm purchase commitments, contractual
foreign currency cash flows or obligations, including third-party and
intercompany foreign currency transactions. The Company regularly monitors its
foreign currency exposures and ensures that hedge contract amounts do not exceed
the amounts of the underlying exposures.
At December 31, 1996, the Company held foreign currency forward
contracts with notional amounts totaling $203.1 million and option contracts
with notional amounts totaling $61.2 million to hedge foreign currency items.
These contracts all have maturities prior to December 31, 1997. The Company also
entered into certain option contracts with notional amounts totaling $46.4
million and foreign currency forward contracts totaling $99.0 million, which do
not qualify as hedging transactions under the current accounting definitions
and, accordingly, have been marked to market. The mark-to-market adjustment on
these option contracts at December 31, 1996, was insignificant. The Company's
risk of loss on these options in the future is limited to premiums paid, which
are insignificant.
The Company attempts to minimize its credit exposure to counterparties
by entering into interest rate swap and cap contracts only with major
international financial institutions with "A" or higher credit ratings as issued
by Standard & Poor's Corporation. The Company's foreign currency and interest
rate derivatives are comprised of over-the-counter forward contracts or options
with major international financial institutions. Although the Company's
theoretical credit risk is the replacement cost at the then estimated fair value
of these instruments, management believes that the risk of incurring losses is
remote and that such losses, if any, would not be material.
Non-performance of the counterparties to the balance of all the
currency and interest rate swap agreements in a net receivable position would
not result in a significant write-off at December 31, 1996. In addition, there
are other swap agreements in a net payable position of an insignificant amount
at
38
<PAGE>
December 31, 1996. Each agreement provides for the right of offset between
counterparties to the agreement. In addition, Avon may be exposed to market risk
on its foreign exchange and interest rate swap and cap agreements as a result of
changes in foreign exchange and interest rates. The market risk related to the
foreign exchange agreements should be substantially offset by changes in the
valuation of the underlying items being hedged.
39
<PAGE>
THE COMPANY
GENERAL
The Company is one of the world's leading manufacturers and marketers
of beauty and related products, which include CFT; gift and decorative products;
apparel; and fashion jewelry and accessories. The Company commenced operations
in 1886 and was incorporated in the State of New York on January 27, 1916. The
Company's business is comprised of one industry segment, direct selling, with
worldwide operations.
STRATEGY
Avon's global strategy is focused on three key growth initiatives:
International Expansion
Avon is one of the most widely recognized brand names in the world. The
Company is particularly well positioned to capitalize on growth in new
international markets due to high demand for quality products, underdeveloped
retail infrastructures and relatively attractive earnings opportunity for women.
The Company presently has operations in 41 countries outside the U.S. and its
products are distributed in 89 more, for coverage in over 130 markets and
continues to expand into new markets. The Company has entered 15 new markets
since 1990, including Russia and China and rapidly emerging nations throughout
Central Europe, and is currently evaluating several other markets in Eastern
Europe and Asia Pacific.
Leveraging Direct Selling Channel
The Company has revitalized its direct selling channel, enabling the
Company to reach women quickly and efficiently as well as introduce new products
that complement the core beauty business. In 1994, Avon introduced a highly
successful line of apparel in the U.S. achieving $437 million in net sales over
three years. In 1996, the Company had outstanding success with Barbie dolls,
achieving over $40 million in sales of Barbie dolls designed exclusively for
Avon, making her the Company's best selling gift product ever. The relationship
with Mattel is being expanded this year to include additional products. This
array of products, available through the direct selling channel, increases
earnings opportunities and presents a consistent beauty image to consumers
across a broad product line.
Customer Access and Image Enhancement
To restore and accelerate growth in established industrial nations such
as the U.S., Western Europe and Japan, the Company has developed new channels to
reach customers and improve access to its products through direct mail catalogs,
toll-free telephone numbers, buying by fax and "on line" with a new home page on
the worldwide web. The Company also updated its core beauty products and created
a portfolio of global beauty brands. These contemporary products project a
consistent, high-quality image in all markets and include brands such as Avon
Color, Anew, Far Away, Rare Gold, Natori and Millennia. Global brands are
growing rapidly as a percentage of the Company's worldwide CFT business. In
1996, they accounted for $755 million or 26% of core beauty sales. The
development of global brands has also enabled the Company to achieve major
economies of scale by consolidating certain functions like sourcing and
logistics.
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DISTRIBUTION
The Company's products are sold worldwide by approximately 2.3 million
Representatives, approximately 440,000 of whom are in the United States.
International operations are conducted primarily through subsidiaries in 41
countries and through distributorships, licensees and other similar arrangements
in 89 other countries. Avon sells its products to customers through a
combination of direct selling and marketing, utilizing independent
Representatives, the mail, phone and fax. Almost all Representatives are women
who sell on a part-time basis either in the home or the workplace.
Representatives purchase products directly from the Company and sell them
directly to their customers. Representatives are independent contractors or
independent dealers, and are not agents or employees of the Company.
In the United States, the Representatives contact customers, selling
primarily through the use of brochures that also highlight new products and
specially priced items for each two-week sales campaign. Product samples,
demonstration products and make-up color charts are also used. Outside the
United States, each sales campaign is generally of a three or four week
duration. Although terms of payment and cost of merchandise to Representatives
vary from country to country, the basic method of direct selling and marketing
by Representatives is essentially the same as that used in the United States,
and substantially the same merchandising and promotional techniques are used.
PRODUCTS
Avon has pioneered many innovative products, including Skin-So-Soft,
its best selling bath oil; BioAdvance, the first skin care product with
stabilized retinol, the purest form of Vitamin A; and Collagen Booster, the
premier product to capitalize on Vitamin C technology. Avon also introduced the
benefits of aromatherapy to millions of American women, encapsulated color for
the Color-Release line and introduced alpha-hydroxy acid for cosmetic use in the
Anew Perfecting Complex products. Each year, researchers at the Company test and
develop more than 600 products in the cosmetic, fragrance, toiletry and jewelry
categories as well as analyze, evaluate and develop gift and decorative
products.
Avon's consolidated net sales, by classes of principal products, are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Cosmetics, fragrance and toiletries.. $2,946.8 $2,797.2 $2,604.2
Gift and decorative products......... 934.1 780.6 769.2
Apparel.............................. 556.3 500.5 480.3
Fashion jewelry and accessories...... 377.0 413.8 412.8
---------- ---------- ----------
Total............................. $4,814.2 $4,492.1 $4,266.5
======== ======== ========
</TABLE>
MANUFACTURING
The Company manufactures and packages almost all of its cosmetic,
fragrance and toiletry products. Raw materials, consisting chiefly of essential
oils, chemicals, containers and packaging components, are purchased from various
suppliers. The Company has nineteen manufacturing facilities around the world,
three of which are principally devoted to the manufacture of fashion jewelry. In
the United States, the Company's cosmetic, fragrance and toiletry products are
produced in three manufacturing laboratories for
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the Company's four distribution centers. Most products sold in foreign countries
are manufactured in the Company's facilities abroad. The fashion jewelry line is
generally developed by the Company's staff and produced in its two manufacturing
facilities in Puerto Rico, its manufacturing facility in Ireland, or by several
independent manufacturers.
COMPETITION
The cosmetic, fragrance and toiletry; gift and decorative product;
apparel; and fashion jewelry and accessory industries are highly competitive.
The Company is one of the leading manufacturers and distributors of cosmetics
and fragrances in the United States. Its principal competitors are the large and
well-known cosmetics and fragrances companies that manufacture and sell broad
product lines through various types of retail establishments. The Company has
many competitors in the gift and decorative products and apparel industries in
the United States, including retail establishments, principally department
stores, gift shops and direct-mail companies, specializing in these products.
The Company is one of the leading distributors of fashion jewelry and
accessories for women in the United States. Its principal competition in the
fashion jewelry industry consists of a few large companies and many small
companies that manufacture and sell fashion jewelry for women through retail
establishments. The number of competitors and degree of competition that the
Company faces in its foreign cosmetics, fragrance, toiletries and fashion
jewelry markets varies widely from country to country. The Company is one of the
leading manufacturers and distributors in the cosmetics, fragrance and
toiletries industry in most of its foreign markets, as well as in the fashion
jewelry industry in Europe. There are a number of direct-selling companies which
sell product lines similar to the Company's, some of which also have worldwide
operations and compete with the Company. The Company believes that the
personalized customer service offered by Representatives; the high quality,
attractive designs and reasonable prices of its products; new product
introductions; and the guarantee of satisfaction are significant factors in
establishing and maintaining its competitive position.
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DESCRIPTION OF THE NOTES
The Old Notes were, and the New Notes will be, issued under an
Indenture, dated as of August 1, 1997 (as amended, the "Indenture"), between the
Company and The Chase Manhattan Bank, as Trustee (the "Trustee"). The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and qualified in their entirety by reference to, all the
provisions of the Trust Indenture Act of 1939, as amended, the Indenture and the
Notes issued thereunder, including the definitions of certain terms in the
Indenture. Wherever particular Sections or defined terms of the Indenture are
referred to, such Sections or defined terms are incorporated herein by
reference.
The Old Notes and the New Notes will be considered collectively to be a
single class for all purposes under the Indenture, including, without
limitation, waivers and amendments.
GENERAL
The Notes are unsecured obligations of the Company and rank pari passu
with all other unsecured and unsubordinated indebtedness of the Company. The
Notes are limited to $100.0 million aggregate principal amount and will mature
on August 1, 2007. The Notes bear interest at the rate of 6.55% from August 1,
1997 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semi-annually on February 1 and August 1 of each
year, commencing February 1, 1998, to the Person in whose name the Note is
registered at the close of business on the preceding January 15 or July 15, as
the case may be. (Sections 301 and 307)
The Notes are not redeemable prior to maturity and do not have the
benefit of a sinking fund. The principal of and interest on the Notes are
payable, and the transfer of Notes is registrable, at the office of the Trustee
at One Chase Manhattan Plaza, New York, New York. In addition, payment of
interest may, at the option of the Company, be made by check mailed to the
address of the Person entitled thereto as it appears in the Security Register.
(Sections 301, 305 and 1002)
The New Notes will be issued only in fully registered book-entry form,
without coupons, in denominations of $1,000 and any integral multiple of $1,000.
(Section 302) No service charge will be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Section 305) The Notes will be represented by a Global Note registered in the
name of a nominee of The Depository Trust Company, New York, New York ("DTC").
Except as set forth under "Book-Entry; Delivery and Form" below, Notes will not
be issuable in certificated form.
COVENANTS
Negative Pledge. In the Indenture, the Company has agreed that if the
Company or any subsidiary shall issue, assume, incur or guarantee any
indebtedness secured by a lien on any Principal Property or on any shares of
capital stock of any subsidiary ("Secured Debt"), the Company will secure, or
cause such subsidiary to secure, the outstanding Notes equally and ratably with
such Secured Debt, unless after giving effect thereto the aggregate amount of
all such Secured Debt, together with all Attributable Debt (as defined below) of
the Company and its subsidiaries in respect of sale and leaseback transactions
to which the restrictions referred to in the following paragraph applies, would
not exceed 20% of the Consolidated Net Tangible Assets of the Company and its
consolidated subsidiaries. Secured Debt does not include indebtedness secured
by: (a) liens on any Principal Property acquired by the Company or a subsidiary
after the date of the Indenture to secure or provide for the payment or
financing of all or any part of the purchase price thereof or construction of
fixed improvements thereon (prior to, at the time of or within 180 days after
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the latest of the acquisition, completion of construction or commencement of
commercial operation thereof); (b) liens on any shares of stock or Principal
Property acquired by the Company or a subsidiary after the date of the Indenture
existing at the time of such acquisition; (c) liens on any shares of stock or
Principal Property of a corporation which is merged into or consolidated with
the Company or a subsidiary or substantially all of the assets of which are
acquired by the Company or a subsidiary; (d) liens securing indebtedness of a
subsidiary owing to the Company or another subsidiary; (e) liens existing at the
date of the Indenture; (f) liens on any Principal Property being constructed or
improved securing loans to finance such construction or improvements; (g) liens
in favor of governmental bodies of the United States or any state thereof or any
other country or political subdivision thereof to secure partial, progress or
advance payments pursuant to any contract or statute, or to secure any
indebtedness incurred or guaranteed for the purpose of financing all or any part
of the cost of acquiring, constructing or improving the property subject to such
liens; (h) liens securing taxes, assessments or governmental charges or levies
not yet delinquent, or already delinquent but the validity of which is being
contested in good faith; (i) liens arising by reason of deposits necessary to
qualify the Company or any subsidiary to conduct business, maintain
self-insurance, or obtain the benefit of, or comply with, any law; and (j)
extensions, renewals or replacement of liens referred to in the foregoing
clauses provided that the indebtedness secured is not increased or the lien
extended to any additional assets.
(Sections 1006 and 101)
Restrictions on Sale and Leaseback Transactions. The Company has also
agreed in the Indenture that neither the Company nor any subsidiary will enter
into, assume, guarantee, or otherwise become liable with respect to any sale and
leaseback transaction involving any Principal Property, unless immediately after
giving effect thereto the sum, without duplication, of (i) the aggregate
principal amount of all Secured Debt and (ii) the aggregate amount of all
Attributable Debt in respect of sale and leaseback transactions to which this
restriction applies would not exceed 20% of the Consolidated Net Tangible Assets
of the Company and its consolidated subsidiaries. This restriction will not
apply to the extent that during the period commencing 60 days prior to and
ending 120 days after a sale and leaseback transaction the Company or a
subsidiary applies an amount equal to the Attributable Debt with respect to such
sale and leaseback transaction (a) to the acquisition, directly or indirectly
and in whole or in part, of Principal Properties or (b) to the retirement of
long-term indebtedness (other than mandatory prepayment or retirement) of the
Company or any subsidiary. This restriction will also not apply to any sale and
leaseback transaction (i) between the Company and a subsidiary or between
subsidiaries or (ii) involving the taking back of a lease for a period of three
years or less. (Section 1007)
"Attributable Debt" means, as of the time of determination, the present
value (discounted at the rate per annum equal to the rate of interest implicit
in the lease involved in such sale and leaseback transaction, as determined in
good faith by the Company) of the obligation of the lessee thereunder for rental
payments (excluding, however, any amounts required to be paid by such lessee,
whether or not designated as rent or additional rent, on account of maintenance
and repairs, insurance, taxes, assessments, water rates or similar charges or
any amounts required to be paid by such lessee thereunder contingent upon the
amount of sales or similar contingent awards) during the remaining term of such
lease (including any period for which such lease has been extended or may, at
the option of the lessor, be extended). In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such rental payments
shall also include the amount of such penalty, but no rental payments shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated. (Section 101)
"Consolidated Net Tangible Assets" means the total assets shown on the
most recent audited annual consolidated balance sheet of the Company and its
consolidated subsidiaries, after deducting the amount of all current liabilities
and intangible assets. (Section 101)
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"Principal Property" means any manufacturing plant, testing or research
and development facility, distribution facility, processing plant or warehouse
(including, without limitation, land, fixtures and equipment), owned or leased
by the Company or any subsidiary (including any of the foregoing acquired or
leased after the date of the Indenture) and located within the United States of
America, its territories and possessions, unless the Board of Directors of the
Company determines in good faith that such plant or facility is not of material
importance to the total business conducted by the Company and its consolidated
subsidiaries. (Section 101)
The Indenture does not otherwise restrict the incurrence of debt by the
Company or its subsidiaries.
Consolidation, Merger and Sale of Assets. The Company has also agreed
in the Indenture that it will not consolidate with or merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, any
Person (a "successor Person"), and may not permit any Person to merge into, or
convey, transfer or lease its properties and assets substantially as an entirety
to, the Company, unless (i) the successor Person (if not the Company) is a
corporation, partnership, trust or other entity organized and validly existing
under the laws of any domestic jurisdiction and assumes the Company's
obligations on the Notes and under the Indenture, (ii) immediately after giving
effect to the transaction, and treating any indebtedness which becomes an
obligation of the Company or any subsidiary as a result of the transaction as
having been incurred by it at the time of the transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an Event
of Default, shall have occurred and be continuing, and (iii) certain other
conditions are met. (Section 801)
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the
Indenture: (a) failure to pay principal of any Note when due; (b) failure to pay
any interest on any Notes when due, continued for 30 days; (c) failure to
perform any covenant of the Company in the Indenture, continued for 60 days
after written notice of such failure is given as provided in the Indenture; (d)
failure by the Company to pay when due (subject to any applicable grace period)
the principal of, or acceleration of, any indebtedness for money borrowed by the
Company having an aggregate principal amount outstanding of at least
$50,000,000, if, in the case of any such failure, such indebtedness has not been
discharged or, in the case of any such acceleration, such indebtedness has not
been discharged or such acceleration has not been rescinded or annulled, in each
case within 30 days after written notice has been given by the Trustee, or the
holders of at least 25% in principal amount of the Outstanding Notes, as
provided in the Indenture; and (e) certain events in bankruptcy, insolvency or
reorganization. (Section 501)
If an Event of Default (other than an Event of Default described in
clause (e) above) shall occur and be continuing, either the Trustee or the
holders of at least 25% in aggregate principal amount of the outstanding Notes
by notice as provided in the Indenture may declare the principal amount of the
Notes to be due and payable immediately. If an Event of Default described in
clause (e) above shall occur, the principal amount of all the outstanding Notes
will automatically, and without any action by the Trustee or any holder, become
immediately due and payable. After any such acceleration, but before a judgment
or decree based on acceleration, the holders of a majority in aggregate
principal amount of the outstanding Notes may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
non-payment of accelerated principal, have been cured or waived as provided in
the Indenture. (Section 502) For information as to waiver of defaults, see
"Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default shall occur and be continuing, the
Trustee is under no obligation to exercise any of its rights or
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<PAGE>
powers under the Indenture at the request or direction of any of the holders,
unless such holders shall have offered to the Trustee reasonable indemnity.
(Section 603) Subject to such provisions for the indemnification of the Trustee,
the holders of a majority in aggregate principal amount of the outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Notes.
(Section 512)
No holder of a Note has any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such holder has previously given to
the Trustee written notice of a continuing Event of Default with respect to the
Notes, (ii) the holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and such holder or holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding, and has
not received from the holders of a majority in aggregate principal amount of the
outstanding Notes a direction inconsistent with such request, within 60 days
after such notice, request and offer. (Section 507) However, such limitations do
not apply to a suit instituted by a holder of a Note for the enforcement of
payment of the principal of or interest on such Note on or after the applicable
due date specified in such Note. (Section 508)
The Company is required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the performance or observance of any of the terms, provisions
and conditions of the Indenture and, if so, specifying all such known defaults.
(Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the holders of at least a majority
in aggregate principal amount of the Outstanding Notes affected by such
modification or amendment; but no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (a) change
the stated maturity of the principal of, or any installment of interest on, any
Note, (b) reduce the principal amount of or interest on, any Note, (c) change
the place or currency of payment of principal of or interest on, any Note, (d)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Note, (e) reduce the percentage in principal amount of
outstanding Notes, the consent of whose Holders is required for modification or
amendment of the Indenture, (f) reduce the percentage in principal amount of
outstanding Notes necessary for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults or (g) modify such provisions
with respect to modification and waiver. (Section 902)
The holders of at least a majority in principal amount of the
outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1011) The holders of a majority in
principal amount of the outstanding Notes may waive any past default under the
Indenture, except a default in the payment of principal or interest and certain
covenants and provisions of the Indenture which cannot be amended without the
consent of the holder of each outstanding Note affected. (Section 513)
DEFEASANCE AND DISCHARGE; COVENANT DEFEASANCE
The Company may elect, at its option at any time, to have the
provisions of Section 1102, relating to defeasance and discharge of
indebtedness, or Section 1103, relating to defeasance of certain restrictive
covenants in the Indenture, applied to the outstanding Notes. (Section 1101)
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Defeasance and Discharge. The Indenture provides that, upon the
Company's exercise of its option to have Section 1102 applied to the Notes, the
Company will be discharged from all its obligations with respect to the Notes
(except for certain obligations to exchange or register the transfer of Notes,
to replace stolen, lost or mutilated Notes, to maintain paying agencies and to
hold monies for payment in trust) upon the deposit in trust for the benefit of
the holders of the Notes of money or U.S. Government Obligations, or both,
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and interest on the Notes at maturity in accordance with the
terms of the Indenture and the Notes. Such defeasance or discharge may occur
only if, among other things, the Company has delivered to the Trustee an opinion
of counsel to the effect that the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling, or there has
been a change in tax law, in either case to the effect that holders of the Notes
will not recognize gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge were not to occur. (Sections
1102 and 1104)
Defeasance of Certain Covenants. The Indenture provides that, upon the
Company's exercise of its option to have Section 1103 applied to the Notes, the
Company may omit to comply with certain restrictive covenants, including those
described under "Covenants--Negative Pledge" and "--Restriction on Sale and
Leaseback Transactions" and in the last sentence under "Consolidation, Merger
and Sale of Assets," and the occurrence of certain Events of Default, which are
described above in clause (d) (with respect to such restrictive covenants) and
clause (e) under "Events of Default," will be deemed not to be or result in an
Event of Default, in each case with respect to the Notes. The Company, in order
to exercise such option, will be required to deposit, in trust for the benefit
of the holders of the Notes, money or U.S. Government Obligations, or both,
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and interest on the Notes at maturity in accordance with the
terms of the Indenture and the Notes. The Company will also be required, among
other things, to deliver to the Trustee an opinion of counsel to the effect that
holders of the Notes will not recognize gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such deposit and defeasance
were not to occur. In the event the Company exercises this option and the Notes
are declared due and payable because of the occurrence of any Event of Default,
the amount of money and U.S. Government Obligations so deposited in trust would
be sufficient to pay amounts due on the Notes at maturity but may not be
sufficient to pay amounts due on the Notes upon any acceleration resulting from
such Event of Default. In such case, the Company would remain liable for such
payments. (Sections 1103 and 1104)
REGARDING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
(Sections 601 and 603)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security
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or otherwise. The Trustee is permitted to engage in other transactions with the
Company or any affiliate of the Company; provided, however, that if it acquires
any conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. (Section 608)
The Trustee under the Indenture is also the Administrative Agent and a
lender under the Company's $600,000,000 Revolving Credit and Competitive Advance
Facility Agreement dated as of August 8, 1996, the Trustee with respect to the
Company's pension assets and the Issuing and Paying Agent with respect to the
Company's commercial paper program.
BOOK-ENTRY; DELIVERY AND FORM
The New Notes will be represented by one or more fully registered
global notes (collectively, the "Global Notes") and will be deposited upon
issuance with DTC and registered in the name of DTC or a nominee thereof.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("Participants") and to facilitate the clearance
and settlement of securities transactions, such as transfers and pledges, among
Participants in deposited securities through electronic book-entry charges to
accounts of its Participants, thereby eliminating the need for physical movement
of securities certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
("Direct Participants"). Certain of such Direct Participants (or other
representatives), together with other entities, own DTC. Access to the DTC
System is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Global Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Global Notes on
DTC's records. The ownership interest of each actual purchaser of each Global
Note (a "Beneficial Owner") is in turn to be recorded on the Direct
Participants' and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
Participant or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Global Notes are
to be accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Global Notes, except in the event that
use of the book-entry system for the Global Notes is discontinued.
To facilitate subsequent transfers, all Global Notes deposited with DTC
are registered in the name of DTC's nominee, Cede & Co. The deposit of Global
Notes with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Global Notes; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Global Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners
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will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time.
Principal and interest payments on the Global Notes will be made to DTC
by wire transfer of immediately available funds. DTC's practice is to credit
Direct Participants' accounts on the payable date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payment on the payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the Company, disbursement
of such payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
DTC may discontinue providing its services as securities depositary
with respect to the Global Notes at any time by giving reasonable notice to the
Company. Under such circumstances, in the event that a successor securities
depositary is not obtained, certificates for the Global Notes are required to be
printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
certificates representing the Global Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company believes to be reliable,
but the Company does not take responsibility for the accuracy thereof.
CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS
The exchange of Old Notes for New Notes should not be treated as a
taxable transaction for U.S. Federal income tax purposes because the New Notes
will not be considered to differ materially in kind or in extent from the Old
Notes. Rather, the New Notes received by a holder of Old Notes should be treated
as a continuation of such holder's investment in the Old Notes. As a result,
there should be no material U.S. Federal income tax consequences to holders
exchanging Old Notes for New Notes.
PERSONS CONSIDERING THE EXCHANGE OF THE OLD NOTES FOR NEW NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING UNDER
STATE, LOCAL, OR FOREIGN LAWS OF SUCH AN EXCHANGE.
49
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of any New Notes
received in exchange for Old Notes acquired by such broker-dealer as a result of
market-making or other trading activities. Each such broker-dealer that receives
New Notes for its own account in exchange for such Old Notes pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. For a period of up to 90 days after the
Expiration Date, the Company will make this Prospectus, as amended or
supplemented, available to any such broker-dealer that requests copies of this
Prospectus in the Letter of Transmittal for use in connection with any such
resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers or any other persons. New Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the New Notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes that
were received by it for its own account pursuant to the Exchange Offer in
exchange for Old Notes acquired by such broker-dealer as a result of
market-making or other trading activities and any broker-dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and, under
certain circumstances, will indemnify the holders of Old Notes (including any
broker-dealers), and certain parties related to such holders, against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF THE NEW NOTES
The validity of the New Notes will be passed upon for the Company by
Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements and related financial statement
schedule as of December 31, 1996 and 1995, and for each of the years in the
three-year period ended December 31, 1996, incorporated herein by reference,
have been incorporated herein in reliance on the report, which includes an
explanatory paragraph regarding changes in methods of accounting for
postemployment benefits, postretirement benefits other than pensions for its
foreign benefit plans, and internal systems development costs, of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
50
<PAGE>
AVON PRODUCTS, INC.
All tendered Old Notes, executed Letters of Transmittal, Notices of
Guaranteed Delivery, and other related documents should be directed to the
Exchange Agent. Any questions or requests for assistance or additional copies of
this Prospectus, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related documents should be directed to the Exchange Agent addressed
as set forth below. You may also contact your broker, dealer, commercial bank or
trust company or other nominee for assistance concerning the Exchange Offer.
By Mail or Hand/Overnight Delivery:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attn.: Global Trust Services
By Facsimile:
(212) 941-8161
Confirm by Telephone:
(212) 946-3083
(Originals of all documents submitted by
facsimile should be sent promptly by hand,
overnight courier or registered or certified mail.)
----------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS (OR INCORPORATED BY REFERENCE HEREIN) AND THE ACCOMPANYING
LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR
BOTH TOGETHER CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THE PROSPECTUS RELATES OR AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR THE LETTER OF TRANSMITTAL OR BOTH TOGETHER NOR
ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
----------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XII of the By-Laws of Avon Products, Inc. provides as follows:
Section 1. Indemnification--Third Party and Derivative Actions. (a) The
corporation shall indemnify any person made, or threatened to be made, a party
to an action or proceeding, whether civil or criminal (other than one by or in
the right of the corporation to procure a judgment in its favor), including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director, officer or employee of the corporation
served in any capacity at the request of the corporation, by reason of the fact
that he is or was a director or officer of the corporation, or is or was serving
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, including excise
taxes, amounts paid in settlement and expenses, including attorney's fees,
incurred in connection with any such action or proceeding, or any appeal
therein, provided that no indemnification may be made to or on behalf of such
person if a judgment or other final adjudication adverse to such person
establishes that (i) his acts were committed in bad faith or were the result of
his active or deliberate dishonesty and were material to such action or
proceeding or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
(b) The corporation shall indemnify any person made, or threatened to
be made, a party to an action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, or of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
expenses, including attorneys' fees, incurred in connection with such action, or
any appeal therein, provided that no indemnification may be made to or on behalf
of such person if (i) his acts were committed in bad faith or were the result of
his active and deliberate dishonesty and were material to such action or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
(c) The termination of any civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such person has
not met the standard of conduct set forth in this Section 1.
Section 2. Payment of Indemnification; Repayment. (a) A person who has
been successful, on the merits or otherwise, in the defense of a civil or
criminal action or proceeding of the character described in Section 1 of this
Article shall be entitled to indemnification as authorized in such Section.
(b) Any indemnification under Section 1 of this Article, unless ordered
by a court, shall be made by the corporation in such manner as provided by law.
(c) Expenses incurred by a person referred to in Section 1 of this
Article in defending a civil or criminal action or proceeding shall be paid by
the corporation in advance of the final disposition of such action or proceeding
upon receipt of an undertaking by or on behalf of such person to repay such
amount in case he is ultimately found, in accordance with this Article, not to
be entitled to
II-1
<PAGE>
indemnification or, where indemnity is granted, to the extent the expenses so
paid exceed the indemnification to which he is entitled.
(d) Any indemnification of a person under Section 1 of this Article, or
advancement of expenses under Section 2(c) of this Article, shall be made
promptly, and in any event within 60 days, upon the written request of such
person.
Section 3. Enforcement; Defenses. The right to indemnification or
advancement of expenses granted by this Article shall be enforceable by the
person in question in any court of competent jurisdiction if the corporation
denies such request, in whole or in part, or if no disposition thereof is made
within 60 days. Such person's expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim for the
advancement of expenses under Section 2(c) of this Article where the required
undertaking has been received by the corporation) that the claimant has not met
the standard of conduct set forth in Section 1 of this Article, but the burden
of proving such defense shall be on the corporation. Neither the failure of the
corporation to have made a determination that indemnification of the claimant is
proper, nor the fact that there has been an actual determination by the
corporation that indemnification of the claimant is not proper, shall be a
defense to the action or create a presumption that the claimant is not entitled
to indemnification.
Section 4. Survival; Savings Clause; Preservation of Other Rights. (a)
The foregoing indemnification provisions shall be deemed to be a contract
between the corporation and each person who serves in such capacity at any time
while these provisions as well as the relevant provisions of the New York
Business Corporation Law are in effect and any repeal or modification thereof
shall not affect any right or obligation then existing with respect to any state
of facts then or previously existing or any action or proceeding previously or
thereafter brought or threatened based in whole or in part upon any such state
of facts. Such a contract right may not be modified retroactively without the
consent of such person.
(b) If this Article or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each such person against judgments, fines, amounts paid
in settlement and expenses, including attorneys' fees, incurred in connection
with any actual or threatened action by or in the right of the corporation, or
any appeal therein, to the full extent permitted by any applicable portion of
this Article that shall not have been invalidated and to the full extent
permitted by applicable law.
(c) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of shareholders or directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer or employee of the corporation and shall inure to the benefit
of the heirs, executors and administrators of such a person. The corporation is
hereby authorized to provide further indemnification if it deems it advisable by
resolution of shareholders or directors, by amendment of these by-laws or by
agreement.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<S> <C>
1.1 Purchase Agreement, dated July 30, 1997, between Avon Products, Inc. and
Morgan Stanley & Co. Incorporated, Chase Securities Inc. and J.P. Morgan
Securities Inc.
4.1 Form of New Note (included in Exhibit 4.2)
4.2 Indenture dated as of August 1, 1997, between Avon
Products, Inc., as Issuer, and The Chase Manhattan Bank,
as Trustee, relating to the 6.55% Notes due 2007 of Avon
Products, Inc.
4.3+ First Supplemental Indenture dated as of December __, 1997, to the Indenture
4.4 Registration Rights Agreement, dated as of August 4, 1997, between Avon
Products, Inc. and Morgan Stanley & Co. Incorporated, Chase Securities Inc. and
J.P. Morgan Securities Inc.
5.1+ Opinion of Sullivan & Cromwell regarding the validity of the New Notes.
23.1+ Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included on the signature pages of this Registration Statement).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The
Chase Manhattan Bank, as Trustee.
99.1+ Form of Letter of Transmittal
99.2+ Form of Notice of Guaranteed Delivery
99.3+ Form of Exchange Agent Agreement
(b) Not applicable.
(c) Not applicable.
<FN>
- -------------------
+ To be filed by amendment.
</FN>
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is
II-3
<PAGE>
incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on this 1st day of December, 1997.
AVON PRODUCTS, INC.
By: /s/ Ward M. Miller, Jr.
-----------------------------
Ward M. Miller, Jr.
Senior Vice President,
General Counsel and Secretary
POWER OF ATTORNEY
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Ward M. Miller, Jr. with full power to
act without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, and for him and in his name, place and
stead, in any and all capacities (unless revoked in writing) to sign any and all
amendments (including post-effective amendments thereto) to this Registration
Statement to which this power of attorney is attached, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting to such attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby notifying and
confirming all that such attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ James E. Preston Chairman of the Board and December 1, 1997
- --------------------------
James E. Preston Chief Executive Officer
(principal executive officer)
/s/ Edwina D. Woodbury Executive Vice President and December 1, 1997
- --------------------------
Edwina D. Woodbury Chief Financial and
Administrative Officer
(principal financial officer)
/s/ Michael R. Mathieson Vice President and Controller December 1, 1997
- --------------------------
Michael R. Mathieson (principal accounting officer)
II-5
<PAGE>
/s/ Brenda C. Barnes Director December 1, 1997
- -------------------------------
Brenda C. Barnes
/s/ Richard S. Barton Director December 1, 1997
- -------------------------------
Richard S. Barton
/s/ Remedios Diaz Oliver Director December 1, 1997
- -------------------------------
Remedios Diaz Oliver
/s/ Edward T. Fogarty Director December 1, 1997
- -------------------------------
Edward T. Fogarty
/s/ Stanley C. Gault Director December 1, 1997
- -------------------------------
Stanley C. Gault
/s/ George V. Grune Director December 1, 1997
- -------------------------------
George V. Grune
Director December 1, 1997
- -------------------------------
Charles S. Locke
/s/ Ann S. Moore Director December 1, 1997
- -------------------------------
Ann S. Moore
Director December 1, 1997
- -------------------------------
Charles R. Perrin
/s/ Paula Stern Director December 1, 1997
- -------------------------------
Paula Stern
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
1.1 Purchase Agreement, dated July 30, 1997, between Avon Products,
Inc. and Morgan Stanley & Co. Incorporated, Chase Securities
Inc. and J.P. Morgan Securities Inc.
4.1 Form of New Note (included in Exhibit 4.2)
4.2 Indenture dated as of August 1, 1997, between Avon
Products, Inc., as Issuer, and The Chase Manhattan Bank,
as Trustee, relating to the 6.55% Notes due 2007 of Avon
Products, Inc.
4.3+ First Supplemental Indenture dated as of December __, 1997,
to the Indenture
4.4 Registration Rights Agreement, dated as of August 4, 1997,
between Avon Products, Inc. and Morgan Stanley & Co.
Incorporated, Chase Securities Inc. and J.P. Morgan Securities
Inc.
5.1+ Opinion of Sullivan & Cromwell regarding the validity of the New
Notes.
23.1+ Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included on the signature pages of this
Registration Statement).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939
on Form T-1 of The Chase Manhattan Bank, as Trustee.
99.1+ Form of Letter of Transmittal
99.2+ Form of Notice of Guaranteed Delivery
99.3+ Form of Exchange Agent Agreement
- ------------------
+ To be filed by amendment.
II-7
EXHIBIT 1.1
AVON PRODUCTS, INC.
6.55% NOTES DUE 2007
PURCHASE AGREEMENT
July 30, 1997
<PAGE>
July 30, 1997
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
J.P. Morgan Securities Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
AVON PRODUCTS, INC., a New York corporation (the "COMPANY"), proposes to
issue and sell to the several purchasers named in Schedule I hereto (the
"INITIAL PURCHASERS") $100,000,000 principal amount of its 6.55% Notes due 2007
(the "SECURITIES") to be issued pursuant to the provisions of an Indenture dated
as of August 1, 1997 (the "INDENTURE") between the Company and The Chase
Manhattan Bank, as Trustee (the "TRUSTEE").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act, in offshore transactions in reliance on
Regulation S under the Securities Act ("REGULATION S") and to institutional
accredited investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that deliver a letter in the form annexed to the Final
Memorandum (as defined below).
The Initial Purchasers and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement dated the Closing
Date (as defined in Section 4) between the Company and the Initial Purchasers,
substantially in the form attached hereto as Exhibit D (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed, among other things, to use
its reasonable best efforts to file a registration statement (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the Securities or the Exchange Securities (as defined in the
Registration Rights Agreement).
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and will
<PAGE>
prepare a final offering memorandum (the "FINAL MEMORANDUM" and, with the
Preliminary Memorandum, each a "MEMORANDUM") including or incorporating by
reference a description of the terms of the Securities, the terms of the
offering and a description of the Company. As used herein and, unless otherwise
stated, the term "MEMORANDUM" shall include in each case the documents
incorporated by reference therein. The terms "SUPPLEMENT", "AMENDMENT" and
"AMEND" as used herein with respect to a Memorandum shall include all documents
deemed to be incorporated by reference in the Preliminary Memorandum or Final
Memorandum that are filed subsequent to the date of such Memorandum with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
1. Representations and Warranties. The Company represents and warrants to,
and agrees with, you that:
(a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in either Memorandum complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder and
(ii) the Preliminary Memorandum does not contain and the Final Memorandum,
in the form used by the Initial Purchasers to confirm sales and on the
Closing Date, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in either Memorandum based upon
information furnished to the Company in writing by or on behalf of any
Initial Purchaser expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in each Memorandum and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
-2-
<PAGE>
(c) Each significant subsidiary* of the Company has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business in all
material respects as described in each Memorandum and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole; all of the issued
shares of capital stock of each significant subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and
non-assessable and, except for Avon Products Company Limited (Avon's
Japanese subsidiary), are owned directly by the Company, free and clear of
all liens, encumbrances, equities or claims.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) The Securities have been duly authorized and, when executed and
authenticated and delivered in accordance with the provisions of the
Indenture and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent transfer or
similar laws affecting creditors' rights generally and general principles
of equity, and the holders thereof will be entitled to the benefits of the
Indenture, pursuant to which such Securities are to be issued, and the
Registration Rights Agreement.
(f) Each of the Indenture and the Registration Rights Agreement has
been duly authorized, executed and delivered by, and, assuming due
authorization, execution and delivery by the Trustee (in the case of the
Indenture) and by the Initial Purchasers (in the case of the Registration
Rights Agreement), is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent transfer or similar laws
affecting creditors' rights generally and general principles of equity and
- --------
*A "significant subsidiary" is any subsidiary that
generates 5% or more of the Company's revenue or income or
that holds 5% or more of the Company's assets.
-3-
<PAGE>
except as rights to indemnification and contribution under the Registration
Rights Agreement may be limited under applicable law.
(g) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture and the Registration Rights Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws
of the Company or, except to the extent that any such contravention would
not have a material adverse effect on the Company and its subsidiaries,
taken as a whole, any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Indenture, and the Registration Rights Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities and by Federal and
state securities laws with respect to the Company's obligations under the
Registration Rights Agreement.
(h) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Final Memorandum.
(i) Each of the Company and its subsidiaries owns or possesses all
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, and trade names, in each case to the extent
disclosed in the Preliminary Memorandum and the Final Memorandum as being
material to the business of the Company and its subsidiaries, taken as a
whole, (collectively, the "INTELLECTUAL PROPERTY") to the extent required
by it for the employment thereof in connection with their businesses as
currently operated by them, and neither the Company nor, to the Company's
knowledge, any of its subsidiaries has received any written notice of
infringement of asserted rights of others with respect to any of the
Intellectual Property that if taken to a final judgment could have a
material adverse effect on the Company and its subsidiaries, taken as a
4
<PAGE>
whole. To the knowledge of the Company, the use of such Intellectual
Property in connection with the business and operations of the Company or
its subsidiaries does not infringe on the rights of any person.
(j) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject other than proceedings accurately
described in all material respects in each Memorandum and proceedings that
are not reasonably expected by the Company to have a material adverse
effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under this
Agreement, the Indenture, or the Registration Rights Agreement or to
consummate the transactions contemplated by the Final Memorandum.
(k) To the knowledge of the Company, the Company and its
subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(l) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(m) The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Final Memorandum, will not be an "investment company"
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as such term are defined in the Investment Company Act of 1940, as amended.
(n) Neither the Company nor, to the Company's knowledge, any
affiliate (as defined in Rule 501(b) of Regulation D under the Securities
Act, an "AFFILIATE") of the Company has directly, or through any agent, (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act) which is or
will be integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities or (ii)
engaged in any form of general solicitation or general advertising in
connection with the offering of the Securities (as those terms are used in
Regulation D under the Securities Act), or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(o) Neither the Company nor, to the Company's knowledge, its
Affiliates or any person acting on its or their behalf has engaged or will
engage in any directed selling efforts (within the meaning of Regulation S)
with respect to the Securities and the Company and its Affiliates and any
person acting on its or their behalf have complied and will comply with the
offering restrictions requirement of Regulation S, except that no
representation, warranty or agreement is made by the Company in this
paragraph with respect to the Initial Purchasers.
(p) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended.
(q) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Initial Purchasers, and each Initial Purchaser, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Securities set forth in
Schedule I hereto opposite its name at a purchase price of 99.103% of the
principal amount thereof (the "PURCHASE PRICE") plus accrued interest, if any,
to the Closing Date (as defined below).
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The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Initial Purchasers, it will not,
during the period beginning on the date hereof and continuing to and including
the Closing Date, offer, sell, contract to sell or otherwise dispose of any debt
of the Company or warrants to purchase debt of the Company substantially similar
to the Securities (other than the sale of the Securities under this Agreement).
3. Terms of Offering. You have advised the Company that the Initial
Purchasers will make an offering of the Securities purchased by the Initial
Purchasers hereunder on the terms to be set forth in the Final Memorandum, as
soon as practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Securities shall be made to the
Company in Federal or other funds immediately available in New York City against
delivery of such Securities for the respective accounts of the several Initial
Purchasers at 10:00 a.m., New York City time, on August 4, 1997, or at such
other time on the same or such other date, as shall be mutually agreed upon in
writing. The time and date of such payment are hereinafter referred to as the
"CLOSING DATE."
Certificates for the Securities shall be in definitive form or global form,
as specified by you, and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date. The certificates evidencing the Securities shall be delivered to
you on the Closing Date for the respective accounts of the several Initial
Purchasers, with any transfer taxes payable in connection with the transfer of
the Securities to the Initial Purchasers duly paid, against payment of the
Purchase Price therefor plus accrued interest, if any, to the date of payment
and delivery.
5. Conditions to the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase and pay for the Securities on
the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded the Company
or any of the Company's securities by any
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"nationally recognized statistical rating organization," as such
term is defined for purposes of Rule 436(g)(2) under the Securities
Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that set
forth in the Final Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that,
in your judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Securities on the terms and in
the manner contemplated in the Final Memorandum.
(b) The Initial Purchasers shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an officer of the Company
reasonably satisfactory to the Initial Purchasers, to the effect set forth
in Section 5(a)(i) and to the effect that the representations and
warranties of the Company contained in this Agreement are true and correct
as of the Closing Date (as if made on the Closing Date) and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Initial Purchasers shall have received on the Closing Date
an opinion of Sullivan & Cromwell, outside counsel for the Company, dated
the Closing Date, to the effect set forth in Exhibit A. Such opinion shall
be rendered to the Initial Purchasers at the request of the Company and
shall so state therein.
(d) The Initial Purchasers shall have received on the Closing Date
an opinion from the General Counsel of the Company, dated the Closing Date,
to the effect set forth in Exhibit B. Such opinion shall be rendered to the
Initial Purchasers at the request of the Company and shall so state
therein.
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Initial Purchasers,
dated the Closing Date, to the effect set forth in Exhibit C.
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(f) The Initial Purchasers shall have received on the Closing Date a
letter, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, from Coopers & Lybrand L.L.P.,
independent public accountants, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in or incorporated by reference into each Memorandum;
provided that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
6. Covenants of the Company. In further consideration of the agreements of
the Initial Purchasers contained in this Agreement, the Company covenants with
each Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date
of this Agreement and during the period mentioned in Section 6(c), as many
copies of the Final Memorandum, any documents incorporated by reference
therein (excluding the Exhibits thereto) and any supplements and amendments
thereto as you may reasonably request.
(b) Before amending or supplementing (other than through the filing
of periodic reports under the Exchange Act that are to be incorporated by
reference in such Memorandum) either Memorandum, to furnish to you a copy
of each such proposed amendment or supplement and not to use any such
proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Initial
Purchasers, any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Final Memorandum in order to
make the statements therein, in the light of the circumstances when the
Final Memorandum is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Initial Purchasers, it is necessary to amend or
supplement the Final Memorandum to comply with applicable law, forthwith to
prepare and furnish, at its own expense, to the Initial Purchasers, either
amendments or supplements to the Final Memorandum so that the statements in
the Final Memorandum as so amended or supplemented will not, in the light
of the circumstances when the Final Memorandum is delivered to a purchaser,
be misleading or so that the
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<PAGE>
Final Memorandum, as amended or supplemented, will comply with applicable
law.
(d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
issuance and sale of the Securities and all other fees or expenses
(excluding fees or expenses of the Initial Purchasers' counsel) in
connection with the preparation of each Memorandum and all amendments and
supplements thereto, including all printing costs associated therewith, and
the delivering of copies thereof to the Initial Purchasers, in the
quantities herein above specified, (ii) all costs and expenses related to
the transfer and delivery of the Securities to the Initial Purchasers,
including any transfer or other taxes payable thereon, (iii) the cost of
printing or producing any Blue Sky or legal investment memorandum in
connection with the offer and sale of the Securities under state securities
laws and all expenses in connection with the qualification of the
Securities for offer and sale under state securities laws as provided in
Section 6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchasers in connection with such
qualification and in connection with the Blue Sky or legal investment
memorandum, (iv) any fees charged by rating agencies for the rating of the
Securities, (v) all document production charges and expenses of counsel to
the Initial Purchasers (but not including their fees for professional
services) in connection with the preparation of this Agreement, (vi) the
costs and charges of the Trustee and any transfer agent, registrar or
depositary, (vii) the cost of the preparation, issuance and delivery of the
Securities, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Securities, including, without limitation,
expenses associated with the production of road show slides and graphics,
fees and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with
the road show, and (ix) all other cost and expenses incident to the
performance
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<PAGE>
of the obligations of the Company hereunder for which provision is not
otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 8, and the last paragraph of Section 10,
the Initial Purchasers will pay all of their costs and expenses, including
fees and disbursements of their counsel, transfer taxes payable on resale
of any of the Securities by them and any advertising expenses connected
with any offers they may make.
(f) Except as contemplated by the Registration Rights Agreement, not
to sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) reasonably
likely to be integrated with the sale of the Securities under the rules and
interpretations of the Commission in a manner which would require the
registration under the Securities Act of the Securities.
(g) Except as contemplated by the Registration Rights Agreement, not
to solicit any offer to buy or offer or sell the Securities by means of any
form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
(h) While any of the Securities remain "restricted securities"
within the meaning of the Securities Act, to make available, upon request,
to any seller of such Securities the information specified in Rule
144A(d)(4) under the Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(i) Not to engage and not to permit its Affiliates or any person
acting on its or their behalf (other than the Initial Purchasers) to engage
in any directed selling efforts (as that term is defined in Regulation S)
with respect to the Securities, and the Company and its Affiliates and each
person acting on its or their behalf (other than the Initial Purchasers)
will comply with the offering restrictions requirement of Regulation S.
(j) During the period of two years after the Closing Date, not to
resell and not to permit any of its affiliates (as defined in Rule 144A
under the Securities Act), to resell any of the Securities which constitute
"restricted securities" under Rule 144A that have been reacquired by any of
them.
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7. Offering of Securities; Restrictions on Transfer. (a) Each Initial
Purchaser, severally and not jointly, represents, warrants, and agrees that such
Initial Purchaser is a qualified institutional buyer as defined in Rule 144A
under the Securities Act (a "QIB"). Each Initial Purchaser, severally and not
jointly, agrees with the Company that (i) it will not solicit offers for, or
offer or sell, such Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Securities only
from, and will offer such Securities only to, persons that it reasonably
believes to be (A) in the case of offers inside the United States, (1) QIBs or
(2) other institutional accredited investors (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) ("INSTITUTIONAL ACCREDITED INVESTORS")
that, prior to their purchase of the Securities, deliver to such Initial
Purchaser a letter containing the representations and agreements set forth in
Appendix A to the Memorandum and (B) in the case of offers outside the United
States, to persons other than U.S. persons ("FOREIGN PURCHASERS," which term
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than an
estate or trust)) in reliance upon Regulation S under the Securities Act that,
in each case, in purchasing such Securities are deemed to have represented and
agreed as provided in the Final Memorandum under the caption "Transfer
Restrictions".
(b) Each Initial Purchaser, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) such Initial Purchaser understands that no action has been or
will be taken in any jurisdiction by the Company that would permit a public
offering of the Securities, or possession or distribution of either
Memorandum or any other offering or publicity material relating to the
Securities, in any country or jurisdiction where action for that purpose is
required;
(ii) such Initial Purchaser will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Securities or has in its possession or distributes either
Memorandum or any such other material, in all cases at its own expense;
(iii) the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Rule
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<PAGE>
144A or Regulation S under the Securities Act or pursuant to another
exemption from the registration requirements of the Securities Act;
(iv) such Initial Purchaser has offered the Securities and will
offer and sell the Securities (A) as part of their distribution at any time
and (B) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 of
Regulation S or as otherwise permitted in Section 7(a) hereof; accordingly,
neither such Initial Purchaser, its Affiliates nor any persons acting on
its or their behalf have engaged or will engage in any directed selling
efforts (within the meaning of Regulation S) with respect to the
Securities, and any such Initial Purchaser, its Affiliates and any such
persons have complied and will comply with the offering restrictions
requirement of Regulation S; and
(v) such Initial Purchaser agrees that, at or prior to confirmation
of sales of the Securities, it will have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the offering
and the closing date, except in either case in accordance with Regulation S
(or Rule 144A if available) under the Securities Act. Terms used above have
the meaning given to them by Regulation S."
Terms used in this Section 7(b) have the meanings given to them by Regulation S.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and hold
harmless each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in either Memorandum (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
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<PAGE>
necessary to make the statements therein in the light of the circumstances under
which they were made not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished to the
Company in writing by or on behalf of any Initial Purchaser expressly for use
therein.
(b) Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Initial Purchaser, but only with
reference to information furnished to the Company in writing by or on behalf of
any Initial Purchaser expressly for use in either Memorandum or any amendments
or supplements thereto.
(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY") shall
promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicting interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be
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a final judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or 8(b)
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company on the one hand and of the Initial Purchasers on
the other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand in connection with the
offering of the Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Securities (before
deducting expenses, but after deduction of the discounts and commissions
received by the Initial Purchasers) received by the Company and the total
discounts and commissions received by the Initial Purchasers, in each case as
set forth in the Final Memorandum, bear to the aggregate offering price of the
Securities. The relative fault of the Company on the one hand and of the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue
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statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 8 are
several in proportion to the respective principal amount of Securities they have
purchased hereunder, and not joint.
(e) The Company and the Initial Purchasers agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities resold by it in the initial
placement of such Securities were offered to investors exceeds the amount of any
damages that such Initial Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this Section 8
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Initial Purchaser or any person controlling any Initial
Purchaser or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Securities.
9. Termination. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
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York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses
9(a)(i) through 9(a)(iv), such event, singly or together with any other such
event, makes it, in your judgment, impracticable to market the Securities on the
terms and in the manner contemplated in the Final Memorandum.
10. Effectiveness; Defaulting Initial Purchasers. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities that it or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Securities which
such defaulting Initial Purchaser or Initial Purchasers agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal amount
of Securities to be purchased on such date, the other Initial Purchasers shall
be obligated severally in the proportions that the principal amount of
Securities set forth opposite their respective names in Schedule I bears to the
aggregate principal amount of Securities set forth opposite the names of all
such non-defaulting Initial Purchasers, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date;
provided that in no event shall the principal amount of Securities that any
Initial Purchaser has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Securities
with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Initial Purchaser
or of the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Final Memorandum or in any
other documents or arrangements may be effected. Any
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action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of such Initial Purchaser
under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
18
<PAGE>
Very truly yours,
AVON PRODUCTS, INC.
By:
-----------------------------------
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
J.P. Morgan Securities Inc.
Acting severally on behalf of themselves and
the several Initial Purchasers named in
Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:
-------------------------------------------
Name:
Title:
19
<PAGE>
SCHEDULE I
$100,000,000
OF
SECURITIES TO BE
INITIAL PURCHASER PURCHASED
- ----------------- -----------------
Morgan Stanley & Co. Incorporated $ 33,334,000
Chase Securities Inc. 33,333,000
J.P. Morgan Securities Inc. 33,333,000
------------------
Total:......................................$100,000,000
============
I-1
<PAGE>
EXHIBIT A
Opinion of Counsel
for the Company
The opinion of the counsel for the Company, to be delivered pursuant to
Section 5(c) of the Purchase Agreement shall be to the effect that:
(A) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of New York, has the
corporate power and authority to own its property and to conduct its business as
described in the Final Memorandum.
(B) Each significant subsidiary** of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Final Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole;
all of the issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable,
and are owned directly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(C) The Purchase Agreement has been duly authorized, executed and delivered
by the Company.
(D) The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general
- --------
** A "significant subsidiary" is any subsidiary that generates 5% or more of
the Company's revenue or income or that holds 5% or more of the Company's
assets.
A-1
<PAGE>
principles of equity, and will be entitled to the benefits of the Indenture and
the Registration Rights Agreement pursuant to which such Securities are to be
issued.
(E) Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity; provided that we give no opinion as to Section __
of the Registration Rights Agreement.
(F) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Purchase Agreement, the Indenture and
the Registration Rights Agreement will not contravene any provision of
applicable law or the certificate of incorporation or by-laws of the Company and
no consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under the Purchase Agreement, the Indenture and the Registration
Rights Agreement, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Securities and by Federal and state securities laws with respect to the
Company's obligations under the Registration Rights Agreement.
(G) The Company is not, and after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Final Memorandum, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(H) The statements in the Final Memorandum under the captions "Description
of the Notes", "Private Placement" and "Transfer Restrictions" and in "Item 3 -
Legal Proceedings" of the Company's most recent annual report on Form 10-K,
insofar as such statements constitute summaries of the documents or proceedings
referred to therein, fairly summarize the matters referred to therein.
(I) The statements in the Final Memorandum under the caption "Certain
Federal Income Tax Considerations," insofar as such statements constitute a
summary of the United States federal tax laws referred to therein, are accurate
and fairly summarize in all material respects the United States federal tax laws
referred to therein.
(J) Such counsel (i) is of the opinion that each document incorporated by
reference in the Final Memorandum (except for financial statements and schedules
and other financial and statistical data included therein as to which such
A-2
<PAGE>
counsel need not express any opinion), complied as to form when filed with the
Commission in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder and (ii) has no reason to believe that
(except for financial statements and schedules and other financial and
statistical data as to which such counsel need not express any belief) the Final
Memorandum when issued contained, or as of the date such opinion is delivered
contains, any untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(K) Based upon the representations, warranties and agreements of the
Company in Sections 1(m), 1(n), 1(p), 6(f), 6(g) and 6(j) of the Purchase
Agreement and of the Initial Purchasers in Section 7 of the Purchase Agreement,
it is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers under the Purchase Agreement or in
connection with the initial resale of such Securities by the Initial Purchasers
in accordance with Section 7 of the Purchase Agreement to register the
Securities under the Securities Act of 1933 or to qualify the Indenture under
the Trust Indenture Act of 1939, it being understood that no opinion is
expressed as to any subsequent resale of any Security.
With respect to paragraph (J) above, counsel may state that his or her
opinion and belief are based upon his or her participation in the preparation of
the Final Memorandum (and any amendments or supplements thereto) and review and
discussion of the contents thereof and review of the documents incorporated by
reference therein, but are without independent check or verification except as
specified.
A-3
<PAGE>
EXHIBIT B
Opinion of General Counsel
The opinion of the General Counsel of the Company, to be delivered
pursuant to Section 5(d) of the Purchase Agreement shall be to the effect that:
(A) The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
(B) Each significant subsidiary*** of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Final Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole;
all of the issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable,
and are owned directly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(C) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Purchase Agreement, the Indenture and
the Registration Rights Agreement will not contravene any provision of
applicable law or the certificate of incorporation or by-laws of the Company or
any agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken as a
whole, or, any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary.
(D) Each of the Company and its subsidiaries owns or possesses all
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade
- --------
*** A "significant subsidiary" is any subsidiary that generates 5% or more
of the Company's revenue or income or that holds 5% or more of the Company's
assets.
A-4
<PAGE>
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, and trade names,
in each case to the extent disclosed in the Preliminary Memorandum and the Final
Memorandum as being material to the business of the Company or its subsidiaries
(collectively, the "Intellectual Property") to the extent currently employed by
it in connection with the businesses now operated by them, and neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of the
Intellectual Property. To the knowledge of the Company, the use of such
Intellectual Property in connection with the business and operations of the
Company or its subsidiaries does not infringe on the rights of any person.
(E) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject other than proceedings fairly summarized in
all material respects in the Final Memorandum and proceedings which such counsel
believes are not likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the power or ability of the Company to
perform its obligations under the Purchase Agreement, the Indenture or the
Registration Rights Agreement or to consummate the transactions contemplated by
the Final Memorandum.
A-5
<PAGE>
EXHIBIT C
Opinion of Davis Polk & Wardwell
The opinion of Davis Polk & Wardwell to be delivered pursuant to Section
5(e) of the Purchase Agreement shall be to the effect that:
(A) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(B) The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity, and will be entitled to the benefits of the
Indenture and the Registration Rights Agreement pursuant to which such
Securities are to be issued.
(C) Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity and except as rights to indemnification and
contribution under the Registration Rights Agreement may be limited under
applicable law.
(D) The statements in the Final Memorandum under the captions "Description
of the Notes", "Private Placement" and "Transfer Restrictions", insofar as such
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein.
(E) Such counsel has no reason to believe that (except for the
incorporated documents, the financial statements and schedules, and other
financial and statistical data as to which such counsel need not express any
belief) the Final Memorandum when issued contained, or as of the date such
opinion is delivered contains, any untrue statement of a material fact or
omitted or omits to
B-1
<PAGE>
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(F) Based upon the representations, warranties and agreements of the
Company in Sections 1(m), 1(n), 1(p), 6(f), 6(g) and 6(j) of the Purchase
Agreement and of the Initial Purchasers in Section 7 of the Purchase Agreement,
it is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers under the Purchase Agreement or in
connection with the initial resale of such Securities by the Initial Purchasers
in accordance with Section 7 of the Purchase Agreement to register the
Securities under the Securities Act of 1933 or to qualify the Indenture under
the Trust Indenture Act of 1939, it being understood that no opinion is
expressed as to any subsequent resale of any Security.
With respect to paragraph (E) above, Davis Polk & Wardwell may state that
their opinion and belief are based upon their participation in the preparation
of the Final Memorandum (and any amendments or supplements thereto) and review
and discussion of the contents thereof (including the review of, but not
participation in the preparation of, the incorporated documents), but are
without independent check or verification except as specified.
B-2
<PAGE>
EXHIBIT D
Registration Rights Agreement
D-1
EXHIBIT 4.2
- -------------------------------------------------------------------------------
AVON PRODUCTS, INC.
as Issuer
TO
THE CHASE MANHATTAN BANK
Trustee
---------------------------
Indenture
Dated as of August 1, 1997
---------------------------
$100,000,000
6.55% Notes due 2007
- -------------------------------------------------------------------------------
<PAGE>
.....................................
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
ss. 310(a)(1) .......................... 609
(a)(2) .......................... 609
(a)(3) .......................... Not Applicable
(a)(4) .......................... Not Applicable
(b) .......................... 608
610
ss. 311(a) .......................... 613
(b) .......................... 613
ss. 312(a) .......................... 701
702(a)
(b) .......................... 702(b)
(c) .......................... 702(c)
ss. 313(a) .......................... 703(a)
(b) .......................... 703(a)
(c) .......................... 703(a)
(d) .......................... 703(b)
ss. 314(a) .......................... 704
(b) .......................... Not Applicable
(c)(1) .......................... 102
(c)(2) .......................... 102
(c)(3) .......................... Not Applicable
(d) .......................... Not Applicable
(e) .......................... 102
ss. 315(a) .......................... 601
(b) .......................... 602
(c) .......................... 601
(d) .......................... 601
(e) .......................... 514
ss. 316(a)(1)(A) .......................... 512
(a)(1)(B) .......................... 513
(a)(2) .......................... Not Applicable
(b) .......................... 508
(c) .......................... 104(c)
- -----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE>
ss. 317(a)(1) .......................... 503
(a)(2) .......................... 504
(b) .......................... 1003
ss. 318(a) .......................... 107
- -----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
-iii-
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions........................................1
SECTION 102. Compliance Certificates and Opinions...............9
SECTION 103. Form of Documents Delivered to Trustee............10
SECTION 104. Acts of Holders; Record Dates.....................11
SECTION 105. Notices, Etc., to Trustee and Company.............12
SECTION 106. Notice to Holders; Waiver.........................12
SECTION 107. Conflict with Trust Indenture Act.................12
SECTION 108. Effect of Headings and Table of Contents..........13
SECTION 109. Successors and Assigns............................13
SECTION 110. Separability Clause...............................13
SECTION 111. Benefits of Indenture.............................13
SECTION 112. Governing Law.....................................13
SECTION 113. Legal Holidays....................................13
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally...................................14
SECTION 202. Form of Face of Security..........................14
SECTION 203. Form of Reverse of Security.......................17
SECTION 204. Form of Trustee's Certificate of Authentication...21
SECTION 205. Legend on Restricted Securities...................21
ARTICLE THREE
The Securities
SECTION 301. Title and Terms...................................22
SECTION 302. Denominations.....................................22
SECTION 303. Execution, Authentication, Delivery and Dating....23
SECTION 304. Temporary Securities..............................23
SECTION 305. Registration; Registration of Transfer and
Exchange; Restrictions on Transfer................24
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..25
SECTION 307. Payment of Interest; Interest Rights Preserved....26
SECTION 308. Persons Deemed Owners.............................27
SECTION 309. Book-Entry Provisions for Global Securities.......27
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iv-
<PAGE>
SECTION 310. Cancellation......................................29
SECTION 311. Computation of Interest...........................29
SECTION 312. Special Transfer Provisions.......................29
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture...........31
SECTION 402. Application of Trust Money........................32
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.................................32
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.........................................34
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee............................35
SECTION 504. Trustee May File Proofs of Claim..................36
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities.....................................36
SECTION 506. Application of Money Collected....................36
SECTION 507. Limitation on Suits...............................37
SECTION 508. Unconditional Right of Holders to Receive
Principal and Interest..........................37
SECTION 509. Restoration of Rights and Remedies................38
SECTION 510. Rights and Remedies Cumulative....................38
SECTION 511. Delay or Omission Not Waiver......................38
SECTION 512. Control by Holders................................38
SECTION 513. Waiver of Past Defaults...........................39
SECTION 514. Undertaking for Costs.............................39
SECTION 515. Waiver of Stay or Extension Laws..................39
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities...............40
SECTION 602. Notice of Defaults................................40
SECTION 603. Certain Rights of Trustee.........................40
SECTION 604. Not Responsible for Recitals......................41
SECTION 605. May Hold Securities...............................41
SECTION 606. Money Held in Trust...............................42
SECTION 607. Compensation and Reimbursement....................42
SECTION 608. Disqualification; Conflicting Interests...........42
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE>
SECTION 609. Corporate Trustee Required; Eligibility...........42
SECTION 610. Resignation and Removal; Appointment of
Successor.........................................43
SECTION 611. Acceptance of Appointment by Successor............44
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business............................44
SECTION 613. Preferential Collection of Claims Against Company.45
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders..............................45
SECTION 702. Preservation of Information; Communications
to Holders........................................45
SECTION 703. Reports by Trustee................................46
SECTION 704. Reports by Company................................46
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms.....................................46
SECTION 802. Successor Substituted.............................47
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
Holders...........................................47
SECTION 902. Supplemental Indentures with Consent of Holders...48
SECTION 903. Execution of Supplemental Indentures..............49
SECTION 904. Effect of Supplemental Indentures.................49
SECTION 905. Conformity with Trust Indenture Act...............49
SECTION 906. Reference in Securities to Supplemental
Indentures........................................49
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal and Interest....................50
SECTION 1002. Maintenance of Office or Agency......................50
SECTION 1003. Money for Security Payments to Be Held in Trust......50
SECTION 1004. Statement by Officers as to Default..................51
SECTION 1005. Existence............................................51
SECTION 1006. Liens................................................52
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-vi-
<PAGE>
SECTION 1007. Limitation on Restricted Sale/Leaseback Transactions.52
SECTION 1008. Reports and Delivery of Certain Information..........52
SECTION 1009. Resale of Certain Securities.........................53
SECTION 1010. BookEntry System.....................................53
SECTION 1011. Waiver of Certain Covenants..........................53
ARTICLE ELEVEN
Defeasance and Covenant Defeasance
SECTION 1101. Company's Option to Effect Defeasance or Covenant
Defeasance...........................................53
SECTION 1102. Defeasance and Discharge.............................53
SECTION 1103. Covenant Defeasance..................................54
SECTION 1104. Conditions to Defeasance or Covenant Defeasance......54
SECTION 1105. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions........56
SECTION 1106. Reinstatement........................................57
EXHIBIT A - Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
EXHIBIT B - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
- -----------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-vii-
<PAGE>
INDENTURE, dated as of August 1, 1997, between AVON PRODUCTS, INC., a
corporation duly organized and existing under the laws of the State of New York,
as Issuer (herein called the "Company"), having its principal office at 1345
Avenue of the Americas, New York, New York 10105-0196, and THE CHASE MANHATTAN
BANK, a banking corporation duly organized under the laws of the State of New
York, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 6.55%
Notes due 2007 (herein called the "Securities," which term includes Exchange
Securities as defined in Section 101) of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
-1-
<PAGE>
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Attributable Debt", in respect to any Sale/Leaseback Transaction,
means, as of any time of determination, the present value (discounted at the
rate per annum equal to the rate of interest implicit in the lease involved in
such Sale/Leaseback Transaction, as determined in good faith by the Company) of
the obligation of the lessee thereunder for rental payments (excluding, however,
any amounts required to be paid by such lessee, whether or not designated as
rent or additional rent, on account of maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges or any amounts required to be
paid by such lessee thereunder contingent upon the amount of sales or similar
contingent awards) during the remaining term of such lease (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended). In the case of any lease which is terminable by the lessee upon the
payment of a penalty, such rental payments shall also include the amount of such
penalty, but no rental payments shall be considered as required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
"Board of Directors" means, with respect to any Person, either the
board of directors of such Person or any duly authorized committee of that
board.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law, regulation or executive order to close.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this
-2-
<PAGE>
instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or any Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Consolidated Net Tangible Assets" means (a) the total amount of assets
(less applicable reserves and other properly deductible items) which under GAAP
would be included on the most recent audited annual consolidated balance sheet
of the Company and its consolidated Subsidiaries after deducting therefrom,
without duplication, the sum of (i) all current liabilities and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, which in each case under GAAP would be
included on such consolidated balance sheet.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 450 West 33rd Street, New York 10001-2697, Attention: Global Trust
Services.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Credit Agreement" means the Amended and Restated $600,000,000
Revolving Credit and Competitive Advance Facility Agreement, dated as of August
8, 1996, among the Company, Avon Capital Corporation, the Lenders and Co-Agents
named therein and The Chase Manhattan Bank, as Administrative Agent.
"Default" means any event that is or with the passage of time or the
giving of notice or both would become an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1102.
"Depositary" means The Depository Trust Company until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" shall mean such successor Depositary.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning specified in Section 501.
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"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means an exchange offer pursuant to a registration
statement under the Securities Act, registering securities substantially
identical to the Securities, as provided by the Registration Rights Agreement.
"Exchange Security" means any security issued by the Company (i)
pursuant to the Exchange Offer, (ii) upon the registration of transfer of a
Security registered for resale on a Resale Registration Statement or (iii) upon
the registration of transfer of, or in exchange for, Securities which are
Exchange Securities.
"GAAP" means 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 entity as have been approved by a significant segment of the accounting
profession, in each case, as in effect in the United States on the date hereof.
"Global Security" means any Security in global form registered in the
Security Register in the name of a Depositary or a nominee thereof.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"IAI Security" has the meaning specified in Section 201.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of (i) borrowed money
evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness
secured by a mortgage, pledge, lien, charge, encumbrance of any security
interest existing on property owned by such Person, (iii) the reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance that constitutes an accrued
expense or trade payable or (iv) any lease of property by such Person as lessee
which is reflected in such Person's consolidated balance sheet as a capitalized
lease in accordance with GAAP, in the case of items of Indebtedness under (i)
through (iii) above to the extent that any such items (other than letters of
credit) would appear as a liability on such Person's consolidated balance sheet
in accordance with GAAP, and also includes, to the extent not otherwise
included, any obligation by such Person to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the ordinary
course of business), Indebtedness of another Person.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated, Chase
Securities Inc. and J.P. Morgan Securities Inc.
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"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Securities.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans,
advances or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
"Issue Date" means the date the Securities are originally issued under
this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration or otherwise.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined
in Regulation S.
"Offering Memorandum" means the Offering Memorandum dated July 30,
1997, offering Securities for sale as provided therein.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or any Vice President,
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Offshore Global Securities" has the meaning specified in Section 201.
"Offshore Physical Securities" has the meaning specified in Section
201.
"Opinion of Counsel" means a written opinion of counsel, who may be
(external or in-house) counsel for the Company, and who shall be acceptable to
the Trustee.
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"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other
than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders
of such Securities; and
(iii) Securities which have been paid or in exchange for or in lieu of
which other Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company. The Trustee
shall initially be the Paying Agent.
"Permitted Liens" means any of the following: (a) Liens on any
Principal Property acquired by the Company or a Subsidiary after the date of
this Indenture to secure or provide for the payment or financing of all or any
part of the purchase price thereof or construction of fixed improvements thereon
(prior to, at the time of or within 180 days after the latest of the
acquisition, completion of construction or commencement of commercial operation
thereof); (b) Liens on any shares of stock or Principal Property acquired by the
Company or a Subsidiary after the date of this Indenture existing at the time of
such acquisition; (c) Liens on any shares of stock or Principal Property of a
corporation which is merged into or consolidated with the Company or a
Subsidiary or substantially all of the assets of which are acquired by the
Company or a Subsidiary; (d) Liens securing Indebtedness of a Subsidiary owing
to the Company or another Subsidiary; (e) Liens existing on the date of this
Indenture; (f) Liens on any Principal Property being constructed or improved
securing loans to finance such construction or improvements; (g) Liens in favor
of governmental bodies of the United States or any State thereof or any other
country or
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political subdivision thereof to secure partial, progress or advance payments
pursuant to any contract or statute, or to secure any Indebtedness incurred or
guaranteed for the purpose of financing all or any part of the cost of
acquiring, constructing or improving the property subject to such Liens; (h)
Liens securing taxes, assessments or governmental charges or levies not yet
delinquent, or already delinquent but the validity of which is being contested
in good faith; (i) Liens arising by reason of deposits necessary to qualify the
Company or any Subsidiary to conduct business, maintain self-insurance, or
obtain the benefit of, or comply with, any law; and (j) extensions, renewals or
replacement of Liens referred to in the foregoing clauses provided that the
Indebtedness secured is not increased nor the Lien extended to any additional
assets.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Securities" has the meaning specified in Section 201.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Principal Property" means any manufacturing plant, testing or research
and development facility, distribution facility, processing plant or warehouse
(including, without limitation, land, fixtures and equipment), owned or leased
by the Company or any Subsidiary (including any of the foregoing acquired or
leased after the date of this Indenture) and located within the United States of
America, its territories and possessions, unless the Board of Directors of the
Company determines in good faith that such plant or facility is not of material
importance to the total business conducted by the Company and its consolidated
Subsidiaries.
"Purchase Agreement" means the Purchase Agreement entered into by the
Company and the Initial Purchasers in connection with the sale of the
Securities.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 4, 1997, between the Company and the Initial
Purchasers, for the benefit of themselves and the Holders, as the same may be
amended or modified from time to time in accordance with the terms thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 15 or July 15 (whether or not a Business Day), as the
case may be, immediately preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
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"Resale Registration Statement" means a registration statement under
the Securities Act registering the Securities for resale pursuant to the terms
of the Registration Rights Agreement.
"Responsible Officer" means any officer of the Trustee within the
Corporate Trust Office of the Trustee including any vice president, assistant
vice president, secretary, assistant secretary or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also, with respect to a particular matter, any
other officer of the Trustee to whom such matter is referred because of such
officer's knowledge and familiarity with the particular subject.
"Restricted Global Security" means a Global Security representing
Restricted Securities.
"Restricted Sale/Leaseback Transaction" means any Sale/Leaseback
Transaction entered into by the Company or any Subsidiary after the date of this
Indenture, except: (i) Sale/Leaseback Transactions entered into by and between
the Company or a Subsidiary and/or one or more Subsidiaries of the Company; (ii)
Sale/Leaseback Transactions as to which, during the period commencing 60 days
prior to and ending 120 days after entering into such Sale/Leaseback
Transaction, the Company or a Subsidiary applies an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction to the
acquisition, directly or indirectly and in whole or in part, of one or more
Principal Properties or to the retirement of long-term Indebtedness (other than
mandatory prepayment or retirement) of the Company or any Subsidiary; and (iii)
Sale/Leaseback Transactions involving the taking back of a lease for a period of
three years or less.
"Restricted Securities" has the meaning specified in Section 205.
"Rule 144" means Rule 144 under the Securities Act (including any
successor rule thereto), as the same may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor rule thereto), as the same may be amended from time to time.
"Sale/Leaseback Transaction" means any arrangement, directly or
indirectly, with any Person whereby the Company or any Subsidiary shall sell or
transfer any Principal Property whether now owned or hereafter acquired, and
then or thereafter rent or lease as lessee such Principal Property or any part
thereof which the Company or such Subsidiary, as the case may be, intends to use
for substantially the same purpose as the Principal Property being sold or
transferred.
"Secured Debt" has the meaning specified in Section 1006.
"Securities" has the meaning specified in the first paragraph of the
Recitals of the Company.
"Securities Act" means the U.S. Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
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"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to the Securities or any
instalment of interest thereon, means the date specified in the Securities as
the fixed date on which the principal thereof or such instalment of interest is
due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Global Security" means a Global Security representing
Securities which are not Restricted Securities.
"U.S. Global Securities" has the meaning specified in Section 201.
"U.S. Government Obligation" has the meaning specified in Section 1104.
"U.S. Physical Securities" has the meaning specified in Section 201.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
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Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to enable
such individual to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be. With regard to any
record date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
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SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at 450 West 33rd Street, New York, New York 10001, Attention: Global
Trust Services, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company, Attention: Treasurer.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
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SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date or Stated Maturity of any
Security shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or of the Securities) payment of interest or principal need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date or at the
Stated Maturity, provided that no interest shall accrue with respect to such
payment for the period from and after such Interest Payment Date or Stated
Maturity, as the case may be.
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ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or Depositary
therefor, the Internal Revenue Code of 1986, as amended, and regulations
thereunder, or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution thereof.
Securities offered and sold in reliance on Rule 144A shall be issued in
the form of permanent U.S. Global Securities in registered form in substantially
the form set forth in this Article (the "U.S. Global Securities"). Securities
offered and sold in offshore transactions in reliance on Regulation S shall be
issued, subject to certain exceptions, in the form of permanent Global
Securities in registered form in substantially the form set forth in this
Article (the "Offshore Global Securities"). The aggregate principal amount of
the Global Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
as hereinafter provided.
Securities offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph, and those securities offered and sold in offshore transactions in
reliance on Regulation S that cannot be issued in the form of Global Securities
under the laws of the relevant jurisdiction (the "Offshore Physical
Securities"), shall be issued in the form of permanent certificated Securities
in registered form, in substantially the form set forth in this Article (the
"U.S. Physical Securities"). The Offshore Physical Securities and the U.S.
Physical Securities are sometimes collectively referred to as the "Physical
Securities."
Securities sold to Institutional Accredited Investors (the "IAI
Securities") shall be issued in definitive, fully registered form without
interest coupons, substantially in the form of Security set forth in this
Article. IAI Securities shall be delivered to such Institutional Accredited
Investor(s) only upon the execution and delivery to the Initial Purchasers, the
Company and the Trustee of an Accredited Investor Letter, substantially in the
form of the letter attached as Exhibit B to the Offering Memorandum. Securities
shall cease to be IAI Securities upon certain transfers as provided in Section
312.
SECTION 202. Form of Face of Security.
[INCLUDE IF SECURITY IS A RESTRICTED SECURITY -- THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT), (B)
IT IS AN "INSTITUTIONAL ACCREDITED INVESTOR" (AS DEFINED IN
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RULE 501(a)(1), (2), (3) or (7) UNDER THE ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF
BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE
TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE
IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT.]
[INCLUDE IF SECURITY IS NOT AN EXCHANGE SECURITY -- THE HOLDER OF THIS
SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS OF, A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF AUGUST 4, 1997, ENTERED INTO BY THE COMPANY FOR THE
BENEFIT OF CERTAIN HOLDERS FROM TIME TO TIME OF SECURITIES.]
[INCLUDE IF SECURITY IS A GLOBAL SECURITY -- THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE
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<PAGE>
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITORY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY ("DTC"), A NEW YORK CORPORATION, TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF)
DTC, ANY TRANSFER, PLEDGE OR OTHER USE THEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
AVON PRODUCTS, INC.
6.55% Note due 2007
No. __________ $________
Avon Products, Inc., a corporation duly organized and existing under
the laws of New York (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to __________________, or registered assigns,
the principal sum of _____________________ Dollars [INCLUDE IF SECURITY IS A
GLOBAL SECURITY -- (which amount may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary, in accordance with the rules and procedures of the Depositary)] on
August 1, 2007, and to pay interest thereon from August 1, 1997 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semiannually on February 1 and August 1 in each year, commencing February
1, 1998 at the rate of 6.55% per annum, until the principal hereof is paid or
made available for payment.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be January 15 or July 15 (whether or not a Business Day),
as the case may be, immediately preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of and interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in The City of
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<PAGE>
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register. If this Security is a Global
Security, then notwithstanding the foregoing, each such payment will be made in
accordance with the procedures of the Depositary as then in effect.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
AVON PRODUCTS, INC.
By_______________________
Attest:
- ------------------------------
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 6.55% Notes due 2007 (herein called the "Securities"),
limited in aggregate principal amount to $100 million, issued and to be issued
under an Indenture, dated as of August 1, 1997 (herein called the "Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are not redeemable prior to maturity and do not have the
benefit of a sinking fund.
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<PAGE>
[INCLUDE IF SECURITY IS A GLOBAL SECURITY -- In the event of a deposit
or withdrawal of an interest in this Security, including an exchange, transfer,
repurchase or conversion of this Security in part only, the Trustee, as
custodian of the Depositary, shall make an adjustment on its records to reflect
such deposit or withdrawal in accordance with the rules and procedures of the
Depositary.]
[INCLUDE IF SECURITY IS A RESTRICTED SECURITY -- Subject to certain
limitations in the Indenture, at any time when the Company is not subject to
Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as
amended, upon the request of a Holder of a Restricted Security, the Company will
promptly furnish or cause to be furnished Rule 144A Information (as defined
below) to such Holder of Restricted Securities, or to a prospective purchaser of
any such security designated by any such Holder, to the extent required to
permit compliance by any such Holder with Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"). "Rule 144A Information" shall be such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto).]
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time, upon
compliance with certain conditions set forth therein, of (i) the entire
Indebtedness evidenced by this Security or (ii) certain restrictive covenants
and Events of Default with respect to this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Outstanding
Securities. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Outstanding
Securities, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity, and the Trustee shall not have received from
the Holders of a majority in principal amount of Outstanding Securities a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit
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<PAGE>
instituted by the Holder of this Security for the enforcement of any payment of
principal hereof or interest hereon on or after the respective due dates
expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $100,000 and any integral multiple of $1,000 above that amount.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ASSIGNMENT FORM
If you want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID
number of assignee)
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<PAGE>
and irrevocably appoint _____________________________________, agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: _____________ Signed:____________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: ________________________________
[Include if Security is not an Exchange Security -- In connection with any
transfer of this Security occurring prior to the date which is the earlier of
(i) the date of the declaration by the Commission of the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), covering resales of this Security (which effectiveness shall
not have been suspended or terminated at the date of the transfer) and (ii)
August 4, 1999, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that
this Security is being transferred:
[Check One]
(1) |_| to the Company or a subsidiary thereof; or
(2) |_| pursuant to and in compliance with rule 144A under the Securities Act;
or
(3) |_| to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) |_| outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) |_| pursuant to the exemption from registration provided by Rule 144 under
the Securities Act; or
(6) |_| pursuant to an effective registration statement under the Securities
Act; or
(7) |_| pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered Holder thereof; provided that if box (3), (4), (5) or (7) is
checked, the Company may require, prior to registering any such transfer of the
Securities, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Company may reasonably request to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.
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<PAGE>
If none of the foregoing boxes is checked, the Trustee or Security Registrar
shall not be obligated to register this Security in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 312 of the Indenture shall have
been satisfied.
Date: _________ Signed:____________________________
(Sign exactly as your name appears on the other side of
this Security)
Signature Guarantee: ________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: _____________ Signed:___________________________]
NOTICE: To be executed by an executive officer
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By _______________________
Authorized Officer
SECTION 205. Legend on Restricted Securities.
During the period beginning on August 4, 1997 and ending on the date
two years from such date, any Security including any Security issued in exchange
therefor or in lieu thereof, shall be deemed a "Restricted Security" and shall
be subject to the restrictions on transfer provided in the legends set forth on
the face of the form of Security in
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<PAGE>
Section 202; provided, however, that the term "Restricted Security" shall not
include any Securities as to which restrictions have been terminated in
accordance with Section 305. All Securities shall bear the applicable legends
set forth on the face of the form of Security in Section 202. Except as provided
in Section 305 and Section 312, the Trustee shall not issue any unlegended
Security until it has received an Officers' Certificate from the Company
directing it to do so.
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $100 million, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306
or 906.
The Securities shall be known and designated as the "6.55% Notes due
2007" of the Company. Their Stated Maturity shall be August 1, 2007, and they
shall bear interest at the rate of 6.55% per annum, from August 1, 1997 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, payable semiannually on February 1 and August
1, commencing February 1, 1998 until the principal thereof is paid or made
available for payment.
The principal of and interest on the Securities shall be payable at the
office or agency of the Company in The City of New York maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose; provided, however, that at the option of the Company payment of
interest may be made by wire transfer or by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
The Securities shall not be redeemable prior to maturity and shall not
have the benefit of a sinking fund.
The Securities shall not be superior in right of payment to, and shall
rank pari passu with, all other unsecured and unsubordinated Indebtedness of the
Company.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Eleven.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and in denominations of $100,000 and any integral multiple of $1,000
above that amount.
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<PAGE>
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities. The Company Order shall specify
the amount of Securities to be authenticated and whether the Securities are to
be Exchange Securities, and shall further specify the amount of such Securities
to be issued as a Global Security, as Offshore Physical Securities or as U.S.
Physical Securities. The Trustee in accordance with such Company Order shall
authenticate and deliver such Securities as in this Indenture provided and not
otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
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<PAGE>
SECTION 305. Registration; Registration of Transfer and Exchange; Restrictions
on Transfer.
(a) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount and tenor each such Security bearing such restrictive legends as may be
required by this Indenture (including Sections 202, 205 and 312).
At the option of the Holder and subject to the other provisions of this
Section 305 and to Section 312, Securities may be exchanged for other Securities
of any authorized denominations and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing. As a condition to the
registration of transfer of any Restricted Securities, the Company or the
Trustee may require evidence satisfactory to them as to the compliance with the
restrictions set forth in the legend on such securities.
Except as provided in the following sentence and in Section 312, all
Securities originally issued hereunder and all Securities issued upon
registration of transfer or exchange or replacement thereof shall be Restricted
Securities and shall bear the legend required by Sections 202 and 205, unless
the Company shall have delivered to the Trustee (and the Security Registrar, if
other than the Trustee) a Company Order stating that the Security is not a
Restricted Security and may be issued without such legend thereon. Securities
which are issued upon registration of transfer of, or in exchange for,
Securities which are not Restricted Securities shall not be Restricted
Securities and shall not bear such legend.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or
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<PAGE>
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304 or 906 not involving any transfer.
(b) Beneficial ownership of every Restricted Security shall be subject
to the restrictions on transfer provided in the legends required to be set forth
on the face of each Restricted Security pursuant to Sections 202 and 205, unless
such restrictions on transfer shall be terminated in accordance with this
Section 305(b) or Section 312. The Holder of each Restricted Security, by such
Holder's acceptance thereof, agrees to be bound by such restrictions on
transfer.
The restrictions imposed by this Section 305 and Sections 202, 205 and
312 upon the transferability of any particular Restricted Security shall cease
and terminate upon delivery by the Company to the Trustee of an Officers'
Certificate stating that such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto). Any Restricted Security as to which the Company has delivered to the
Trustee an Officers' Certificate that such restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon
surrender of such Restricted Security for exchange to the Security Registrar in
accordance with the provisions of this Section 305, be exchanged for a new
Security, of like tenor and aggregate principal amount, which shall not bear the
restrictive legends required by Sections 202 and 205. The Company shall inform
the Trustee in writing of the effective date of any registration statement
registering the Securities under the Securities Act. The Trustee shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the aforementioned registration statement.
As used in the preceding two paragraphs of this Section 305, the term
"transfer" encompasses any sale, pledge, transfer or other disposition of any
Restricted Security.
(c) Neither the Trustee nor any of its agents shall (1) have any duty
to monitor compliance with or with respect to any federal or state or other
securities or tax laws or (2) have any duty to obtain documentation on any
transfers or exchanges other than as specifically required hereunder.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
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<PAGE>
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less
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than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the name
of the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for the Depositary and (iii) bear legends as set forth on
the face of the form of Security in Section 202.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary
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may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of the Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of any
Holder.
(b) Transfers of the Global Securities shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in a Global Security may be transferred
or exchanged, in whole or in part, for Physical Securities in accordance with
the rules and procedures of the Depositary and the provisions of Section 312. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Securities if (A) such
Depositary has notified the Company (or the Company becomes aware) that the
Depositary (i) is unwilling or unable to continue as Depositary for such Global
Security or (ii) has ceased to be a clearing agency registered under the
Exchange Act when the Depositary is required to be so registered to act as such
Depositary and, in both such cases, no successor Depositary shall have been
appointed within 90 days of such notification or of the Company becoming aware
of such event, (B) there shall have occurred and be continuing an Event of
Default with respect to such Global Security and the Outstanding Securities
shall have become due and payable pursuant to Section 502 and the Trustee has
requested that Physical Securities be issued or (C) the Company has decided to
discontinue use of book-entry transfers through the Depositary (or a successor
Depositary); provided that Holders of Securities offered and sold in reliance on
Rule 144A or Regulation S in the form of permanent certificated Securities in
registered form shall have the right, subject to applicable law, to request that
such Securities be exchanged for interests in the applicable Global Security.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Security to beneficial owners pursuant to
paragraph (b), the Security Registrar shall (if one or more Physical Securities
are to be issued) reflect on its books and records the date and a decrease in
the principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to paragraph (b), the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
(e) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in the Global Security pursuant to paragraph (c) or
(d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 312, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth on the face of the form of Security in Section
202.
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(f) The Holder of the Global Securities may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 310. Cancellation.
The Company at any time may deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and may deliver to the Trustee for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold. The Trustee shall cancel and destroy all Securities
surrendered for registration of transfer, exchange, payment or cancellation and
shall deliver certificates of destruction to the Company, all in accordance with
its customary practices. The Company may not issue new Securities to replace
Securities it has paid in full or delivered to the Trustee for cancellation.
SECTION 311. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 312. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person to which Securities in the form of Global Securities cannot be
issued:
(i) the Security Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
legend required by Sections 202 and 205, if (x) the requested transfer is
after August 4, 1999 or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Security Registrar a
certificate substantially in the form of Exhibit A hereto or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Security Registrar a certificate substantially in the form
of Exhibit B hereto, together in the case of clause (1) or clause (2) with
such other certifications, legal opinions or other information as the
Company may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act; and
(ii) if the proposed transferor is an Agent Member holding a beneficial
interest in the Global Security, upon receipt by the Security Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depositary's and the Security
Registrar's procedures,
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whereupon (a) the Security Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of the Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security to be transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Securities of like tenor and
amount.
If the Securities to be transferred consist of IAI Securities, the
following shall apply: (x) if such IAI Securities are proposed to be transferred
to an Institutional Accredited Investor which is not a QIB, upon the
registration of such transfer such Securities shall continue to be IAI
Securities, and (y) if such IAI Securities are proposed to be transferred to a
Non-U.S. Person, upon the registration of such transfer such Securities shall
cease to be IAI Securities.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Security Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided for
on the form of Security stating, or has otherwise advised the Company and
the Security Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has signed
the certification provided for on the form of Security stating, or has
otherwise advised the Company and the Security Registrar in writing, that
it is purchasing the Security for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) if the proposed transferee is an Agent Member, and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Global Security, upon receipt by the
Security Registrar of instructions given in accordance with the
Depositary's and the Security Registrar's procedures, the Security
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the Global Security in an amount equal to the
principal amount of the Physical Securities to be transferred, and the
Trustee shall cancel the Physical Securities so transferred; and
(iii) If the Securities to be transferred consist of IAI Securities,
upon the registration of such transfer according to this Section such
Securities shall cease to be IAI Securities and may be evidenced by
Physical Securities or interests in a Global Security.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Securities not bearing the legends required by
Sections 202 and 205, the Security Registrar shall deliver Securities that do
not bear such legends. Upon the
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registration of transfer, exchange or replacement of Securities bearing the
legends required by Sections 202 and 205, the Security Registrar shall deliver
only Securities that bear such legends unless (i) the circumstance contemplated
by paragraph (a)(i)(x) of this Section 312 exists or (ii) there is delivered to
the Security Registrar an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) General. By its acceptance of any Security bearing the legends
required by Sections 202 and 205, each Holder of such a Security acknowledges
the restrictions on transfer of such Security set forth in this Indenture and in
such legends and agrees that it will transfer such Security only as provided in
this Indenture.
The Security Registrar shall retain, in accordance with its customary
procedures, copies of all letters, notices and other written communications
received pursuant to this Section 312. The Company shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Security Registrar.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced
or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year,
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and the Company, in the case of (i) or (ii)
above, has deposited or caused to be deposited with
the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the
entire indebtedness evidenced by such Securities
not theretofore delivered to the Trustee for
cancellation, for principal and interest to the
date of such deposit (in the case of Securities
which have become due and payable) or to the Stated
Maturity, as the case may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any
Security when it becomes due and payable, and continuance of
such default for a period of 30 days; or
(2) default in the payment of the principal of any
Security at its Maturity; or
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(3) default in the performance of any covenant,
agreement or condition of the Company in this Indenture or
the Securities, and continuance of such default for a period
of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written
notice specifying such default and requiring it to be
remedied and stating that such notice is a "Notice of
Default" hereunder; or
(4) a default under any bond, debenture, note or other
evidence of Indebtedness for money borrowed by the Company,
whether such Indebtedness now exists or shall hereafter be
created, which default shall constitute a failure to pay the
principal of Indebtedness having an aggregate principal
amount outstanding of at least $50 million when due and
payable after the expiration of any applicable grace period
with respect thereto or shall have resulted in such
Indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become
due and payable, without such Indebtedness having been
discharged, or such acceleration having been rescinded or
annulled, within a period of 30 days after there shall have
been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such
default and requiring the Company to cause such Indebtedness
to be discharged or cause such acceleration to be rescinded
or annulled and stating that such notice is a "Notice of
Default" hereunder; provided, however, that, subject to the
provisions of Sections 601 and 602, the Trustee shall not be
deemed to have knowledge of such default unless either (A) a
Responsible Officer of the Trustee shall have actual
knowledge of such default or (B) the Trustee shall have
received written notice thereof from the Company, from any
Holder or from the holder of or trustee in respect of any
such Indebtedness; or
(5) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of
the Company of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
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(6) the commencement by the Company of a voluntary case
or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law
or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of
a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by
it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial
part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Company
in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than those specified in Sections 501(5)
and 501(6)) occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities may declare the principal of all the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal shall become
immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default
specified in Sections 501(5) or 501(6), all Outstanding Securities will ipso
facto become due and payable without any declaration or other Act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of any Securities which have
become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by
the Securities,
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(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne
by the Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under
Section 607;
and
(2) all Events of Default, other than the non-payment of
the principal of Securities which have become due solely by
such declaration of acceleration, have been cured or waived
as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of any Security at
the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and on
any overdue interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to the Securities occurs and is
continuing, the Trustee may in its discretion, subject to applicable law,
proceed to protect and enforce its rights and the rights of the Holders by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
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SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest,
upon presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 607; and
SECOND: To the payment of the amounts then due and
unpaid for principal of and interest on the Securities in
respect of which or for the benefit of which such money has
been collected, ratably,
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without preference or priority of any kind, according to
the amounts due and payable on such Securities for principal
and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount
of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by
the Holders of a majority in principal amount of the
Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 307) interest on
such Security on the respective Stated Maturities expressed in such Security and
to institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such
direction.
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SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or interest on
any Security, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the
consent of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, in either case in respect to the Securities of any series, a
court may require any party litigant in such suit to file an undertaking to pay
the costs of the suit, and the court may assess reasonable costs, including
reasonable attorney's fees, against any party litigant in the suit having due
regard to the merits and good faith of the claims or defenses made by the party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the outstanding Securities of any series, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of or interest on any Security on or after the maturity of such
Security.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in Section 501(3), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to
have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company
mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order and any resolution of
the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be
proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers'
Certificate;
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(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by
this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its
discretion, may make such further inquiry or
investigation into such facts or matters as it may see
fit;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be charged with knowledge
of any Default or Event of Default (except as provided
in Section 501(4)) with respect to the Securities of any
series for which it is acting as Trustee unless either
(i) a Responsible Officer shall have actual knowledge of
such Default or Event of Default or (ii) written notice
of such Default or Event of Default shall have been
given to the Trustee by the Company or any other obligor
on such Securities or by any other Holder of such
Securities; and
(i) the Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
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SECTION 605. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of
this trust, including the reasonable costs and expenses of
defending itself against any claim or liability in
connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section 607 shall survive the
satisfaction and discharge of this Indenture. To secure the Company's payment
obligations in this Section 607, the Trustee shall have a Lien prior to the
Securities on all money or property held or collected by the Trustee, except
that held in trust to pay principal and interest on the Securities. Such Lien
shall survive the satisfaction and discharge of this Indenture. When the Trustee
incurs expenses or renders services after a Default or an Event of Default
specified in Sections 501(5) or 501(6) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to
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constitute expenses of administration under U.S. Code, Title 11 or any other
similar foreign, federal or state law for the relief of debtors.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608
after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under Section
609 and shall fail to resign after written request therefor
by the Company or by any such Holder, or
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(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Company Order may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Company Order, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each
Regular Record Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of
the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request
in writing, within 30 days after the receipt by the
Company of any such request, a list of similar form and
content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar; provided, however, that no such list need be
furnished so long as the Trustee is acting as Security Registrar.
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SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
Reports so required to be transmitted at stated intervals of not more than 12
months shall be transmitted no later than January 31, in each calendar year,
commencing in January, 1998.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. In the event the Company is not subject to Section 13 or 15(d) of
the Exchange Act, it shall file with the Trustee upon request the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge
into another Person or convey, transfer or lease its
properties and assets substantially as an entirety to any
Person, the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be
a corporation, partnership or trust, shall be organized and
validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the
principal of and interest on all the Securities and the
performance or observance of every covenant of this
Indenture on the part of the Company to be performed or
observed;
(2) immediately after giving effect to such transaction
and treating any Indebtedness which becomes an obligation of
the Company as a result of such transaction as having been
incurred by the Company at the time of such transaction, no
Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall
have happened and be continuing; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such
supplemental indenture comply with this Article.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may
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exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power
herein conferred upon the Company; or
(3) to add any additional Events of Default for the
benefit of the Holders; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with
respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this
Indenture, provided that such action pursuant to this Clause
(4) shall not adversely affect the interests of the Holders
in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
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(1) change the Stated Maturity of the principal of, or
any instalment of interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon, or
change the place of payment where, or the coin or currency
in which, any Security or interest thereon is payable, or
impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is
required for any such supplemental indenture, or the consent
of whose Holders is required for any waiver (of compliance
with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in
this Indenture, or
(3) modify any of the provisions of this Section,
Section 513 or Section 1011, except to increase any such
percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, in
addition to the documents required by Section 102, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal and Interest.
The Company shall duly and punctually pay the principal of and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
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SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it shall,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and shall promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining shall be repaid to the Company.
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SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Liens.
The Company shall not, and shall not permit any Subsidiary to issue,
assume, incur or guarantee any Indebtedness secured by a Lien, except Permitted
Liens, on any Principal Property or any shares of Capital Stock of any
Subsidiary ("Secured Debt"), without at the same time effectively providing that
the Securities shall be secured equally and ratably with (or prior to) the
Indebtedness so secured for so long as such Indebtedness is so secured, unless
after giving effect thereto, the aggregate amount of Secured Debt, together with
all Attributable Debt of the Company and its Subsidiaries in respect of
Restricted Sale/Leaseback Transactions would not exceed 20% of Consolidated Net
Tangible Assets.
SECTION 1007. Limitation on Restricted Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Subsidiary to, enter
into, assume, guarantee or otherwise become liable with respect to any
Restricted Sale/Leaseback Transaction, unless after giving effect thereto the
aggregate amount of Attributable Debt of the Company and its Subsidiaries in
respect of Restricted Sale/Leaseback Transactions, together (without
duplication) with all Secured Debt then outstanding, would not exceed 20% of
Consolidated Net Tangible Assets.
SECTION 1008. Reports and Delivery of Certain Information.
Whether or not required by the rules and regulations of the Commission,
so long as any Securities are outstanding, the Company shall furnish to the
Holders of the Securities (i) all quarterly and annual financial information
that is substantially equivalent to that which would be required to be contained
in a filing with the Commission on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a "Management's Discussion and
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Analysis of Financial Condition and Results of Operations" section and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all reports that are substantially
equivalent to that which would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, the Company
shall file a copy of all such information with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to investors who request it in writing. So long as any of
the Securities remain Outstanding, the Company shall make available to any
prospective purchaser of Securities or beneficial owner of Securities in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Company has either exchanged
the Securities for securities identical in all material respects which have been
registered under the Securities Act or until such time as the Holders thereof
have disposed of such Securities pursuant to an effective registration statement
under the Securities Act.
SECTION 1009. Resale of Certain Securities.
During the period beginning on the Issue Date and ending on the date
that is two years from the Issue Date, the Company shall not, and shall not
permit any of its "affiliates" (as defined under Rule 144 under the Securities
Act or any successor provision thereto) to, resell any Securities which
constitute "restricted securities" under Rule 144 that have been reacquired by
any of them. The Trustee shall have no responsibility in respect of the
Company's performance of its agreement in the preceding sentence.
SECTION 1010. Book-Entry System.
If the Securities cease to trade in the Depositary's book-entry
settlement system, the Company covenants and agrees that it shall use reasonable
efforts to make such other book-entry arrangements that it determines are
reasonable for the Securities.
SECTION 1011. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1006 and 1007 if before the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect.
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ARTICLE ELEVEN
Defeasance and Covenant Defeasance
SECTION 1101. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section 1102
or Section 1103 applied to the Outstanding Securities upon compliance with the
conditions set forth below in this Article. Any such election shall be evidenced
by a Board Resolution.
SECTION 1102. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to the Outstanding Securities, the Company shall be deemed to have been
discharged from its obligations with respect to such Securities as provided in
this Section on and after the date the conditions set forth in Section 1104 are
satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Securities and to have satisfied all
its other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), subject to the following
which shall survive until otherwise terminated or discharged hereunder: (1) the
rights of Holders of such Securities to receive, solely from the trust fund
described in Section 1104 and as more fully set forth in such Section, payments
in respect of the principal of and interest on such Securities when payments are
due, (2) the Company's obligations with respect to such Securities under
Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (4) this Article. Subject to
compliance with this Article, the Company may exercise its option (if any) to
have this Section applied to the Outstanding Securities notwithstanding the
prior exercise of its option (if any) to have Section 1103 applied to such
Securities.
SECTION 1103. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities, (1) the Company shall be released from its
obligations under Sections 1006 through 1008, inclusive and (2) the occurrence
of any event specified in Sections 501(3) (with respect to any of Sections 1006
through 1008, inclusive) or 501(4) shall be deemed not to be or result in an
Event of Default, in each case with respect to such Securities as provided in
this Section on and after the date the conditions set forth in Section 1104 are
satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such
Covenant Defeasance means that, with respect to such Securities, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such specified Section (to the extent
so specified in the case of Section 501(3)), whether directly or indirectly by
reason of any reference elsewhere herein to any such Section or by reason of any
reference in any such Section to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
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SECTION 1104. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
1102 or Section 1103 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of and interest on
such Securities on the respective Stated Maturities, in accordance with the
terms of this Indenture and such Securities. As used herein, "U.S.
Government Obligation" means (x) any security which is (i) a direct
obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not
callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation
which is specified in Clause (x) above and held by such bank for the
account of the holder of such depositary receipt, or with respect to any
specific payment of principal of or interest on any U.S. Government
Obligation which is so specified and held, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depositary receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by
such depositary receipt.
(2) In the event of an election to have Section 1102 apply to such
Securities, the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
of this instrument, there has been a change in the applicable Federal
income tax law, in either case (A) or (B) to the effect that, and based
thereon such opinion shall confirm that, the Holders of such Securities
will not recognize gain or loss for Federal income tax purposes as a result
of the deposit, Defeasance and discharge to be effected with respect to
such Securities and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case if
such deposit, Defeasance and discharge were not to occur.
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(3) In the event of an election to have Section 1103 apply to such
Securities, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of such Securities will not
recognize gain or loss for Federal income tax purposes as a result of the
deposit and Covenant Defeasance to be effected with respect to such
Securities and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would be the case if such deposit
and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that such Securities, if then listed on any
securities exchange, will not be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities shall have
occurred and be continuing at the time of such deposit or, with regard to
any such event specified in Sections 501(5) and 501(6), at any time on or
prior to the 90th day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after such 90th
day).
(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee
to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming all Securities are in default within the meaning of such
Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which the Company is
bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act unless such trust shall be
registered under such Act or exempt from registration thereunder.
(9) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
SECTION 1105. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 1106, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1104 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and interest, but money
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so held in trust need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1104 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1104 with
respect to the Outstanding Securities which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to such Securities.
SECTION 1106. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to the Outstanding Securities by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
obligations under this Indenture and such Securities from which the Company has
been discharged or released pursuant to Section 1102 or 1103 shall be revived
and reinstated as though no deposit had occurred pursuant to this Article with
respect to such Securities, until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust pursuant to Section 1105 with respect
to such Securities in accordance with this Article; provided, however, that if
the Company makes any payment of principal of or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.
--------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
AVON PRODUCTS, INC.
By___________________________
Attest:
- --------------------------
THE CHASE MANHATTAN BANK
By___________________________
Attest:
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EXHIBIT A
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
----------, ----
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Global Trust Services
Re: Avon Products, Inc. (the "Company")
6.55% Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $_____ aggregate principal
amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated July 30, 1997, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated on pages
(i)-(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as
of August 1, 1997 relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes prior to the
date which is within two years after the original issuance of the Notes, we
will do so only (i) to the Company or any of its subsidiaries, (ii) inside
the United States in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act), (iii) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished that, prior to such transfer, furnishes (or has
furnished on its behalf of a U.S. broker-dealer) to you a signed letter
containing certain representatives and agreements relating to the
restrictions on transfer of the Notes, substantially in the form of this
letter, (iv) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (v) pursuant to the exemption from
registration provided by Rule 144 under the
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<PAGE>
Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certification, legal
opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Company and the Initial Purchasers (as defined in the Offering
Memorandum) are entitled to reply upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:________________________
Authorized Signature
A-2
<PAGE>
EXHIBIT B
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
----------, ----
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Global Trust Services
Re: Avon Products, Inc. (the "Company")
6.55% Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $_________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the United
States;
2. either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged with a buyer
in the United States;
3. no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
B-1
<PAGE>
You and the Company are entitled to reply upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By_________________________
Authorized Signature
B-2
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 4, 1997 (this
"Agreement"), among AVON PRODUCTS, INC., a New York corporation (the "Company")
and MORGAN STANLEY & CO. INCORPORATED, CHASE SECURITIES INC. and J.P. MORGAN
SECURITIES INC., as the initial purchasers (the "Initial Purchasers") of the
6.55% Notes due 2007 of the Company.
1. Certain Definitions.
For purposes of this Registration Rights Agreement, the following terms
shall have the following respective meanings:
(a) "Closing Date" means the date on which the Securities are
initially issued.
(b) "Commission" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.
(c) "Effective Time", in the case of (i) an Exchange Offer, means the
time and date as of which the Commission declares the Exchange Offer
Registration Statement effective or as of which the Exchange Offer
Registration Statement otherwise becomes effective and (ii) a Shelf
Registration, means the time and date as of which the Commission declares
the Shelf Registration effective or as of which the Shelf Registration
otherwise becomes effective.
(d) "Exchange Act" means the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
(e) "Exchange Offer" has the meaning assigned thereto in Section 2(a).
(f) "Exchange Offer Registration Statement" has the meaning assigned
thereto in Section 2(a).
(g) "Exchange Registration" has the meaning assigned thereto in
Section 3(f).
(h) "Exchange Securities" has the meaning assigned thereto in Section
2(a).
(i) "Holder" means each Initial Purchaser for so long as it owns any
Registrable Securities, and such of its respective successors and assigns
who acquire Registrable Securities, directly or indirectly, from such
person or from any successor or assign of such person, in each case for so
long as such person owns any Registrable Securities.
(j) "Indenture" means the Indenture, dated as of August 1, 1997,
between the Company and The Chase Manhattan Bank, as Trustee, as the same
shall be amended from time to time.
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<PAGE>
(k) "Person" means a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
(l) "Purchase Agreement" means the Purchase Agreement dated as of July
30, 1997 among the Company and the Initial Purchasers
(m) "Registrable Securities" means the Securities; provided, however,
that such Securities shall cease to be Registrable Securities when (i) such
Securities have been exchanged for Exchange Securities in an Exchange Offer
as contemplated in Section 2(a); (ii) in the circumstances contemplated by
Section 2(b), a registration statement registering such Securities under
the Securities Act has been declared or becomes effective and such
Securities have been sold or otherwise transferred by the holder thereof
pursuant to such effective registration statement; (iii) such Securities
are sold pursuant to Rule 144 under circumstances in which any legend borne
by such Securities relating to restrictions on transferability thereof,
under the Securities Act or otherwise, is removed or such Securities are
eligible to be sold pursuant to paragraph (k) of Rule 144; or (iv) such
Securities shall cease to be outstanding.
(n) "Registration Default" has the meaning assigned thereto in Section
2(c).
(o) "Registration Default Interest" has the meaning assigned thereto
in Section 2(c).
(p) "Registration Expenses" has the meaning assigned thereto in
Section 4.
(q) "Resale Period" means the period beginning on the date the Shelf
Registration becomes effective and ending on the earlier of (i) the Shelf
Registration ceasing to be effective or (ii) the second anniversary of the
Closing Date.
(r) "Restricted Holder" means (i) a holder that is an affiliate of the
Company within the meaning of Rule 405, (ii) a holder who acquires Exchange
Securities outside the ordinary course of such holder's business, (iii) a
holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Securities, or (iv) a broker-dealer who receives Securities for its own
account but did not acquire the Securities as a result of market-making
activities or other trading activities.
(s) "Rule 144," "Rule 405" and "Rule 415" means, in each case, such
rule promulgated under the Securities Act.
(t) "Securities" means the 6.55% Notes due 2007, to be issued under
the Indenture and sold by the Company to the Initial Purchasers, and
securities (other than Exchange Securities) issued in exchange therefor or
in lieu thereof pursuant to the Indenture.
(u) "Securities Act" means the Securities Act of 1933.
(v) "Shelf Registration" has the meaning assigned thereto in Section
2(b).
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<PAGE>
(w) "Trust Indenture Act" means the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this
Agreement, and the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision. Unless the context otherwise requires, any
reference to a statute, rule or regulation refers to the same (including any
successor statute, rule or regulation thereto) as it may be amended from time to
time.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b), the Company agrees to use its
reasonable best efforts to file under the Securities Act a registration
statement (the "Exchange Offer Registration Statement") relating to an offer to
exchange (the "Exchange Offer") any and all of the Securities for a like
aggregate amount of securities issued by the Company, which have the same terms
as the Securities (and are entitled to the benefits of a trust indenture which
has been qualified under the Trust Indenture Act), except that they have been
registered pursuant to an effective registration statement under the Securities
Act, do not contain restrictions on transfers and do not contain provisions for
the additional interest contemplated in Section 2(c) below (such new securities
hereinafter called "Exchange Securities"). The Company agrees to use its
reasonable best efforts to cause the Exchange Offer Registration Statement to
become effective under the Securities Act within 180 days after the Closing
Date. The Exchange Offer will be registered under the Securities Act on the
appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its
reasonable best efforts to commence and complete the Exchange Offer promptly
after the Exchange Offer Registration Statement has become effective for all
Securities that have been properly tendered and not withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed completed
only if the Exchange Securities received by holders (other than Restricted
Holders) in the Exchange Offer for Securities are, upon receipt, transferable by
each such holder without restriction imposed thereon by the Securities Act or
the Exchange Act and without material restrictions imposed thereon by the blue
sky or securities laws of a substantial majority of the States of the United
States of America. The Exchange Offer shall be deemed to have been completed
upon the Company having exchanged, pursuant to the Exchange Offer, Exchange
Securities for all Securities that have been properly tendered and not withdrawn
before the expiration of the Exchange Offer, which shall be on a date that is at
least 30 days following the commencement of the Exchange Offer.
(b) If (i) because of any change in law or in applicable interpretations by
the staff of the Commission, the Company is not permitted to effect the Exchange
Offer or (ii) in the case of any holder, other than a Restricted Holder, that
participates in the Exchange Offer, such holder does not receive Exchange
Securities on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such holder as an affiliate of the Company within the meaning of the Securities
Act), then in addition to or in lieu of conducting the Exchange Offer
contemplated by Section 2(a), the Company shall file under the
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Securities Act as promptly as practicable a "shelf" registration statement
providing for the registration of, and the sale on a continuous or delayed basis
by the holders of, all of the Registrable Securities, pursuant to Rule 415 or
any similar rule that may be adopted by the Commission (the "Shelf
Registration"). The Company agrees to use its reasonable best efforts to cause
the Shelf Registration to become or be declared effective and to keep such Shelf
Registration continuously effective for a period ending on the earlier of (i)
the second anniversary of the Closing Date or (ii) such time as there are no
longer any Registrable Securities outstanding. The Company further agrees to
supplement or make amendments to the Shelf Registration, as and when required by
the rules, regulations or instructions applicable to the registration form used
for such Shelf Registration or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Company agrees to furnish to the
holders of the Registrable Securities copies of any such supplement or amendment
prior to its being used or promptly following its filing with the Commission.
(c) If any of the following events (any such event a "Registration
Default") shall occur, then, as liquidated damages, additional interest (the
"Registration Default Interest") shall become payable in respect of the
Securities as follows:
(i) if the Exchange Offer Registration Statement or a Shelf
Registration is not filed with the Commission within 150 days following the
Closing Date, then commencing on the 151st day after the Closing Date,
Registration Default Interest shall accrue on the principal amount of the
Securities at a rate of 0.25% per annum; or
(ii) if neither the Exchange Offer Registration Statement nor a Shelf
Registration is declared effective by the Commission on or prior to the
180th day following the Closing Date, then commencing on the 181st day
after the Closing Date, Registration Default Interest shall accrue on the
principal amount of the Securities at a rate of 0.25% per annum; or
(iii) if either (A) the Company has not exchanged Exchange Securities
for all Securities validly tendered and not withdrawn, in accordance with
the terms of the Exchange Offer, on or prior to 35 days after the date on
which the Exchange Offer Registration Statement was declared effective, or
(B) if applicable, the Shelf Registration has been declared effective but
such Shelf Registration ceases to be effective at any time prior to two
years from the Closing Date, then commencing on (x) the 36th day after such
effective date, in the case of (A) above, or (y) the day such Shelf
Registration ceases to be effective, in the case of (B) above, Registration
Default Interest shall accrue on the principal amount of Securities at a
rate of 0.25% per annum.
provided, however, that the Registration Default Interest rate on the
Securities, shall not exceed in the aggregate 0.25% per annum; provided further,
however, that (1) upon the filing of the Exchange Offer Registration Statement
or a Shelf Registration (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration (in the case of clause (ii) above), (3) upon the exchange of
Exchange Securities for all Securities validly tendered and not withdrawn (in
the case of clause (iii) (A) above), or upon the effectiveness of the Shelf
Registration which had ceased to remain effective (in the case of clause (iii)
(B) above), or (4) upon the termination of certain transfer restrictions on the
Securities as a result of the
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application of Rule 144(k), Registration Default Interest on the Securities as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue.
(d) Any reference herein to a registration statement shall be deemed to
include any document incorporated therein by reference as of the applicable
Effective Time and any reference herein to any post-effective amendment to a
registration statement shall be deemed to include any document incorporated
therein by reference as of a time after such Effective Time.
(e) Notwithstanding any other provision of this Agreement, no holder of
Registrable Securities who does not comply with the provisions of Section 3(d),
if applicable, shall be entitled to receive Registration Default Interest unless
and until such holder complies with the provisions of such section, if
applicable.
3. Registration Procedures.
The following provisions shall apply to registration statements filed
pursuant to Section 2:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act.
(b) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall, as soon as reasonably
practicable (or as otherwise specified herein):
(i) prepare and file with the Commission a registration statement with
respect to the Shelf Registration on any form which may be utilized by the
Company and which shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods thereof, as
specified in writing by the holders of the Registrable Securities, and use
its reasonable best efforts to cause such registration statement to become
effective as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to effect and maintain the effectiveness of
such registration statement for the period specified in Section 2(b) and as
may be required by the applicable rules and regulations of the Commission
and the instructions applicable to the form of such registration statement,
and furnish to the holders of the Registrable Securities copies of any such
supplement or amendment simultaneously with or prior to its being used or
filed with the Commission;
(iii) comply, as to all matters within the Company's control, with the
provisions of the Securities Act with respect to the disposition of all of
the Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the holders thereof
provided for in such registration statement;
(iv) provide to any of (A) the holders of the Registrable Securities to
be included in such registration statement, (B) the underwriters (which
term, for purposes of this Agreement, shall include a person deemed to be
an underwriter within the meaning of Section 2(11) of the
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Securities Act), if any, thereof, (C) the sales or placement agent, if any,
therefor, (D) counsel for such underwriters or agent and (E) not more than
one counsel for all the holders of such Registrable Securities who so
request of the Company in writing the opportunity to participate in the
preparation of such registration statement, each prospectus included
therein or filed with the Commission and each amendment or supplement
thereto;
(v) for a reasonable period prior to the filing of such registration
statement, and throughout the Resale Period, make available at reasonable
times at the Company's principal place of business or such other reasonable
place for inspection by the persons referred to in Section 3(b)(iv), who
shall certify to the Company that they have a current intention to sell
their Registrable Securities pursuant to the Shelf Registration, such
financial and other information and books and records of the Company, and
cause the officers, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the judgment of the respective counsel referred to
in such Section, to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act; provided, however, that each such
party shall be required to maintain in confidence and not to disclose to
any other person any information or records reasonably designated by the
Company in writing as being confidential, until such time as (A) such
information becomes a matter of public record (whether by virtue of its
inclusion in such registration statement or otherwise), or (B) such person
shall be required so to disclose such information pursuant to a subpoena or
order of any court or other governmental agency or body having jurisdiction
over the matter (subject to the requirements of such order, and only after
such person shall have given the Company prompt prior written notice of
such requirement and the opportunity to contest the same or seek an
appropriate protective order), or (C) such information is required to be
set forth in such registration statement or the prospectus included therein
or in an amendment to such registration statement or an amendment or
supplement to such prospectus in order that such registration statement,
prospectus, amendment or supplement, as the case may be, does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading;
(vi) promptly notify the selling holders of Registrable Securities, the
sales or placement agent, if any, therefor and the managing underwriter or
underwriters, if any, thereof named in the Shelf Registration or a
supplement thereto, and confirm such notice in writing, (A) when such
registration statement or the prospectus included therein or any prospectus
amendment or supplement or post-effective amendment has been filed, and,
with respect to such registration statement or any post-effective
amendment, when the same has become effective, (B) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or written threat of any
proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
written threat of any proceeding for such purpose, or (D) at any time when
a prospectus is required to be delivered under the Securities Act, that
such registration statement, prospectus, prospectus amendment or supplement
or post-effective amendment does not conform in all material respects to
the applicable requirements of the Securities Act and the Trust Indenture
Act and the rules and regulations of the Commission thereunder;
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<PAGE>
(vii) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount of
Registrable Securities being sold by such holder or agent or to any
underwriters, the name and description of such holder, agent or
underwriter, the offering price of such Registrable Securities and any
discount, commission or other compensation payable in respect thereof, the
purchase price being paid therefor by such underwriters and with respect to
any other terms of the offering of the Registrable Securities to be sold by
such holder or agent or to such underwriters; and make all required filings
of such prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(b)(iv) an executed copy (or, in
the case of a holder of Registrable Securities, a conformed copy) of such
registration statement, each such amendment or supplement thereto (in each
case including all exhibits thereto) and such number of copies of such
registration statement (excluding exhibits thereto) and of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity in all material
respects with the applicable requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder; and the Company hereby consents to the use of such prospectus
(including any such preliminary or summary prospectus) and any amendment or
supplement thereto by each such holder and by any such agent and
underwriter, in each case in the form most recently provided to such person
by the Company in connection with the offering and sale of the Registrable
Securities covered by the prospectus (including any such preliminary or
summary prospectus) or any supplement or amendment thereto; and
(x) use its reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such registration statement under
such securities laws or blue sky laws of such United States jurisdictions
as any holder of such Registrable Securities and each placement or sales
agent, if any, therefor and underwriter, if any, thereof shall reasonably
request, and (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers, sales and
dealings therein in such jurisdictions during the period the Shelf
Registration is required to remain effective under Section 2(b) and for so
long as may be necessary to enable any such holder, agent or underwriter to
complete its distribution of Securities pursuant to such registration
statement but in any event not later than the date through which the
Company is required to keep the Shelf Registration effective pursuant to
Section 2(b); provided, however, that the Company shall not be required for
any such purpose to (1) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(b)(x), (2) consent to general
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service of process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it and its
stockholders.
In case any of the foregoing obligations is dependent upon information provided
or to be provided by a party other than the Company, such obligation shall be
subject to the provision of such information by such party; provided that the
Company shall use its reasonable best efforts to obtain the necessary
information from any party responsible for providing such information.
(c) In the event that the Company would be required, pursuant to Section
3(b)(vi)(D), to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor or the managing underwriters, if any,
thereof named in the Shelf Registration or a supplement thereto of the existence
of the circumstances described therein, the Company shall promptly prepare and
furnish to each such holder, to each placement or sales agent, if any, and to
each such underwriter, if any, a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers of
Registrable Securities, such prospectus shall conform in all material respects
to the applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder. Each holder of
Registrable Securities agrees that upon receipt of any notice from the Company,
pursuant to Section 3(b)(vi)(D), such holder shall forthwith discontinue (and
cause any placement or sales agent or underwriters acting on their behalf to
discontinue) the disposition of Registrable Securities pursuant to the
registration statement applicable to such Registrable Securities until such
holder (i) shall have received copies of such amended or supplemented prospectus
and, if so directed by the Company, such holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus covering such Registrable Securities
at the time of receipt of such notice or (ii) shall have received notice from
the Company that the disposition of Registrable Securities pursuant to the Shelf
Registration may continue.
(d) The Company may require each holder of Registrable Securities as to
which any registration pursuant to Section 2(b) is being effected to furnish to
the Company such information regarding such holder and such holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Securities Act. Each such
holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such holder to the Company or
of the occurrence of any event in either case as a result of which any
prospectus relating to such registration contains or would contain an untrue
statement of a material fact regarding such holder or such holder's intended
method of disposition of such Registrable Securities or omits to state any
material fact regarding such holder or such holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading, and promptly to furnish
to the Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such holder or the disposition of such Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
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<PAGE>
(e) Until the expiration of two years after the Closing Date, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
(f) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
reasonably practicable (or as otherwise specified):
(i) prepare and file with the Commission such amendments and
supplements to the Exchange Offer Registration Statement and the prospectus
included therein as may be necessary to effect and maintain the
effectiveness thereof for the periods and purposes contemplated in Section
2(a) hereof and as may be required by the applicable rules and regulations
of the Commission and the instructions applicable to the form of the
Exchange Offer Registration Statement, and promptly provide each
broker-dealer holding Exchange Securities with such number of copies of the
prospectus included therein (as then amended or supplemented), in
conformity in all material respects with the requirements of the Securities
Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request for use
in connection with resales of Exchange Securities;
(ii) promptly notify each broker-dealer that has requested or received
copies of the prospectus included in the Exchange Offer Registration
Statement, and confirm such advice in writing, (A) when any prospectus
amendment or supplement or post-effective amendment to the Exchange Offer
Registration Statement has been filed, and, with respect to any
post-effective amendment to the Exchange Offer Registration Statement, when
the same has become effective, (B) of the issuance by the Commission of any
stop order suspending the effectiveness of the Exchange Offer Registration
Statement or the initiation or threatening of any proceedings for that
purpose, (C) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Exchange Securities for sale
in any United States jurisdiction or the initiation or threatening in
writing of any proceeding for such purpose, or (D) at any time when a
prospectus is required to be delivered under the Securities Act, that the
Exchange Offer Registration Statement, prospectus, prospectus amendment or
supplement or post-effective amendment does not conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder;
(iii) in the event that the Company would be required, pursuant to
Section 3(f)(ii)(D), to notify any broker-dealers holding Exchange
Securities, promptly prepare and furnish to each such holder a reasonable
number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to purchasers of such Exchange Securities, such
prospectus shall conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or notify such
broker-dealers that the offer and sale of Exchange Securities pursuant to
the Exchange Offer Registration Statement may continue;
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<PAGE>
(iv) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Exchange Offer Registration
Statement or any post-effective amendment thereto at the earliest
practicable date;
(v) use its reasonable best efforts to register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, provided, however, that the Company shall not be required
for any such purpose to (1) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(f)(v), (2) consent to general service of
process in any such jurisdiction or (3) make any changes to its certificate
of incorporation or by-laws or any agreement between it and its
stockholders; and
(vi) make generally available to its security holders as soon as
practicable but no later than eighteen months after the effective date of
such registration statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including,
at the option of the Company, Rule 158 thereunder).
In case any of the foregoing obligations is dependent upon information provided
or to be provided by a party other than the Company, such obligation shall be
subject to the provision of such information; provided that the Company shall
use its reasonable best efforts to obtain the necessary information from any
party responsible for providing such information.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly upon
request being made therefor all expenses incident to the Company's performance
of or compliance with this Agreement, including (a) all Commission and any NASD
registration and filing fees and expenses, (b) all fees and expenses in
connection with the qualification of the Securities or Exchange Securities for
offering and sale under the State securities and blue sky laws referred to in
Section 3(b)(x) and Section 3(f)(v) hereof, including reasonable fees and
disbursements of one counsel for the placement or sales agent or underwriters,
if any, in connection with such qualifications, (c) all expenses relating to the
preparation, printing, distribution and reproduction of each registration
statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Securities and all other documents
relating hereto, (d) fees and expenses of the Trustee under the Indenture, and
of any escrow agent or custodian, (e) internal expenses (including all salaries
and expenses of the Company's officers and employees performing legal or
accounting duties), (f) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance) and (g) reasonable fees, disbursements and expenses
of one counsel for the holders of Registrable Securities retained in connection
with a Shelf Registration, as selected by the holders of at least a majority in
aggregate principal amount of the Registrable Securities being registered and
approved by the Company, and fees, expenses and disbursements of any other
persons, including special experts,
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retained by the Company in connection with such registration (collectively, the
"Registration Expenses"). To the extent that any Registration Expenses are
incurred, assumed or paid by any holder of Registrable Securities or any
placement or sales agent therefor or underwriter thereof, the Company shall
reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a documented request
therefor. Notwithstanding the foregoing, the holders of the Registrable
Securities being registered shall pay all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable Securities and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other than
the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, the Initial
Purchasers and each of the holders from time to time of Registrable Securities
that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus)
contained therein or furnished pursuant to Section 3(c) or Section 3(f)
hereof and any further amendments or supplements to any such registration
statement or prospectus, when it becomes effective or is filed with the
Commission, as the case may be, and, in the case of an underwritten
offering of Registrable Securities, at the time of the closing under the
underwriting agreement relating thereto, will conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and at all times subsequent to the
Effective Time when a prospectus would be required to be delivered under
the Securities Act, other than from (i) such time as a notice has been
given to holders of Registrable Securities pursuant to Section 3(b)(vi)(D)
or Section 3(f)(ii)(D) hereof until (ii) such time as the Company furnishes
an amended or supplemented prospectus pursuant to Section 3(c) or Section
3(f)(iii) hereof or such time as the Company provides notice that offers
and sales pursuant to the Exchange Offer Registration Statement or the
Shelf Registration, as the case may be, may continue, each such
registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(b) or
Section 3(f) hereof, as then amended or supplemented, will conform in all
material respects to the applicable requirements of the Securities Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by or on
behalf of a holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material
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<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by a holder of Registrable Securities expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or, except to the extent that any
such contravention would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, any indenture or instrument
relating to indebtedness for money borrowed or any agreement to which the
Company is a party or any order, rule, regulation or decree of any court or
governmental agency or authority located in the United States having
jurisdiction over the Company or any property of the Company; and, to the
best knowledge of the Company, no consent, authorization or order of, or
filing or registration with, any court or governmental agency or authority
is required for the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the
Securities Act contemplated hereby, qualification of the Indenture, under
the Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities
or blue sky laws.
(d) This Agreement has been duly authorized, executed and delivered by
the Company.
6. Indemnification.
(a) Indemnification by the Company. In connection with a Shelf
Registration, the Company shall, and it hereby agrees to, indemnify and hold
harmless each of the holders of Registrable Securities included in such Shelf
Registration, and each person who is named in such Shelf Registration or a
supplement thereto as a placement or sales agent or as an underwriter in any
offering or sale of such Registrable Securities and each person who controls any
such person (each, a "Participant") against any losses, claims, damages or
liabilities, joint or several, to which such Participant may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, or any preliminary, final or summary
prospectus contained therein or furnished by the Company to any such
Participant, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or neces sary to make the statements therein not
misleading and the Company shall, and it hereby agrees to, reimburse each such
Participant for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
any such person in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, or preliminary, final or summary prospectus, or amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by such
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Participant expressly for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Indemnification by Participants. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2(b) and to entering into any underwriting agreement
with respect thereto, that the Company shall have received an undertaking
reasonably satisfactory to it from each Participant, severally and not jointly,
to indemnify and hold harmless the Company, each of the Company's directors,
officers and employees and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, to the same extent as
the foregoing indemnity from the Company, but only with reference to written
information furnished to the Company by or on behalf of such Participant
specifically for use in any registration statement, or any preliminary or final
or summary prospectus contained therein or any amendment or supplement thereto.
This indemnity agreement will be in addition to any liability which any such
person may otherwise have.
(c) Promptly after receipt by an indemnified party under Section 6(a)
or (b) of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to any indemnified
party otherwise than under Section 6(a) or (b). In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided that, if the defendants in any such action
include both the indemnified party and the indemnifying party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential conflicting interests between them, the indemnified party or parties
shall have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of its election so
to assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under Section 6(a) or (b) for any legal or other expenses subsequently incurred
by such indemnified party (other than reasonable costs of investigation) in
connection with the defense thereof unless (i) the indemnified party shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the immediately preceding sen tence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate national counsel, approved by the
indemnifying party, representing the indemnified parties who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii).
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No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the Participants
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no Participant shall be required to contribute
any amount in excess of the amount by which the dollar amount of the proceeds
received by such Participant from the sale of any Registrable Securities
exceeds the amount of any damages which such Participant has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Participants' obligations in this Section 6(d) to
contribute shall be several in proportion to the principal amount of Registrable
Securities registered or underwritten, as the case may be, by them and not
joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each Participant and each person, if any, who controls any Participant within
the meaning of the Securities Act or the Exchange Act; and the obligations of
the Participants contemplated by this Section 6 shall be in addition to any
liability which the
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<PAGE>
respective Participants may otherwise have and shall extend, upon the same terms
and conditions, to each officer, employee and director of the Company (including
any person who, with his consent, is named in any registration statement as
about to become a director of the Company), and to each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act.
7. Rule 144.
The Company covenants to the holders of Registrable Securities that the
Company shall use its reasonable best efforts to timely file the reports
required to be filed by it under the Exchange Act or the Securities Act
(including the reports under Section 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder, all to the extent required from time to time to enable such holder
to sell Registrable Securities without registration under the Securities Act
within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar or
successor rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities in connection with that holder's
sale pursuant to Rule 144, the Company shall deliver to such holder a written
statement as to whether it has complied with such requirements.
8. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities which would be inconsistent with the
terms contained in this Agreement.
(b) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 1345 Avenue of the Americas, New York, New York 10105-0196, Attention:
Treasurer; if to an Initial Purchaser, to it at the address for the Initial
Purchasers set forth in the Purchase Agreement; and if to a holder, to the
address of such holder set forth in the security register or other records of
the Company or to such other address as the Company or any such holder may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
(c) Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective successors and assigns of the parties hereto. In the event that
any transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be deemed a party hereto for all purposes and such Registrable
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities such transferee shall be entitled
to receive the benefits of, and be conclusively deemed to have agreed to be
bound by and to perform, all of the applicable terms and provisions of this
Agreement.
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<PAGE>
(d) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made pursuant
hereto shall remain in full force and effect regardless of any investigation (or
statement as to the results thereof) made by or on behalf of any holder of
Registrable Securities, any director, officer or partner of such holder, any
agent or underwriter or any director, officer or partner thereof, or any
controlling person of any of the foregoing, and shall survive delivery of and
payment for the Registrable Securities pursuant to the Purchase Agreement and
the transfer and registration of Registrable Securities by such holder and the
consummation of an Exchange Offer.
(E) LAW GOVERNING. THIS REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
(f) Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) Entire Agreement; Amendments. This Agreement and the other writings
referred to herein (including the Indenture) or delivered pursuant hereto which
form a part hereof contain the entire understanding of the parties with respect
to its subject matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any amendment or waiver
effected pursuant to this Section 8(g), whether or not any notice, writing or
marking indicating such amendment or waiver appears on such Registrable
Securities or is delivered to such holder.
(h) Inspection. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders of
Registrable Securities shall be made available for inspection and copying on any
business day by any holder of Registrable Securities for proper purposes only
(which shall include any purpose related to the rights of the holders of
Registrable Securities under the Securities, the Indenture and this Agreement)
at the offices of the Company at the address thereof set forth in Section 8(b)
above, or at the office of the Trustee under the Indenture.
(i) Counterparts. This Agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
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<PAGE>
Agreed to and accepted as of the date referred to above.
AVON PRODUCTS, INC.
By: ______________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
CHASE SECURITIES INC.
J.P. MORGAN SECURITIES INC.
By: MORGAN STANLEY & CO. INCORPORATED
By: ______________________________________
Name:
Title:
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EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Avon Products, Inc. on Form S-4 of our report dated February 6, 1997, on our
audits of the financial statements and financial statement schedule included in
the Annual Report on Form 10-K of Avon Products, Inc. for the year ended
December 31, 1996. We also consent to the reference to our firm under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
COOPERS & LYBRAND L.L.P.
New York, NY
November 25, 1997
II-8
EXHIBIT 25.1
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
AVON PRODUCTS, INC.
(Exact name of obligor as specified in its charter)
New York 13-0544597
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1345 Avenue of the Americas
New York, New York 10105
(Address of principal executive offices) (Zip Code)
----------------------------------------
6.55% Notes Due 2007
(Title of the indenture securities)
----------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
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<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 21st. day of November 1997.
THE CHASE MANHATTAN BANK
By /s/ Kathleen Perry
-------------------------
Kathleen Perry
Second Vice President
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<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin.................................. $ 13,892
Interest-bearing balances.......................... 4,282
Securities:.............................................
Held to maturity securities............................. 2,857
Available for sale securities........................... 34,091
Federal funds sold and securities purchased under
agreements to resell............................... 29,970
Loans and lease financing receivables:
Loans and leases, net of unearned income $124,827
Less: Allowance for loan and lease losses 2,753
Less: Allocated transfer risk reserve..... 13
Loans and leases, net of unearned income, -------
allowance, and reserve............................. 122,061
Trading Assets.................................... 56,042
Premises and fixed assets (including capitalized
leases)............................................ 2,904
Other real estate owned................................. 306
Investments in unconsolidated subsidiaries and
associated companies............................... 232
Customers' liability to this bank on acceptances
outstanding........................................ 2,092
Intangible assets....................................... 1,532
Other assets............................................ 10,448
TOTAL ASSETS............................................ $280,709
=========
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<PAGE>
LIABILITIES
Deposits
In domestic offices.............................. $91,249
Noninterest-bearing......................$38,157
Interest-bearing..........................53,092
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's....................................... 70,192
Noninterest-bearing......................$ 3,712
Iterest-bearing ......................... 66,480
Federal funds purchased and securities sold under agree-
ments to repurchase.................................. 35,185
Demand notes issued to the U.S. Treasury............. 1,000
Trading liabilities.................................. 42,307
Other borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less... 4,593
With a remaining maturity of more than one year
through three years........................ 260
With a remaining maturity of more than three years 146
Bank's liability on acceptances executed and outstanding 2,092
Subordinated notes and debentures.................... 5,715
Other liabilities.................................... 11,373
TOTAL LIABILITIES.................................... 264,112
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock......................................... 1,211
Surplus (exclude all surplus related to preferred stock)... 10,283
Undivided profits and capital reserves............... 5,280
Net unrealized holding gains (losses)
on available-for-sale securities..................... (193)
Cumulative foreign currency translation adjustments.. 16
TOTAL EQUITY CAPITAL................................. 16,597
TOTAL LIABILITIES AND EQUITY CAPITAL................. $280,709
==========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the
best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and belief
has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority
and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
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